OPINION: Oil and gas industry workers still reeling from the shocks of 2020 — Covid-19, plunging demand, a price crash and serious questions about the future of hydrocarbons — have some understandably mixed feelings about the outlook for 2021.

Getting a reading on sentiment in a business as complex and varied as international oil and gas is a tough task but a new survey of energy professionals released this week attempted to do just that.


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Perhaps surprisingly, it is not all gloom and doom.

The study, published annually by advisory DNV GL, found that just 39% of respondents — more than 1000 executives, top engineers and analysts — expect to see their businesses grow in 2021, down from 66% last year and 76% two years ago.

Capex hopes

But that confidence in the year ahead compares favourably with the 28% who felt that way in the survey conducted after the last oil price crash in 2014.

Likewise, a majority — 62% — expect their organisations to maintain or increase capex in 2021, whereas a year into the last downturn that number was only 43%.

Last year marked the third serious industry downturn in a dozen years, and given the uncertainty around the ongoing coronavirus pandemic, a degree of pessimism is understandable.

The industry has been through many such cycles and the pattern of recovery has been much the same on the upswing: resurgent demand, price recovery, renewed exploration.

But the survey — appropriately titled ‘Turmoil and Transformation’ — indicated that respondents feel recovery this time around will be different, as investments shift to include more low-carbon and renewable energy.

Glimpse of 'what peak oil could look like'

As DNV GL vice president Hans Krans Kristian Danielsen noted: “The financial markets — through the effects of the Covid-19 pandemic — have seen what peak oil demand could look like and are increasingly factoring in changing sentiment in society towards a decarbonised future.”

The responses support that view, with two-thirds of survey participants saying their respective organisations are “actively adapting to a less carbon-intensive energy mix” and 57% saying they plan to increase investment in renewables, up from 44% last year.

The outlook for natural gas is reasonably positive, with 48% of respondents saying they plan to increase investment in “green or decarbonised” gas, while only one-fifth said they expect to increase spending on oil projects this year.

Net-zero emissions pledges and the proliferation of low-carbon climate policies “from Europe to China” are certainly a factor, as Danielsen noted: “Long-term, net-zero policies have the potential to drive deep decarbonisation of the world’s energy system, and they are already changing the direction of the oil and gas industry.”

Adapting to low carbon

The anticipated increase in capex in 2021 partly reflects an industry “actively adapting to a less carbon-intensive energy mix”, as DNV GL said, with the majority of respondents planning to increase investment in renewables.

The promise of a successful vaccination campaign and government commitments to economic stimulus are already bolstering oil prices in anticipation of renewed demand.

But few expect 2021 to see the sanction of many huge greenfield projects. Rather, new oil and gas investments will likely be in what DNV GL called “quicker and more flexible options”.

The pace of transformation is anybody’s guess, but there is no doubt the industry is ready to put the turmoil of the past year behind it.

(This is an Upstream opinion article.)