Oil and Gas To Play Role In Global Economy through 2050


Some analysts and pundits who examine global investment trends claim

that oil and gas will soon be a sunset industry.


In this CEC Fact Sheet, we examine global investment trends over the next

three decades under the International Energy Agency’s (IEA) most probable

scenario, known as the Stated Policies Scenario (STEPS), using the IEA

World Energy Outlook (WEO), 2021 Extended Data Set. The IEA is one of

the few organizations that comprehensively tracks global investment trends

in the oil and gas industry.


Background on the IEA’s World Energy Outlook Stated Policies Scenario (STEPS)

In October 2021, the IEA released its WEO 2021 Extended Data Set and

updated it in January 2022. WEO 2021 makes use of a scenario approach to

examine future energy trends, including global oil and gas investment. In

WEO 2021, the IEA modelled four scenarios: the Net Zero Emissions by

2050 Scenario (NZE), the Announced Pledges Scenario (APS), the Stated

Policies Scenario (STEPS), and the Sustainable Development Scenario

(SDS) (IEA, 2021a).


Of the four scenarios, STEPS appears to be a more plausible and realistic

scenario than the other more aggressive scenarios set out in the WEO 2021.

According to the IEA:


STEPS provides a more conservative benchmark for the future because it

does not take for granted that governments will reach all announced goals.

Instead, it takes a more granular, sector-by-sector look at what has actually been put in place to reach these and other energy-related objectives, taking account not just of existing policies and measures but also of those that are actually under development (IEA, 2021a).


Cumulative investments of over $26 trillion needed to meet global crude oil and natural gas demand through 2050 indicate that global demand for oil and gas, and thus the necessary investment in it, will continue to remain robust over the next three decades.

Under STEPS, world demand for oil increases from 96.6 million barrels per

day (mb/d) in 2019 to 104 mb/d in 2035, before falling slightly to 103 mb/d

in 2050. Under STEPS, world demand for natural gas increases from 3,999 billion

cubic metres (bcm) in 2020 to 5,113 bcm in 2050


Taking into account projected global demand for oil and gas, between 2021

and 2050, global oil and gas investment under STEPs is expected to reach a

cumulative $26.1 trillion (in U.S. 2020 dollars), with global oil investments

estimated at nearly $14.9 trillion and natural gas at over $11.2 trillion.



Oil and gas investment in North America (Canada, the U.S., and Mexico)

over the period is estimated to lead the way at nearly $8.1 trillion, split

between oil at nearly $4.9 trillion and gas at nearly $3.2 trillion cumulative


Oil and gas investment in the Middle East over the period is estimated at

over $3.8 trillion, split between oil at over $2.4 trillion and gas at over $1.4

trillion cumulative. Oil and gas investment in the Asia-Pacific region over the period is

estimated at over $3.8 trillion, split between oil at over $1.3 trillion and gas

at nearly $2.5 trillion cumulative.


Looking at just upstream investment under STEPS, according to the IEA,

Annual upstream oil and gas spending averages around $650 billion

between 2021 and 2030, and $700 billion through to 2050, which is higher

than the average investment in the 2010s. Over 60% of total upstream

investment is spent on developing new oil and gas fields.


An opportunity for Canada to increase its market share of oil and gas investment

Global investment trends drawn from the IEA STEPS scenario illustrate that

the oil and gas industry will remain a strong performer over the next three

decades, despite claims by some analysts and pundits that the industry is in

decline.


With an estimated cumulative investment of over $26 trillion needed to

meet global oil and gas demand over the next three decades, Canada could

attract a significant slice of the investment pie. Unfortunately over the past decade, Canada’s share of global oil and gas investment has declined, while the share of global investment held by Russia/Asia, and the U.S. has remained strong.


According to the Canadian Association of Petroleum Producers (CAPP),

In 2014, Canada was viewed as a top tier international investment

jurisdiction for resource development and attracted $81 billion or more

than 10 per cent of total global upstream natural gas and oil investment.

International energy research firm Wood Mackenzie is forecasting global

spending on upstream natural gas and oil production will reach $525

billion in 2022. Based on that forecast Canada has fallen to just six per cent

of total market share, a four per centage point drop which represents over

$21 billion in potential investment (CAPP, 2022).


While there are numerous factors that explain oil and gas investment

decline in Canada, key reasons include increased regulatory burdens and

delays here in Canada, along with White House opposition to the Keystone

XL pipeline under the Democratic administrations of Barack Obama and

Joe Biden.

Sitting on some of the world’s largest reserves of oil and natural gas,

enjoying a reputation as a secure and reliable supplier, and maintaining

high environmental, social and governance (ESG) scores compared with

competitors such as Saudi Arabia, Iran, and Venezuela, Canada can and

should be part of the medium- to long-term solution to energy security,

especially considering the Russia-Ukraine conflict. The federal government

must remove some of the regulatory constraints they have imposed over the

past few years. Doing so will be critical to ensuring that Canada can increase

its share of global oil and gas investment and assist in efforts towards North

American and European energy security, with an emphasis on maintaining

high environmental standards.

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