Why we need to keep investing in oil and gas

As the International Energy Agency says, “inv­­­­estment is the lifeblood of the global energy system.”  The IEA is giving the topic so much importance that it is launching its first ever annual ‘Status of Global Energy Investment.’

The concept holds true for oil and gas: exploring and producing new resources is crucial to ensure that the world’s growing population will have access to the energy it will demand – even as nations across the world implement the Paris climate agreement.

Here is why:

1. Even if the world manages to keep the temperature increase within 2 Degrees Celsius, in 2040 oil and gas will each have to meet 22% of the world’s energy demand. This is what the IEA projects in its “450 ppm Scenario” (the 2 Degrees scenario), shown in its 2015 World Energy Outlook:
2. If the oil and gas industry doesn’t explore (and find!) new resources, we will not be able to meet that demand, as production from current resources is decreasing. The slide below, from this year’s Statoil Energy Perspectives – the company’s scenarios – speaks for itself (the Renewal scenario is equivalent to the 2 Degrees pathway). Even in the most stringent Renewal scenario, demand for oil and gas in 2040 remains so high – the growth of renewables notwithstanding –the world will need the equivalent of more than 15 Norways – Europe’s largest producer of oil and gas – to compensate for the declining production.
3. Last but not least: not all fossil fuels are equal: gas can actually help reduce CO₂ emissions – for two main reasons. First, it can be used to produce electricity with roughly half the CO₂ emissions of coal – which means that stopping the use of coal to produce electricity in favour of gas would dramatically reduce the growth of CO₂ in the atmosphere. Second, gas is an excellent partner for renewable energy. Gas power plants are very fast at ramping up production, which means they can quickly jump in when there is no sun and/or no wind. This this blog explains it clearly.

The conclusion is clear: we really need to keep that lifeblood going, encouraging investment and so making sure that the world can meet the growing energy demands of its growing population.

As the IEA says: “attracting large amounts of capital and investment flows is vital to accelerating the transition to a low-carbon economy while also maintaining energy security and expanding access to energy to all.”

About Alessandro Torello

Alessandro is IOGP’s EU Communications Manager. Before joining IOGP in 2013, he was a journalist for over seven years, covering energy and climate issues for The Wall Street Journal/Dow Jones in Brussels, and the transport industry in Italy for Bloomberg before that. Alessandro has a background in international relations, with a degree from the School of Advanced International Studies (SAIS) of the John Hopkins University in Washington, D.C.