Oslo-based independent research and business intelligence company Rystad Energy said last week persistent claims of chronic underinvestment in the global oil and gas industry are “overblown.” Investments in the upstream sector are expected to reach about $580 billion this year after peaking at $887 billion in 2014. The number of completed wells also has fallen from 88,000 in 2014 to 59,000 this year.
“Many market participants predict that this trend will continue and lead to chronic underinvestment and an oil supply shortage in the coming years,” Rystad said July 5. “However, our modeling and analysis tell a different story. Lower unit prices, efficiency gains, productivity gains and evolving portfolio strategies have significantly increased the upstream industry’s efficiency… The industry can do the same as before, but at a much lower cost. Although investments have shrunk, activity and production remain healthy and on par with the levels seen from 2010 to 2014.”
Espen Erlingsen, who directs upstream research for Rystad, added, “Contrary to popular opinion, the world is investing appropriate amounts of money in fossil fuel production to satisfy demand… We don’t foresee an oil supply crisis due to underinvestment on the immediate horizon.”