DNV: Oil & gas witnessing confidence resurgence while energy transition price tag hampers net-zero aspirations

As looming political uncertainty prepares the world for the incoming tsunami of elections, optimism still runs strong in the energy industry, especially within the oil and gas sector. While rising costs and supply chain disruptions are putting at risk the viability of many projects and dampening the short-term optimism for electrification and renewables, a new survey from DNV, a risk management and assurance provider, pinpoints the cost of the energy transition as the biggest barrier to meeting the net zero targets.

DNV’s recent annual ‘Industry Insight’ survey shows optimism within the energy sector, despite prevailing caution, with 73% of senior energy professionals expressing confidence in the industry’s growth trajectory for the upcoming year, a figure that has remained steady at around 74% since 2022, reflecting a resolute stance amid turbulence. 

This survey outlines that the oil and gas sector is witnessing a resurgence in confidence, reflecting what is said to be the industry’s pivotal role in meeting global energy demand while navigating the transition to cleaner fuels. 

Ditlev Engel, CEO of Energy Systems at DNV, commented: “The transition towards a sustainable energy future is not just desirable; it’s imperative. Key drivers of optimism include the relentless march toward decarbonization and electrification, offering long-term clarity amid near term uncertainty.

“Understanding this shift as a necessary progression aligns with the industry commitments under the Paris Agreement, reinforcing its determination to drive meaningful change. Consequently, the industry’s optimism about the path ahead is well-founded – especially since the requisite technologies are already within our reach.” 

A complex landscape of shifting dynamics is said to be beneath the apparent stability with specific sectors, such as electric power and renewables, recording notable declines from previous peaks even though the industry as a whole maintains a positive outlook.

While stressing that nearly two-thirds of the energy sector view global political uncertainty as the primary threat to success over the coming year, DNV’s study reveals that nearly two-thirds (62%) of respondents perceive the 2024 wave of elections and potential policy shifts as one of the steepest barriers to growth. This political uncertainty, which ranked as the 13th major concern in 2022, surged to sixth place in 2023. 

However, 2024 is perceived to mark a record year for elections, with over 2 billion people heading to the polls, thus, the prospect of continued policy upheaval has been identified to be of particular concern in the Americas, with 71% of Latin American and 67% of North American energy professionals highlighting political issues, reflecting the polarized landscape of energy and climate politics.

Engel outlined: “For decades, the energy sector has faced enduring political risks, evolving from localized tensions to global challenges affecting every aspect of the industry. Amidst fluctuating prices, disruptions in supply chains, wavering investor confidence, and shifting regulations, stakeholders stress the importance of maintaining a long-term perspective, anchored in stable supply contracts.

“In this climate of uncertainty, the sector must demonstrate resilience, adaptability, and a strategic vision for the future to overcome policy ambiguities and foster economic growth, job creation, and prosperity for all.”

Given its importance to the global energy sector, DNV claims that the outcome of the upcoming elections in the United States holds particularly significant implications for energy industry sentiment and strategic planning. 

“Furthermore, to effectively scale the energy transition across various industries, it’s imperative to streamline and standardize processes. A key challenge is to secure lasting regulatory support and clear visibility into the future to rapidly deploy existing technologies,” added Engel.

Based on the survey’s findings, optimism among respondents in electrical power has dipped from 87% to 76%, while renewables have experienced a similar downward trend, from 87% to 78%, mirroring a broader shift in industry growth expectations and organizational confidence, with rising costs and supply chain disruptions posing significant hurdles to project viability and the pace of energy transition. In light of this, the electric power industry is said to be facing a pronounced shortage of skilled talent, hindering progress in energy transition and digital initiatives.

Meanwhile, renewables are perceived to grapple with regulatory hurdles and intensifying market competition while a fall in optimism is also noted about organizational decarbonization targets among survey respondents, with the majority (62%) believing that financial costs are the greatest barrier to reaching the goals of the Paris Agreement.  

Eirik Wærness, Senior Vice President and Chief Economist, Head of Global External Analysis at Equinor, emphasized: “The price of carbon is still too low globally, and the political difficulty of having energy consumers face the cost of carbon in their everyday decisions is one of the reasons why the energy transition will move slower than many people hope.

“So carbon border adjustment mechanisms are needed to encourage every government around the world to put a price on carbon. That is easier said than done, particularly in emerging market democracies, where there are so many urgent priorities.” 

DNV’s survey finds that the oil and gas sector has undergone a confidence boost, rising from 58% in 2022 to 68% in 2024, with established oil and gas companies also benefitting from branching out into decarbonization and renewable energy arenas. 

Arnaud Le Foll, Senior Vice President of New Business, Carbon Neutrality at TotalEnergies Exploration and Production, underlined: “The price of power on any given day can be quite erratic, which is part of why we have kept to our vision of integrated businesses. It’s through integration that we have remained strong through the cycles in oil and gas, and we think it will be similarly important in our electricity business.” 

In line with this, Jacqui Bridge, Executive General Manager of Energy Futures at Powerlink Queensland, an Australian transmission system operator, also emphasized the importance of integrated approaches and systems thinking for navigating the future energy landscape, pointing to the need to look “across the entire power system, including all the different resources that customers are connecting within the distribution grid”.

This position is shared by Gerard Reid, Co-founder of Alexa Capital, an investment bank focused on energy transformation, and co-host of the Redefining Energy podcast, who believes that “the biggest change since the outbreak of the Ukraine-Russia hostilities is that residential, commercial and industrial consumers are now driving change, irrespective of the actions of neighbours, grid operators or government.”