The global momentum surrounding efforts to combat climate change and reduce carbon emissions continues, coinciding with the recovery of global economies from the effects of the pandemic, in addition to stimulus economic programs directed towards green projects.
At the same time, this economic recovery produced a sharp reversal in the demand for energy, especially on fossil fuels.
The demand for oil rebounded from the end of the second quarter of last year until the end of the third quarter of this year at a rate of 15 million barrels per day, which represents a huge leap.
Despite the remarkable progress in the uses of alternative energies in many applications such as electricity, transportation and industry, they do not constitute long-term solutions, and therefore fossil energy will remain an essential part of the global energy mix for the foreseeable future.
According to the main scenario forecasts of the consulting firm IHS Markit, oil and gas combined will make up 55% of the global energy mix by 2030, slightly up from 2020.
Under the scenario of a rapid green transition, the consultancy expects that the share of oil and gas will decline in 2020 to only 52 percent.
According to most of the expected basic scenarios, the global demand for oil will witness growth by 2030, or at least it will remain stable compared to current levels.
Investment volume
However, according to the International Energy Forum IEF, upstream investments in oil and gas witnessed a sharp decline in 2020 by about 30% from 2019 to reach $309 billion.
Although it rose this year to $341 billion, it is still far less than what is needed to meet global demand, according to a recent report issued by the IEF and HIS Markit.
According to the report, this lack of investments threatens to trigger several energy crises during the energy transition phase, expecting recurrent price shocks resulting from the discrepancy between the slow transformation in energy consumption patterns on the one hand, and the erosion of oil and gas production capacities on the other hand to meet demand as a result of investments. insufficient.
Accordingly, the report concludes that upstream investments in oil and gas should grow by about 50% by 2030 compared to levels this year, to reach about $525 billion in order to meet the expected demand.
This means that the volume of investments required in the ten years between 2021 and 2030 should amount to about $4.7 trillion. This is compared to the total of those investments in the previous period between 2011 and 2020, amounting to 5.5 trillion dollars.
In the event that the demand for oil witnessed some decline in the future, the investments are necessary to compensate for the natural declines in the production of existing fields, and without pumping these investments, the oil production of countries outside the Organization of Petroleum Exporting Countries, for example, may decrease by about 41% from its current levels by 2030, which is equivalent to a decline at 20 million barrels per day.
Oil shale
The US shale oil sector, which is known for its rapid resilience in terms of production, will not be able to meet demand in a timely manner. As the merger of companies in this sector and the conservative capital spending emerging in it will limit its ability to meet demand quickly, as was the case in the previous decade, when this sector recorded huge growth rates.
The reluctance to make these investments in the US shale oil sector itself may translate into a decrease in oil production by 2030 by about 86%, which is equivalent to a decline of 6 million barrels per day.
It is noteworthy that the conditions for financing these necessary investments have become more difficult than before. As the oil and gas sector is competing with the green projects sector for the same financing, for the first time ever, bank financing for renewable energies exceeds the value of the same financing directed to the fossil sector during the current year 2021.
Therefore, it is also essential for the oil and gas sector to quickly adapt to the new financing requirements and conditions during the energy transition phase. In terms of standardization of greenhouse gas emissions measurement and disclosure in a transparent manner.
