Today's Edition
A. SREENIVASA REDDY (ABU DHABI)
More investments are needed across both the conventional oil and gas sector and low-carbon energy systems in the wake of disruptions caused by recent geopolitical developments in the Middle East, a white paper issued by ADIPEC has argued.
“Both conventional and low-carbon energy systems should scale in parallel. It is no longer a question of reallocating capital between ‘old’ and ‘new’ energy, but of expanding both to meet demand, manage risk, and ensure system resilience,” the paper said.
ADIPEC has launched a series of papers on energy markets and geopolitics to provide insights into the impact of the recent conflict on global energy markets and the way forward for the industry.
While recent years were defined by a singular focus on the energy transition and the substitution of hydrocarbons with low-carbon alternatives, recent geopolitical shocks have triggered a broader reassessment of how energy systems are built and financed.
The central question, the paper noted, is no longer which energy sources will replace others, but how quickly a sufficient and resilient energy supply across all sources can be secured.
Global energy investment reached $3.3 trillion in 2025, with about $2.2 trillion directed towards clean energy and roughly $1.1 trillion towards hydrocarbons, reflecting the continued structural role of oil and gas alongside the energy transition.
The paper pointed to a growing mismatch between current investment levels in the oil sector and what is required to maintain stable markets, particularly in upstream production and supporting infrastructure.
Global oil demand remains around 104 million barrels per day, while existing oil fields decline at an average rate of 5–7% annually, requiring several million barrels per day of new supply each year just to maintain current levels.
Against this backdrop, OPEC estimates that the oil sector will require about $18.2 trillion in cumulative investment by 2050, with the bulk directed towards upstream activities.
The report also highlighted vulnerabilities in global energy supply chains, noting that concentrated routes such as the Strait of Hormuz — through which around 15–20% of global oil supply transits — remain critical chokepoints, where even short disruptions can have significant global consequences.
Gaurav Sharma, energy analyst and Forbes columnist, said the recent conflict has reinforced the need for a “security-first” investment approach.
“Even with a ceasefire in place, the fate of the Strait is uncertain, and there will be a two-to-three-month lag before operations return to normal. Wells that have been shut in require remedial work, and refineries must be recalibrated. This lag is why we are seeing a ‘security-first’ investment approach, where energy companies and investors are not just looking at price but also the resilience of the infrastructure itself,” he said.
Sharma said investment priorities are shifting towards strengthening infrastructure to mitigate geopolitical risks.
“We can expect a surge in hard infrastructure investment — pipelines that bypass volatile chokepoints, storage facilities, and LNG regasification plants. The goal is to ensure that no single point of failure can paralyse the supply chain and the global economy,” he added.
The paper makes a case for moving beyond a linear transition model towards an “energy addition” approach, where governments expand capacity across oil and gas, renewables, nuclear and emerging fuels to meet growing demand while managing risks.
The paper argues that there is scope and a need for further investment across the hydrocarbon value chain, focused on diversification and resilience. It cites ADNOC’s “Maximum Energy, Minimum Emissions” strategy to illustrate how these objectives are increasingly being pursued in parallel — expanding supply while reducing carbon intensity.
It also underscores the need for greater investments in diversification of supply routes, strategic storage and infrastructure resilience to reduce exposure to disruptions and future-proof the global energy system.
Sharma said long-term capital flows are likely to reflect this shift. “We will see more long-term capital flowing into diversified upstream projects, LNG flows, cross-border grid interconnections, and infrastructure protection. The winners will be those who can provide a reliable, secure and stable supply of energy, regardless of the source,” he said.
The white paper noted that recent disruptions have demonstrated how underinvestment can quickly translate into market instability, with even limited supply disruptions creating deficits equivalent to hundreds of millions of barrels within days, highlighting the system’s reduced spare capacity.
