Capital spending on renewable energy is in a period of robust growth and is on track to catch up with oil and gas spending.
According to the research data analyzed and published by ComprarAcciones.com, renewables spending is set to hit $243 billion in 2021. That will be an 8.5% increase over 2020’s $224 billion. In contrast, the oil and gas capital expenditure (capex) will grow by only 1.6%, going from $306 billion in 2020 to $311 billion this year. For some context, companies in the sector spent $422 billion in 2019, compared to only $177 billion for renewables.
As a result of these trends, spending on renewable energy projects this year will be only 22% lower than on oil and gas.
During the year, onshore wind projects will account for the bulk of spending. From around $94 billion in 2020, these are projected to hit $100 billion in 2021. On the other hand, spending on solar energy projects will rise from $88 billion to $96 billion. Offshore wind projects will have the lowest capex, going from $43 billion to $46 billion.
Saudi Aramco Posts 44% Profit Decline in 2020, Slashes 2021 Capex by $10 Billion
In the period between 2019 and 2021, spending on upstream oil and gas has declined by a compound annual growth rate (CAGR) of 15%. In 2020, businesses in the sector had to find ways to reduce exposure due to risky market conditions.
Based on revenue data from 170 listed companies, Rystad analysis reveals that businesses focused on oil and gas suffered a 23% year-over-year (YoY) revenue drop. In contrast, those focused on wind and solar energy grew sales by 18%.
For Saudi Aramco, the world’s largest oil company, there was a YoY decline of 44.4% in 2020 full-year earnings. However, despite this massive drop, the company still made a profit of $49 billion.
That was the second full-year earnings report from the Saudi Arabian company since it went public. Prior to its public listing on the Tadawul exchange, Saudi Aramco reported $111.1 billion as its annual income in 2018.
In 2019, the figure declined to $88.2 billion but still gave it the title of the most profitable publicly listed company globally according to Statista. Current results, however, place it behind Apple, which netted $57.41 billion in 2020.
Additionally, Saudi Aramco was the most valuable listed company when it first went public with a market cap of $1.7 trillion. Its value has declined since and it has lost the title to Apple. As of April 14, 2021, its market cap is $1.89 trillion according to Marketwatch. Comparatively, Apple is valued at $2.26 trillion.
The company is optimistic as it still maintained its dividend for the year 2020, a total of $75 billion. It expects to return to pre-pandemic levels of oil production by the end of 2021.
Its capital expenditure in 2020 dropped by 18% to $27 billion from $32.8 billion in the previous year. In 2021, it projects total capital expenditure at $35 billion, which could be up to $10 billion lower than its previous guidance.
Exxon Mobil Slashes 2021 Capex by $16 Billion, Chevron by $8 Billion
The Saudi Arabian oil giant joins a throng of oil majors planning to cut capital expenditure significantly in 2021.
US oil company Exxon Mobil announced plans to keep its annual spending at $19 billion or less during the year. It had previously estimated a capex of $35 billion per year with the aim of building production. In the period between 2022 and 2025, its annual project spending will range between $20 billion and $25 billion.
According to S&P Global, its production will remain static from 2020 levels, at 3.7 million barrels of oil equivalent per day (boe/d) through 2025. Its previous production estimate stood at 5 million boe/d.
Exxon Mobil suffered its first annual loss in decades in 2020. From a full-year profit of $14 billion in 2019, the firm posted a $22.4 billion loss. That came following a 30% revenue decline to $181.5 billion.
Meanwhile, Chevron projected its total capital and exploratory costs at $14 billion through 2025. That was significantly lower than its previous forecast of up to $22 billion. In 2021, it plans to spend $11.5 billion on exploration and production. Refining-related operations will account for $2.1 billion in the period.
Its Permian basin spending in 2021 is estimated at $2 billion. That would be half the figure it estimated at the start of 2020 and well below the $3.6 billion spent in 2019.