Global energy investment trends for 2024: soaring fossil fuel prices, growing commitments to clean energy

Fossil fuel investments are expected to continue to grow in 2024 and low-carbon fuel commitments are expected to grow rapidly, but still from very low levels. Despite significant shifts in power sector investment towards the energy transition, fuel supply investment remains largely focused on fossil fuels, driven by strong demand as the world recovers from disruption caused by the Covid-19 pandemic and geopolitical tensions, including invasion Russia to Ukraine. Investors face many potential energy futures, each impacting fuel supply projects in different ways.

Spending on oil and gas extraction is projected to grow by approximately 7% in 2024, reaching $570 billion. National oil companies from the Middle East and Asia are mainly responsible for this growth. Despite a significant increase in revenues and profits during the period of price spikes in 2021-2022, this did not translate into a corresponding increase in new capital expenditure, and more funds were directed to dividends, share buybacks and debt repayment. Investments in the upstream segment focus on projects that will remain profitable in difficult future pricing and regulatory conditions, often characterized by low costs and low emissions intensity. Investments to maximize value from existing deposits reached $200 billion in 2023, the highest level since 2019. Strong cash positions and the search for favorable resources are also driving mergers and acquisitions.

Investment in LNG is set to increase, with a significant wave of approvals for new LNG export projects expected to increase supply capacity by 250 bcm (50% increase) between 2023 and 2030, mainly from the United States and Qatar. Unlike previous supply surges, the less engaged end users of these additional volumes point to a shift from a seller’s market to a buyer’s market in the second half of the decade. Investment in refineries remained stable in 2022-23 but is expected to decline in 2024 due to long project lead times and uncertainty about future demand. The increase in refining capacity in 2023 was driven by projects in China, Nigeria and the Middle East, with future capacity expansion expected mainly in China, India and the Middle East.

Investment in coal supplies increased in 2023, especially in China, India and Indonesia, with further growth expected in 2024. Investments in coal will largely depend on the prospects for demand in China, which may slow due to economic uncertainty and the rapid development of renewable energy sources. Existing policies and commitments, such as the Global Mamine Pledge, aim to reduce methane emissions from fossil fuel activities by 50% by 2030, requiring a total investment of over $80 billion. Financial support for low- and middle-income countries will be crucial to achieving these reductions and the more ambitious target of reducing emissions by 75% by 2030.

Commitments for low-carbon fuels are growing rapidly, but from very low levels. Clean energy investments by oil and gas companies rose to about $30 billion in 2023, which still represents less than 4% of total capital spending. About half of these investments were in mergers and acquisitions of clean energy companies. Low-carbon hydrogen is another emerging area of ​​investment, although uncertainty around demand and reliable buyers is hampering the development of large-scale projects. Progress has also been made on new carbon capture, utilization and storage (CCUS) projects: approximately 20 commercial-scale projects will reach Final Investment Decision (FID) in 2023, with over 110 projects potentially reaching FID in 2024 .

The critical minerals market was valued at $325 billion in 2023 but has declined due to falling commodity prices, particularly battery materials such as lithium, graphite, cobalt, nickel and manganese. Diversifying supply and increasing recycling is essential to ensure sustainable and resilient markets as the energy transition drives demand.

Projected investments in oil and gas in 2024 correspond to the levels required by 2030 in the Policy Scenario, which predicts stabilization of demand before 2030. However, global production capacity for crude oil and reserve gas is already close to 6 million barrels per day, and there is a buyer’s market for LNG is expected. This context increases the risk of overinvestment if the world quickly meets net zero commitments and climate targets.

Oil and gas companies’ clean energy investments rose to $28 billion in 2023, up 30% from 2022, although still below the 65% growth seen in 2021-2022. Mergers and acquisitions accounted for almost half of clean energy investment in 2023, with significant deals including ExxonMobil’s acquisition of the CCUS network in Denbury and TotalEnergys’ acquisition of Eren Re. Investments in solar and wind projects accounted for more than 40% of the oil and gas industry’s clean energy spending in 2023.

Investment in hydrogen electrolysers is expected to increase by more than 140% to $5 billion in 2024 due to the addition of new production capacity and cost inflation. Its primary focus is on replacing existing hydrogen uses in the refining and chemical industries, seen as lower risk than generating new sources of demand. Overall, while the development of low-carbon fuel projects is gaining positive momentum, investment in these technologies remains well below the levels needed to meet future climate goals.

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