IEA warns that deepest capex cuts have occurred in "stable" oil producing nations, putting future oil security at risk
In their latest World Energy Investment 2016 report, the Paris-based International Energy Agency (IEA) estimates that global energy investments fell to US$1.8 trillion last year, down 8% from 2014. Those figures include oil, natural gas, coal and power generation.
Among the key highlights:
- The largest energy investments made in 2015 was for power generation in China.
- Investments in US shale declined 52% last year, while costs of production declined about 30%.
- Upstream oil investment in Russia and the Middle East remain strong, with state-owned companies providing a record 44% of those investments.
- The Middle East produces about 35% of the world's oil but accounts for only 12% of upstream investments due to exceptionally low drilling costs.
- Lack of LNG infrastructure is limiting the use of natural gas for power generation in Asia, making coal-fired power plants substantially cheaper.
The IEA warns that the deepest cuts in upstream oil and gas investments have occurred in regions where geopolitical risk is low, such as North America. That means more production in the future will come from unstable areas, making global energy markets more susceptible to supply disruptions.