Electricity Investments Exceed Oil, Gas in 2017

As the world’s energy sector moves toward greater electrification, investments in electricity surpassed investments in oil and gas for a second consecutive year in 2017, the International Energy Agency said in its World Energy Investment 2018 report on Tuesday.

Last year, more than $750 billion in investment went to the electricity sector, which attracted the largest share of spending amid robust expenditure on grids. In comparison, global investments in oil and gas supply stood at $715 billion in 2017, the Paris-based IEA said in its report.

Total global energy investment came in at $1.8 trillion in 2017, down by 2% in real terms compared to 2016, Reuters reported.

The share of fossil fuels in investment in energy supply increased in 2017 for the first time since 2014, as spending on oil and gas supply increased modestly, the IEA said.

The share of national oil companies in total oil and gas upstream investments across the world stayed close to record highs and this share is expected to keep up this year as well.

IEA’s report on energy investments also found that the financial prospects of the US shale industry are improving and that investment in renewables and energy efficiency dropped last year for the first time after several years of growth, with a risk of further decline.

With regard to the US shale industry, the IEA noted that it “is becoming a financially sustainable business”. In the previous shale boom that was snapped by the oil price crash in 2014, US shale producers used to spend up to $1.80 against each dollar they earned as revenues.

Now the industry has nearly halved its breakeven price, providing a more sustainable basis for future expansion and underpinning a record expected increase in US light oil production of 1.3 million bpd in 2018, the IEA said.

“The industry appears on track to achieve positive free cash flow for the first time ever this year, turning into a more mature and financially solid industry while production is growing at its fastest pace ever,” IEA’s Executive Director Fatih Birol said.

While prospects for shale are improving, investment in conventional projects—which account for most of the global supply—remains subdued, the report said.

“Investment in new conventional capacity is set to plunge in 2018 to about one-third of the total, a multi-year low raising concerns about the long-term adequacy of supply,” the IEA said.