While high oil prices have fueled soaring profits for energy companies over the past year, only a small portion of those profits have been plowed back into the oil and gas sector. As companies involved in this field recognize the inevitability of the energy transition in the future, many are investing in their clean energy business or returning cash to shareholders.
However, industry experts fear that insufficient investment in oil and gas could jeopardize global energy security at a time when demand for fossil fuels is strong and growing.
Amin Nasser, CEO of Saudi oil giant Saudi Aramco, said this month that “the problem of insufficient investment in oil exploration and even refining persists.” The latest IEA report indicates demand at 101.7 million barrels, with a peak production base of 100 million. And this before the “opening up” of China and the continuation of the rise in consumption at pre-crisis levels. Nearly two million deficit per day!
Clearly, demand for fossil fuels remains high and continues to grow, but investment in oil and gas projects around the world is alarming. The global average rate of oil depletion is around 6%, which means that oil and gas companies need to invest not in new projects, but simply to maintain the existing level of production. In other words, there are concerns about the continued reliance on mature oilfields that will soon dry up.
Disruptions to Russian oil and gas supplies have shown just how vulnerable the global energy system is, and prioritizing sustainability over energy security could be a real challenge going forward.
With such a rate of decline in the industry, there are only five or six years left before its collapse, which is very short. This will happen if the big companies don’t change their approach and start investing in oil and gas on a large scale, distributing the income in such a way that it is possible to encourage shareholders, to invest in renewable energies and develop their core business.
Photos used: pixabay.com
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