Manup Industry Roundup - W0723: NEWSL -02
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Annual upstream oil and gas investment needs to rise by 28% to reach $640 billion by 2030 to ensure adequate global supplies, according to a new report published by the International Energy Forum (IEF) and S&P Global Commodity Insight
A cumulative $4.9 trillion will be needed from now until 2030 to meet market needs, even if the growth in oil and gas demand slows down, the report says.
Below are the oil and gas stories and news that made headlines this week carefully curated by?Manup.
Summary of the news
IEF: $4.9 Trillion Of Oil and Gas Investment Needed By 2030
Up to $4.9 trillion worth of global upstream oil and gas investments will be needed by 2030 to ensure sustained supplies and prevent an energy crisis in the coming years, according to a report by the International Energy Forum and S&P Global Commodity Insights.
The massive investment will be needed “to meet market needs and prevent a supply shortfall, even if demand growth slows towards a plateau”, the report said.
The IEF said that global oil and gas upstream capital expenditure increased by 39% in 2022 to $499 billion, the highest level since 2014 and the largest year-on-year gain in history.
Higher costs primarily drive the increase in investment, and activity has also started to recover. However, drilling remained below pre-pandemic levels as inflation ate away at the spending, according to the report. The number of drilling rigs rose by 22% in 2022, but this was still 10% percent below 2019 levels.
The report claimed annual upstream spending “will need to increase from $499 billion in 2022 to $640 billion in 2030 to ensure adequate supplies”.
“This estimate for 2030 is 18% higher than we assessed a year ago primarily because of rising costs,” the IEF said.
Under-investment in the oil and gas sector “threatens to undermine energy security in the short and medium term”, it added.
Meanwhile, producers can support markets by promoting investment, it says. Operators need a certain level of assurance and fiscal certainty to invest in capital-intensive, long-cycle projects. They will be increasingly constrained in committing capital, or will require higher returns to do so, as risks evolve, the report says.
"Future supply must clear an acceptable hurdle rate that accounts for policy uncertainty, variable oil and gas prices, and, increasingly, carbon price assumptions," the report says.
Additionally, governments should base policies on realistic energy demand outlooks and to ensure adequate and affordable energy supplies during the transition, the report says. "Governments need to ensure assumptions do not underestimate energy demand growth coming from the 80 percent of the global population in the developing world," it says.
When Will Oil Demand Peak?
When will oil demand peak? It depends on who you ask.
Fitch Solutions, for example, doesn’t see oil demand peaking within its forecast period, which runs to 2032, according to Emma Richards, an associate director of oil and gas at the company.
“Based on the way that growth is trending, it’s likely that demand will peak around the mid-2030s, although there’s a lot of uncertainty when forecasting that far out,”
EM demand is more robust – the economic and demographic fundamentals point to a strong rise in overall energy demand growth and progress in displacing oil in the energy mix faces a number of headwinds in most markets. By the mid-2030s, though, it seems probable that EM growth will be sufficiently weak and DM losses sufficiently steep to pull consumption past its peak
On another note, Al Salazar, a senior vice president at Enverus Intelligence Research, believes total global oil demand will peak and plateau “sometime in the back half of this decade due to (1) bearish Chinese demographics, (2)the electrification of the light duty vehicle fleet, and (3) aggressive fuel economy standards”.
IEA, BP Outlooks
In its latest World Energy Outlook report, which was released in October 2022, the International Energy Agency (IEA) highlighted that oil demand has different peaks under different scenarios.
Under an Announced Pledges Scenario (APS), net zero commitments lead to a peak in oil demand in 2024, according to the IEA, which outlined that under a Stated Policies Scenario (STEPS) scenario, global oil demand peaks and levels off after 2035.
In BP’s latest energy outlook, which was released at the end of January this year, the company noted that “global oil demand plateaus over the next 10 years or so before declining over the rest of the outlook, driven in part by the falling use of oil in road transport as vehicles become more efficient and are increasingly fueled by alternative energy sources”.
BP’s energy outlook outlined three scenarios - Accelerated, Net Zero and New Momentum - and looked at the energy system out to 2050.
Hydrogen production capacity to shoot up in 2023
Hydrogen development, given its application across various industries, is indispensable to attaining energy transition, meeting decarbonisation goals, and positioning leading companies as market experts
It is estimated to reach 4.5 mn tons per annum worldwide by the end of the year.
Against this backdrop, hydrogen production capacity is estimated to reach 4.5 mn tons per annum (mtpa) worldwide by the end of the year, representing 165% growth compared to 2022, says GlobalData
GlobalData’s recent publication 'Hydrogen Transition Outlook and Trends: Q1 2023' highlights deals trends and investments as useful benchmarks to identify those leading companies driving the hydrogen market growth.
According to the report, over 393 deals related to hydrogen were closed, representing a significant increase compared to 277 deals registered in 2021.
