Shifting priorities of energy executives worldwide are putting more impetus on a lower-carbon future, while oil and natural gas price volatility remains the No. 1 "critical" uncertainty, according to the World Energy Council.
The council's eighth annual "The World Energy Issues Monitor 2017" surveyed 1,200 energy executives in 95 countries and found that renewables and energy efficiency rapidly have shaken up the traditional fossil fuels world and upended long-term global outlooks.
"Our survey shows that energy leaders face and acknowledge disruptive change," said Secretary General Christoph Frei. "The Issues Monitor illustrates that innovation issues such as digitalization, decentralization, innovative market design or electric storage rapidly gain traction, while a more difficult growth context and new physical and digital risks are posing ever greater threats to the energy sector."
Five years ago, Frei said, "these issues were far from being a priority." Disruptive technologies, including renewable energies and energy efficiency, are affecting top priorities for energy leaders globally in 2017.
However, the biggest single critical issue in terms of "high uncertainty and higher impact" remains the outlook for oil and gas prices.
"Ostensibly a short-term concern of critical importance to resource-holding governments, international hydrocarbon developers and all consumers, commodity prices take on an increasingly long-term perspective within the context of the energy transition," survey researchers said. "Increased price volatility is a likely consequence of the peak in energy demand growth predicted by the latest world energy scenarios as international oil companies and national oil companies reduce their investment spending in anticipation of falling demand."
The International Energy Agency, researchers noted, last month warned of price volatility "as necessary investments fail to keep up with natural declines from existing oilfields and increasing demand in the run-up to the anticipated peak."
Commodity price volatility is an issue of importance for all regions surveyed, but resource-holders and consumers in developing economies showed the highest levels of concern.
U.S., Canada ‘Held Hostage’ to Prices
"For their part, North American energy leaders are equally concerned, buoyed by the fact that they are major producers and consumers of energy. Here, the slow decline in coal has an impact on commodity price concerns but, more than anything, it is the future of the tight and shale oil/gas industries that keeps energy leaders awake at night.
"Massive amounts of capital are now tied up in the industry in both the United States and Canada, and they are held hostage to a single issue: price."
Other findings in this year's report include:
Economic growth shifting, creating more uncertainty about primary energy demand;
Geopolitical power being reshaped, with a renewed focus on U.S. policy and the uncertainty of the UK exit from the European Union;
Physical and virtual risks, as cyber attacks pose more threats to the energy sector; and
Talent acquisition and retention a major focus as new technology reshapes the energy industry.
As global energy leaders focus on the big picture, a noticeable lack of concern is seen regarding the historic primary energy resources. Worldwide, coal, nuclear and hydro all have fallen off of the radar screen and are rated as "low-impact, low-uncertainty" issues.
LNG’s Future Complex
However, a more complex picture emerged about the future of liquefied natural gas (LNG), as gas consumption under most global energy scenarios sees "modest" growth for the foreseeable future.
"While energy leaders in Europe, Africa and Asia see LNG as an issue of little concern, it was a major issue in individual countries where LNG plays an important role," the researchers said.
In Singapore, for example, which aims to become a leading regional LNG hub, a lot of investment is being put toward storage infrastructure. Singapore’s business model "depends on the continued role of natural gas in Asia and benefits from a new focus of spot sales of LNG instead of gas supplied under long-term contracts."
LNG also is an important issue for Middle East-North Africa, or MENA, which has become "increasingly dependent on LNG imports for domestic power generation. Qatar, the region's main gas exporter, has effectively capped gas exports to neighboring states, forcing Kuwait and the United Arab Emirates to start LNG imports."
Meanwhile, climate concerns are waning, energy executives said.
"The global climate framework remains in the quadrant of critical uncertainties but global leaders believe that this issue has less uncertainty and a lower impact than commodity prices," the researchers said. "Again, at first sight this is surprising: after all, the move towards the decarbonization of energy is the biggest single driver behind the energy transition."
However, following the December 2015 United Nations global agreement by more than 200 nations, "this is a clear signal that energy leaders believe that the world is in an irrevocable path toward decarbonization, one that is no longer entirely dependent on a global climate agreement."
Technology holds the key long-term, with energy leaders clearly believing that its many forms will lead to a decarbonized future.
"While energy efficiency gains tend to come in slow increments and are hard to retrofit, there is an increasing certainty that it will have a major impact on the future of energy," researchers said.
The Issues Monitor is a snapshot of what keeps CEOs, energy ministers and experts awake at night, helping to define the world energy agenda and its evolution.
"The survey indeed illustrates the tensions that emerge against the context of the grand energy transition," Frei said. "The report does not find reasons why the current high dynamics in the energy sector would slow down. How the different regions decide to address the challenges and tensions identified in our report will define the agendas for the future."