Goldman Sachs does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to www.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not registered/qualified as research analysts with FINRA in the U.S.The Goldman Sachs Group, Inc.EQUITY RESEARCH | March 17, 2022 | 9:21PM GMTMichele Della Vigna, CFA +44 20 7552-9383 michele.dellavigna@gs.com Goldman Sachs InternationalZoe Clarke +44 20 7051-2816 zoe.clarke@gs.com Goldman Sachs InternationalSecurity of Supply and the Return of Energy CapexWe believe that the Russia-Ukraine conflict is a turning point for the energy sector, similar to and potentially greater than the 2011 concurrence of the Fukushima nuclear accident/Libyan civil war. Similarly to 2011, we expect an acceleration of US shale and global LNG construction. However, seven years of hydrocarbon under-investment (2015-21) and an ongoing focus on de-carbonization mean this energy investment cycle will be different. In this report, we analyze in detail this Return of Energy Capex, with five key conclusions: 1) Primary energy capex fell 35% over the past decade, and we expect it togrow 60% by 2025 to $1.4 trn (from c.$0.9 trn in 2021).2) This European energy crisis has a strong seasonal component (winterdemand for gas is >2x higher than in summer) that requires LNG importsand hydrogen to complement renewable power growth.3) Analyzing the global LN...
