A new study published Wednesday by consultants Deloitte finds that the oil and gas industry will need to make a minimum E&P investment of three trillion dollars over 2016-2020 just to sustain output and reserves at the present level – and that the industry may not have enough cash flow to cover these capital expenditure needs, repay its debts and make dividend payouts all at the same time. Deloitte foresees oil and gas companies resolving this funding tension through cuts in capex, leading to a trillion-dollar investment shortfall by the end of the decade.

Upstream E&P firms cut capex by 25 percent last year, and they plan to do the same again this year, Deloitte says. 80 percent of O&G capex over the last ten years went to sustaining current reserve and production levels: every year, fields decline on average between seven and nine percent, and demand typically grows in the range of one percent – meaning that new resources have to be brought online every year to meet market needs. “Simply put, it takes a lot for the industry to just stay flat,” Deloitte wrote.

Deloitte is concerned that cutting capex more than 20 percent will eventually cut into reserves and supply. “Even if the upstream capital cost deflation of 15-18 percent is considered, the industry’s capex levels have gone below the minimum required levels to offset depletion, let alone meet any expected growth,” the group said.

The analysts noted that some market factors could reduce or offset future investment needs – including record existing crude stocks (1500 million barrels in storage), low-cost shale and Middle Eastern onshore production, lower demand growth in the developing world, and the completion of long-cycle projects like LNG plants.

However, even taking these factors into consideration, Deloitte expects that the industry have a cash flow gap of “up to $2 trillion” and a capex investment shortfall in the range of $1 trillion. Even a recovery in oil prices might not help close the gap for more E&P, as upstream costs for oilfield services could rebound faster than oil futures.

Deloitte foresees all players (except for resource-poor national oil companies) prioritizing debt service or divident payouts over capex for the next five years. “The industry has nearly doubled its debt since 2008, and its leverage ratio is at a record high of 34 percent . . . about 50 percent of the industry’s debt is maturing in the next five years,” the consultants wrote. “The industry, on the other hand, maintained and even increased its dividends to shareholders.”

In a separate report published Wednesday, Wood MacKenzie concurred with an independent estimate that oil and gas players would cut $1 trillion from planned investments 2015-2020.