by kublikhan » Fri 17 Jan 2014, 17:00:32
$this->bbcode_second_pass_quote('', 'U').S. gas, oil Infrastructure spending jumps 60 percent in four years
That's only infrastructure spending. IE. Pipelines, transmission lines, etc. If you look at upstream investments, larger amounts of money are being poured in for smaller gains:
$this->bbcode_second_pass_quote('', 'R')ising costs are being met only by ever smaller increases in supply. The most interesting message in this year’s World Energy Outlook from the International Energy Agency is also its most disturbing.
Over the past decade, the oil and gas industry’s upstream investments have registered an astronomical increase, but these ever higher levels of capital expenditure have yielded ever smaller increases in the global oil supply. Even these have only been made possible by record high oil prices. This should be a reality check for those now hyping a new age of global oil abundance.
the sheer scale of the increase is staggering: upstream outlays have risen more than threefold in real terms over the past 12 years, reaching nearly $700bn in 2012 compared with only $250bn in 2000 (both figures in constant 2012 dollars). All of which means the
2013 WEO has the oil industry’s upstream capex rising by nearly 180 per cent since 2000, but the global oil supply (adjusted for energy content) by only 14 per cent. The most straightforward interpretation of this data is that the economics of oil have become completely dislocated from historic norms since 2000 (and especially since 2005), with the industry investing at exponentially higher rates for increasingly small incremental yields of energy.
Looking only at the period since 2005, capital outlays have risen faster than prices (90 per cent and 75 per cent respectively), while in the past two years capex has risen by a further 20 per cent.
Without a significant technological breakthrough reversing the geological forces that have driven the unprecedented increase in upstream investment over the past decade, prices will have to rise further in real terms from here or else capex – and with it future oil production – will fall.
Capex is currently rising faster than oil prices. This cannot continue indefinitely. Either oil investments/drilling is going to have to be curtailed(and with it, oil production increases), or oil prices are going to have to rise faster. I'm guessing more of the former, at least in the short term. We are already seeing signs of Shell cutting back and various companies pulling out of risky bets in Venezuela.