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Global Energy Investment Slumped 12% to $1.7trn in 2016

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  • Global Energy Investment Slumped 12% to $1.7trn in 2016

The world’s total energy investment was $1.7 trillion in 2016, having dropped by 12 per cent from 2015 in real terms and accounted for 2.2 per cent of global gross domestic product (GDP), World Energy Investment 2017 has revealed.

The WEI, a publication of International Energy Agency, which was released in July, noted that increase in spending on energy by nine per cent with six per cent rise in electricity networks were more than balance a continuing drop in investment in upstream oil and gas, which fell by over a quarter, and power generation, down five per cent.

According to the report, “Falling unit capital costs, especially in upstream oil and gas, and solar photovoltaics (PV), was a key reason for lower investment, though reduced drilling and less fossil fuel-based power capacity also contributed.”

Pointing out that, “The electricity sector edged ahead of the fossil fuel supply sector to become the largest recipient of energy investment in 2016 for the first time ever,” WEI disclosed that, “Oil and gas represent two-fifths of global energy investment, despite a fall of 38 per cent in capital spending in that sector between 2014 and 2016.”

“As a result, the low-carbon components, including electricity networks, grew their share of total supply-side investment by twelve percentage points to 43 per cent over the same period,” it added.

The WEI reported that China remained the largest destination of energy investment, taking 21 per cent of the global total. “With a 25 per cent decline in commissioning of new coal-fired power plants, energy investment in China is increasingly driven by low-carbon electricity supply and networks, and energy efficiency. Energy investment in India jumped 7 per cent, cementing its position as the third-largest country behind the United States, owing to a strong government push to modernise and expand India’s power system and enhance access to electricity supply.”

According to the report, “The rapidly growing economies of Southeast Asia together represent over 4 per cent of global energy investment. Despite a sharp decline in oil and gas investment, the share of the United States in global energy investment rose to 16 per cent – still higher than that of Europe, where investment declined 10 per cent – mainly as a result of renewables.”

On key trends in energy investment by sector, WEI pointed out that, after a 44 per cent plunge between 2014 and 2016, upstream oil and gas investment has rebounded modestly in 2017.

“A 53 per cent upswing in US shale investment and resilient spending in large producing regions like the Middle East and the Russia Federation (hereafter, “Russia”) has driven nominal upstream investment to bounce back by six per cent in 2017 (a three per cent increase in real terms). Spending is also rising in Mexico following a very successful offshore bid round in 2017.

“There are diverging trends for upstream capital costs: at a global level, costs are expected to decline for a third consecutive year in 2017, driven mainly by deflation in the offshore sector, although with only three per cent decline, the pace of the plunge has slowed down significantly compared to 2015 and 2016. The rapid ramp up of US shale activities has triggered an increase of US shale costs of 16 per cent in 2017 after having almost halved from 2014-16,” it stated.

Similarly, WEI revealed that global electricity investment fell just below one per cent to $718 billion, with an increase in spending on networks partially making up for a drop in power generation. “Investment in new renewables-based power capacity, at $297 billion, remained the largest area of electricity spending, despite falling back by three per cent. Renewables investment was three per cent lower than five years ago, but capacity additions were 50 per cent higher and expected output from this capacity about 35 per cent higher, thanks to declines in unit costs and technology improvements in solar PV and wind. Investment in coal-fired plants fell sharply, with nearly 20 gigawatts (GW) less commissioned, reflecting concerns about local air pollution and the emergence of overcapacity in some markets, notably China, though investment grew in India. The investment decisions taken in 2016, totalling a mere 40 GW globally, signal a more dramatic slowdown ahead for coal power investment once the current wave of construction comes to an end.

Nevertheless, the report further stated that, “Gas-fired power investment remained steady in 2016, but nearly half of it was in North America, the Middle East and North Africa where gas resources are abundant.”

According to the report, “In Europe, although 4 GW of new capacity came online based on investment decisions made years ago, retirements of gas-power plants exceeded the amount of new capacity that was given the green light for construction. The 10 GW of nuclear power capacity that came on line in 2016 was the highest in over 15 years, but only 3 GW started construction, situated mostly in China, which was 60 per cent lower than the average of the previous decade.”

