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Oil and gas to lead global energy spend to a record US$2 trillion in 2022, says Rystad

Oil and gas to lead global energy spend to a record US$2 trillion in 2022, says Rystad

08 Apr 2022

Surging oil, gas and power prices together with the European Union’s (EU) goals of becoming less dependent on Russian supplies and post-Covid-19 pandemic inflation will catapult global energy spending this year to US$2.1 trillion.

According to Norway-based independent energy research and business intelligence company Rystad Energy, a concern in energy markets was that the ongoing war in Ukraine will derail the energy transition, but the latest data suggests that spending in green energies will grow faster than in the fossil fuel sector.

In a statement on Thursday (April 7), the firm said that without the invasion, however, there would have been less growth in investments in oil and gas and the share of green energies in global energy spending would be slightly more than today’s 31%.

Rystad said upstream oil and gas spending was now projected to grow 16% — or US$142 billion — compared with last year as oil and gas producers around the world up their investment budgets to increase output.

It said for green energy in 2022, based on the current pipeline of projects, global capacity would grow at 250 gigawatts (GWac) within wind and solar, and lead green energy spending to grow by 24%, or US$125 billion.

The firm said another important factor pushing energy spending to new highs was the global inflation of material prices, labour costs and shipping rates caused by the pandemic and the sanctions imposed on Russia.

It said compared with 2020 levels, project costs in oil and gas had increased by between 10% and 20%, due largely to steel price rises and a tighter market among suppliers.

It said within renewables, lithium, nickel, copper and polysilicon — which are all important materials in battery and solar PV manufacture — had sent renewable project costs up by between 10% and 35% within the same time frame.

Rystad head of energy service Research Audun Martinsen said the world was now spending more on energy than ever before.

“The year 2014 was the last time we saw similar numbers. One can see a major shift in the amount of spending on green energy, which has increased, with a drop in expenditure on oil and gas.

“However, expenditure on other fossil fuels, such as coal, has remained constant,” said Martinsen.

Europe’s energy mix

Rystad said that sourcing fossil fuels from alternative providers to Russia was just a temporary solution as the EU harboured a clear goal of reducing the bloc’s dependence on fossil fuel energy in general.

It said green energy — through solar and wind power, coupled with hydrogen and CCS initiatives — would be key to improving energy security but also delivering on member countries’ energy transition goals.

Rystad said the European Commission in March unveiled a plan to make Europe independent of Russian gas and the Commission’s REPowerEU body had set out a framework to target a 45% share of renewables in primary energy by 2030.

It said the framework demanded an overall 1,600 GWac of installed capacity in Europe by 2030.

In 2022, based on the current pipeline of projects, global capacity would grow at 250 GWac, and lead to green energy spending to grow by 24%, or US$125 billion.

Source: The Edge Markets

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