How much does the oil and gas industry need to spend?

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Is the industry under-investing? In the very near-term, yes. But probably by less than many may think. Upstream development investment is on track to recover to US$430 billion by 2023 (in 2021 terms). If it does, supply will meet our near-term demand outlook. Longer-term, upstream capital requirements depend on expected demand and achievable capital efficiency. An average of US$400 billion per year (in 2021 terms) is required out to 2050, to meet our long-term demand forecast. Capital efficiency has been transformed since 2014; spending does not need to return to historic levels to meet our base case demand forecast. Capital efficiency and demand are the key variables, with both having a substantial impact on defining capital requirements.

Table of contents

  • Upstream spend needs to increase, but not as much as you might think
  • Year one of a three-year recovery?
  • Cost efficiency, not less activity, is the primary driver of lower spend
  • US investment is structurally lower; Qatar will lead the recovery
  • LNG and deepwater spend could exceed pre-covid levels by 2023
  • NOCs recovering fastest; Majors won’t return to historical levels
  • Demand peaks at more than 200 million boe/d in the 2030s
  • Annual average of US$400 billion (in 2021 terms) required
  • North America, Middle East and Russia/Caspian will remain dominant
  • How will US tight oil investment respond to prolonged high oil prices?
  • Accelerated Energy Transition scenarios highlight potential downsides
  • Substantial investment needed, even in an accelerated energy transition
  • Cost inflation could pick up as activity levels rise, increasing absolute spend requirements

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