After two years of unprecedented decline, global upstream oil and gas investment is expected to stabilise in 2017, according to a report issued by the International Energy Agency, IEA.
However, an upswing in US shale spending contrasts with stagnation in the rest of the world, signalling a two-speed oil market. At the same time, the oil and gas industry overall is transforming itself by delivering large cost savings and focussing more on technology development and efficient project execution.
Global energy investment amounted to USD$ 1.7 trillion in 2016, or 2.2 percent of global GDP. For the first time, spending on the electricity sector around the world exceeded the combined spending on oil, gas and coal supply. The share of clean-energy spending reached 43 percent of total supply investment a record high.
China, the world's largest energy investor, saw a 25 percent decline in coal-fired power investment last year and is increasingly driven by clean electricity generation and networks, as well as energy-efficiency investment. The United States saw a sharp decline in oil and gas investment and accounted for 16 percent of global spending. India was the fastest-growing major energy investment market, with spending up by 7 percent thanks to a strong government push to modernise and expand the power sector.
"Our analysis shows that smart investment decisions are more critical than ever for maintaining energy security and meeting environmental goals.As the oil and gas industry refocuses on shorter-cycle projects, the need for policymakers to keep an eye on the long-term adequacy of supply is more important. Even with ambitious climate-mitigation goals, current investment activity in oil and gas will have to rise from its current slump," said Dr. Fatih Birol, the IEA's Executive Director.
"The good news is that in spite of low energy prices, energy efficiency spending is rising thanks to strong government policies in key markets," he added.
For the first time, the report tracks financing sources across the entire energy sector. More than 90 percent of investments are financed from the balance sheets of companies, governments and households, reinforcing the importance of sustainable industry earnings in funding the energy sector.
Global electricity investment was nearly flat at $718 billion, with a growing network spending mostly offset by fewer coal-power additions. Investment in renewable-based power capacity, the largest area of electricity spending, fell 3 percent to $297 billion. While renewable investment is also 3 percent lower compared with five years ago, it will generate 35 percent more power thanks to cost declines and technology improvements in solar PV and wind.
Energy-efficiency investment rose 9 percent to $231 billion with China, the fastest-growing region, accounting for 27 percent of the total last year. At this rate, China could overtake Europe, the largest spender on energy efficiency, within a few years. More than half of the global investment in energy efficiency went to buildings, including efficient appliances, which account for a third of the world's total energy demand.
For the first time, the IEA tracked global energy sector research and development spending. It estimated that over $65 billion was spent on it worldwide in 2015, based on a bottom-up assessment of spending by public and private bodies.