BAKU, Azerbaijan, June 9
By Leman Zeynalova - Trend:
After a precipitous fall in 2020 of more than 25 percent, total fuel supply investment is expected to rebound by about 14 percent from just over USD 620 billion to nearly USD 710 billion in 2021, Trend reports with reference to the International Energy Agency (IEA).
“The vast majority of fuel supply investment in 2020 went into fossil fuels – around 84 percent to oil and gas and just over 14.5 percent to coal (which is a much less capital-intensive sector). Only around 1.3 percent was spent on low-carbon fuels. However, as we explore later in this section, companies – including in the oil and gas industry – are starting to allocate more capital spending to projects in low-carbon fuels and CCUS; this is set to have a tangible influence on future investment trends,” reads the IEA report.
IEA notes that the oil and gas industry has never seen a year like 2020, and the reverberations are still being felt in the finances and strategies of companies across the sector.
“After a sharp decline in 2020, our bottom-up analysis of publicly announced oil and gas company spending plans shows an 8 percent increase in upstream spending in 2021, taking the total spending to over USD 350 billion, but this remains well below 2019 levels.
Prices and revenues have been higher in the first quarter of 2021, but it is far from certain that this will trigger additional upstream spending. Companies face multiple dilemmas as they put together their spending plans. Demand uncertainties related to the pandemic and the speed of energy transitions are accompanied on the supply side by the large spare capacity held by countries in the OPEC+3 grouping, and questions over the pace at which OPEC+ supply cuts will be unwound. There are variations among companies but, in aggregate, the Majors are holding a conservative line on upstream capital spending plans: these are essentially flat compared with 2020 (-2%). Continued investor pressure to diversify into low carbon energy underpins more modest spending programs, which are also aimed at reducing debt and supporting dividend payments. Upstream spending by the Majors as a group has traditionally been well above the levels from their peers in the Middle East, Russia and China; this is no longer the case,” said the IEA.
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