Positioning for green: oil and gas business in a low-carbon world
A growing number of oil and gas (O&G) companies are pledging net-zero goals, but not all are clear about how to get there. In a recent Deloitte survey (see sidebar, “Executive survey methodology”), 56% of respondents view the energy transition as a mixed bag of opportunities, risks, or a complex phenomenon. Successful transition will take a long time, and some prominent energy transition scenarios project oil demand in 2030 to remain around 90 MMbbl/d (figure 1). This implies there’s likely to be sustained value in oil and gas—indeed, an overwhelming 77% of surveyed executives plan to maintain hydrocarbons as their long-term business.
The interplay of energy transition and traditional hydrocarbons creates a spectrum of opportunities, which can be distilled into four archetypes. Net-zero pioneers and green followers are training their sights on renewables and new energy, while low-carbon producers and hydrocarbon stalwarts continue to focus on fossil fuel production. The metrics for success in each archetype are different but are consistent with the steps needed to be a “winner” in that archetype. For example, a net-zero pioneer will be concerned with asset divestments, while a low-carbon producer will focus on decarbonizing field operations. And as a company’s strategy evolves, it may move across these archetypes: A low-carbon producer could move over time to be a green follower. As the market evolves, the role of each archetype will likely be important for the industry to meet both rising energy demand and climate goals.
By associating themselves with an archetype that closely matches their strategy, O&G companies can identify ways to drive value from the transition—and there’s indeed value near US$1.3 trillion to be unlocked. However, companies must address their internal transformation using operations design, supply chain ecosystem, a digital mindset, and organizational setup. Fundamentally, meeting high stakeholder expectations can require each archetype to attain a balance not just between economics and environment, but also between growing the overall market and growing their market share.
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