State of the Oil and Gas Industry in 2024: A Resilient and Dynamic Sector

The global oil and gas industry in 2024 stands at a fascinating juncture, marked by resilience, adaptability, and a renewed sense of optimism. Despite the ongoing challenges posed by geopolitical tensions, economic uncertainty, and the accelerating energy transition, the sector has shown remarkable strength and flexibility. This year’s developments highlight a critical period of relative stability, offering a platform for future growth and innovation.

A New Era of Upstream Investment

One of the most notable trends in 2024 is the significant rebound in upstream investment, which is crucial for ensuring long-term energy security. The industry has seen a substantial increase in capital expenditures, with annual upstream investment needing to rise by $135 billion, reaching a total of $738 billion by 2030. This 15% increase over last year’s projections reflects rising costs and a stronger demand outlook, underscoring the sector's critical role in meeting global energy needs.

The investment landscape has transformed dramatically since the pandemic-induced lows of 2020. In 2023, upstream capital expenditures surged by $63 billion year-on-year, with an additional $26 billion expected in 2024. For the first time in a decade, upstream investment is poised to surpass $600 billion, more than doubling from the 2020 low of $300 billion. This resurgence not only represents a recovery but also positions the industry for sustained growth and stability.

Regional Dynamics and Opportunities

The growth in upstream investment is being driven by regional dynamics that present unique opportunities for advancement. North America remains the largest contributor to capital expenditure growth, accounting for more than a third of global spending. However, the spotlight is increasingly shifting toward Latin America, which is expected to be the largest source of incremental capital expenditure growth in 2024, surpassing North America for the first time since at least 2004.

Latin America’s emergence as a key player in the global oil and gas landscape is driven by significant expansions in Brazil and Guyana. By 2030, around 2.2 million barrels per day of new or expanded conventional projects are expected to come online in the region, representing more than a third of the total 6 million barrels per day globally. This growth highlights Latin America's crucial role in non-OPEC supply and its potential to shape the future of the industry.

Geopolitical Stability and Supply Resilience

Despite the challenges posed by geopolitical risks, including the ongoing conflicts in Israel and Ukraine, and growing tensions in the Red Sea, the physical production of oil has remained remarkably resilient. The industry has adapted to these challenges by rerouting trade and adjusting to increasingly dangerous transit routes, mitigating the impact of sanctions and conflicts.

Moreover, output in key regions like the US, Canada, Brazil, and Guyana has reached all-time highs, contributing to record non-OPEC supply and historically high OPEC spare production capacity. The resilience of production in countries under sanctions, such as Russia, Iran, and Venezuela, further underscores the sector’s ability to navigate complex geopolitical landscapes.

Navigating Uncertainty in Demand and Energy Transition

While the supply side of the oil and gas industry has shown strength, the demand outlook remains uncertain, particularly in the context of the energy transition. The industry's future hinges on balancing the need for continued investment to meet growing demand with the imperative to transition towards lower carbon-intensive energy sources.

The base case forecasts suggest that global demand for liquids will rise to nearly 110 million barrels per day by 2030 before plateauing and gradually declining to around 100 million barrels per day by 2050. However, there is significant uncertainty around this trajectory, with projections varying widely depending on the pace of the energy transition and the adoption of more ambitious climate scenarios.

This uncertainty creates a challenging environment for making long-term investment decisions. Yet, it also presents an opportunity for the industry to innovate and adapt, ensuring that it can meet future demand while contributing to a just and orderly energy transition. The sector's ability to remain agile and responsive to changes in demand and policy will be critical in navigating this complex landscape.

Attracting and Retaining Talent for a Sustainable Future

A key factor in ensuring the industry's prosperous and sustainable future is the ability to attract and retain the right talent. As the sector evolves, there is a growing need for skilled professionals who can drive innovation and implement progressive investment strategies. The industry's transformation offers exciting opportunities for those with expertise in areas such as digitalization, sustainability, and new energy technologies.

To remain competitive, companies must focus on creating an inclusive and dynamic work environment that appeals to the next generation of talent. This includes embracing diversity, fostering continuous learning, and providing opportunities for career development. By investing in human capital, the industry can build a workforce that is capable of navigating the challenges of the energy transition and driving the sector forward.

Conclusion: A Resilient Industry Poised for Growth

In 2024, the oil and gas industry find itself in a period of relative stability, with a positive outlook for the future. The significant rebound in upstream investment, coupled with the resilience of supply and the emergence of new regional opportunities, underscores the sector's ability to adapt and thrive in a changing world. While uncertainties remain, particularly on the demand side and in the context of the energy transition, the industry is well-positioned to navigate these challenges and continue its critical role in meeting global energy needs. By embracing innovation, investing in talent, and remaining agile, the oil and gas sector can ensure a prosperous and sustainable future.

To learn more about how the sector is poised to deliver in 2025 and beyond, join us at the “Global Outlook Panel” at the next edition of the World Energy Capital Assembly 2024 and learn from industry directly:

• • Moderator: Paul Jones, Partner – Infrastructure, Projects and Energy, Addelshaw Goddard
  • Pedro Antonio Merino Garcia, Chief Economist, Repsol
  • Saad Rahim, Chief Economist, Trafigura