The Influence of Global Energy Demand on Oil and Gas Investments

Current trends in global energy demand

Current trends in global energy demand indicate a significant increase, with projections showing a 15% rise by 2050. While oil demand remains steady, renewables and natural gas are expected to grow, despite policy shifts favoring lower-carbon investments and increasing electrification impacting natural gas demand.

"Later this month, we'll publish our global outlook, which projects global energy demand 15% higher in 2050 than it is today. We see oil demand holding steady at around 100 million barrels per day in 2050, while demand for renewables and natural gas grows considerably." --- (XOM, earning call, 2024/Q2)

"In current trajectory, the energy addition phase continues in the 2020s. You can see in the 2020s as a whole, the growth of carbon and low carbon energy increases even more, but still not enough to meet all of the growth in energy demand and unabated fossil fuels shown here in the black bar continues to rise." --- (BP, event transcript, 2024/07/10)

"It's an economy that is large and demand continues to go up. That said, the policy environment has been one that is geared towards reducing investment in traditional energy, encouraging investments in these lower-carbon energies." --- (CVX, earning call, 2024/Q1)

"We saw record demand in 2023 and expect another record this year. At the same time, we're constantly monitoring trends and signpost in the global markets and we're prepared to adjust and evolve just as we have for the past 140 years." --- (XOM, event transcript, 2024/05/29)

"In contrast, in net 0, natural gas demand is crowded out as energy systems around the world increasingly electrify and the share of wind and solar in power generation increases. These 2 opposing forces are operating in both scenarios. In current trajectory, increasing demand in" --- (BP, event transcript, 2024/07/10)

Impact of renewable energy on oil and gas investments

Renewable energy is significantly impacting oil and gas investments, as companies like Nextera Energy and Chevron are reallocating capital towards renewables and lowering carbon intensity. ExxonMobil's renewable diesel project and Amazon's extensive investments in solar and wind further illustrate this shift, highlighting a broader trend towards sustainable energy solutions.

"While we may see a few pennies impact again next quarter, we expect gas infrastructure's earnings growth to be effectively flat going forward as we continue to allocate more capital on a relative basis to renewables, storage and transmission. Similar to what we saw this quarter, the increased contributions from new investment driven by the strength of our renewable development program are expected to more than offset any slowing in gas infrastructure growth going forward." --- (NEE, earning call, 2024/Q2)

"We aim to grow our oil and gas business, lower the carbon intensity of our operations, and grow lower carbon businesses in renewable fuels, carbon capture and offsets, hydrogen and other emerging technologies." --- (CVX, press release, 2024/04/25)

"On the renewable fuel side, biofuel side, we have a 20,000 barrel a day renewable diesel project up in Strathcona in Canada that's on track to come online going into next year." --- (XOM, conference, 2024/09/05)

"To get there, we’ve been the largest corp buyer of renewable energy in the world for four years running, according to BloombergNEF, and we’ve invested billions of dollars in more than 500 solar and wind projects worldwide." --- (AMZN, Twitter, 2024/07/10)

"Renewables are energy independence, it's electricity generated from the sun and the wind, it's not subject to fuel price volatility. Low cost renewables are also bringing power bills down which attract new investment from data centers, semiconductor chip manufacturers and other sectors that are looking to invest in the U.S., and low power bills can really dictate which states they select to make those investments in." --- (NEE, earning call, 2024/Q2)

Technological advancements shaping investment strategies

Technological advancements are crucial in shaping investment strategies within the oil and gas sector. Companies like ExxonMobil and SLB emphasize sustainable practices and infrastructure improvements, while Halliburton focuses on profitable growth through technology. This alignment with government policies and market demands drives significant investments in energy innovation.

"Their vision for modern IT transformation through platformization aligns with our own commitment to safeguarding critical infrastructure and driving technological advancement." --- (SLB, press release, 2024/08/19)

"With advancements in technology and the support of clear and consistent government policies, ExxonMobil aims to achieve net-zero Scope 1 and 2 greenhouse gas emissions from its operated assets by 2050." --- (XOM, press release, 2024/04/12)

"Following the recent announcement to not pursue an increase to its maximum sustainable capacity, the country's shifting focus towards natural gas where production is now expected to increase by more than 60% through 2030, will require significant investment in gas infrastructure." --- (BKR, earning call, 2024/Q1)

"That means that we are delivering the technology, we're making the investment while expanding margins and growing, and that's been sort of our mantra, our strategy is profitable international growth." --- (HAL, earning call, 2024/Q1)

"We started out on a purposeful journey to build the best production focused company in the energy industry, driven by our vision of improving lives and focus on helping our customers unlock energy the world needs in an economically and environmentally sustainable way. We have long viewed the production well site as the playing field in which we are uniquely well positioned to deliver impactful life of field production optimization solutions to our customers." --- (SLB, event transcript, 2024/04/02)

Geopolitical and regulatory factors influencing investments

Geopolitical and regulatory factors significantly impact oil and gas investments. Companies like ExxonMobil highlight that political developments and stringent regulations, particularly in Europe, complicate investment decisions. Additionally, capital investments in lower-emission projects depend heavily on public policy support and the availability of opportunities.

