Energy investment to hit record $3.3 trillion in 2025 as oil capex falls: IEA

Global energy investment in 2025 is set to hit a record $3.3 trillion, two-thirds of it in clean technologies, as investors shrug off economic and geopolitical uncertainty, the International Energy Agency said June 5, although oil spending will fall for the first time since 2020.

The Paris-based IEA, which represents mostly high-income energy consumers, said in its annual investment report that $2.2 trillion would be pumped into clean technologies -- including renewables, nuclear, grids, electrification and low-emission fuels -- in 2025 as the world enters what it calls the "Age of Electricity" underpinned by rapid uptake of electric vehicles, cooling and artificial intelligence.

Meanwhile, investment in oil, natural gas and coal would reach $1.1 trillion, the agency said. The overall $3.3 trillion investment marks a 2% real terms rise on 2024, the IEA said.

Heavy spending will come in spite of ongoing trade tensions, particularly between the US and China, following President Donald Trump's raft of tariffs on all of the US' trading partners announced on April 2, as well as geopolitical tensions amid wars in Europe and the Middle East.

IEA Executive Director Fatih Birol noted, however, that energy security concerns, which have garnered more attention following Russia's invasion of Ukraine in 2022, are "coming through as a key driver of the growth in global investment this year...as countries and companies seek to insulate themselves from a wide range of risks."

Birol added that "the fast-evolving economic and trade picture means that some investors are adopting a wait-and-see approach to new energy project approvals, but in most areas we have yet to see significant implications for existing projects."

China is set to be the largest energy investor by far, the report notes, accounting for more than a quarter of total spending, while Africa -- home to 20% of the world's population -- will continue to struggle to mobilize capital for energy projects.

The solar sector is expected to be the biggest recipient with $450 billion in 2025, driven by China, while nuclear power spending should hit $75 billion, having grown by 50% in the past five years.

Investment in grids, though strong at $400 billion per year, "is failing to keep pace with spending on generation and electrification," the IEA said. Indeed, 2024 saw record EV sales globally, the IEA said, with some 17 million units sold, two-thirds of them to customers in China. That could rise to around 22 million in 2025, while cumulative US data center investment could exceed $2.1 trillion in the next five years, the report noted.

In recent years, international energy majors -- particularly BP, Equinor and Shell -- have shifted away from low-emissions technologies, with a 25% dip in investment in 2024 and a further 10% expected this year. However, the IEA expects Middle Eastern NOCs including the UAE's ADNOC and Saudi Aramco, as well as Malaysia's Petronas and China's Sinopec, to pick up the slack.

Oil investment slump

While clean technologies are seeing record investment, oil capex is set to fall by 6% in 2025, the IEA said, marking the first year-over-year drop since the height of the coronavirus pandemic in 2020, as a result of sluggish prices and global demand fears.

Trump's blanket "Liberation Day" tariffs, as well as plans by the OPEC+ producers' alliance to accelerate the return to market of 2.2 million b/d of crude, caused Platts-assessed Dated Brent to fall $15/b in the first nine days of April, one of the biggest shocks since the benchmark's creation in the 1980s, on fears that production would outpace demand.

Dated Brent was last assessed at $66.52/b on June 4.

The IEA said the dip in investment would be driven by lower spending in the price-sensitive US shale patch, where producers require Dated Brent to be in the mid $60s/b to justify new drilling. US tight oil and shale gas accounts for 15% of global upstream investment, the IEA said, and should see a 10% investment dip in 2025.

Meanwhile, "global spending on upstream oil and gas is gravitating towards the Middle East," the report noted, with the region's NOCs expected to comprise a 20% share of global upstream investment in 2025, an all-time high, fueled by gas project expansions in Saudi Arabia, the UAE and Qatar.

Upstream investment in sub-Saharan Africa is expected to fall by 15% in 2025, while it could rise slightly in Russia after dipping in 2024.

For a third year running in 2024, capex by international oil majors accounted for less than half their cash utilization, as the companies focused on distributions to shareholders, including share buybacks and dividends. In 2025, the IEA expects around $50 billion to be spent on exploration.

The IEA has been among the most bearish forecasters of oil demand in recent years, intensifying a row with OPEC, which accuses the agency of jeopardizing energy security by potentially scuttling vital investment in oil projects.

OPEC expects global crude demand to rise by 1.3 million b/d in 2025, compared with the IEA's prediction of just 650,000 b/d, according to its latest oil market report. And while OPEC sees no peak oil demand through 2050, the IEA expects consumption to plateau by 2030.

LNG, coal boost

In 2025, the Paris-based agency also sees refinery investments falling to their lowest level in 10 years at roughly $30 billion, the report noted. As a result, there will be no net capacity additions in 2025, due to increasing refinery retirements and a drop in new additions.

While oil investment is seen dipping, the IEA said investment in new LNG facilities is "on a strong upward trajectory" as new projects come onstream in the US, Qatar and Canada, adding some 900 Bcm/year of capacity by 2029.

Coal, too, will see a 4% rise in investment this year, as growth in China -- which has greenlit almost 100 GW of new coal-fired plants in 2025 -- offsets declines in other countries, the IEA said.