Energy sector overview for oil & gas and nuclear energy investors in 2025

January 11, 2025 | New York, NY

The energy industry is constantly changing, and 2025 is no different. The ongoing war in Ukraine and sanctions on Russia continue to disrupt the global energy market, affecting supply chains and energy prices. At the same time, artificial intelligence (AI) is revolutionizing many sectors, including energy. AI is being used to optimize operations and improve exploration techniques. The rise of AI is also driving greater energy demand, especially for electricity.

Climate change is a major factor influencing the energy industry. Governments around the world are implementing policies to promote clean energy and reduce carbon emissions. This focus on sustainability is driving the growth of renewable energy sources and the development of new technologies like carbon capture, utilization, and storage (CCUS).

These factors are creating both exciting opportunities and uncertainty in the energy industry. Emerging economies and new technologies are driving continued growth in energy demand. However, the transition to a cleaner energy future is underway, with renewables playing an increasingly important role.

Top energy trends in 2024

Several notable trends have emerged in the energy industry during 2024:

Upstream growth and consolidation: The oil & gas sector is focusing on upstream growth, with companies consolidating and growing their positions in tight oil, deepwater, and LNG.
Reshaping the downstream sector: The downstream sector is undergoing a transformation, with investors rationalizing refining portfolios to include more sustainable projects like biofuels. Companies are also integrating further into the chemicals sector, particularly those with strong fundamentals in that area.
Diverging new energy bets: There is a mixed picture of new energy bets. While sustainable fuels and CCUS are seeing increased focus, there is a decreased emphasis on renewable power, hydrogen, nature-based solutions, and EV charging. Some companies, however, are placing their bets on integrated power and critical materials like lithium.
Performance push: Industry players are focusing on improving capital expenditures and cost efficiency, embracing new technologies like AI to drive performance.
Reducing Scope 1 and 2 emissions: Companies are making progress in reducing Scope 1 and 2 emissions, including methane, with less focus on Scope 3 emissions.
- Scope 1: Emissions from sources that a company owns or controls directly, such as burning fuel in vehicles
- Scope 2: Emissions from the generation of purchased energy, such as electricity used in a company's buildings
- Scope 3: Emissions that occur in a company's value chain, including upstream and downstream emissions

These trends illustrate that the energy industry is dynamic and responsive to various pressures. The focus on upstream growth and consolidation indicates continued reliance on fossil fuels, while the reshaping of the downstream sector and the performance push demonstrate commitments to efficiency and sustainability. The diverging new energy bets and the focus on reducing Scope 1 and 2 emissions highlight the complex considerations involved in balancing profitability and environmental responsibility.

Energy predictions for 2025

Looking ahead to 2025, we can expect the following developments in the energy industry:

Continued geopolitical uncertainty: The war in Ukraine and global tensions are likely to persist, impacting energy markets and creating volatility. This uncertainty will require companies to be agile and adaptable, with a focus on risk management and supply chain resilience.
Accelerated energy transition: The transition to cleaner energy sources is expected to gain momentum, driven by government policies, technological advancements, and increasing investor and consumer pressure. This will create opportunities for companies involved in renewable energy, energy storage, and clean technology.
Increased focus on energy security: The importance of energy security will be amplified in 2025, encouraging countries to diversify their energy sources and supply chains. This could lead to increased investment in domestic energy production and a renewed focus on traditional energy sources like nuclear power.
Digital transformation: The digitalization of the energy industry will accelerate, with AI and machine learning playing a more significant role in optimizing operations, improving decision-making, and driving innovation.
Talent and workforce development: The energy industry will face challenges in attracting and retaining a skilled staff, particularly in the face of an aging workforce and the increasing demand for expertise in new technologies. Companies will need to invest in training and development to ensure they have the necessary talent to navigate the changing energy landscape.

These predictions suggest a year of continued transformation in the energy industry. Companies that can adapt to the changing landscape, embrace new technologies, and prioritize sustainability will be well-positioned for success in 2025 and beyond.

Key considerations for investors in oil & gas and nuclear energy

Investors seeking opportunities in the oil & gas and nuclear energy sectors should keep in mind the following crucial considerations:

Balancing short-term profitability with long-term sustainability: The oil & gas sector continues to generate strong financial performance, but investors must balance short-term profitability with long-term sustainability considerations. The transition to cleaner energy sources is underway, and companies that fail to adapt risk being left behind.
Evaluating new energy bets: The landscape of new energy bets is complex and rapidly evolving. Investors must carefully evaluate the potential of different technologies and assess the risks and opportunities associated with each.
Embracing digital transformation: The digitalization of the energy industry is creating new opportunities for efficiency and innovation. Investors should seek companies that are embracing AI and other digital technologies to optimize their operations and drive value creation.
Prioritizing ESG factors: Environmental, Social, and Governance (ESG) factors are increasingly important for investors. Companies that prioritize ESG considerations are better positioned to navigate the changing regulatory landscape, attract investors, and maintain a positive public image.
Understanding geopolitical risks: The energy industry is heavily influenced by geopolitical events. Investors must carefully assess the potential impact of political instability, conflict, and regulatory changes on their investments.

In addition to these general considerations, investors should also be aware of the specific challenges and opportunities associated with each sector:

Oil & Gas

Upstream longevity and stranded asset risks: Investors should assess the longevity of upstream opportunities and evaluate the risk of stranded assets as the energy transition progresses.
Profitability and scalability of new energy bets: The profitability and scalability of new energy bets in the oil & gas sector remain uncertain. Investors must carefully analyze the potential of different technologies and assess the companies' ability to leverage their existing capabilities and competitive advantages.
M&A and growth strategies: M&A can be a key tool for accelerating growth in the oil & gas sector. Investors should evaluate companies' M&A strategies and their ability to structure deals for maximum return on investment.
Operational excellence and innovation: The oil & gas sector is increasingly focused on operational excellence and innovation. Investors should seek companies that are embracing new technologies and driving performance improvements.

Nuclear Energy

Policy and regulatory landscape: The nuclear energy sector is heavily influenced by policy and regulation. Investors must stay informed about the changing regulatory landscape and assess the potential impact on their investments.
Public perception and social acceptance: Public perception and social acceptance remain significant challenges for the nuclear energy sector. Investors should consider companies' efforts to address these issues and build public trust.
Technological advancements and innovation: Technological advancements and innovation are crucial for the future of nuclear energy. Investors should seek companies that are investing in research and development and exploring new reactor designs and technologies.
Waste management and decommissioning: Waste management and decommissioning are important considerations for investors in nuclear energy. Companies must have robust plans for managing nuclear waste and decommissioning aging reactors.

By carefully considering these factors, investors can make informed decisions and identify opportunities in the oil & gas and nuclear energy sectors. While the energy industry faces many challenges, it also offers significant potential for those who can navigate the changing landscape and capitalize on the opportunities presented by the energy transition.

By RR, General Assets Research Center

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