Released October 20, 2025 | SUGAR LAND
en
Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--A recent report from the International Energy Agency (IEA) (Paris, France) on rates of decline in the world's oil and gas fields was informative yet frustrating. Informative because the agency comprehensively slices and dices the data, as it typically does. But frustrating because the largely technical report touched only briefly on the varying levels of oil and gas investment that might be needed to meet different amounts of global oil and gas demand to 2050.
The IEA estimated that global demand for oil will be slightly over 100 million barrels per day (BBL/d) in 2025. Around the world, oil companies, including national oil companies, are expected to invest about $570 billion this year on upstream activities, down significantly from the early years of the shale revolution a decade ago. Only a small percentage, about 10%, will be spent on pure exploration for new oil or gas; the rest will be spent on various follow-on activities, such as development, construction of infrastructure, production and maintenance. The industry's operating costs have remained fairly steady at about $400 million annually.
Click on the IEA image at right to see annual outlays for capital and maintenance activities since 2015.
Around the world, conventional oil fields are declining at an annual rate of about 5.6%, the IEA said. Unconventional oil fields decline faster than that. On the gas side, conventional fields decline at a 6.8% annual rate, again slower than unconventional fields, the agency wrote.
A growing percentage of the world's oil and gas production is coming from the more rapidly depleting unconventional formations, the agency pointed out: In 2000, conventional oil fields contributed 97% of total oil output globally, however, by 2024 this share had fallen to 77% as a result of rising output from unconventional fields. In the case of natural gas, around 70% of the 4,300 billion cubic meters (Bcm) produced today is from conventional fields, with nearly all of the rest being shale gas produced in the United States.
"In the absence of investment, supply falls quickly," the agency continued. If capital investment in new oil and gas fields were to stop immediately, the IEA estimated that the "natural" rate of decline would accelerate, to about 8% annually for oil fields and 9% for gas fields.
"As oil and gas supply increasingly relies on fields with higher decline rates and complex operating environments, the interplay of investment decisions, economics, and regulation will shape supply resilience and market stability," IEA wrote.
The 73-page report, "The Implications of Oil and Gas Field Declines," released September 16, contained a few graphics but very little text about the level of investment that may be needed to counter oil and gas fields that are being depleted.
The report did say that if the oil industry's annual upstream investment averages $540 billion through to 2050, this would keep production slightly above current demand levels of around 100 million BBL/d. Whether that will be sufficient to meet projected demand, or is too little, or too much, apparently was beyond the scope of this largely technical report.
The report treats investments in oil and natural gas separately, even though often they are found together. So while one graphic shows the expected level of oil production for various levels of investment to 2050, there's a separate graphic for gas production at various annual investment amounts.
Current production of about 4,300 Bcm of gas can be maintained with annual investments of about $150 billion per year, the graphic suggests. But expanding production to nearly 6,000 Bcm by 2050 would require annual investments of about $250 billion for the next quarter-century, it added. Many analysts expect that global demand for gas will rise in the coming decades.
Click on the IEA image at right to see the various levels of oil and gas production to 2050 that are projected to result from given annual levels of investment.
When it comes to capital investments in oil and gas, the Paris-based energy agency appears to be on the horns of a dilemma. It has long called for a reduction in the world's use of fossil fuels to combat global warming. In various reports, it has projected that world oil demand is, or will soon, peak and begin to decline. But even then, it has said continued investment in oil and gas upstream activities will be needed to counter decline rates and bring on new resources. Various agency reports have made predictions about energy industry capital investments, but in this report, it skirts the issue.
The report documents that, on a global basis, it is taking longer to go from discovery of new oil or gas to the start of first production. During the 1990s, it took about 14 years to go from exploration award to discovery, financial investment decision (FID) and the beginning of production. Halfway into the current decade, that time has stretched to about 19 years.
There is plenty of oil and gas that has been discovered but not yet approved for development, the report noted. "Around 230 billion barrels of oil and 40 trillion cubic meters (Tcm) of gas resources have been discovered that have yet to be approved for development. The largest volumes are in the Middle East, Eurasia and Africa. Developing these resources could add around 28 million BBL/d and 1,300 Bcm to the (world's) supply balance by 2050."
