Rystad Energy has conducted an analysis showing that claims of chronic underinvestment in the global oil and gas industry are exaggerated. According to their findings, investments in the upstream sector have declined since reaching a peak of $887 billion in 2014, with an estimated $580 billion to be invested this year. The number of completed wells has also decreased from 88,000 in 2014 to 59,000 in 2023. This has led many market participants to predict a persistent underinvestment trend, resulting in a shortage of oil supply. However, Rystad Energy’s analysis presents a different perspective. They point out that lower unit costs, increased efficiency, productivity gains, and evolving portfolio strategies have significantly improved the efficiency of the upstream sector. In other words, the industry can achieve the same results as before but at a much lower cost. Although investments have declined, overall activity and production remain healthy and in line with the levels seen between 2010 and 2014. Espen Erlingsen, Head of Upstream Research at Rystad Energy, stated that contrary to popular belief, the world is investing adequate amounts of money in fossil fuel production to meet demand. Cost savings have allowed operators to produce the same amount of oil at a lower cost, alleviating concerns of an immediate oil supply crisis due to underinvestment.
Global upstream investments peaked at nearly $900 billion in 2014 but declined to around $500 billion two years later after the 2015 oil price collapse. Another drop occurred in 2020 when investments fell to $400 billion due to the impact of the Covid pandemic and the subsequent oil price crash. However, there has been a recovery in oil and gas activity, resulting in approximately $500 billion in spending last year. Despite this rebound, investments in 2022 only reached 60% of 2014 levels, leading to the assumption that upstream activity has decreased by 40% since 2014.

The secretary-general of the Organization of the Petroleum Exporting Countries (OPEC) has indicated that the influential alliance of producers is actively seeking new members. When asked about expanding the OPEC coalition, Haitham al-Ghais, the secretary-general, confirmed during a press conference on Wednesday, “Yes, we are.” Currently, the group consists of 13 members, primarily located in the Middle East, North and West Africa, and South America. The organization of oil producers faces the challenge of reconciling expectations of a tighter crude oil supply in the second half of the year with ongoing concerns about the macroeconomy and inflation. OPEC members coordinate their oil production levels to influence prices. Ecuador left the group in 2020 due to political circumstances but was invited to rejoin OPEC in May, as stated in a letter from al-Ghais shared by the Ecuadorian Energy Ministry. “The organization considers it a top priority for Ecuador to rejoin the OPEC family,” the letter stated. The response from the Ecuadorian ministry has not been disclosed. Al-Ghais declined to disclose the names of potential new members. However, he mentioned recent visits to oil-producing countries, including allies that are part of the OPEC+ group, which implements a joint production strategy with OPEC countries. “I visited Malaysia and Brunei,” he mentioned, emphasizing that he did not necessarily invite these countries to join the organization. “I also visited Azerbaijan and Mexico.” OPEC previously clarified in late June that although there has been speculation about Guyana’s potential membership, the South American country had not received an invitation to join, although it is recognized as an emerging player in the international oil market. When asked about the requirements for becoming an OPEC member, al- Ghais explained, “They need to be a substantial net oil exporter and share similar goals with OPEC.
These criteria are clearly outlined in our statute. Many of the countries I mentioned earlier actually fit this profile. So, it’s a work in progress.”

