Oil explorers need to raise drilling budgets by 54% to more than half a trillion dollars to forestall a significant supply deficit in the next few years, according to Moody’s Investors Service Inc.
Crude and natural gas drillers chastened by last year’s unprecedented collapse in demand and prices haven’t responded to the recent market rebound as the industry typically does by expanding the search for untapped fields. While international crude and U.S. gas have risen more than 50% and 120% this year, respectively, drilling outlays are only forecast to increase by 8% globally, Moody’s said in a report Thursday.
That’s too little to replace what those companies will pump from the ground in 2022, setting the stage for even tighter supply scenarios, Moody’s analysts including Sajjad Alam wrote in the report. Any such squeeze would come atop the current crises afflicting Asian and European economies scrambling to shore up fuel stockpiles as winter approaches and prices seemingly break records on an almost-daily basis.
“The industry will need to spend significantly more, especially if oil and gas demand keeps climbing beyond pre-pandemic levels through 2025,” the Moody’s analysts wrote.
Oil and gas companies are expected to spend $352 billion on drilling and related activities this year, Moody’s said, citing estimates from the International Energy Agency. If they raised to to the credit-rating firm’s recommended $542 billion, that would be the highest worldwide since 2015.