From divergence to convergence: Examining the energy transition expectations of oil and gas executives and investors
Amid a growing focus on net-zero, a recent Deloitte survey compares the expectations of oil and gas executives and institutional investors around the energy transition.
There are diverse expectations from the oil and gas (O&G) industry regarding the energy transition. O&G companies cite a 28% average reduction in scope 1 and scope 2 emissions over the last three years and remain confident about achieving a 50%–60% reduction in emissions by 2030.1
Additionally, there is a recognition that the O&G industry offers high dividend and buyback yield to investors, leading all industries with a combined yield of 8% in 2022.2 Amid these perspectives, individual O&G companies continue their capital discipline and pursuit of bankable low-carbon projects while empowering investors to invest their received dividends in the most promising low-carbon solutions.3
Deloitte conducted a global executive survey4 that highlights key areas of divergence between O&G management and institutional shareholders (who now possess a 47% ownership stake, the highest in five years).5 When asked about expectations on returns, target technologies for investment, and metrics of success, the two groups had distinct answers.
While there might be divergence between surveyed executives and investors on some expectations, there are some areas where their expectations align:6
- New and improved financing mechanisms are needed to plug the “capital gap.”
- Demand for low-carbon energy needs to be increased via robust commercial models to achieve economies of scale.
- Leveraging critical mineral and controlling clean supply chains offers a unique way to play in the renewables space.
- Conducive and well-defined policies remain a cornerstone for accelerating the adoption of low-carbon technologies.
- Slow decision-making represents a major challenge to the energy transition.
Although their paths toward net-zero might not be completely aligned, there seems to be a shared consensus between executives and investors on the industry’s potential to achieve its overarching goal.