Significant investment in new oil and natural gas production is still required

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Even though the demand for oil and natural gas peaks and falls in nearly all the scenarios, the ‎faster rate of decline in existing production means that significant amounts of new upstream ‎investment in oil and natural gas production are required in all three scenarios.‎

The scenarios are based on the assumption that, if oil producers over the next 30 years invested ‎only in maintaining existing (brownfield) sites, as well as completing projects that have already ‎been sanctioned, this would imply an average decline rate of oil production of a little above 4% ‎p.a., with global oil supplies falling to around 25 Mb/d in 2050. The corresponding decline rate ‎for natural gas is assumed to be slightly higher (4.5%), reflecting the greater proportion of ‎natural gas production that comes from short-cycle unconventional plays.‎

Closing the gap between these ‘no new greenfield investment’ supply profiles for oil and natural ‎gas and the level of supply needed to meet the demand profiles in the three scenarios requires ‎significant levels of new investment in upstream oil and gas production, totaling between $9 ‎trillion and over $20 trillion over the next 30 years. ‎

The profile of oil demand in Net Zero highlights the increasingly difficult judgments concerning ‎future investments in oil and gas as the world transition to a lower-carbon energy system. ‎

The relative resilience of oil demand during the first half of the Outlook in Net Zero implies that ‎several trillions of US dollars of new oil investment is needed over the next 15 years or so to ‎ensure adequate supplies. But the pace at which oil demand falls in the second half of Net Zero is ‎faster than the natural decline rate of production, implying that some of these investments by ‎‎2050 may not be fully utilized and so may become uneconomic.‎

This risk may be able to be mitigated by investing in less capital-intensive, shorter-cycle, scalable ‎projects, such as unconventional tight oil and gas, brownfield redevelopments, and subsea ‎tiebacks. ‎

The uncertainty about the speed and nature of the energy transition, as highlighted for example ‎by Delayed and Disorderly, means the option value associated with these types of projects could ‎increase in the coming years.‎