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Upstream gas and LNG lead global oil and gas investment in 2022

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Global oil and gas investments will expand by $26bn in 2022 to reach $602bn (a rise of 4%) as the industry continues its protracted recovery from the worst of the Covid-19 pandemic and the hurdles imposed by the Omicron variant, according to the latest analysis by Rystad Energy.

A significant factor behind the rise is a 14% increase in upstream gas and LNG investments. These segments will be the fastest-growing this year, with a jump in investments from $131bn in 2021 to around $149bn in 2022. Although this falls short of pre-pandemic totals, investments in the sector are expected to surpass 2019 levels of $168bn in just two years, reaching $171bn in 2024.

Upstream oil investments are projected to rise from $287bn in 2021 to $307bn in 2022, a 7% increase, while midstream and downstream investments will fall by 6.7% to $172bn.

‘The pervasive spread of the Omicron variant will inevitably lead to restrictions on movement in the first quarter of 2022, capping energy demand and recovery in the major crude-consuming sectors of road transport and aviation. But despite the ongoing disruptions caused by Covid-19, the outlook for the global oil and gas market is promising,’ comments Audun Martinsen, Head of Energy Service Research at Rystad Energy.

Drilling further into the numbers, global shale investments are forecast to surge 18% in 2022, reaching $102bn in 2022 compared with $86bn in 2021. Offshore investments are set to increase 7%, from $145bn to $155bn, while conventional onshore will jump 8%, from $261bn to $290bn.

Regionally, Australia and the Middle East stand out, with Australia likely to see a jump in investments of 33%, thanks to greenfield gas developments. In the Middle East, investments will rise by an anticipated 22% this year as Saudi Arabia boosts its oil export capacity and Qatar expands production and export capacity of LNG.

This year’s investment growth is very much pre-programmed by the $150bn worth of greenfield projects sanctioned in 2021, up from $80bn in 2020, reports the market analyst. Sanctioning activity in 2022 is likely to closely match 2021 levels, with a similar amount of project spending to be unleashed over the short to medium term. 

Sanctioning activity is set to rebound in North America, with over $40bn worth of projects due for sanctioning in 2022. Six LNG projects are expected to receive the green light, five in the US and one in Canada. Offshore projects will also provide ample opportunities for contractors as TotalEnergies’ North Platte project enters the final stage of its tender process and LLOG Exploration’s Leon and Chevron’s Ballymore developments in the US Gulf of Mexico look to proceed to the development phase in 2022. For Africa, however, 2022 is expected to be another quiet year, with expected sanctioned projects worth a comparatively small $5bn.

When it comes to offshore field sanctioning, there are around 80 projects worth a total of $85bn in the global approvals pipeline for 2022. Of these, 10 are floating production storage and offloading units (FPSO), 45 involve subsea tie-backs, and 35 are grounded platforms. Latin America and Europe will account for around 24% each of the total offshore sanctioning values next year, with deepwater expansions expected in Guyana and Brazil and Norway following recent tax changes.

The number of sanctioned offshore projects is expected to rise year-over-year but will remain little changed when measured by capital commitments. An outstanding concern for 2022 is execution challenges related to the pandemic and increased inflationary costs for steel and other input factors. These are likely to make operators mildly cautious regarding significant capital commitments. In addition, major offshore operators are being challenged on their portfolio strategy as the energy transition unfolds, with many E&P companies already directing investment budgets to low-carbon energy sources.

For offshore contractors, the energy transition could be advantageous for wind power developments. Spending in the offshore wind sector reached almost $50bn last year, double the 2019 levels. By 2025, Rystad Energy expects offshore wind investments will rise to $70bn as demand for clean energy surges. By contrast, the offshore oil and gas sector is set to face a challenging energy transition period with oil demand likely to peak in the next five years, capping offshore investment at about $180bn in 2025.

Figure 1: Global oil and gas investments by market, in $bn
Source: Rystad Energy

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