Energy transition slowing, finds L.E.K. study
In 2023, energy firms prioritized oil & gas more than they have in recent years, according to L.E.K. Consulting’s fifth annual Global Energy Study. The strategy firm surveyed approximately 300 executives in multiple segments of the energy sector, including oil and gas, utilities, renewables, and strategic investors.
The study indicates the drive for energy transition away from fossil fuels has eased up.
“The approach to energy transition investment in the energy industry is moving from aspiration to moderation," said study coauthor Franco Ciulla, managing director at L.E.K.
The proportion of energy execs who listed “continued oil & gas focus" as a top-three investment in the next five years rose 25 points from the 2021 survey to over 70% in 2023.
The refocusing on fossil fuels was marked by several large transactions, including ExxonMobil's agreement to buy Pioneer Natural Resources and Chevron's plan to acquire Hess Corp.
“Energy firms have emphasized core operations and tempered investment into emerging energy technologies due to high interest rates, energy security concerns and strong demand and prices for hydrocarbons," said coauthor Amar Gujral, managing director at L.E.K.
The top sustainability solution cited by oil & gas execs was decarbonizing their own operations (25%). The top energy transition tech they are focusing on in the next five years allows repurposing existing infrastructure, namely carbon capture (39%) and hydrogen technology (39%).
“Energy transition is a 'when,' not an 'if.' But at this point in time, oil & gas companies, in particular, are finding it difficult to invest in new technologies and projects and are thus focusing more on decarbonizing existing infrastructure and operations," said report co-author Rebecca Scottorn, a managing director at L.E.K.
Oil & gas executivess expect to increase the portion of investment budget spent on decarbonization to 26% in five years, up from 21% today.
Despite the decline in industry enthusiasm, proven renewables will continue to grow at a healthy rate, L.E.K. says, receiving investment from utilities, renewable technology firms, investors, and oil & gas companies. Half of energy execs (50%) said solar is the most likely renewable technology investment in the next five years, followed by energy storage systems (33%), wind (29%), and hydrogen (27%).
