Oil and gas capex: investment in fossil fuels is far from fossilised


Here is more evidence — if proof were needed — that the great energy transition is a slow one. Oil and gas majors continue to plough money into fossil fuels and drill down for the viscous black stuff.

Global oil and gas investment will increase by $26bn this year to $628bn, analysts at Rystad Energy estimate. State-owned Saudi Aramco has already committed to increasing production capacity. Meantime drilling rig use, a leading indicator of production, is climbing. Last week 729 rigs operated in North America (including Canada), up by half from a year ago, according to Baker Hughes. Internationally the rig numbers have had a similar jump. State-owned Saudi Aramco has committed to increasing production capacity.

Fossil fuels were never going to make a swift exit. Combined, they make up 83 per cent of the energy mix. Oil and natural gas alone account for 56 per cent. These are fast declining assets; based on current global demand of 100m barrels a day the industry needs to invest enough to offset the 5m to 6m b/d normal rate of decline.

And demand does not stand still. Opec’s long-term outlook sees this rising to 108m b/d, or 28 per cent of energy requirements, by 2045.

Private oil companies will want to maximise income from existing portfolios, hence continued spending even beyond the state-owned sector. The oil and gas majors, led by Shell, BP and Exxon, will lift upstream spending to more than $75bn this year, estimates Jefferies. That is an increase on last year but still well below the $100bn spent in pre-pandemic 2019 — and steeply below the 2013 boom year of $200bn.

Expect the most investment going to natural gas production and liquefied natural gas, up 14 per cent to $149bn this year and to $171bn in 2024, surpassing pre-pandemic levels.

Much of this year’s spending is well-signalled, including $150bn into greenfield projects, a near-doubling of last year’s spend. For sure, majors are pumping more money into renewables. But fossil fuel spending is far from over.



Source link

Comments are closed, but trackbacks and pingbacks are open.