One natural conclusion to the reality of longer development times and ongoing natural field decline, which the IEA report does not make, is that producers should act more aggressively to move resources from "discovered" status to "developed" and "producing." That's where the agency's commitment to decarbonizing the world's energy systems appears to limit its willingness to draw elementary conclusions. Given its longstanding worry about rising carbon dioxide (CO2) emissions from the energy sector, it would be hard for it to advocate for more rapid development of oil and gas resources.
In this report, the one time the IEA delves into its own climate change scenarios is in a sidebar on production and demand for oil and gas its Net-Zero carbon emissions case (NZE).
"In this (NZE) scenario," wrote the agency, "a huge acceleration in the pace of energy transitions relative to current trends means that oil demand drops to around 55 million BBL/d in 2035 and natural gas demand falls to 2,250 Bcm. ... The pace of demand reduction in the NZE Scenario is therefore sufficiently rapid that, in aggregate, no new long lead-time conventional upstream projects would need to be approved for development. In addition, to ensure a smooth balance between supply and demand, declines in demand in the NZE Scenario would lead to the early closure of several higher cost projects before they reach the end of their technical lifetimes."
Click on the image at right to see a graphic of future demand and production of oil and gas in the IEA's Net-Zero Emissions case to 2050.
Given the decline rates of oil and gas fields, lengthy timelines to develop new resources and uncertainties over future demand for both, the IEA noted, "the oil and gas industry needs to run fast to stand still."
This takeaway mirrors the comments of oil industry executives who have called upon the industry to invest more heavily in exploration. For more on that, see Industrial Info's August 26, 2025, article - Two Oil Leaders Call for Put the 'E' Back into 'Exploration & Production'.
The report documents the faster decline rates of oil and gas extracted from unconventional reservoirs compared to conventional ones. Given the surge of production in the U.S. from unconventional reservoirs, the report suggests that, absent other developments, such as a technology breakthrough or sustained sharply higher prices, production in the U.S. is most at risk if investment is not ramped up.
The IEA report does not touch on the issue of crude oil and natural gas prices other than to note that expectations of future prices affect current-day decision-making. The cash spot price for a barrel of West Texas Intermediate (WTI) crude oil has declined about 22% so far in 2025, to a recent level of about $62 per barrel from an early-January price of just over $80. Since a recent peak of $114 per barrel in May 2022, WTI has fallen approximately 45%, or roughly $52 per barrel.
Click on the image at right to see the monthly average cash spot prices for WTI at Cushing, Oklahoma, since 2000. Source: the U.S. Energy Information Administration.
Corporate decisions about whether to invest surplus cash flow to find new fields or extend the lives of producing fields likely will be colored by several trends, some of which are in tension:
The IEA estimated that global demand for oil will be slightly over 100 million barrels per day (BBL/d) in 2025. Around the world, oil companies, including national oil companies, are expected to invest about $570 billion this year on upstream activities, down significantly from the early years of the shale revolution a decade ago. Only a small percentage, about 10%, will be spent on pure exploration for new oil or gas; the rest will be spent on various follow-on activities, such as development, construction of infrastructure, production and maintenance. The industry's operating costs have remained fairly steady at about $400 million annually.
Around the world, conventional oil fields are declining at an annual rate of about 5.6%, the IEA said. Unconventional oil fields decline faster than that. On the gas side, conventional fields decline at a 6.8% annual rate, again slower than unconventional fields, the agency wrote.
A growing percentage of the world's oil and gas production is coming from the more rapidly depleting unconventional formations, the agency pointed out: In 2000, conventional oil fields contributed 97% of total oil output globally, however, by 2024 this share had fallen to 77% as a result of rising output from unconventional fields. In the case of natural gas, around 70% of the 4,300 billion cubic meters (Bcm) produced today is from conventional fields, with nearly all of the rest being shale gas produced in the United States.
"In the absence of investment, supply falls quickly," the agency continued. If capital investment in new oil and gas fields were to stop immediately, the IEA estimated that the "natural" rate of decline would accelerate, to about 8% annually for oil fields and 9% for gas fields.
"As oil and gas supply increasingly relies on fields with higher decline rates and complex operating environments, the interplay of investment decisions, economics, and regulation will shape supply resilience and market stability," IEA wrote.
The 73-page report, "The Implications of Oil and Gas Field Declines," released September 16, contained a few graphics but very little text about the level of investment that may be needed to counter oil and gas fields that are being depleted.
The report did say that if the oil industry's annual upstream investment averages $540 billion through to 2050, this would keep production slightly above current demand levels of around 100 million BBL/d. Whether that will be sufficient to meet projected demand, or is too little, or too much, apparently was beyond the scope of this largely technical report.
