We’re witnessing a degree of realism in the Energy Transition. The elections showed that people want leaders who can make decisions and also that they don’t want to put all their eggs into the Green basket. There’s also a recognition that Europeans want lower energy prices. Share prices of super majors and service companies over the course of the last three months have been downwards. So, there isn’t a view that activity levels are going to increase for the foreseeable future. Also, investors have a big influence on European super majors. There’s a clear difference in share valuations between European and US companies and European investors also want consistent share price and dividend performance, so that pressure is there on the companies to move away from the Energy Transition debate.
Has financial confidence in the Energy Transition been shaken?
Large renewable energy projects have struggled to meet economic goals in both the US and Europe. The supply chain for renewable energy equipment is also fractured, with unclear roles for the US, UK, Europe, and China. This uncertainty leaves big oil and gas companies without a clear pathway. Investors are demanding consistency, preferring to invest in renewables directly when the landscape is clearer. In the meantime, they want oil and gas companies to focus on their core business of hydrocarbon development.
Outlook for higher US production this year?
Because of cost and access to capital, it’s getting increasingly difficult for companies to attract investment capital, whether debt or equity. Investors are not supporting significant increases in production. It would require a substantial amount of expensive capital for new equipment in the shale sector, which service companies have not invested in.