The Middle East's upstream oil and gas capital expenditure (capex) growth is forecasted to slow down significantly up to 2030 in contrast to a projected global surge, according to a new report by the International Energy Forum (IEF) and S&P Global Commodity Insights.

The report, titled ‘Upstream Oil and Gas Investment Outlook,’ forecasts a total of $135 billion (or 22 percent) increase in global annual upstream capex by 2030, bringing the total to $738 billion. This significant rise is driven by cost inflation and growth in demand from 103 million barrels per day (bpd)in 2023 to nearly 110 million bpd by 2030.

While the global investment landscape is set for a rise, the Middle East's upstream capex is predicted to rise from $60 billion in 2023 to $65 billion in 2030, an increase of $5 billion. This is the lowest growth rate among all regions covered in the report. In comparison, North America’s upstream capex is expected to rise by $77 billion between 2024 and 2030, driven by US shale.

The Middle East's share of global upstream capex is also forecasted to decline from 10 percent in 2024 to 9 percent in 2030. The region will only account for 4 percent of incremental growth by 2030, dwarfed by North America, which is slated to account for 57 percent, followed by Asia and Africa at 13 percent each.

In 2024, the pace of increase in capital spending in the region is expected to be modest, with a year-on-year increase of only $2 billion compared to a $7 billion increase in 2023.

Globally, annual oil and gas upstream capital expenditures grew by $63 billion year-on-year in 2023 and are expected to grow by a further $26 billion this year, to reach $603 billion –the highest level since 2014 (when it peaked at $700 billion) and more than double the levels spent in 2020.

"More investment in new oil and gas supply is needed to meet growing demand and maintain energy market stability, which is the foundation of global economic and social wellbeing," said Joseph McMonigle, Secretary General of the IEF. "Well-supplied and stable energy markets are critical to making progress on climate, because the alternative is high prices and volatility, which undermines public support for the transition as we have seen in the past two years."

Latin America is projected to be a major driver of capex growth in 2024, surpassing North America for the first time in over two decades. The Americas (North and South) are expected to account for over 60 percent of the projected increase in upstream capex by 2030. The report underlined that a cumulative $4.3 trillion in new investments will be needed between 2025 and 2030.

 (Editing by Anoop Menon) (anoop.menon@lseg.com)

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