In its recent report “The Implications of Oil and Gas Field Decline Rates,” the International Energy Agency reminded us that hundreds of billions of dollars must be spent each year to keep global oil and gas output steady. This is the latest in a series of pivots by the IEA back to recognizing the importance of oil and gas in the long-term energy balance.
Notoriously, in its landmark 2021 report “Net Zero by 2050 – A Roadmap for the Global Energy Sector” the Agency suggested there would be no need for investments in new upstream oil and gas projects. The Agency was widely criticised, including by the National Center for Energy Analytics, for abandoning its Current Policies Scenario which most closely reflected today’s reality versus the aspirations of policy makers. In its upcoming World Energy Outlook 2025, the IEA will likely reinstate a CPS, and a reasonable assumption is that it will show oil demand as higher for longer, with important implications for future supply. Exxon Mobil and BP recently published outlooks showing oil demand staying close to 100 million barrels a day into the 2040s.
In recent years, there has been a lot of focus on clean energy investment. In its report “World Energy Investment 2025, the IEA reflected this it showed a 78% rise in spending from $1.2 trillion in 2015 to $2.2 trillion in 2025, with clean energy’s share of total energy investment rising from 45% in 2015 to 65% today. In the same time period, investment in upstream oil and gas fell by 35% from $869 billion in 2015 to only $567 billion in 2025.
All this spending on clean energy does not mean that we have seen much of an energy transition. In 2024, oil, coal and gas took nearly an 82% share of total global energy supply, down only slightly from the 85% level seen in 1974. The reality is that we are living in an “all of the above” energy world and we should be concerned by a fall in investment in upstream oil and gas at a time when demand is at record levels and climbing.
The challenges to more investment in upstream oil and gas are several: most importantly, field decline rates are accelerating. Observed annual decline rates for the world as a whole show post-peak production rates of decline averaging nearly 6%. Natural decline rates – defined by the IEA as what might happen if all upstream investment stopped today – show global oil production falling by 8% a year on average with this rate increasing in recent years. This is equivalent to losing about 5.6 million barrels day each year, roughly the current combined output of Brazil and Norway. For investment to stop completely is, of course, an extreme and unlikely scenario. However, it would not take much of a decline from current levels of upstream investment for production levels to potentially fall significantly as observed field decline rates accelerate.
Another important point the IEA makes is that the period between the issuing of an exploration licence and first commercial production is lengthening and is now 20 years on average; although there was a notable exception in Guyana where the Liza oil and gas field took only five years between the commencement of exploration to first production. If we are to ensure that more oil is produced in a timely fashion, there are many countries where this process needs to be speeded up.
For oil production to be maintained at current levels in 2050, the IEA believes that 45 million barrels a day are needed from new conventional oil fields. There will also be continued investment in unconventional resources such as shale oil. Even so, in the IEA’s words: “still, this leaves a large gap that would need to be filled by new conventional oil and gas projects….” Unfortunately, the wisdom of this statement is then marred by the next clause which says that “the amounts needed could be reduced if oil and gas demand were to come down.” True, but it’s wishful thinking!
With sentiment gradually shifting to recognizing the need for a bigger role for oil in the global energy balance, this report reminds us that a fast pick up in investment is needed to make up for ground lost in recent years. Unfortunately, many oil and gas companies lost sight of the energy reality and, partly under ESG pressures, pivoted away from their core business to sectors they knew little about. This report is also a reminder for oil and gas companies that theirs is far from being a sunset industry and they have a big future ahead. The IEA is telling us that we need more oil!
Neil Atkinson is an independent energy analyst, a former head of the IEA’s oil
industry and markets division and a visiting fellow at the National Center for Energy Analytics.
For a deeper dive into this topic, read NCEA’s issue brief on decline rates.
This article was originally published by RealClearEnergy and made available via RealClearWire.
Without too much interference, the market will figure it out.
We have wasted decades on wind and solar development. Not that we haven’t learned anything from it. We have learned that no amount of money spent on wind and solar can make them able to sustain the grid or a modern society. Of course we didn’t have to spend as much as we did, it was clear decades ago that wind and solar were not a substitute for fossil fuel and nuclear. We are slow learners but we are getting there.
