IEF BCG Report: Oil and gas investment boost needed to ward off a crisis

IEF BCG Report: Oil and gas investment boost needed to ward off a crisis

The COVID-19 crisis has resulted in an unprecedented demand shock for the energy sector, and the weakened market environment has led many oil and gas companies to reduce capital expenditure (capex).

A new joint report by the International Energy Forum (IEF) and Boston Consulting Group (BCG), "Oil and Gas Investment in the New Risk Environment", examines the far-reaching impact of capex reductions on the energy markets and headwinds for the post-pandemic global economic recovery. It warns that weak energy demand caused by the COVID-19 pandemic and subsequent investment cuts by companies will have repercussions through a future supply shock.

According to the IEF and BCG analysis, the most critical long-term risk in the aftermath of COVID-19 will relate to investment. The report states that investment in oil and gas development will have to increase over the next three years by at least 25% annually from 2020 levels to stave off a crisis.

The report further explores how investment cutbacks and oil and gas project deferrals could impact policymakers' long-term goals and industry strategies:

  • Climate change: Reduced investment in oil and gas could hamper efforts towards achieving Paris Agreement climate goals.
  • Social equity: Tighter investment constraints will make it increasingly difficult to achieve goals such as affordable access to modern energy services and healthy living conditions.
  • Sector employment: Reductions in investment are likely to force companies to lay off highly skilled employees and further worsen the oil and gas industry's employment prospects.
  • Energy security: The COVID-19 crisis risks eroding energy security and jeopardising the prospect of inclusive, sustainable growth, the report notes.

Watch industry experts from IEF and BCG present key insights and analysis from the report on the future of oil and gas investments.

         

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