Global energy spending is on track to reach a record high of $2.1 trillion in 2022 as a result of rising oil, gas, and power prices, as well as the European Union’s (EU) goal of becoming less reliant on Russian supplies, a new Rystad Energy research has shown.
According to the energy analysis, this spending is also driven by global inflation of material prices, labor costs, and shipping rates caused by the pandemic and sanctions imposed on Russia.
An analysis of the breakdown shows that upstream oil continues to dominate the energy landscape, with $658 billion in spending and a 16 percent increase to produce 99.6 million barrels per day (bpd) in liquid supply in 2022.
“In comparison to last year, upstream oil and gas spending is expected to increase by 16 percent, or $142 billion, as oil and gas producers throughout the world increase their investment budgets to enhance output,” Rystad said in a release
The gas and liquefied natural gas (LNG) sector, on the other hand, is experiencing considerable growth, with spending up 15 percent and output up to 396 million cubic feet per day (MMcfd) from 390 MMcfd.
It also suggested that the on-going conflict in Ukraine is causing concern in energy markets, although the newest data predicts that spending on green energy will expand faster than spending on fossil fuels.
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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 percent, according to the report.
It said, “For green energy in 2022, based on the current pipeline of projects, global capacity will grow at 250 gigawatts (GWac) within wind and solar, and lead green energy spending to grow by 24 percent, or $125 billion.”
While noting this, the survey also revealed that solar, carbon capture and storage (CCS), hydrogen, and geothermal are the fastest developing green energy technologies, with growth rates ranging from 40 percent to 60 percent.
Meanwhile, it was revealed that solar utility scale and wind are the primary sources of significantly increased capacity, with 140 GWac and 110 GWac, respectively.
Audun Martinsen, Head of Energy Service Research at Rystad Energy said, “The world is 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,” he said.
The research also stated that, compared to 2020 levels, oil and gas project prices have grown by 10 percent to 20 percent, owing to steel price increases and a tighter market among suppliers.
Furthermore, the report reveals that renewables, lithium, nickel, copper, and polysilicon – all critical elements in battery and solar PV manufacturing – have increased the cost of renewable projects by 10 percent to 35 percent in the same timeframe.
