Despite growing demand and ambitious country pledges for net zero, the energy supply chain is shifting into oil and gas, triggered by a lack of consistent and profitable work in green projects, raising concerns that net zero 2050 commitments will also be delayed
This is according to the Energy Industries Council's (EIC) 7th Survive and Thrive report.
The world's oil and gas markets are experiencing a period of significant growth and a return to boom times, according to the EIC Report. This finding is backed up by EIC's Financial Investment Decision (FID) data, which paints a sobering picture. It suggests that oil and gas projects are more valuable and more likely to proceed with full funding compared to renewable and transition technologies such as wind and hydrogen.
The report shows that oil and gas segments, including upstream, midstream, and downstream, have the highest FID rates, averaging around 20% for projects with startup dates between this year and 2028. In contrast, renewable energy and energy transition technologies have much lower FID rates. Offshore wind stands at only 8%, hydrogen at 3%, carbon capture at 2%, and floating offshore wind at just 1%.
This new data raises the prospect of rapidly widening disparities between green ambitions and the reality of what businesses actually see in their order books, the report concludes.
"The much lower level of funding for green projects, compared to hydrocarbons, highlighted in this report, is having a direct impact on energy supply chain businesses. They are not seeing enough renewable and transition related work cascading down into their order books. They can’t wait for policy pledges anymore, so they look to more active markets like oil and gas to support their growth plans,” said Stuart Broadley, CEO of the EIC. "This is such a lost opportunity. The supply chain wants to be part of, and to drive, net zero solutions, but opportunities just aren’t there, in anything like enough volume or profitability.”
Oil and gas features heavily in the report, both in terms of its high levels of activity and the resilience it potentially provides to businesses. As the world teeters on the edge of a recession, leaders believe they are safe from the worst ravages of such a downturn when active with oil and gas, compared to more vulnerable sectors like nuclear, hydrogen and floating offshore wind.
Frustratingly for export and trade policy makers, the report confirms for the 7th straight year, that the least used and hardest growth strategy remains the development of new export and international markets. Nothing the government has done to stimulate global growth seems to have worked, and indeed the results are the worst ever in 2023.
The report also seeks clarity of the talk of a skills crisis, instead suggesting businesses are today largely still able to meet their growth commitments with the resources at their disposal, worried more about a future growth spurt of the green revolution finally happens.
For more information or to access the complete Survive and Thrive report, please visit the EIC website at EIC Survive and Thrive Insight Report (the-eic.com).
