The International Energy Agency (IEA) has issued a critical warning about looming global energy shortages, highlighting significant funding gaps in both new and ongoing oil and gas ventures.
In its recent publication, titled ‘The Implications of Oil and Gas Field Decline Rates,’ the IEA reveals that halting all investments in oil and gas projects by the end of this year would cause oil production to plummet to 42 million barrels per day (mb/d) by 2035, and further decline to a mere 15 mb/d by 2050.
Similarly, natural gas output is projected to decrease sharply, falling to 1.6 trillion cubic meters annually by 2035 and dropping further to 500 billion cubic meters per year by 2050.
The agency emphasizes that if upstream investments cease immediately, oil production would shrink by approximately 8% annually, while gas output would contract by 9% each year over the next decade. This translates to an annual oil production loss of 5.5 million barrels per day-comparable to the combined output of Brazil and Norway-and a gas decline of 270 billion cubic meters per year, roughly equal to Africa’s current gas production. For context, in 2010, natural decline rates would have resulted in a smaller reduction of 3.9 million barrels per day for oil and 180 billion cubic meters per year for gas.
The IEA points out that maintaining stable production levels today demands significantly greater upstream capital expenditure than in previous decades due to accelerating decline rates at existing fields.
Since 2019, global spending to counteract natural field depletion has averaged around $500 billion annually, accounting for nearly 90% of total upstream investment. However, if decline rates had remained consistent with those of the 1980s, only about $360 billion per year would have been necessary.
As of 2024, the IEA estimates global oil production at 100 million barrels per day, with gas output reaching 4.3 trillion cubic meters. The agency suggests that modest growth in production is feasible if upstream investments continue at the projected $570 billion for 2025.
The report identifies three primary factors driving the accelerated decline rates:
Firstly, there is an increased dependence on unconventional resources such as tight oil and shale gas, especially in the United States, which naturally experience faster depletion compared to traditional reservoirs.
Secondly, conventional oil supplies now include a higher proportion of natural gas liquids (NGLs) and a growing share from offshore deepwater fields, both of which exhibit more rapid decline rates than onshore fields. Additionally, offshore gas fields constitute a larger portion of global production and present greater challenges in sustaining output.
Thirdly, current oil production is approximately 20% higher than in 2010, and gas production has risen by 30%. This elevated baseline means that absolute annual declines are more substantial today.
Even with ongoing investments in existing fields, the IEA forecasts oil production will still drop to 51 million barrels per day by 2050, while gas output will fall to 2.3 trillion cubic meters annually.
To preserve 2024 production levels through 2050, the world would require an additional 47 million barrels per day of oil and 2 trillion cubic meters per year of gas from new projects that have yet to receive approval. This may also necessitate activating some of the current spare oil production capacity, according to the IEA.
Ultimately, the scale of investment and production needed will hinge on future global demand trends for oil and gas.
The IEA projects that oil demand will peak in 2029 at 105.5 million barrels per day. In contrast, the Organization of the Petroleum Exporting Countries (OPEC) anticipates demand will continue to rise, reaching 122.9 million barrels per day by 2050, with no peak expected.
OPEC responded to the IEA’s report by accusing the agency of inconsistency, stating that the IEA’s promotion of its Net Zero Emissions Scenario and forecasts of peak oil demand have discouraged investment and created uncertainty about long-term oil demand.