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This shows an upward trend in the hydrogen market development, which could be decisive in achieving over 71 mtpa capacity worldwide by 2030.
However, the partnerships represented 66% of the deals last year, and the number of deals decreased after Q2 2022 to numbers even below those seen in the same quarter in 2021. This could have been due to the companies trying to strengthen their core business and diversify the investment risk given the global economic situation.”
Despite the high number of partnerships formed between companies as compared to government agencies, investing and raising capital was of utmost importance to develop the hydrogen economy in 2022.
Last year, the merger and acquisitions (M&A) deals reached US$24.4bn in monetary value, representing an increase compared to 2021 levels. On the other hand, venture finance deal values also grew from US$595.23mn to over US$3,001.1mn.
In 2022, over 111.9 mtpa hydrogen capacity was announced in the US, Denmark, Egypt, Canada, Portugal and other countries.
In Canada, Green Hydrogen International (GHI) announced two important green hydrogen projects as a sole participant, with 43 mtpa capacity each, which are expected to begin production in 2030.
Some other companies took part in multiple project investments globally to diversify their risk, including Fortescue Industries, which has two-thirds of its capacity outside its home country, Australia.
Companies like?GHI,?Suez Canal Economic Zone,?New and Renewable Energy Authority,?Sovereign Fund of Egypt, and?Egyptian Electricity Transmission Co?are the global leaders in low carbon hydrogen capacity, with 56.3 mtpa active capacity combined.
As part of developing low-carbon hydrogen, and with electrolysis being a key technology to produce green, electrolysis capacity of over 1,065 GW is now in pipeline. This is mainly being produced by manufacturing companies such as Hydrogenics, Nel ASA, ThyssenKrupp, ITM Power, HydrogenPro, Enapter and Plug Power.
During last year, as the hydrogen economy raised, companies like Globeleq Africa, Linde, John Wood Group, ThyssenKrupp, H2-Industries, Alcazar energy, and Samsung Engineering took advantage of the growing demand for hydrogen capacity and became the?engineering, procurement and construction (EPC)?leaders for green projects.
Despite the challenging global economic conditions, the number of investments in low-carbon hydrogen increased from 600 to over 1,700 between Q4 2021 and Q4 2022.
As of January, 93% of both active and pipeline hydrogen projects were green, as reflected by the increasing manufacturers' electrolysis capacity and the number of EPC contractors participating in bigger green projects. This, in addition to the renewable energy development, will create a momentum that will accelerate the cost reduction across the entire hydrogen value chain.
Shell Starts Production At Vito In US Gulf Of Mexico
Oil major Shell has started production from its Vito offshore platform in the US Gulf of Mexico (GoM).
With an estimated peak production of 100,000 barrels of oil equivalent per day, Vito is the company's first deep-water platform in the GoM to employ a simplified, cost-efficient host design
The Vito development, sanctioned in April 2018, is owned by Shell Offshore Inc. (63.11% operator) and Equinor (36.89%). Estimated recoverable resources are around 290 million barrels of oil equivalent.
Originally discovered in 2009, the Vito field spans four Outer Continental Shelf (OCS) blocks in the Mississippi Canyon and is located at a depth of more than 4,000 feet (1,220 meters) of water.
GETI Report: Oil And Gas Sector First Choice For Energy Workers
The seventh annual Global Energy Talent Index (GETI), has revealed that the recent gas price crisis has transformed oil and gas into the most popular sector for energy workers looking to change roles and has sent salaries soaring above pre-pandemic levels.
The report by Airswift, finds that, with oil and gas majors posting record profits, 44% of oil and gas workers saw their pay increase last year and two-thirds expect further salary rises next year. 41% expect bumper pay rises of over 5% next year..
Sector-wide salaries are being inflated by fierce competition for oil and gas talent, with almost one-in-three oil and gas workers having been headhunted over six times in the past year. Big pay packets are also driving high job satisfaction, with remuneration cited as the biggest driver of said satisfaction and 69% of oil and gas workers declaring themselves satisfied in their current positions..
Yet rising salaries and job opportunities are also empowering oil and gas workers to seek jobs based on values as well as salaries, with ESG concerns now among their top three reasons for choosing employers.
Renewables is the first choice of outside energy sector for oil and gas workers to join, perhaps due to its pivotal role in the environment.
The report also found that;
? The revival of oil and gas projects from France to the UK makes Europe the leading destination for oil and gas workers seeking overseas transfers (27%). The Middle East has supplanted North America as the second choice destination, as workers are drawn by the lure of low taxes and booming Middle Eastern infrastructure development.
? The proportion of workers wanting to relocate has fallen from 91% in 2020 to 81% as of now
? Of those companies that have begun transitioning to clean energy, 38% welcome the change this has made to their roles.
Read full report?here
Other stories we are following…