Several research institutions have issued warnings that the world will enter an era of \"oil and gas shortage\"

[ Time:2021-12-24 | Hits:621 ]

Novel coronavirus pneumonia has been in the doldrums for the past two years. The investment in upstream oil and gas sector has dropped by about 25% compared to the new crown pneumonia epidemic this year, according to a joint report released by the International Energy Forum (IEF) and the letter of the International Trade Forum (IHC). The lack of upstream investment in the oil and gas field is likely to lead to the global crude oil supply not keeping up with the growth of demand, thus pushing up the global oil price.

Upstream investment enthusiasm of oil and gas industry no longer exist

According to the above report, including oil and gas resources exploration and development and production activities, the total upstream investment in the global oil and gas field this year remained at about US $341 billion, about 25% lower than the "normal level" before 2019. In 2020, the upstream investment in the global oil and gas sector was US $350 billion, a new low in recent 15 years, and it has not recovered this year.

China's novel coronavirus pneumonia demand is already close to the high level before the new crown pneumonia epidemic this year. It is widely expected that the oil demand of developing countries will continue to show strong trend in the coming years. This means that the tight upstream investment is likely to pose a threat to future oil and gas supply.

The report predicts that if there is no new oil and gas production, the crude oil production of non OPEC oil producing countries will drop by about 9 million barrels a day by 2025 and even 20 million barrels by 2030. At the same time, the oil and gas demand of developing countries in Africa, the Middle East and Asia will continue to rise strongly, and the incremental demand for oil and gas supply will be high.

In addition, the report also points out that in order to offset the decline in the production of aging oil and gas fields, new upstream investment in the oil and gas field will be indispensable. According to the report, if we want to meet the global demand for crude oil and maintain the balance between supply and demand of oil and gas in the future, the upstream investment in the global oil and gas field needs to reach more than US $525 billion every year from this year to 2030, which is far higher than the current actual level.

Moody's, an investment service provider, also said in its latest report that the investment plan for 2022 currently formulated by most oil and gas producers is still "conservative", and the upstream investment in oil and gas must increase to US $542 billion in the medium term to meet the oil and gas demand during the economic recovery. Sultan al Jaber, Minister of industry and advanced technology of the United Arab Emirates, recently pointed out that by 2030, the global oil and gas field needs to invest at least $600 billion a year to meet the growing demand for oil and gas.

The shortage of supply leads to the continuous rise of oil prices

In the face of this situation, the report of IEF and Aisin Huamai predicts that the phenomenon of oil market turbulence and oil price rushing to a new high in history may become the "normal".

IEF Secretary General Joseph mcmonigle pointed out that insufficient upstream investment in the oil and gas field for two consecutive years indicates high oil prices and instability. The energy crisis in Europe and Asia this winter is a microcosm of the future energy market. The latest data show that since this year, the global crude oil price has increased by more than 40%. At the same time, the natural gas price in many parts of the world has also soared. Since December, the natural gas price in Europe has even increased by more than 40%.

Daniel YERGIN, vice chairman of Aisin Huamai, also said: "With the gradual advancement of energy transformation, the scale of investment in renewable energy and other low-carbon technologies is expanding, while at the same time, the investment in the oil and gas industry is decreasing again and again. The energy crisis faced by Europe and Asia in recent months is the consequence of this measure. If this continues, it is likely to have more serious economic consequences and inflation crisis."

This conclusion is similar to the expectations of oil and gas producers in Saudi Arabia, Russia and other countries. Bloomberg quoted Amin nasse, chief executive of Saudi Aramco, as saying that if governments no longer encourage investment in fossil energy, there is likely to be "chaos" in the oil and gas market in the future, and the rapid promotion of renewable energy development may lead to serious inflation and social unrest.

An executive of Rosneft also said that affected by insufficient investment and sanctions, the crude oil supply capacity of "OPEC +" oil producing countries is facing risks, and the global oil price may rise to $120 / barrel in the middle of next year.

Moreover, JPMorgan Chase, an investment bank, recently said that in the past 18 months, the insufficient investment in the oil and gas industry caused by the epidemic has hit many oil producing countries, and the situation of short supply of crude oil is likely to further push up the oil price. By 2022, the price of Brent crude oil is expected to exceed US $125 / barrel, and may even exceed US $150 / barrel by 2023.

Reuters also quoted Jeff Miller, CEO of oil service giant Halliburton, as saying that the world is moving towards an "era of oil shortage", and buyers may look around for oil for a long time in the future.

Whether to vote or not becomes a difficult problem

Although many oil producing countries have called for "throwing money" at the oil and gas industry, in fact, multiple factors such as climate objectives, repeated epidemics and unknown benefits have also become factors that hinder more "active" investment in the oil and gas industry.

According to the analysis of IEF and Aisin Huamai's report, policy changes in various countries, record price declines and unclear long-term oil and gas demand prospects all make it more difficult for the oil and gas industry to make investment decisions. At the same time, due to the different "environmental, social and governance standards" of various countries, oil and gas projects with long cycle face more investment obstacles. The demand of governments and industries for green transformation restricts the investment from entering the field of oil and gas exploration and production.

In addition, the report also points out that from the current situation, compared with the newly developed oil and gas resources, oil and gas operators are more willing to invest in maintaining the production of mature oil and gas fields. The initial cost of this operation is relatively lower, and the investment return cycle is relatively shorter, so they do not have to face the risk factors of unstable long-term demand.

Moreover, the International Energy Agency also warned that, in fact, even if all the climate targets set by countries are achieved, it is difficult to control the temperature rise within the scope of commitments. In order to achieve the set climate targets and combat climate change, countries should not approve any new investment in the development of oil and gas resources in the future; In addition, countries should completely ban the sale of new fuel vehicles in 2035 and shut down all coal-fired power plants without emission reduction devices by 2040.