Global investment in oil and gas is expected to decline by almost one-third in 2020 and investment in shale is anticipated to drop by 50% this year, which according to the Paris-based International Energy Agency (IEA), will be biggest fall in global energy investments on record.
At the start of the year, global energy investment was on track for a 2% increase in 2020, its biggest growth in six years, the IEA said. A total of $1.8tn was invested in the sector in 2019.
If investment stays at 2020 levels in oil markets, it would reduce the previously expected level of supply in 2025 by almost 9mn barrels a day, the IEA outlined.
The organisation said this would create a clear risk of tighter markets if demand starts to move back towards its pre-crisis trajectory.
“The historic plunge in global energy investment is deeply troubling for many reasons,” points out Fatih Birol, IEA’s executive director.
“It means lost jobs and economic opportunities today, as well as lost energy supply that we might well need tomorrow once the economy recovers,” Birol said, adding that it could hurt the move towards cleaner energies.
The IEA said revenues for governments and industry are set to plummet by over $1tn this year due to the fall in energy demand and lower prices.
Mobility and aviation are leading the drop in oil investment, which account for 60% of global oil demand.
The IEA said global oil demand was down by about 25mn barrels per day in April when more than 4bn people around the world were under some form of lockdown.
For the entire year, oil demand could drop by 9mn barrels per day and return to 2012 levels, the IEA said.
Global energy companies have cut investments and shelved projects to shore up their finances due to the crisis.
The IEA said higher debts after the crisis will pose lasting risks to investments.
The latest forecast by the IEA comes despite China reporting last week that oil demand has returned to pre-crisis levels and rebounded back to 13mn barrels per day.
Oil prices briefly turned negative for the first time in history in mid-April due to lack of demand during the pandemic and an extreme shortage of storage space, particularly at a key hub in the United States in Cushing, Oklahoma.
Prices have recovered since, with both benchmarks - Brent crude, the international standard, and West Texas Intermediate, the US standard - trading at around $35 per barrel right now.
