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New York Energy Assembly Key Takeaways
Published 10th June 2022
In Partnership with the NYSE, the Energy Council was delighted to return to New York on 17 May 2022 to bring together 200+ decision makers from institutional investors, private equity funds, E&P companies & emerging clean tech companies as they look to collaborate and navigate the evolving energy investment landscape as a result of the disruption brought about by the energy transition.
For those of you who were unable to attend, Ben West, MD Americas, has put together his key takeaways from the event:
The Role of Oil & Gas in the Energy Mix
Investor appetite for Oil & Gas is picking back up again. There is a recognition of the impact that under-investment in new O&G supply over the past couple of years has had on real world issues such as energy security and affordability. Therefore, the energy transition is not a case of Hydrocarbons vs. Renewables, but marrying up the roles that all energies have to play in meeting the world’s energy needs. The Upstream E&P sector must be supported to be ease the inflationary pressures being felt by society.
Indeed, divestment of fossil fuel assets has led to unintended consequences. Investors & asset managers who divest fossil fuel assets from their portfolios are not solving climate change, they are simply passing the problem onto somebody else. Real impact can be achieved through the adoption of a pragmatic approach to decarbonization rather than by approaching the issue through a binary lens of brown vs. green.
Asset Backed Securitizations as a Long Term Financing Instrument
Innovative financing mechanisms, including increasingly popular Asset-Backed Securitizations, are an effective way of attracting capital back to the sector. They have been an effective way of attracting institutional investors such as Life Insurers & Pension Funds back to the space as these securities offer them a huge pickup on what they can get versus public debt. These investors also tend to buy and hold so ABS is an effective way to provide management teams with good liquidity to support business growth and helps to reduce the reliance that these firms have had on their bank group.
Independent Third-Party Certification
Independent Third-Party Certification of natural gas production is going to become the norm. Investor criteria is becoming increasingly stringent and Oil & Gas management teams must provide investors with clear and transparent data that enables them to measure and report on their emissions reduction progress and to demonstrate a clear roadmap/strategy on how they are going to go about achieving their stated emissions reduction/net-zero goals.
The Success of New Energy Projects
For new energy projects, such as CCUS & Hydrogen, to be successful, there needs to be an industry mind-set shift towards creating opportunity and a willingness to partner in efforts rather than a focus on self-performing initiatives and competitive differentiation. There also needs to be more open dialogue between industry and regulatory bodies to help to overcome regulatory hurdles, improve understanding of project economics/fundamentals and accelerate private investment into these projects. Finally, uptake/adoption of new technologies has to be far quicker than the historical average (15 years); the industry needs to understand the urgency around emissions reductions targets and help management teams get comfortable with adopting new technologies over a much shorter time frame.
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