Wood Mackenzie: The cost of capital discipline: Big Oil faces production cliff edge

30 of the world's largest companies must find 22 million barrels a day by 2040

LONDON/HOUSTON/SINGAPORE, Feb. 26, 2026 (GLOBE NEWSWIRE) -- INSIGHT FOR IMMEDIATE RELEASE

Wood Mackenzie | www.woodmac.com

Wood Mackenzie analysis reveals 30 of the world's largest oil and gas companies face a combined 22 million barrels of oil equivalent per day (mmboe/d) production shortfall by 2040 to maintain their market share of oil and gas demand.

The group collectively produces around 50 million barrels of oil equivalent per day, meeting close to 30% of global demand. But the latest report from Wood Mackenzie expects production from current commercial projects for these 30 companies to fall nearly 40% between 2025 and 2040. Filling the 22 mmboe/d gap is the equivalent to adding nearly two Permian basins or 14 Guyana-scale plays.

The main industry players can't spend their way out of the problem. With capital discipline and shareholder distributions now a defining feature of how companies are valued, in what is fundamentally a maturing sector, companies are under pressure to return between 30% to 50% of operating cash flow to shareholders through dividends and buybacks.

"Big Oil is recalibrating back to upstream, but years of reduced activity has left many oil and gas companies with production profiles more aligned with net zero pathways than the higher-for-longer scenario that is playing out. The core strategic challenge is how to sustain output and cash flow when reinvestment rates are roughly half of mid-2010s levels," said Neivan Boroujerdi, Director, Corporate Research at Wood Mackenzie. "Not every company will succeed, making further industry consolidation inevitable. Fundamentally, companies will need to deploy every tool in the playbook to square the circle."

The production gap has doubled over the last decade

In 2015, the same cohort faced a production gap of 11 mmboe/d to grow production in line with demand to 2030. They closed it, delivering an additional 19 mmboe/d through exploration, M&A, new projects and increased recovery. US tight oil expansion and Chinese NOC upgrades to their domestic outlooks dominated. But barring the emergence of a new Permian-scale play, this is unlikely to be repeated.

Even if companies replicated that performance out to 2040, they would still fall 3 mmboe/d short of what's needed to maintain their market share of oil and gas demand, according to Wood Mackenzie. And there are now fewer options to fill the gap. US tight oil production is plateauing. Many of the most attractive corporate M&A targets have been snapped up and big resources holders such as Saudi Arabia, Russia, and Iran remain closed to foreign investment.

Winners and losers will emerge

The industry can deliver the supply needed to meet peak demand and beyond, according to the analysis. Less certain is which companies are best placed to deliver it and how they maintain their share of global supply. Wood Mackenzie states that companies lacking portfolio depth, quality, and financial capacity will either be acquired or shrink. The share of global production will continue shifting from international oil companies to resource holding national oil companies.

Technology and creative capital structures offer paths forward

Companies will need to deploy every tool in the playbook to align the needs of investors while addressing the longevity challenge in oil and gas. Enhanced recovery from existing fields could unlock 470 billion barrels globally. Companies that invested in data infrastructure during the late 2010s digitalization phase will lead in deploying large language models to deliver operational efficiencies. ExxonMobil's Permian strategy demonstrates how proprietary technology can boost recovery factors and reduce unproductive capital to drive breakevens down.

Business development will continue to prop up portfolios, but companies will need more creative strategies to access capital and deliver attractive returns from M&A and exploration-led resource renewal. Strategic ventures also offer an alternative business model. These have unleased new growth in the mature North Sea, Africa, and Southeast Asia. BP and Eni's Norway and Angola operations have thrived under strategic venture structures. While Eni's Kutei Basin partnership with Petronas uses cash-generative legacy assets to fund development of multi-tcf gas discoveries.

New financial structures including sale-leaseback arrangements and contingent payment mechanisms provide additional options.

Key Findings:

• 30 major E&P companies face a combined 22 mmboe/d shortfall to sustain their share of oil and gas demand by 2040
• Production from current commercial projects set to decline nearly 40% between 2025 and 2040
• Only three companies are positioned to produce more in 2040 than today
• European majors and NOCs require more than 1 mmboe/d on average to close the gap (50% of current base)
• The gap to maintain production over the next fifteen years is nearly twice what it was in 2015
• Even replicating 2015 performance of adding 19 mmboe/d of new volumes would leave a 3 mmboe/d gap to sustaining market share over next decade with global demand forecast to grow 6% to 2040
• Companies are now returning between 30-50% of cash flow to shareholders, cutting reinvestment rates to half of mid-2010s levels
• Enhanced recovery could unlock 470 billion barrels globally - IOCs typically outperform NOCs when it comes to recovery factors, offering greater opportunities for technology transfer and 'win-win' collaboration
• Oil and gas companies will need to be more creative in their next phase of M&A-led growth including the deployment of strategic ventures and new financial structures

ENDS

Background

The analysis is based on Wood Mackenzie's Corporate Strategy and Analytics Service. The peer group of 30 companies spans major integrated oil companies, national oil companies from importing countries (excluding Middle Eastern resource holders), international oil companies, and North American E&P firms. The research examines how a slowing energy transition and challenges building low-carbon businesses have prompted a recalibration back towards oil and gas. But years of reduced activity have left many companies with production outlooks more aligned with net-zero pathways than the higher-for-longer demand scenario now playing out.

Mark Thomton Wood Mackenzie 6308816885 [e-mail] Chris Boba Wood Mackenzie [phone] [e-mail] Hla Myat Mon Wood Mackenzie [phone]