Investment in fossil fuels is expected to continue rising in 2024, with commitments to low-emission fuels growing rapidly but still from a very low base. Despite significant shifts in power sector investment toward energy transitions, fuel supply investment remains predominantly focused on fossil fuels, driven by a robust demand as the world recovers from disruptions caused by the COVID-19 pandemic and geopolitical tensions, including Russia’s invasion of Ukraine. Investors are faced with multiple potential energy futures, each impacting fuel supply projects differently.
Upstream oil and gas spending is projected to increase by around 7% in 2024, reaching USD 570 billion. This increase is primarily led by national oil companies in the Middle East and Asia. Despite a substantial rise in revenues and profits during the price spikes of 2021-2022, this has not resulted in a corresponding increase in new capital expenditures, with more funds being directed toward dividends, share buybacks, and debt repayment. Upstream investments are focusing on projects that remain viable under challenging future price and regulatory conditions, often characterized by low costs and low emissions intensities. Investments aimed at maximizing value from existing fields hit USD 200 billion in 2023, marking the highest level since 2019. Strong cash positions and pursuit of advantageous resources have also driven merger and acquisition activities.
Investment in LNG is set to rise, with a significant wave of new LNG export project approvals expected to increase supply capacity by 250 bcm (a 50% increase) between 2023 and 2030, primarily from the United States and Qatar. Unlike previous supply surges, there are fewer committed end-use off-takers for these additional volumes, indicating a shift from a sellers’ market to a buyers’ market in the latter half of the decade. Investment in refineries remained stable from 2022 to 2023 but is anticipated to decline in 2024 due to long project lead times and uncertainty about future demand. Growth in refinery 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.
Coal supply investment increased in 2023, particularly in China, India, and Indonesia, with further growth expected in 2024. Coal investments will largely depend on the demand outlook in China, which may slow due to economic uncertainties and the rapid growth of renewables. Existing policies and commitments, such as the Global Methane Pledge, aim to reduce methane emissions from fossil fuel operations by 50% by 2030, requiring more than USD 80 billion in cumulative investments. Financial support for low- and middle-income countries will be crucial to achieving these reductions and the more ambitious target of a 75% reduction in emissions by 2030.
Commitments to low-emissions fuels are increasing rapidly but from a very low base. Clean energy investment by oil and gas companies grew to around USD 30 billion in 2023, still less than 4% of overall capital spending. Approximately half of this investment involved mergers and acquisitions of clean energy companies. Low-emissions hydrogen is another emerging area for investment, though uncertainties about demand and reliable off-takers constrain large-scale project development. Progress has also been made with new carbon capture, utilization, and storage (CCUS) projects, with around 20 commercial-scale projects reaching final investment decision (FID) in 2023 and over 110 projects potentially reaching FID in 2024.
The critical mineral market was valued at USD 325 billion in 2023 but experienced a contraction due to declining commodity prices, particularly for battery materials like lithium, graphite, cobalt, nickel, and manganese. Diversifying supply and increasing recycling is essential to ensure balanced and resilient markets as energy transitions drive demand.
Anticipated oil and gas investment in 2024 aligns with the levels required by 2030 in the Stated Policies Scenario, which sees demand leveling off before 2030. However, global spare oil production capacity is already near 6 million barrels per day, and a buyers’ market for LNG is expected. This context raises the risk of over-investment if the world rapidly meets net-zero pledges and climate goals.
Investment in clean energy by oil and gas companies grew to USD 28 billion in 2023, a 30% increase from 2022, though still below the 65% increase seen from 2021 to 2022. Mergers and acquisitions accounted for nearly half of the clean energy investment in 2023, with significant transactions including ExxonMobil’s acquisition of Denbury’s CCUS network and TotalEnergies’ takeover of Eren Re. Investments in solar PV and wind projects made up more than 40% of the clean energy spending by the oil and gas industry in 2023.
Investment in hydrogen electrolyzers is expected to jump by over 140% in 2024 to USD 5 billion, driven by new capacity additions and cost inflation. The focus is primarily on replacing existing hydrogen uses in refining and chemical industries, perceived as lower risk than generating new demand sources. Overall, while there is positive momentum in developing low-emission fuel projects, investment in these technologies remains far below the levels needed to meet future climate goals.
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