"Actual future results, including project plans, schedules, capacities, production rates, and resource recoveries could differ materially due to: changes in market conditions affecting the oil and gas industry or long-term oil and gas price levels; political or regulatory developments including obtaining necessary regulatory permits; reservoir performance; the outcome of future exploration efforts; timely completion of development and construction projects; technical or operating factors; and other factors cited under the caption 'Factors Affecting Future Results' on the Investors page of our website at exxonmobil.com and under Item 1A." --- (XOM, press release, 2024/05/07)

"If you look at expanded disclosure requirements that Europe is looking for, or if you look at regulation around reducing carbon footprint and not necessarily implementing regulation that's technology agnostic and focused on just reducing carbon intensity, that all makes Europe a much tougher investment proposition." --- (XOM, earning call, 2024/Q1)

"Capital investment guidance in lower-emission investments is based on our corporate plan; however, actual investment levels will be subject to the availability of the opportunity set, public policy support, and focused on returns." --- (XOM, sec filing, 2024/Q1)

Energy prices and their impact on investment decisions

Energy prices significantly influence investment decisions in the oil and gas sector. Companies like EOG Resources and Pioneer Natural Resources emphasize that investor sentiment is closely tied to energy price outlooks, while factors such as geopolitical risks and OPEC's actions contribute to price volatility, impacting overall investment strategies.

"We feel that obviously if investors are investing in our company, A, they like our strategy, they like our assets, they like our low cost basis, but B, they also have a favorable outlook on the energy prices and so we should leave our operators exposed to that or our investors exposed to that and basically do a hedge on the backside on our operations." --- (EOG, conference, 2024/05/29)

"Global oil price levels and general inflationary pressures will ultimately depend on various factors that are beyond the Company's control, such as (i) the ability of OPEC and other oil producing nations to manage the global oil supply, (ii) the impact of sanctions and import bans on production from Russia, (iii) the impact on oil supplies from the Middle East should the Middle Eastern conflicts continue to expand, (iv) global oil demand growth, including demand growth from China and India, (v) oilfield services demand, (vi) political stability of oil consuming countries and (vii) the overall health of the global economy." --- (PXD, sec filing, 2024/Q1)

"It is expected that the price of oil will be volatile for the foreseeable future given the current geopolitical risks, evolving macro-economic environment that impacts energy demand, future actions by OPEC and non-OPEC oil producing countries, the Russia-Ukraine war and the conflicts in the Middle East, and the Biden Administration's management of the U.S. Strategic Petroleum Reserve." --- (OXY, sec filing, 2024/Q1)

"Adjusted earnings were lower by $1 billion versus last quarter. Adjusted upstream earnings were down due to lower realization and liquid liftings, partly offsetting were favorable tax impacts." --- (CVX, earning call, 2024/Q1)

"The strength and depth of our multi-basin portfolio of premium assets is a tremendous advantage, and our focus on premium drilling means each of these assets competes against our premium price deck, measuring direct well investments against a $40 oil and $2.50 natural gas price for the life of the assets." --- (EOG, earning call, 2024/Q2)

Future outlook for global energy demand and investments

Future global energy demand is expected to grow significantly, with U.S. power demand projected to increase by 38% over the next two decades. However, uncertainties in policy and technology advancements pose challenges for meeting net zero goals, influencing investment strategies in both traditional and renewable energy sectors.

"However, the Global Outlook does not attempt to project the degree of required future policy and technology advancement and deployment for the world, or ExxonMobil, to meet net zero by 2050." --- (XOM, press release, 2024/05/03)

"I know you're going to update in next year. But do you still think that it's -- or $25 billion to $30 billion of that was going to be allocated towards hydrogen, solar, offshore wind power in effect." --- (BP, earning call, 2024/Q2)

"and storage. Over the next 2 decades, U.S. Power demand is expected to grow 38%." --- (NEE, event transcript, 2024/06/11)

"Energy demand models are forward-looking by nature and aim to replicate system dynamics of the global energy system, requiring simplifications." --- (XOM, sec filing, 2024/Q1)

"By way of example, the extraordinary collapse in oil demand and oil prices, during which oil traded at an all-time low of negative $37 per barrel in April 2020 – driven by the COVID-19 pandemic and compounded by the predatory practices of OPEC, Russia and other producing nations, which flooded the market with oil – posed a direct threat to the stability and competitiveness of the U.S. energy industry and consequently to the U.S.'s long-term energy and national security." --- (XOM, press release, 2024/05/02)