The report treats investments in oil and natural gas separately, even though often they are found together. So while one graphic shows the expected level of oil production for various levels of investment to 2050, there's a separate graphic for gas production at various annual investment amounts.
Current production of about 4,300 Bcm of gas can be maintained with annual investments of about $150 billion per year, the graphic suggests. But expanding production to nearly 6,000 Bcm by 2050 would require annual investments of about $250 billion for the next quarter-century, it added. Many analysts expect that global demand for gas will rise in the coming decades.
When it comes to capital investments in oil and gas, the Paris-based energy agency appears to be on the horns of a dilemma. It has long called for a reduction in the world's use of fossil fuels to combat global warming. In various reports, it has projected that world oil demand is, or will soon, peak and begin to decline. But even then, it has said continued investment in oil and gas upstream activities will be needed to counter decline rates and bring on new resources. Various agency reports have made predictions about energy industry capital investments, but in this report, it skirts the issue.
The report documents that, on a global basis, it is taking longer to go from discovery of new oil or gas to the start of first production. During the 1990s, it took about 14 years to go from exploration award to discovery, financial investment decision (FID) and the beginning of production. Halfway into the current decade, that time has stretched to about 19 years.
There is plenty of oil and gas that has been discovered but not yet approved for development, the report noted. "Around 230 billion barrels of oil and 40 trillion cubic meters (Tcm) of gas resources have been discovered that have yet to be approved for development. The largest volumes are in the Middle East, Eurasia and Africa. Developing these resources could add around 28 million BBL/d and 1,300 Bcm to the (world's) supply balance by 2050."
One natural conclusion to the reality of longer development times and ongoing natural field decline, which the IEA report does not make, is that producers should act more aggressively to move resources from "discovered" status to "developed" and "producing." That's where the agency's commitment to decarbonizing the world's energy systems appears to limit its willingness to draw elementary conclusions. Given its longstanding worry about rising carbon dioxide (CO2) emissions from the energy sector, it would be hard for it to advocate for more rapid development of oil and gas resources.
In this report, the one time the IEA delves into its own climate change scenarios is in a sidebar on production and demand for oil and gas its Net-Zero carbon emissions case (NZE).
"In this (NZE) scenario," wrote the agency, "a huge acceleration in the pace of energy transitions relative to current trends means that oil demand drops to around 55 million BBL/d in 2035 and natural gas demand falls to 2,250 Bcm. ... The pace of demand reduction in the NZE Scenario is therefore sufficiently rapid that, in aggregate, no new long lead-time conventional upstream projects would need to be approved for development. In addition, to ensure a smooth balance between supply and demand, declines in demand in the NZE Scenario would lead to the early closure of several higher cost projects before they reach the end of their technical lifetimes."
Given the decline rates of oil and gas fields, lengthy timelines to develop new resources and uncertainties over future demand for both, the IEA noted, "the oil and gas industry needs to run fast to stand still."
This takeaway mirrors the comments of oil industry executives who have called upon the industry to invest more heavily in exploration. For more on that, see Industrial Info's August 26, 2025, article - Two Oil Leaders Call for Put the 'E' Back into 'Exploration & Production'.
The report documents the faster decline rates of oil and gas extracted from unconventional reservoirs compared to conventional ones. Given the surge of production in the U.S. from unconventional reservoirs, the report suggests that, absent other developments, such as a technology breakthrough or sustained sharply higher prices, production in the U.S. is most at risk if investment is not ramped up.
The IEA report does not touch on the issue of crude oil and natural gas prices other than to note that expectations of future prices affect current-day decision-making. The cash spot price for a barrel of West Texas Intermediate (WTI) crude oil has declined about 22% so far in 2025, to a recent level of about $62 per barrel from an early-January price of just over $80. Since a recent peak of $114 per barrel in May 2022, WTI has fallen approximately 45%, or roughly $52 per barrel.
Corporate decisions about whether to invest surplus cash flow to find new fields or extend the lives of producing fields likely will be colored by several trends, some of which are in tension:
- The current expectation that oil prices are more likely to remain "lower for longer,"
- President Donald Trump's demand for higher oil and gas production, which conventional economics suggest would lead to lower prices, and
- Demands from shareholders for higher payouts in the form of dividends and share buybacks.
