Despite facing unprecedented energy challenges, a substantial 68 per cent of oil and gas industry leaders remain optimistic about sector growth in the upcoming year, as revealed in a recent survey conducted by DNV.
This confidence underscores the sector’s resilience as it seeks to balance immediate energy demands with long-term environmental responsibilities.
The latest DNV survey, titled “The Paradox of Petroleum – How the oil and gas sector is transforming through uncertainty*,” gathered insights from nearly 450 senior oil and gas professionals to examine rapidly evolving trends and the near-term outlook for the sector.
The survey highlights the industry’s renewed confidence following the 2020 downturn, driven by significant investments in alternative energy sources such as wind, solar, hydrogen, carbon capture, utilisation and storage (CCUS), and biofuels.
These investments are paving the way for new revenue streams, despite challenges like higher interest rates and supply chain disruptions.
The sector’s positive outlook is bolstered by recovery and a renewed focus on energy security, partly due to geopolitical events like the conflict in Ukraine.
Despite the optimism, significant concerns persist within the industry.
According to the survey, 51 per cent of executives believe global investment in new oil and gas capacity is insufficient, with 70 per cent of North American executives particularly concerned compared to 40 per cent in Europe.
Operational performance remains a priority, with 62 per cent of organisations planning to increase investments in energy efficiency, and 78 per cent aiming to standardise tools and processes to cut costs.
Furthermore, 82 per cent of respondents recognise the need for new operating models to achieve these efficiencies. Profitability continues to be a challenge due to the high-risk nature of oil and gas investments.
Companies like Equinor are adjusting capital strategies to balance profitability with strategic goals, especially in renewable energy sectors.
The survey identified the top barriers hindering oil and gas companies from prioritising renewable and cleaner energy sources.
The leading challenge, cited by 49 per cent of respondents, is the low financial return or profitability associated with these initiatives.
Additionally, 33 per cent point to the constraints posed by their existing business models and risk profiles, as well as unclear energy or emissions policies.
Required capital investment is a significant obstacle for 30 per cent, while 26 per cent highlight limitations in organisational capabilities, infrastructure, and technology.
Operational costs are a concern for 21 per cent, followed by organisational culture (19 per cent) and the difficulty in scaling up or growing revenue (18 per cent).
Attracting young, skilled workers is critical, with 66 per cent of executives prioritising it to support expansion, decarbonisation, and modernisation efforts.
Innovative workforce development strategies, such as technology-driven training and leveraging global talent pools, are essential to attract and retain talent.
The sector is also deeply committed to environmental impact reduction, with 61 per cent of executives planning increased investment in decarbonisation.
Balancing these efforts with ongoing oil and gas needs is crucial to effectively support the energy transition.
The future of the sector hinges on its ability to meet both demand from consumers and businesses and decarbonisation targets.
Companies like CPC Corporation Taiwan and TotalEnergies are making strategic moves to ensure stability and reduce greenhouse gas intensity.
As the industry navigates this pivotal moment, the balancing act between high petroleum consumption and advancing towards deeply decarbonised energy systems continues to shape its strategic focus.
Leveraging digital tools, new workforce strategies, and increased decarbonisation efforts, the industry is poised for a structural transition.
This paradox of change and continuity defines the current energy landscape.
While there is a strong push towards low-carbon energy, the world’s high consumption of petroleum products remains a significant factor.
Additionally, there is a keen concern over long-term oil supply security, underscoring the industry’s need to balance immediate fossil fuel demands with the imperative to invest in sustainable energy solutions.
Navigating this complex duality will be crucial for the oil and gas sector’s strategic direction in the coming years.
Ditlev Engel, CEO, Energy Systems at DNV, remarked on the findings, stating, “The oil and gas sector is at a critical juncture. Their dual task to invest in low-carbon and renewable energy sources to meet climate targets while meeting global demand and maintaining operational efficiency and profitability is not an easy fix.
“Our survey demonstrates that industry leaders in the sector are confident about their role in the energy transition and are actively seeking solutions to navigate this transformation.
“More profitable business models and clear policies are needed to accelerate this change in the sector. As DNV we will continue to support the oil and gas sector to decarbonise and keep their current operations safe, sustainable and as efficient as possible.”