A recent DNV survey reveals that 64% of oil and gas industry leaders say that the pace of the energy transition is accelerating, while 68% are optimistic about growth despite lingering impacts from the 2020 downturn. Digital technologies and low-carbon innovations are driving the sector’s transformation, making it leaner, cleaner and smarter. However, concerns remain among executives over investment in new oil and gas capacity, highlighting the sector’s demand-decarbonisation dilemma.

The 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.  

The oil and gas industry is investing heavily in alternative energy sources such as wind, solar, hydrogen, carbon capture, utilisation and storage (CCUS), and biofuels, notes DNV. 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 driven by recovery and a renewed focus on energy security, partly due to geopolitical events like the conflict in Ukraine, adds DNV.

However, there are significant concerns within the industry, finds the survey. Some 51% of executives believe global investment in new oil and gas capacity is insufficient, with a large regional disparity: 70% of North American executives ‘particularly concerned’, compared to 40% in Europe. Operational performance remains a priority, with 62% of organisations planning to increase investments in energy efficiency, and 78% aiming to standardise tools and processes to cut costs. Furthermore, 82% of respondents recognise the need for new operating models to achieve these efficiencies.  

In addition, profitability continues to be a challenge due to the high-risk nature of oil and gas investments. Companies like Equinor, for example, are adjusting capital strategies to balance profitability with strategic goals, especially in renewable energy sectors, notes DNV.

Barriers to renewable energy investment

Looking at the barriers hindering oil and gas companies from prioritising renewable and cleaner energy sources, the leading challenge, cited by 49% of respondents to the survey, is the low financial return or profitability associated with such projects. Additionally, 33% point to the constraints posed by their existing business models and risk profiles, as well as unclear energy or emissions policies.  

Excessive required capital investment is a significant obstacle for 30%, while 26% highlight limitations in organisational capabilities, infrastructure and technology. Operational costs are also a concern for 21%, followed by organisational culture (19%) and the difficulty in scaling up or growing revenue (18%).

Addressing the skills shortage for future growth

Attracting young, skilled workers is seen as critical for future sector growth, with 66% 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, respondents say.

The sector is also somewhat interested in environmental impact reduction, with 61% of executives planning increased investment in decarbonisation.  

‘Balancing these efforts with ongoing oil and gas needs is crucial to effectively support the energy transition,’ comments DNV.

The future of the oil and gas sector hinges on its ability to meet both demand from consumers and businesses and decarbonisation targets, according to DNV. It notes 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,’ says DNV.

‘This paradox of change and continuity defines the current energy landscape,’ it continues.  

Shell to build CCS projects in Canada

As noted in DNV’s survey, many companies in the oil and gas sector are investing in alternative energy sources and technologies as they diversify their portfolios on the road to net zero. Recent announcements include Shell’s final investment decision (FID) for Polaris, a carbon capture project at the Shell Energy and Chemicals Park in Alberta, Canada.  

Polaris is designed to capture approximately 650,000 t/y CO₂ from the Shell-owned Scotford refinery and chemicals complex.  

In addition to the Polaris FID, Shell has also announced the FID to proceed with the Atlas carbon storage hub in a 50:50 partnership with ATCO EnPower. The first phase of Atlas will provide permanent underground storage for the CO₂ captured by the Polaris project. Both projects are expected to begin operations toward the end of 2028. A future phase of the Atlas hub, which could potentially store carbon for the partners and third parties, will be subject to a future investment decision.

‘Carbon capture and storage is a key technology to achieve the Paris Agreement climate goals,’ says Huibert Vigeveno, Shell’s Downstream, Renewable and Energy Solutions Director. ‘The Polaris and Atlas projects are important steps in reducing emissions from our own operations.’ Polaris is expected to to reduce Scope 1 CO₂ emissions of Shell’s Scotford refinery by up to 40%, and by up to 22% at the chemicals complex.

Polaris and Atlas will build on the success of the Shell-operated (10%) Quest carbon capture and storage (CCS) facility at Scotford, which has captured and stored more than 9mn tonnes of CO₂ since 2015. Other partners are Canadian Natural Resources (70%) and Chevron Canada (20%).