Delayed Energy Transition Could Mean Higher Hydrocarbon Prices

As the risk of a delayed energy transition scenario increases, so does the possibility of a much greater pull on future oil and gas supply, but meeting this demand would require a significant increase in upstream investment, resulting in higher hydrocarbon prices, according to the latest Horizons report from Wood Mackenzie.

According to the report “Taking the strain: how upstream could meet the demands of a delayed energy transition”, a variety of external pressures have weakened government and corporate resolve to spend the estimated $3.5 trillion required to restructure energy systems to limit both hydrocarbon demand and global warming.

The report focuses on the additional resources and spend required if the upstream sector was to meet higher-for-longer oil and gas demand, and the resultant consequences.

Under this scenario the world would require 5% more oil and gas supply and 30% higher annual upstream capital investment.

Plenty of supply is available to meet rising demand in the near term. “However, stronger-for-longer demand growth is a much stiffer ask. A five-year transition delay would require incremental volumes equivalent to a new US Permian basin for oil and a Haynesville Shale or Australia for gas,” said Angus Rodger, head of upstream analysis for Asia-Pacific