Elephant Hunt: The Search for the Oil and Gas Supplies to 2050

Abstract

_ The oil and gas industry is at a critical juncture in the evolving global energy landscape. As the world intensifies its focus on combating climate change and embracing renewable energy sources, traditional fossil fuel exploration faces unprecedented challenges. The energy transition is now a tangible reality, reshaping the foundations of the oil and gas sector. However, just as there is no shortage of proclamations that the end draws near for King Fossil’s reign at the top of the energy resource pyramid, an equally high number sees the old king hanging around beyond 2050. This back-and-forth between renewable and fossil energy proponents gives all a good bone of contention to gnaw on. In September, Fatih Birol, executive director of the International Energy Agency (IEA), wrote in the Financial Times that it is taboo to suggest that demand for fossil fuels could go into permanent decline. He announced that the relentless age of growth for fossil fuels is set to decline by 2030, according to new projections by the IEA set to be released this month in its World Energy Outlook. OPEC criticized the announcement, describing the narrative as “extremely risky and impractical to dismiss fossil fuels or to suggest that they are at the beginning of their end.” The oil-producing nations group said the IEA’s thinking on fossil fuels is ideologically driven rather than fact-based, and predictions like these are “dangerous” because they are often accompanied by calls to stop investing in new oil and gas projects. Upstream Investment: Too Little or Just Right? The IEA and OPEC did find a small patch of common ground, agreeing that there would still be demand for oil and gas in 2050 and that continued investment in new oil and gas projects is needed. The underinvestment in upstream asset development has been a concern for several years, with the COVID-19 pandemic only exacerbating the issue, and according to a recent report by Goldman Sachs, oil and gas activity declined at a compounded 7% from 2014 to 2021. The investment bank expects primary energy capital expenditure to grow 48% by 2027 to $1.9 trillion, up from $1.3 trillion in 2022. “We believe the energy industry has been underinvesting since the peak of 2014, with investments in traditional energy (upstream oil and gas) falling 50% in 2020 from the peak and driving an 18% reduction in global primary energy investments, from $1.3 trillion in 2014 to $1.0 trillion in 2020,” the bank said. “A number of oil and gas investment decisions had been delayed since 2014, translating into 10 million B/D of lost oil production by 2024–2025—equivalent to Saudi Arabia’s annual production—and 3 million BOED of lost LNG production—more than Qatar, on our estimates,” according to Goldman Sachs.