In March, Saudi Arabia and Iran made an announcement that they had reached an agreement to restore diplomatic relations, marking the end of a seven-year rift. The deal was brokered by China and is seen as one of the recent geopolitical realignments happening in the Middle East. The Saudi Arabia-Iran deal has received widespread praise, with John Kirby, the spokesman for the U.S. National Security Council, stating that it could potentially lead to an end of the war in Yemen, help prevent Saudi Arabia from defending itself against attacks, and deescalate tensions. Tensions between Saudi Arabia and Iran had escalated in 2019 when Iran-backed Yemeni fighters launched an assault on Saudi Arabia’s Abqaiq facility, temporarily halving its production capacity. Last year, Saudi Arabia raised concerns about an imminent Iranian attack, prompting a swift response from the United States. Now, it has come to light that the two nations are willing to elevate their newfound friendship to a new level. Mohsen Khojastehmehr, the head of the National Iranian Oil Company (NIOC), revealed to the Tasnim News Agency that initial steps for bilateral cooperation in the oil industry have already begun. The focus will be on exploring the jointly owned oil and gas fields that were neglected in the past due to animosity between the two countries. Iran and Saudi Arabia have over 28 untapped oil and gas fields in common. Disagreements regarding the extent of exploitation and access have prevented their development. Among these fields are Farzad A and B, as well as the Arash gas field, which extends into Kuwait. The Farzad field holds approximately 23 trillion cubic feet of natural gas reserves and 5,000 barrels per billion cubic feet of gas condensates. The Arash field, on the other hand, contains around 20 trillion cubic feet of gas reserves and has the potential to produce one billion cubic feet per day. These recent developments suggest that the oil markets may face a potential influx of significant volumes of oil from Iran. Despite being under U.S. sanctions, Iran, as an OPEC member, has managed to export clandestine oil using various covert techniques. In May, Iranian crude exports exceeded 1.5 million barrels per day (mb/d), reaching the highest level since 2018. Tehran also announced that it had increased crude output to over 3 million bpd, the highest level since 2018. Considering that Iran’s current production is still lower than the peak of 3.7 mb/d in 2018, there is likely room for further increase in the future.

The UK government made an announcement in early June stating that the Energy Profits Levy, commonly referred to as the windfall tax, would be reduced to lower levels if oil and natural gas prices consistently returned to normal levels for a sustained period. Currently, the levy places an overall tax rate of 75% on operators in the UK North Sea. However, the government plans to keep this levy in effect for the next five years as long as oil and gas prices remain higher than historical norms. Once prices consistently return to normal levels for a sustained period, the tax rate will decrease to 40%. This decision is part of the government’s strategy to support households with energy bills while ensuring stability for investors and securing the long-term future of domestic energy production. However, the tax rate for oil and gas companies will only revert to 40% if both the average oil and gas prices fall to, or below, $71.40 per barrel for oil and £0.54 per therm for gas, for two consecutive quarters. Offshore Energies UK (OEUK), the largest industry association, expressed its support for the price floor mechanism but emphasized the need for additional measures to address the industry’s current challenges. “While this is a positive step, there is still much more that needs to be done to restore confidence in our sector. We will collaborate closely with the government and lenders to understand the specifics of this measure and evaluate its effectiveness in attracting investment,” commented David Whitehouse, Chief Executive of OEUK. “Maintaining a predictable and fair fiscal environment is crucial for ongoing UK energy production and success in the global competition for energy investment. By investing in homegrown production, we avoid costlier, less secure and higher carbon imports while supporting an industry we need to make cleaner, more affordable energy in the UK, for the UK. Our sector is expanding into renewable energy, supported by a world class supply chain.”

The oil and gas industry in Nigeria, which contributes significantly to the country’s foreign earnings and over half of its government revenues, is currently facing significant challenges. Despite the official figures released by Nigeria’s national statistics bureau indicating a revenue of $45.6 billion last year, representing a 46% increase compared to 2021, these numbers conceal an uncomfortable truth: Nigeria’s oil production has been steadily declining in recent years. In April, the country produced less than 1 million barrels of oil per day, well below its OPEC quota of 1.8 million barrels per day. Therefore, despite the oil price surge in 2022 due to Russia’s invasion of Ukraine, the longterm narrative of Nigeria’s energy industry has been one of missed opportunities. Former finance minister Zainab Ahmed has stated that the overall impact of high prices has been “negligible or negative.” The decline in oil production in Nigeria can be attributed to significant issues such as large-scale theft and vandalism, as well as decades of underinvestment in infrastructure. As a result, the state-owned oil company NNPC has been unable to meet its production targets. Mele Kyari, the head of NNPC, has alleged that as much as 600,000 barrels of oil are stolen daily by government officials, security personnel, and even members of the clergy. The security situation is so dire that Nigerian authorities have enlisted the help of Government Ekpemupolo, better known as TomPolo, a former Niger Delta militant leader, to protect pipelines. Furthermore, the fuel subsidies introduced in the 1970s to provide affordable petrol for Nigerians have also deprived NNPC of vital resources for investment. Last year alone, NNPC paid out $10 billion in subsidies to distributors. In addition, official figures indicate that Nigerians now consume approximately 68 million liters of petrol daily, compared to about 49 million liters in 2015. However, there has not been a corresponding increase in population or economic activity. Some suspect that the numbers have been manipulated and that oil distributors sell subsidized oil in neighboring countries at significant profits. As a result, the newly elected president, Bola Tinubu, eliminated subsidies on his first day in office. Experts assert that the cumulative impact of all these challenges has prompted a recent wave of international oil companies to exit Nigeria’s onshore sector. China’s Addax relinquished its four oil blocks to NNPC in November. Meanwhile, ExxonMobil’s planned divestment of four oilfields worth $1.28 billion remains uncertain. Last August, local producer Seplat believed it had received approval to acquire the assets from Exxon, following the initial go-ahead from then-president Muhammadu Buhari, who also served as petroleum minister. However, a few days later, Buhari reversed his support for the deal.

