*As Brent attains $75/b
Lagos — There is a large financing gap to cover to boost global oil upstream market as investments in the sector fall short by $600 billion.
According to JP Morgan’s head of oil and gas research, Christyan Malek, the bank has identified a shortfall of $600bn of upstream investments needed between 2021 and 2030 to meet what he called a ‘’muted view of global demand’’.
He called on oil majors to invest in new upstream projects to mitigate looming huge supply.
Malek said the financing gap would shift leverage toward core OPEC members such as Saudi Arabia but countries like Nigeria and Angola where global oil majors including Shell and Total were active may not be able to cover up the spare capacity.
Malek was quoted as saying, “With record reductions in corporate oil and gas reserves, the course has been set for the concentration of output growth towards OPEC, oil price overshooting, particularly as non-OPEC supply falls short, and a high probability of capital expenditure increases or incentive for mergers and acquisitions.”
In another statement, Trafigura’s co-head of oil trading, Ben Luckock voiced concern in underinvestment in upstream projects.
He said, “The underinvestment is real. In the last seven years, we have lost two thirds of the exploration budget of the world.”
Luckock said it may come back and bite the global economies before they transition into renewable fuels. “That six or seven million barrels per day that they’re holding back on at the moment, we’re going to need it probably sooner than we think.”
An analysts from PwC earlier told The PUNCH in an interview that to meet global cumulative demand over the next 30 years, undeveloped and undiscovered resources totalling 313 billion barrels of oil is needed to be added to currently producing assets.
Temitope Yusuff, Associate Director and Jasmine Ejiofor, a senior associate, stated, “To match this requirement, Rystad Energy calculates that exploration programmes will have to discover a worthy-to-develop resource of 139 billion new barrels of liquids by 2050, an impossible task if this decade’s low exploration activity levels persist.
“The world’s remaining proved reserves of 1.73 trillion barrels can cover 50 years of current production rates, BP estimates.”
International crude oil benchmark, Brent, briefly crossed the $75 per barrel mark to $75.20 at 8:55AM Nigerian time on Wednesday.
Speculations say OPEC and its non-OPEC partners would increase output at their meeting next week following reports that Russia, leading the alliance jointly with Saudi Arabia, are considering proposing that the group increase supply in August.