Oil industry needs over US$500B to avert supply shortages, 3 ASX stocks to look at 


  • Crude oil has surpassed US$80/bbl, the highest since 2014, amid energy crisis across Europe.
  • After the 2020 market crash, investments in the oil industry have dried up, and most upstream companies are keeping their CAPEX low.
  • As the demand for oil & gas is increasing, the upstream sector is expected to see new investments.

The oil industry needs more than half-a-trillion-dollar investment to address supply shortage in the future, according to a report by international credit rating agency Moody’s.

The investment in the industry dried up last year when the prices went down US$30/bbl. Since then, no major project has been commenced with most of the upstream companies trying to keep their capital expenditure at low levels.

The report has highlighted that upstream companies would need to beef up their spending significantly to keep the current level of production and further boost the supply as demand is heating up.

Related read: A look at five ASX oil and gas stocks amid OPEC’s plan to gradually hike output

Producing fields need intervention as the reservoir pressure drops during the production phase. If the pressure drops to a certain level, the oil well or the field is abandoned. As a result, the company needs to find another reserve to replace the production.

Fields that are in the production phase will produce at lower levels or may be abandoned in the coming years. Thus, upstream companies will need to spend on exploration and drilling activities to bring new fields into production.

Oil and gas, production, upstream, demand, supply  

Image source: © Rizami | Megapixl.com

Also read: Eight ASX listed hydrogen stocks under the spotlight amid the ongoing green buzz

Oil industry needs to raise budget by 54%

The rating agency has indicated that upstream companies are expected to spend US$352 billion on exploration and drilling activities for the year 2021. The current rally in crude oil prices amid surging demand could push the sector players to invest in new projects or drill more wells on the existing projects.

The industry should increase its investment figure by 54% to US$542 billion for the year 2022, as suggested by Moody’s.

The gap between demand and supply is already causing energy crisis in Europe. Soaring crude oil prices are making gasoline costly, owing to which the White House had to urge the OPEC nations to increase their output.

According to Moody’s, the year 2025 will see oil & gas demand reaching to the pre-COVID levels. Investments before the COVID-19 era were nearly US$600 billion, which nearly halved to US$350 billion in 2020.

Related read: Crude oil hits multi-year high; how has it impacted ASX oil producers?

On that note, let us examine few ASX-listed oil & gas players for keeping a tab on during the rest of 2021.

Santos Limited (ASX:STO)

Santos Limited is Australia’s largest domestic gas supplier. The Company has oil & gas assets in the Northern Australia & Timor-Leste, Papua New Guinea, and the Carnarvon, Cooper, Surat, and Bowen basins.

It has a significant market share in the Asia-Pacific LNG supply market. The Company registered a 23% increase in production during 1H of 2021.  

STO stock was trading at AU$7.45 midday on 11 October 2021, up 0.948% from its last closing price. The Company has a market capitalisation of AU$15.37 billion.

Woodside Petroleum Ltd (ASX:WPL)

Woodside is Australia’s leading natural gas producer. The Company recently made headlines as it announced a possible merger with BHP’s petroleum business.

Rising crude oil & natural gas prices led to a 31% year-on-year increase in the Company’s operating revenue in 1H.

Shares of WPL were trading higher in the early hours of 11 October, trading at AU$25.37. The Company has a market cap of AU$24.58 billion.

Related read: ASX energy stocks to look at amid rise in oil prices

Beach Energy Limited (ASX:BPT)

Beach Energy operates oil & gas assets in five basins in Australia and New Zealand. The shares of Beach Energy inched upward by more than 38% during September 2021. The Company paid a dividend of AU$0.01 at an annual yield of 1.4% on 30 September 2021.

On 11 October 2021, BPT shares were trading at AU$1.482 at AEST 12:11 PM with a market capitalisation of AU$3.29 billion.

Related read: Why Origin Energy and Beach Energy are making a splash today





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