While energy transition still has a lot of activity underway — energy companies’ top sustainability solution is decarbonizing their own operations — the number of integrated energy and oil and gas (O&G) executives who listed “continued oil & gas focus” as a top three investment area for the next five years rose 25 percentage points by mid-2023, to more than 70%. High interest rates, energy security concerns, and strong demand and pricing for hydrocarbons prompted them to temper their investments in emerging energy technologies, marking a return to “focusing on what you know” for the industry. Participating across energy sources, if not already an area of expertise, is clearly proving to be difficult.

That’s according to L.E.K. Consulting’s fifth annual Global Energy Study, which featured more than 40 roundtable discussions as well as quantitative survey data gleaned from some 300 senior executives in multiple sectors of the energy industry, including O&G, utilities and renewables — and their strategic investors — from key geographies, mainly North America, Europe, the Middle East and Australia.  

Companies that continue to look closely at new technologies and extensions, albeit without the same urgency as previously, are optimizing their existing production operations, the study found, resuming their drilling programs and greenfield developments where doing so is both economically and environmentally feasible, expanding their gas and liquified natural gas infrastructure networks, and/or upgrading their refining and petrochemical capacities wherever demand justifies it. Study results are reinforced by high-profile deals in the market, including ExxonMobil agreeing to buy Pioneer Natural Resources and Chevron’s plan to acquire Hess Corp.

And half of the energy executives surveyed said solar power is the renewable technology they’re most likely to invest in over the next five years, while 33% cited energy storage systems.  

But while the major integrated energy players still believe in sustainability and the new energy technologies that support it, they are now taking a more discerning approach to capital deployment while they focus on their core business. In practice, that means they are increasingly sharing risk with specialized companies to take up the sustainability challenge.  

Meanwhile, utilities companies plan to invest primarily in expanding renewable-generating assets and flexible load solutions, including energy storage and demand-side management technology.

To learn more about energy companies’ renewed focus on O&G, please download our analysis.

For more information, please contact industrials@lekinsights.com.

L.E.K. Consulting is a registered trademark of L.E.K. Consulting LLC. All other products and brands mentioned in this document are properties of their respective owners. © 2024 L.E.K. Consulting LLC 

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