Investment in renewable energy overtook oil gas for the first time in the world

According to the Nihon Keizai Shimbun on August 1, countries around the world are gradually reducing the scale of investment in oil gas development, fossil fuels are facing increasing resistance. Oil majors in the U.S. Europe are tightening their investment in the sector. Investors are increasingly interested in renewable energy as a result of the falling cost of power generation, with investment surpassing oil gas for the first time in 2020. The energy sector, which emits large amounts of greenhouse gases, is getting serious about decarbonising.

How to ensure adequate energy supplies a smooth transition to renewable energy while scaling back investment in oil gas is a major challenge, the report said.

According to a recent survey by the International Energy Agency, investment in the "upstream" industry, such as oil gas exploration, development production, was $326 billion in 2020, down 31 percent 2019. The pandemic has curtailed the movement of people supplies, resulting in a sharp drop in demand for petroleum products such as gasoline.

Investment in renewable energy increased 7 percent to $359 billion, the report said. The falling cost of generating electricity gives renewables an advantage over fossil fuels. Outside Europe, emerging countries are also rapidly stepping up their efforts in the field.

The IEA expects this trend to continue in 2021. While global investment in upstream oil gas is expected to grow 8 per cent, the total, at $351bn, falls short of renewable energy, which rose 2 per cent to $367bn.

Exxon Mobil is expected to spend $16 billion to $19 billion on exploration development in 2021, which could even fall 25% a year ago. French energy giant Total will increase its equipment investment by 10 to 20 percent to $12 billion to $13 billion in 2021, but the IEA said its upstream investment will shrink by more than 10 percent.

According to the report, the background of this phenomenon is that investors are pressuring companies to pursue decarbonization. At Exxon Mobil's shareholder meeting in May, environmentalists recommended by activist shareholders were elected to the board. In the Netherlands, the Regional court in The Hague also issued a ruling ordering The Anglo-Dutch oil group Shell to drastically cut greenhouse gas emissions, as environmental groups have demanded.

It is reported that major companies are gradually shifting their investment towards renewable energy. Bp plans to invest between $3 billion $4 billion a year in clean energy by 2025, up $500 million today. According to Japan's Oil, Gas, Metals Minerals Agency, although less than 10% of the current investment in decarbonization by energy giants in Europe the US will be closer to 20% by 2025.

Among Japanese companies, ENEOS in May revised its medium-term business plan through March 2023. Under the plan, Shinnisi will raise Y220bn in cash the sale of its oilfields invest Y400bn in renewable energy such as hydrogen.

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Source: International gas network