Energy transition slows as global oil and gas industry refocuses on fossil fuels – report

The global oil and gas industry is now refocusing on fossil fuels and away from the energy transition, according to a new report produced by Offshore Technology’s parent company GlobalData, Hellenic Shipping News Worldwide reported on September 24.

The oil and gas industry has been working towards decarbonisation through energy transition efforts. However, concerns over energy security, intensified by the Russia-Ukraine war, have shifted focus back to fossil fuels, causing companies to slow their transition plans. According to the data and analytics company, this trend is likely to continue in 2024, though the move towards low-carbon energy will proceed, but at a reduced pace.

GlobalData’s report, “Energy Transition in Oil and Gas,” highlights the industry’s shift towards renewable power and low-carbon options as part of its energy transition efforts. Many leading oil and gas companies have set a long-term goal of achieving net-zero carbon emissions by 2050, with their progress depending heavily on meeting interim targets set for 2030, the report says.

“Energy security has been a concern for most countries following the outbreak of the Russia-Ukraine war,” said Ravinda Puranik, oil and gas analyst at GlobalData. “The resultant supply chain disruption drove countries towards their readily available fossil fuels, thereby boosting oil and gas demand. On the other hand, the push for energy self-reliance and high inflation have somewhat derailed the clean energy adoption.”

According to the report, leading oil and gas companies have established medium- and long-term decarbonisation targets, relying on both existing and emerging technologies. A key focus is on investments in reliable power generation, particularly through wind and solar energy.

“In 2020, several oil and gas companies announced ambitious energy transition targets. However, the hype around energy transition has somewhat subsided going into 2024,” Puranik pointed out. “Profitability issues and inflation, along with high interest rates are causing uncertainties in undertaking renewable projects.”

The report acknowledges that the share of fossil fuels in global power generation is steadily declining, with renewable sources like solar and wind taking their place. Oil and gas companies are increasingly investing in renewable power as part of their energy transition efforts. These efforts include carbon capture to reduce emissions, and alternatives like hydrogen, renewable power, and low-carbon fuels for consumers. Additionally, battery energy storage is being explored as another key aspect of the transition.

According to the analyst, the oil and gas industry’s energy transition requires long-term planning to reduce or eliminate carbon emissions.

“In the short to medium-term, companies must incorporate transition fuels as well as low-carbon and zero-carbon energy sources in their portfolios,” Puranik said. “Despite periodic slowdowns, energy transition in the oil and gas industry will take place and pave the way for a new global energy mix in the future.”