“Spending on electricity networks and storage continued its steady rise of the past five years, reaching an all-time high of $277 billion in 2016, with 30 per cent of the expansion driven by China’s spending in the distribution system. China accounted for 30 per cent of total networks spending. Another 15 per cent went to India and South-east Asia, where the grid is expanding briskly to accommodate growing demand. In the United States (17 per cent of the total) and Europe (13 per cent), a growing share is going to the replacement of ageing transmission and distribution assets,” the report said.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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Crude Oil

Crude Oil Hits $71.34 After Saudi Largest Oil Facilities Were Attacked

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Brent Crude Oil Rises to $71.34 Following Missile Attack on Saudi Largest Oil Facilities

Brent crude, against which Nigerian oil is priced, jumped to $71.34 a barrel on Monday during the Asian trading session following a report that Saudi Arabia’s largest oil facilities were attacked by missiles and drones fired on Sunday by Houthi military in Yemen.

On Monday, the Saudi energy ministry said one of the world’s largest offshore oil loading facilities at Ras Tanura was attacked and a ballistic missile targeted Saudi Aramco facilities.

One of the petroleum tank areas at the Ras Tanura Port in the Eastern Region, one of the largest oil ports in the world, was attacked this morning by a drone, coming from the sea,” the ministry said in a statement released by the official Saudi Press Agency.

It also stated that shrapnel from a ballistic missile dropped near Aramco’s residential compound in Eastern Dhahran.

Such acts of sabotage do not only target the Kingdom of Saudi Arabia, but also the security and stability of energy supplies to the world, and therefore, the global economy,” a ministry spokesman said in a statement on state media.

Oil price surged because the market interpreted the occurrence as supply sabotage given Saudi is the largest OPEC producer. A decline in supply is positive for the oil industry.

However, Brent crude oil pulled back to $69.49 per barrel at 12:34 pm Nigerian time because of the $1.9 trillion stimulus packed passed in the U.S.

Market experts are projecting that the stimulus will boost the United States economy and support U.S crude oil producers in the near-term, this they expect to boost crude oil production from share and disrupt OPEC strategy.

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Crude Oil

A Loud Blast Heard in Dhahran, Saudi Arabia’s Largest Crude Oil Production Site

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Loud Blast Heard in Dhahran, Saudi Arabia’s Largest Crude Oil Production Site

Two residents from the eastern city of Dhahran, Saudi Arabia, on Sunday said they heard a loud blast, but they are yet to know the cause, according to a Reuters report.

Saudi’s Eastern province is home to the kingdom’s largest crude oil production and export facilities of Saudi Aramco.

A blast in any of the facilities in that region could hurt global oil supplies and bolster oil prices above $70 per barrel in the first half of the year.

One of the residents said the explosion took place around 8:30 pm Saudi time while the other resident claimed the time was around 8:00 pm.

However, Saudi authorities are yet to confirm or respond to the story.

 

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Brent Crude Oil Approaches $70 Per Barrel on Friday

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Nigerian Oil Approaches $70 Per Barrel Following OPEC+ Production Cuts Extension

Brent crude oil, against which Nigerian oil is priced, rose to $69 on Friday at 3:55 pm Nigerian time.

Oil price jumped after OPEC and allies, known as OPEC plus, agreed to role-over crude oil production cuts to further reduce global oil supplies and artificially sustain oil price in a move experts said could stoke inflationary pressure.

Brent crude oil rose from $63.86 per barrel on Wednesday to $69 per barrel on Friday as energy investors became more optimistic about the oil outlook.

While certain experts are worried that U.S crude oil production will eventually hurt OPEC strategy once the economy fully opens, few experts are saying production in the world’s largest economy won’t hit pre-pandemic highs.

According to Vicki Hollub, the CEO of Occidental, U.S oil production may not return to pre-pandemic levels given a shift in corporates’ value.

“I do believe that most companies have committed to value growth, rather than production growth,” she said during a CNBC Evolve conversation with Brian Sullivan. “And so I do believe that that’s going to be part of the reason that oil production in the United States does not get back to 13 million barrels a day.”

Hollub believes corporate organisations will focus on optimizing present operations and facilities, rather than seeking growth at all costs. She, however, noted that oil prices rebounded faster than expected, largely due to China, India and United States’ growing consumption.

The recovery looks more V-shaped than we had originally thought it would be,” she said. Occidental previous projection had oil production recovering to pre-pandemic levels by the middle of 2022. The CEO Now believes demand will return by the end of this year or the first few months of 2022.

I do believe we’re headed for a much healthier supply and demand environment” she said.

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