A spike in ambitious plans by renewable energy and battery producers shaped the investment matrix in the first half of this year, while oil and gas re-entered the top 10 recipient sectors for foreign direct investment (FDI) amid an ongoing global energy crisis.
Between January and June 2022, foreign investors announced investment projects worth more than $401.5bn, according to the latest figures from fDi Markets. This is the largest total capital expenditure (capex) recorded since the second half of 2019, before the Covid-19 pandemic, when total announced FDI stood at $434.4bn.
Much of this investment came from the 48 mega-projects — investments with at least $1bn of capex — announced in the first half of the year, which marks the highest numbers of mega-projects announced in a six-month period in 14 years.
Renewable energy producers set in motion the largest number of mega-projects in the first half of 2022 worth a total capex of $47.8bn. Several major investments were announced into hydrogen and ammonia production, helping push the number of renewables mega-projects in this six-month period to higher than any other previous full-year total since record-keeping began in 2003.
In southern Morocco, French energy giant Total announced its intention to invest more than €9.4bn ($10.28bn) to produce hydrogen and ammonia. Meanwhile, Australian mining giant Fortescue plans to invest up to $10bn by the end of 2030, to implement hydrogen projects in Egypt. Analysts have questioned how realistic these goals are, given scaling challenges such as sourcing the large number of electrolysers needed to produce green hydrogen.
In the first half of 2022, overall greenfield FDI in the renewable energy sector reached $90.2bn, as capex dedicated to wind projects jumped by 180% compared to the same six-month period of 2021, fDi Markets figures show.
Investments into the electrification of transportation were particularly strong too. A record-breaking figure of almost $20bn was pledged to battery projects in the first half of the year, marking an increase of 167% from the same period a year earlier.
In northern Germany, Swedish battery maker Northvolt unveiled plans to build a €4bn ($4.2bn) gigafactory. Italian battery cell company Italvolt also announced plans to invest $4bn into a lithium-ion battery plant in the US state of California.
However, capital pledges were not the preserve of green energy. The first six months of the year saw a strong rebound in fossil fuel investment, reversing the decline trend seen in recent years. The unprovoked invasion of Ukraine by Russia, which was the world’s largest exporter of oil and natural gas in 2021, has sent energy prices soaring.
The International Energy Agency expects global net income from oil and gas production in 2022 to be nearly $2tn higher than in 2021. Goldman Sachs forecasts that primary energy capex will grow by 60% to $1.4tn by 2025.
Amid this windfall, global FDI into oil and gas extraction topped $27bn in the first six months of the year, an almost tenfold increase from the same period of 2021. In Uganda, a joint venture between French energy giant Total, the China National Offshore Oil Corporation and Uganda National Oil company will invest $6.5bn into the Lake Albert project, which is expected to begin production in 2025.
Meanwhile, semiconductor companies continued their investment plans as they aim to address the ongoing chip crunch. The most capital-intensive FDI project tracked in the first half of the year was US Intel’s plans for its facility in Leixlip, Ireland. The chipmaker will invest €12bn ($13.4bn) to double the facility’s manufacturing space and create 1600 new jobs. Intel would stand out even if the analysis was widened to include US interstate projects on top of pure FDI plays, as the Santa Clara-based firm committed $20bn to a new production facility in the US state of Ohio.
Overall, the semiconductor sector attracted $31.6bn of FDI in the first half of the year, marking a 34% decrease from a year earlier, but well above full-year totals recorded before 2021.
Supply chain disruption caused by changes in consumer habits and lockdowns during the pandemic were also reflected in FDI figures. A total of $12.9bn was pledged to freight and distribution services, as companies expanded capacity to reduce bottlenecks in the processing and movement of cargo.