Jakarta – The oil and gas industry’s transition to low-carbon energy is slowing amid global economic uncertainty, according to a new GlobalData report. The report said the impact of inflation, rising interest rates, and geopolitical tensions, such as the war in Ukraine, have led many countries to rely on fossil fuels to maintain energy security.
GlobalData’s “Energy Transition in Oil and Gas” report said the energy transition obstacles will last until 2024.
GlobalData oil and gas analyst Ravindra Puranik said on Tuesday, September 24, that while the energy transition effort continues, the pace is slowing down due to increased demand for fossil fuels and supply chain disruptions triggered by geopolitical tensions. “Energy security has been a concern for most countries following the outbreak of the Russia-Ukraine war,” he said.
The report underlines that growing concerns over energy security have forced many countries to switch back to more accessible fossil fuels. The protracted Russia-Ukraine war has disrupted global energy supplies, which has resulted in rising fossil fuel prices.
“The resultant supply chain disruption drove countries towards the readily available fossil fuels, thereby boosting oil and gas demand. On the other hand, the push for energy self-reliance and high inflation have somewhat derailed the clean energy adoption,” explains Puranik.
Derailed decarbonisation targets
While several leading oil and gas companies have set targets to achieve net zero emissions (NZE) by 2050, achieving this goal in the short—to medium term faces many challenges. Most companies initially invested heavily in renewable energy, such as solar and wind power, but economic uncertainty has hampered these investments.
“In 2020, several oil and gas companies announced ambitious energy transition targets. However, the hype around energy transition has somewhat subsided going into 2024. Profitability issues and inflation, along with high interest rates are causing uncertainties in undertaking renewable projects,” added Puranik.
Nonetheless, oil and gas companies continue to explore various technologies to reduce carbon emissions. One emerging technology is carbon capture storage (CCS), which aims to reduce emissions from industrial processes. In addition, companies are also starting to develop hydrogen production, renewable energy, and low-carbon fuels as alternatives for consumers.
“The oil and gas industry’s energy transition requires long-term planning to reduce or eliminate carbon emissions. In the short to medium-term, companies must incorporate transition fuels as well as low-carbon and zero-carbon energy sources in their portfolios. Despite periodic slowdowns, energy transition in oil and gas industry will take place and pave way for new global energy mix in the future,” Puranik said. (Hartatik)
