ABU DHABI, United Arab Emirates—Look at the road to the energy transition long enough—at least from the oil and gas sector’s vantage– and it begins to increasingly curve into something resembling a traffic circle.

The renewables-only future demanded by keep-it-in-the ground activists simply defies reality, some CEOs said.

The heads of Baker Hughes, SLB and Japanese E&P Inpex see the energy transition progressing, albeit differently. Lowering emissions remains a priority, even as some companies have started to pull back on transition initiatives seen as either impractical or unable to turn a profit.

SLB, Baker Hughes and Inpex are among companies that have pledged at various rates to substantially lower emissions or reach net zero between now and 2050.

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The CEOs touted the successes in their initiatives so far at the ADIPEC Exhibition & Conference on Nov. 4. But they also came bearing a dose of reality.

Baker Hughes, SLB, Inpex and GE Vernova delivered a mixed outlook for 2025, ranging from optimistic (power generation), flat (services) to not so good (upstream).

Lorenzo Simonelli, chairman and CEO of Baker Hughes, said the company is committed to reaching net zero targets by 2050, but said the energy mix cannot be changed in a couple of years. Rather, it’s a multi-decade process.

The time has come to face “some reality and truths,” he said.

“For us to think we are not going to be using hydrocarbons or fossil fuels for the next several decades, I think is living in a dream world,” Simonelli said. “It's not the fuel source, it's emissions that we need to tackle. And when we talk about energy transition, I think we've got to start looking at it from an energy expansion standpoint.”

The world needs an all-of-the-above strategy over the next 15 years to meet energy demand poised to grow by 10%, he said. During the past 18 months, that’s only intensified with the growth of AI and the data centers needed for computational power.

“And that means finding ways to use the hydrocarbons: natural gas, oil; looking at then the energy expansion,” Simonelli said, “but focus on the emissions, the technology that can be developed and … not say ‘hydrocarbons are bad.’”

Natural gas, he added, is not a bridge energy source on the way to a renewables-only world, but a “destination fuel.”

SLB CEO Olivier Le Peuch, when asked by the session moderator when the balance between the energy mix would lean more heavily toward renewables, said: “It’ll happen.”

The quick response belied an answer laden with caveats.

For one, Le Peuch said, the transition is going slowly because of grid infrastructure, permitting and deployment that can support rapid connection of renewable power to end users. He added that the existing ecosystem uses gas and oil for heating and cooling mobility. Hard-to-abate industries “will take decades to decarbonize.”

“So we need to account for this—not stop investing, continue to invest—yet do it in a better way to decarbonize the investment and at the same time accelerate,” he said, “so that we get a better mix every year so that we mitigate the risk on climate and we reach a balance for the future.”

Not ‘even a penny’

And Le Peuch cited another factor: cost.

Inpex CEO Takayuki Ueda agreed on that point, saying the economics of energy, for customers, is first and foremost a pocketbook issue.

“We think that every customer, every user wants to have the clean energy, but no one wants to pay (anything) additional, even a penny for the clean energy,” he said. “Everybody wants to have a clean energy with the existing cost.”

From a production viewpoint, hydrogen and renewables may suit European countries where costs are lower or in the Middle East, where sunshine is abundant.

But for other nations, where renewable energy uses are limited because of geography, the bill gets pricey. The results have been some limitations on introducing renewable energy.

Inpex is constructing a blue hydrogen demonstration project in Japan to “demonstrate that we are really sincere to reduce the carbon dioxide stack.” However, the cost of hydrogen made with natural gas is somewhere between three or four times higher than normal hydrogen. The same goes for ammonia production.

“So who wants to pay for the … higher costs of a three or four times higher than normal energy? I think it seems to me that almost all countr[ies] are not ready to accept such higher costs.”

“So I think economics, energy will also [be] very much [an] important factor for transition.”

Echoing Simonelli, Ueda said that LNG is increasingly playing a larger role as an energy source. The need to lock down consistent supplies has only been highlighted by the Russian invasion of Ukraine.

“So I think we now focus on the energy, especially natural gas, especially LNG and our base [obligation] is to provide the LNG to the Asian region, including Japan,” he said. The key is to do so in a way in which the CO2 is reduced from natural gas by using techniques such as carbon capture and storage, he said. Maví Zingoni, CEO of GE Vernova’s power business, said that renewables are making an impact but that they also need a backup system. Growth in power demand is clear, and “if we want these data centers and other things to work 24-7, we need reliable, dispatchable power.”

With high demand, the penetration of renewables is not enough.

“So we need other sources, and again, all-of-the-above is the answer here, but what we need to make sure is that we keep on working and investing in innovation to make sure that there is a decarbonization option for those technologies in the future so we can have additional gas power generation today,” she said.

Outlook 2025: slow or worse

The CEOs’ sharpest contrasts were on how they see 2025 shaping up.

Le Peuch, noting he leads a public company, offered a generic assessment that the oil and gas industry is still in a long cycle.

Oil and gas momentum is being driven by a combination of deepwater, natural gas and the “Middle East that has invested at scale in the last two or three years. That is here to stay.”

“We see momentum on this happening and continuing going forward, we see the acceleration of new energy renewables continue to scale and we see more investment coming into carbon capture. $12 billion came into the capture side,” he said.

Le Peuch also said more investments are coming into geothermal that will raise energy production to 40 gigawatts (GW) by 2040 compared to 17 GW today.

“By 2030, we see more investment coming into long duration storage,” he said, noting the “huge wave of solar” capacity coming to the market.

“I would not look at a short term,” he said. “I would look at it as a strategic plan.”

Zingoni offered an optimistic take, noting that GE Vernova is increasing capacity just to meet the demand coming from customers across the spectrum of renewables and conventional power fueled by natural gas power.

The company is also investing in small modular reactor nuclear technology and direct air capture. She said she sees power growth in everything related to transmission of power and the grid in 2025 and beyond. The only question is where power demand will double or triple by 2030 or 2040.

“So it's a great momentum when it comes to power. We have to deliver it. We have to serve our customers in the best potential way,” she said.

Ueda sounded a more cautionary note.

He said the 2025 environment is likely to be marked by volatility and uncertainty due to geopolitical crises and a “very uncertain economy, especially in some Asian countries, [which] seems to be deteriorating.”

The “business environment generally speaking seems to be not so much good for next year,” he said. “And also in terms of transition activity, there are some companies who want to shift a little bit to come back to the kind of producing more hydrocarbons.”

Ueda said he wants to drive his company to pursue energy investment, especially in clean energy, as well as monitoring the shift back toward hydrocarbons

Going into next year, Simonelli said he expects an oilfield services environment in which activity is relatively range bound relative to 2024.  

“We've probably slowed down the pace of growth from what was expected at the beginning of 2024,” he said.

Longer term, energy producers need to prepare, he said.

“When you look at the longer cycle, that continues to be robust because the longer cycle equipment requirement, and when you look to ‘27, ‘28, that energy demand that's out there, you need to start equipping yourself now,” he said.

Citing economic growth rates have come down somewhat in China and other areas, he said the outlook is positive from a macro perspective.

“So there's a separation between what's a transactional business and what's longer cycle, very much maintained and some of the transactional side being a bit more subdued as we go into 2025.”

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