The toll of the Covid-19 pandemic on upstream investments in the first two years of the downturn is estimated at a whopping $285bn, and although spending will slowly start to rise from 2022, it will not reach pre-crisis levels of $530bn in the coming period, Norwegian energy intelligence firm Rystad reported.
In February 2020, before Covid-19 started impacting the global energy system, Rystad Energy estimated global upstream investments for the year would end up at around $530bn, almost at the same level as in 2019. At the time Rystad suggested 2021 investments would remain in line with the previous year’s level.
Covid-19 has removed 27% of planned investments
Compared to pre-pandemic estimates for 2020 and 2021, Rystad observes that spending fell by around $145bn last year and will end up losing $140bn by the end of this year. This implies Covid-19 removed 27% of planned investments.
Over the two-year period between 2020 and 2021, shale/tight oil investments are the ones most affected in both absolute and percentage terms, losing $96bn of the previously expected spending, or 39% for the sector.
Exploration spending is expected to drop by $19bn, or 22%, compared to what was previously forecast. Greenfield investment in new conventional projects will suffer a $78bn loss, or 28%, while brownfield investment in existing such projects will fall by $92bn, or 20%.
“Since shale/tight oil is both the segment with the highest decline in activity and the supply source in greatest need of continuous reinvestment to keep production growing, the immediate impact on output from this sector has been significant,” said Espen Erlingsen, head of upstream research at Rystad Energy.