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Despite a crash in confidence, the oil and gas investment in oil projects over the next
industry is expected to boost investment in 12 months, down 10 percentage points
energy systems of the future, according to new from 2020 (Figure 2).
The impetus to lower carbon content
research by DNV. A record two-thirds (66 per across all operations has progressed
cent) of senior oil and gas professionals say their significantly from something on the
organisation is actively adapting to a less carbon-intensive horizon to an immediate priority.
energy mix in 2021, up from just 44 per cent in 2018. Hari CAPITAL SHIFTS AWAY FROM FOSSIL FUELS
Vamadevan, Regional Director UK & Ireland, Senior Vice Shifting priorities for investment
President, DNV Energy Systems, discusses the findings and are also raising expectations for the
the evolution of the sector towards a low carbon future industry to reshape this year. Investors
are reassessing the risks of financing
oil and gas projects as the sector is
increasingly coming to terms with
ased on a survey of more the notion that global demand for oil
than 1,000 senior oil and gas has peaked or will peak in the short to
professionals and in-depth medium term. As such, the financial
interviews with industry markets – through the effects of the
B executives, Turmoil and Covid-19 pandemic – have seen what
Transformation includes commentary peak oil demand could look like and
from business leaders and industry are increasingly factoring in the
experts, plus analysis and examples changing sentiment of society towards a
from DNV’s 11 years of research into decarbonised future.
the outlook for the sector. It suggests The majority of those questioned
priorities are shifting as investors expect such a swing in investment will
reassess the risks of financing oil and lead to a wider reshaping of the industry.
gas projects, and as governments Nearly eight-in-ten (78 per cent) believe
and industry pour billions into green there will be increased consolidation in
recovery strategies following the the year ahead, up from 64 per cent one
Covid-19 crisis and subsequent oil and year ago. Strategic reorientation is also
gas market crash. expected to involve asset and business
sales, with 63 per cent expecting more
PRIORITISING DECARBONISATION demergers, divestments and spin-offs, up
Many are looking beyond the short- from 46 per cent last year.
term challenges of the pandemic,
betting long-term as they invest in a COST CUTTING EFFORTS ARE REINVIGORATED
decarbonised future. Cost cutting continues to be a universal
In 2020, net zero climate policies priority for nearly all (96 per cent)
began to proliferate in Europe and in 2021, but the industry is already
Asia-Pacific. The potential for these lean. A resilient 63 per cent say
policies to drive deep decarbonisation their organisation will still achieve
of the world’s energy system is already acceptable profits if the oil price
changing the direction of the oil and averages between $40 to $50 per barrel
gas industry. Some 57 per cent plan this year. However, there are signs that
to increase investment in renewables, traditional cost cutting methods are
compared to 44 per cent last year. Almost hitting their limits.
half (48 per cent) expect to increase Most of the industry’s available cost
investment in green or decarbonised efficiency levers have been pulled quite
gas. Such transformational investments hard already over the past seven years.
come as only 39 per cent of respondents For some, those levers are stiffening,
expressed confidence about industry meaning less water to squeeze from
growth in 2021, down from 66 per cent the sponge. Four-fifths (80 per cent)
last year and over three-quarters (76 per stated that cost cutting will be more
cent) in 2019. challenging than ever in 2021. Roughly
Notably, confidence is higher now the same number (87 per cent) want
than it was following the last oil price the industry to develop new business
crash in 2014, when only 28 per cent models to enable further cost-
of those questioned were optimistic efficiencies. Increased digitalisation is
about industry growth in the year cited as crucial to this effort by 68 per
ahead (Figure 1). cent of respondents.
While intention to increase Significantly, the sector is not hitting
investment in gas projects/portfolios the spending brakes as hard as it did
remained fairly steady at 37 per cent after the downturn in 2014. While the
(versus 40 per cent last year), just a fifth proportion of respondents expecting to
(21 per cent) said they would increase maintain or increase capex in the year

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