True, but a few $trillion here and a few $trillion there wasted on unreliable intermittent “power” that does nothing positive for the environment and only makes electricity more expensive and pretty soon you’re talking about real money. Are we for another decade or so really going to maintain the wind and solar farce that has now degenerated into outright fraud? Yes, don’t doubt it, we truly are less than wise “slow learners” (irresponsible idiots perhaps)?
You’re assuming that it’s idiocy and not planned. This is the de-industrialization of the West, happening right before your very eyes.
De-industrialization is extreme idiocy.
happening in real time in Germany & UK
let me fix that – politicians are slow learners- you’re welcome
I’m not so sure. Politicians do not have ideas or beliefs of their own. They check to see what people are thinking, which means they are always behind the curve, appearing to be slower than the rest. As soon as they see the direction of the political wind, they change their “beliefs” and say they always believed that way. They then paint their opponents as having the beliefs they just abandoned. An example: Democrats paint Republicans as racists, despite having successfully fought to exclude Blacks as free men in the Declaration of Independence, maintained slavery until defeated in the Civil War, and founded, funded, and provided legal and logistical support to the KKK for 100 years.
Politicians (democrats and Republicans) aren’t like regular people. They have many of the symptoms of sociopaths.
I don’t place Trump in that category as most of his life was spent as a businessman. He never fell for the Climate Scare/Scam. He doesn’t care what other people think, although he listens to see if he can learn something. What he learns may result in a tweak to his beliefs, but his basic principles are not changed because of polls.
No slow learner here! I knew it was massively stupid right from the start. The “slow learners” are the “progressives” who think they’re going to “save the planet,” the ultimate hubris.
So does this mean we’re moving away from an emotion driven energy economy?
Not according to Greta Thunberg.
You just know you’ve gone full retard when you actually consider anything that spoiled-child Greta comes out with.
Are you listening UN officials?
Nah – UNO’s AGW is just being phased out and replaced by WHO’s ONE HEALTH(soon to be ONE HEALTH EMERGENCY and Sickness Crisis after some GOF release).
The energy concessions are for the sake of AI and MiC.
Just imagine if the trillions squandered on “renewable energy” had instead been spent on things that would actually improve the human condition.
Excellent article . have linked on my CoSy.com/DailyBlog .
‘IEA believes 45 MBpD will be needed from conventional oil fields.’
This may be their belief, but it is very likely also as factually impossible as their former green energy projections.
In 2007, IEA did a massive survey of the about 800 largest global conventional oil fields, looking at their then annual decline curves. Those fields comprised (per IEA) about 85% of total crude production that year (this was mostly before unconventional shale from horizontal drilling/fracking.) Based on their survey plus application of standard creaming curves to all the then known crude oil basins (which say that as of 2014 about 75% of all the crude ever to be discovered in those basins has been), it was easy to predict that conventional crude production would globally peak in 2008. It did. Explained in detail in essay ‘IEA facts and fictions’ in ebook Blowing Smoke back in 2014.
Since 2014, a couple of new major basins have been discovered—offshore Guyana in South America and offshore Namibia in Africa. Plus there is ANWR, a known Alaskan oil basin of unknown potential thanks to Biden. But those together will never produce 45MBpD. For scale, by far the worlds largest conventional field, Ghawar in Saudi Arabia, produced 6% of the worlds conventional crude at its peak (it has now declined to half of peak).
So IEA may have gotten off ‘green energy’, but it is still way off reality.
I agree. But there will be no change at IEA until Fatih Birol is removed as Executive Director. He’s the one who moved IEA from its main mission of oil supply reliability to advocating for renewables.
Oil is a finite resource, and many products rely on its availability. Gas is also finite but requires additional processing, so is more useful as a source of thermal energy. That much is clear.
Less clear is the total objection to coal as an albeit finite resource, but which is in principle a more versatile product. Most people have forgotten about coal gas, and coke for both thermal energy and steel making. The reserves are huge but my forecast, which I will not live to see is that coal and nuclear will be the primary sources for energy.
finite but enough under current technology for hundreds of years – right now only about 10% of an oil reserve is recovered but the Conoco CEO recently said that he expects that % to increase dramatically with AI & other technologies – so it no doubt will be the main source of energy for many decades/centuries? to come – probably as God intended
Off topic, but emblematic of current politics, both in the US and elsewhere.
https://www.foxnews.com/us/harvard-hosts-panel-bridging-political-divide-featuring-only-democrats-naacp-president
WTGs and WVs are solutions still seeking a problem to solve.