Forbes Piece: Big Oil Is Backing Rhetoric With Capital, Per Goldman Sachs

[Note: This story is also published at Forbes.com]

Throughout this year, executives from oil majors and big independents have detailed plans to commit larger shares of their capital budgets to their core businesses of finding and developing reserves of oil and natural gas. A new report from Goldman Sachs shows “Big Oil” companies putting their money where their mouths have been in those public statements.

A New Investment Boom

Citing the arrival of this new “investment boom,” Goldman’s 20th annual analysis of the energy sector, “Top Projects,” shows the industry collectively has 70 major projects underway in 2023, a 25% increase over 2020. The number of major projects as defined by Goldman Sachs analysts peaked in 2014 at 107, and had gradually dropped over the next half-decade to 74 due to chronic underinvestment in exploration for new reserves. That decline in investment was caused by a variety of factors, most prominently pressures from ESG investor firms that control trillions of dollars in investor capital, and demands from investors for higher returns after the U.S. drilling boom from 2009 through 2015.

But the bottom dropped out of such investments in 2020. As the COVID-19 pandemic wreaked havoc, companies were forced to idle rigs and cancel projects worldwide in order to conserve capital, Goldman’s tally of major projects in that year fell to just 56. The report’s authors say that period of underinvestment in new reserves will impact supply growth for years to come, given that many projects have five to six years time to market. “So we are still paying for that underinvestment we saw in the 2015 to 2021 period. That’s why even with the capex increase, it is very unlikely that non-OPEC producers can come back to output growth,” the report finds.