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World Energy Investment on a Downslide

World Energy Investment on a DownslideWorld Energy Investment on a Downslide

Global energy investment fell by 2% in 2017, the third consecutive year of a decline, which sounded the alarm this week, warning that the world is not spending enough on energy.

“The overall trend of energy investment remains insufficient for meeting energy security, climate and air quality goals, and is not spurring an acceleration in technologies needed for the clean energy transition,” International Energy Agency's Executive Director Fatih Birol said in a statement published by the agency.

Global spending stood at $1.8 trillion in 2017, down 2% from a year earlier.

Much of the decline occurred in the electricity sector and the IEA declared 2018 “the year of electricity” to raise awareness about the problem. The ongoing electrification of the global economy puts extra emphasis on the need for more generation capacity.

The declining investment in coal, hydro and nuclear power more than offset the increased spending on solar.

Fossil fuel spending edged up but still remains at just two-thirds of the 2014 average.

IEA credits the oil and gas industry with keeping costs in check and because of “cost discipline by operators and excess capacity in the services industry”, the rise in oil prices since 2016 has not led to a corresponding increase in costs.

However, IEA then pointed out that the US shale sector, which has attracted so much attention and investment, did see cost inflation on the order of 10% in 2017. More drilling has put a strain on the supply chain, pushing the cost of everything from sand, to drilling services, to labor and equipment. Another 10% increase in costs is slated for 2018.

Globally, upstream oil and gas spending rose by 4% to $450 billion, and will edge up another 5% this year. Beneath that headline figure, US shale spending will grow by 20% while conventional oil and gas spending remains flat.

Within the conventional segment, most spending is now focusing on brownfield development, a sign of the industry’s cautious approach to development, while spending on new greenfield projects “is expected to plunge to about one-third [of total upstream investment] in 2018–the lowest level for several years”.

China attracted the lion’s share of energy investment. And unlike past years, China’s energy campaign is increasingly focused on clean energy.

“China's energy investment is increasingly driven by low-carbon electricity supply and networks, and energy efficiency. Investment in new coal-fired plants there dropped by 55% in 2017,” IEA said.

 

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