Investors pump $243 bn in renewable, near $311 bn in oil

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Fred Ojiegbe

Portfolio repositioning in the new energy industry landscape is reshaping the investment map, with investors and even oil and gas companies lining up with about $234 billion to boost production of cleaner energy as the world frowns against high polluting fuel options.

Oracle Intelligence reports industry investment advisory firm, Rystad Energy, as projecting possible swing of investments in favour of renewable energy as the portfolio size global energy companies begin to muster greater mass for new energy options.

In Nigeria, indigenous Seplat Petroleum Development Company Limited recently created a new energy division to foray into the future of the industry. The company is also leading local investments in massive gas supply as transition fuel.

Rystad reported that the new capital expenditure profile for renewable energy projects is at a new record in 2021 and significantly narrows the gap with oil and gas spending which is projected to be relatively flat this year at $311 billion.

The capital expenditure for renewables capex comprises purchases from supply firms is set for another record year, improving on the $224 billion recorded for the sector I 2020; while oil and gas capex expected to stay close to the $306 billion recorded in 2020.

A chronological survey of industry capex by Oracle Intelligence shows that global oil and gas investments declared by quoted companies maintained steady marginal growth, before declining in 2020 from the $422 billion splurged on supply purchases in 2019 exploration and operations.

Rystad Energy observed that spending gap between renewable energy and petroleum is closing, leaving renewables capex now just 22% below the estimate for upstream projects.

The firm stated that most of the renewable energy spending would incline towards onshore wind projects, rising to $100 billion from $94 billion in 2020. Solar PV spending is expected to climb to $96 billion this year from $88 billion last year, while offshore wind will see capex grow to $46 billion from $43 billion.

Most of the expenditure stems from Asia, which has 156 gigawatts (GW) of capacity under construction as of January 2021. China’s decision to slowly reduce subsidy assistance from January forced many projects to start construction early, which further supported spending activity. Much of the spending is down to China’s 800-megawatt (MW) Rudong offshore wind farm and the 2 GW Zhuozi County Project.

Europe follows in the renewable expenditure profile with 32 GW of electricity led by the Orsted’s 1.4 GW Hornsea 2 project off the UK.

Rystad also pointed out that upstream capex is expected to increase by less than 2.0 % in 2021, with spending on greenfield projects declining by 6.0 %. However, sanctioning activity is estimated to increase this year by 30%, mainly due to Qatargas’ $30 billion North Field East development, which makes up 33% of the total budget to be sanctioned this year.

Energy service analyst at Rystad Energy, Chinmayi Teggi, is quoted as saying: “Last year’s events forced leading oil and gas businesses to look at strategies to reduce exposure to the risky market amid the energy transition. Oilfield service suppliers, for instance, have started a considerable transformation, hoping to be more relevant in a greener market and become a more attractive option for investors.”