On Wednesday, the Norwegian government announced its approval for the development of 19 oil and gas fields, with investments totaling over 200 billion Norwegian crowns ($18.51 billion). This decision aligns with Norway’s long-term production strategy, aiming to extend oil and gas extraction for many years ahead. In 2020, Norway’s parliament introduced temporary tax incentives to stimulate petroleum investments during a period of low activity. This led to a surge in applications from energy companies. Among the field developments granted final approval on Wednesday, Aker BP (AKRBP.OL) will operate nine fields, Equinor (EQNR.OL) will operate three fields, and Wintershall Dea and OMV (OMVV.VI) will operate several fields. Minister of Petroleum and Energy Terje Aasland stated during a press conference that these projects will contribute to maintaining a consistently high output from Norway’s continental shelf, while also creating employment opportunities and generating value. Norway’s petroleum production faces opposition from environmentalists and other individuals concerned about the contribution of carbon emissions from oil and gas combustion to climate change. However, the government argues that Norway’s oil and gas resources are crucial for Europe’s energy security and will remain necessary for many decades to come. Following Moscow’s reduction in supplies due to the war in Ukraine, Norway surpassed Russia as Europe’s largest gas supplier last year.

Saipem has successfully secured two offshore drilling contracts, one in the Middle East and another in the Mediterranean Sea. These contracts have a combined value of around $550 million. In the Middle East, Saipem has ensured the continuation of its ongoing operations with the Perro Negro 7 jack-up drilling unit by securing a 10-year extension to the existing contract. The Perro  Negro 7 is a state-of-the-art jack-up rig capable of operating in water depths of up to 375 feet. It adheres to the highest environmental standards and complies with the most stringent regulations. This 10-year extension is a record duration for the region and strengthens Saipem’s strategic position in the drilling sector. Saipem has expanded its presence in the Middle East, increasing the number of rigs from three in 2021 to an expected seven by the end of 2023 through the acquisition of various longterm contracts. With this contract renewal, Saipem’s commitment to executing projects efficiently and prioritizing safety and environmental concerns in the primary shallow water market worldwide is once again recognized. In the Mediterranean Sea, Saipem has been awarded a contract to utilize the Scarabeo 9 semi-submersible unit for approximately six months, with the option for an additional period. The Scarabeo 9 is a cutting-edge sixth-generation semi-submersible drilling rig equipped with advanced dual ram technology. It can operate in ultra-deep waters, reaching depths of up to 12,000 feet. This contract acquisition further solidifies Saipem’s position in the Mediterranean drilling market, which has demonstrated considerable stability over the years. The company expects this market to contribute to maintaining high fleet utilization rates. It is worth noting that in mid-May, Saipem also secured two additional offshore contracts. One involves an Engineering, Procurement, Construction, and Installation (EPCI) project in the Black Sea, while the other is related to decommissioning activities in the North Sea. The total value of these contracts is approximately $850 million.

