IEA Sees 8% Drop in World Energy Investment

Global energy investment in 2015 amounted to $1.8 trillion, down 8% (in real terms) from 2014, according to a survey published September 14 by the International Energy Agency. The drop mainly came from the upstream oil and gas segment, it said.

"After three years during which the US was the largest destination for investment in energy supply, China retook the top position in 2015, largely due to the record level of electricity sector investment in China and the decline of US oil and gas investment," it said. However, "the rebalancing and slowdown of the Chinese economy, which are curbing the country’s energy needs, are having a major impact on energy investment globally, largely as a result of lower demand growth for oil, gas and coal." 

Welcoming the report, the head of the International Association of Oil and Gas Producers, Gordon Ballard, said: "In the oil and gas sector, huge investment will be necessary in the next decades, to explore and produce the new resources needed to meet the energy demand that a growing world population will likely generate. As the new Report shows, significant investment is essential to preserve security of energy supply.

"The IEA itself has estimated that, even if the world manages to keep the temperature increase within 2 degrees Celsius, in 2040 oil and gas will each have to cover 22% of the world’s energy demand."

Oil, the largest primary energy source, took a slightly bigger share of the global energy mix, but its share of global energy investment declined, most notably in North America. Gas demand growth remained subdued with the slowdown of electricity demand and the growth of renewables. Low oil and gas prices have led to cuts in investment in upstream and transportation infrastructure, with most major gas infrastructure projects in east Africa and the Eurasian region facing delays.

Upstream oil investment remained robust in Russia and the Middle East. The relatively low cost of developing reserves in these regions and currency movements that mitigated the fall in the dollar oil price helped to support investment there. In Russia, capital spending even increased in ruble terms, helping to stabilise Russian production at a post-Soviet high, the report found.

William Powell

A longer version of this article will appear in the next issue of Natural Gas World magazine.