Wood Mackenzie’s latest Horizons report warns of significant consequences if the energy transition is delayed.

The report, titled Taking the strain: how upstream could meet the demands of a delayed energy transition, highlights the potential for increased demand for oil and gas supply, necessitating a substantial rise in upstream investment.

The analysis suggests that a delayed transition scenario would require 5 per cent more oil and gas supply and a 30 per cent increase in annual upstream capital investment.

Specifically, liquids demand would average 6 million b/d (6 per cent) higher than Wood Mackenzie’s base case through 2050, while gas demand would be 15 bcfd (3 per cent) higher.

Fraser McKay, head of upstream analysis at Wood Mackenzie, notes that while meeting near-term demand poses little challenge, sustained demand growth presents a more significant hurdle.

Angus Rodger, head of upstream analysis for Asia-Pacific and the Middle East, adds that a five-year transition delay would necessitate additional volumes equivalent to a new US Permian basin for oil and a Haynesville Shale or Australia for gas.

The report estimates that upstream spending would need to rise by 30 per cent to meet this increased demand.

This translates to US$659 billion in annual development spending, compared to US$507 billion in the base case, totalling US$17 trillion versus US$13 trillion by 2050.

However, increasing investment faces challenges.

The supply chain is already near capacity in some areas, and project costs are likely to inflate.

Additionally, the industry’s current focus on capital discipline would need to evolve.

The report also predicts higher prices for both oil and gas in a delayed transition scenario.

Wood Mackenzie’s Oil Supply Model forecasts Brent prices rising above US$100/bbl in the 2030s, averaging about US$20/bbl higher than the base case through 2050.

This scenario underscores the urgency of addressing energy transition challenges.

Wood Mackenzie‘s Energy Transition Outlook report emphasises that achieving net zero emissions by 2050 requires doubling annual investment in energy supply to US$3.5 trillion.

Without decisive action, even limiting global warming to 2 degrees Celsius may become unattainable.