Having calculated the oil and gas production associated with a 2D scenario, we can then identify the level of capital expenditure required, and the delta to business-as-usual, (BAU). 

The drop in the oil price since 2014 has curtailed capex spending from the boom times when oil prices sat above US$100/bbl. The 2D pathway would see spending need to be kept down around the current level, rather than rebounding to previous levels.

It is worth noting that capex is always required just to maintain current levels of production due to the naturally declining production rates of oil and gas wells – the exception being some oil sands projects which have a more consistent production level due to the different production techniques used. As cheaper options are used up new projects being brought on will typically be higher cost, meaning that the investment per barrel of new production keeps increasing in the long term. Underneath, longer term trends are also the cyclical movements relating to cost deflation/inflation which are caused by the prevailing level of investment activity and degree of price pressure. The recent lower oil price levels have driven a round of cost-cutting and reduced demand and prices for oil and gas service industries.


For capex, the analysis considers the related investment out to 2025 that corresponds with the level of production in the scenario.

Projected capex under 2D scenario

Potential capex pathway

Source: Rystad Energy, CTI analysis


Looking across the whole of the oil sector, including both listed and unlisted companies, 33% of business-as-usual oil capex does not need to be spent in the 2D scenario. There is obviously a range of percentages in terms of company level exposure – with some companies having capex plans entirely within the 2D budget and others being largely not needed in a 2D scenario.

Capex ($tr)Oil
Source: Rystad Energy, CTI analysis
Within 2D budget $ 3.2
Not needed $ 1.6
Total $ 4.8


In total, 31% of business-as-usual gas capex is not needed in the 2D scenario – similar to the overall oil level. Domestic gas markets are assumed to continue to supply to meet demand. For the regional markets, 60% LNG, 60% North America, and 37% European capex is surplus to requirements to 2025 in a 2D scenario. This challenges the growth plans of operators in these markets.

Capex ($tr)LNGNorth AmericaEuropeOtherTotal
Note: totals may not add up due to rounding. Source: Rystad Energy, CTI analysis
Within 2D budget $ 0.2 $ 0.2 $ 0.2 $ 1.0 $ 1.6
Not needed $ 0.2 $ 0.4 $ 0.1 $ 0.0 $ 0.7
Total $ 0.4 $ 0.6 $ 0.3 $ 1.0 $ 2.4

Exposure across different types of company

The table below indicates that around 60% of the potential capex and production that is not consistent with a 2D scenario is associated with companies in the private sector. The quarter of production that has state ownership also includes INOCs (International National Oil Companies – NOCs that have greater geographic reach) – many of which have partial listings, eg Statoil, Petrobras. Therefore there is still some capital markets exposure to these projects, even if the potential for influence is diminished. This shows that whilst NOCs have a big role in oil and gas production, they are less at risk under a lower demand scenario.

 2017-2035 production (mmboe/d)  2017-2025 capex ($tr)
Unknown and unspecific not allocated to either NOC+INOCs or private sector. Source: Rystad Energy, CTI analysis
  NeededNot Needed   NeededNot Needed
NOC 55 4 1.2 0.3
INOC 25 3 0.9 0.3
Major 21 6 0.7 0.4
Integrated 11 2 0.4 0.1
E&P Company 8 4 0.4 0.3
Independent 18 5 0.7 0.3
Exploration Company 1 1 0.1 0.1
Industrial 3 1 0.1 0.1
Investor 12 0 0.0 0.0
Operating Company 0 0 0.0 0.0
Unknown 0 0 0.0 0.0
Unspecific (Other/Open/ Relinquished) 5 3 0.3 0.4
Total 147 28 4.9 2.3
NOC+INOC 79 6 2.1 0.6
Private sector 64 19 2.4 1.4
NOC+INOC % of total 54%23%44%24%
Private sector % of total 43%68%50%59%

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    2 degrees of separation: Transition risk for oil and gas in a low carbon world

    July 2017

Produced in collaboration with Carbon Tracker

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2 degrees of separation: Transition risk for oil and gas in a low carbon world