On Tuesday, the Norwegian government made an announcement stating its intention to permit seabed extraction of minerals on the country’s continental shelf, citing the necessity of minerals for a successful transition towards a greener future. This announcement, which came a day after the United Nations adopted a groundbreaking agreement to safeguard the high seas, faced strong criticism from environmental activists. In a press release, the Ministry of Energy and Petroleum stated, “The government is proposing the opening of select areas on the Norwegian continental shelf for commercial activities involving seabed mineral extraction. Environmental considerations will be prioritized throughout the entire value chain, and extraction will only be authorized if the industry can demonstrate sustainability and responsible practices.” The ministry emphasized the importance of minerals in facilitating the global shift towards clean energy. It expressed concerns about the current control of resources by a small number of countries, which poses vulnerabilities for Norway. Accordingly, the ministry highlighted the need to secure mineral supplies crucial for the green transition. Furthermore, the ministry stated, “The extraction of minerals has the potential to develop into a new and significant industry for Norway.” The Norwegian Petroleum Directorate, the authority responsible for seabed minerals under the ministry, had already conducted a feasibility assessment. The assessment revealed “significant expected undiscovered mineral resources on the Norwegian continental shelf, some of which may be economically viable for extraction,” as stated in the announcement.

The Iraqi government has issued an invitation to companies for the bidding of 11 exploration blocks containing natural gas reserves. This move is aimed at enhancing Iraq’s self-sufficiency in the hydrocarbon sector. As stated by the Oil Ministry, eight of these blocks are situated in the western region of the country, one is located in northern Iraq, and two are positioned in central Iraq. Reuters reported that all of these areas represent new opportunities for oil and gas exploration. Despite being the second largest oil producer in OPEC, Iraq currently flares a significant portion of the associated gas produced from its oil wells rather than capturing and utilizing it for power generation. To meet its power generation needs, Iraq heavily relies on imported natural gas from neighboring Iran, accounting for up to 40% of its requirements. In light of this, the United States has been pressuring the Iraqi government to change this situation and instead tap into its own natural gas reserves. Consequently, the Iraqi government recently announced its intention to cease natural gas imports by 2026. Prime Minister Mohammed Shia al-Sudani of Iraq recently remarked, “We are burning money,” alluding to the vast quantities of natural gas Iraq flares daily (1,200 cubic meters) and the volume it imports from Iran (1,000 cubic meters). Al-Sudani explained that this practice incurs an annual cost of no less than $4 billion for Iraq. However, it is worth noting that this is not the first time Iraq has pledged to halt gas flaring and utilize it effectively. Iraq is a participant in the Zero Routine Flaring initiative led by the World Bank and the UN, which aims to eliminate routine flaring by 2030. Yet, little progress has been made thus far. Iraq possesses substantial natural gas reserves, estimated at approximately 131 trillion cubic feet, making it the twelfth-largest reserve holder globally. Nevertheless, the country grapples with frequent power outages due to insufficient fuel for its power plants.

Eni is on the verge of finalizing a purchase agreement with Neptune Energy Group for approximately $5 billion, according to sources cited by Bloomberg. Sources revealed that Eni may make an official announcement regarding the acquisition of oil and gas explorer Neptune Energy as early as this week. While other potential buyers, such as TotalEnergies, have shown interest in the private equity-backed company, Eni is currently positioned as the frontrunner to secure the assets. Neptune Energy, which is supported by Carlyle Group and CVC Capital Partners, has not yet made a final decision, and details such as the timing of the deal remain subject to change or potential cancellation, cautioned the sources. Representatives from Eni, Neptune Energy, Carlyle, and CVC declined to comment, as reported by the media outlet. Eni, headquartered in Rome, has been closely monitoring Neptune Energy since late last year, aiming to expand its natural gas business. Earlier this month, it was disclosed that Eni had entered into exclusive negotiations for the acquisition of Neptune Energy. These talks began after several months of negotiations in 2022, which initially stalled due to disagreements over the price. Eni subsequently raised its takeover offer price for Neptune Energy, which now stands between $5 billion and $6 billion. Approximately 75% of Neptune Energy’s production originates from natural gas reserves located in Eni’s operational regions, including the North Sea, North Africa, and Asia. Neptune Energy currently operates various offshore oil and gas projects in the Netherlands, Norway, and the UK.