Global oil and Gas Investment is expected to drop in 2015 and 2016, which could mark the first two-year of spending in serious decline in decades, was remarked by OSLO—The International Energy Agency’s executive director, admonishing the long-term impact of the supply.
Dr. Fatih Birol, the IEA’s executive director stated to The Wall Street Journal on the sidelines of a Statoil conference that, “We have never seen this in the last 30 years, two consecutive years of investment decline. This will have implications for the oil markets, if not tomorrow then the day after tomorrow.”
It has been forecasted by the IEA, the energy watchdog of the Organization for Economic Cooperation and Development that, if the demand keeps growing and the current oversupply gets gradually reduced, chances are that oil prices will pick up slowly toward $80 per barrel by around 2020.
With the oil prices plummeting, it has globally affected in the delay of projects of oil engineers, which leads to cutting the expenditure by more than 20% on the year in 2015, this drop is set to prolong in the coming year, according to Dr. Birol. The Brent crude oil benchmark price after staying north of $100 per barrel for much of the time since 2011, saw a drop commencing since last year, trading a barrel for 45$. Dr. Birol expressed that, “The decline in investment denotes the magnification in production will be negatively affected in the next years to come,” To maintain a global supply of crude oil there is need of lot of investments.
According to Dr. Birol the world would need to add more than four million barrels a day of new oil production each year, even if globally the oil demand doesn’t grow at all, this is to compensate for the decline of the natural production in the existing fields.
Dr, Birol further states that it’s likely that the oil’s demand will grow by about one million barrels a day each year, which would likely tighten in the oncoming years, if the economic growth continues in the current orderly fashion around the globe.
Statoil ASA’s Chief Executive Eldar Sætre expects that oil companies around the world might have to cut the expenditure next year as well, if this period of lower spending lasts, as it will lead to more supply loss because of the annual decline.