Major Energy Transitions in the Oil and Gas Industry

The oil and gas industry affects their operations, business models, and how they may reduce greenhouse gas (GHG) emissions and meet commitments.

The oil and gas industry affects the operations and business models and how they might help meet goals. Several oil and gas corporations face increasing social and environmental challenges, raising complex considerations regarding the function of these fuels in a changing energy economy and their place in society. With rising GHG emissions, the main question is whether oil and gas businesses are merely part of the problem or can help solve it. There is increasing pressure on the oil and gas industry to explain how future energy developments will impact business models and operational procedures.

Several oil and gas corporations face rising social and environmental challenges, raising difficult questions about their role in a changing energy economy and society. In the face of escalating GHG emissions, oil and gas firms are seen merely as part of the problem or as key to solving it. A growing population, some lacking modern electricity, and a developing global economy could increase demand for energy services.

The growing need for meeting international climate targets helps to reduce energy-related emissions. The oil and gas business needs help reconciling short-term returns with its long-term operating license. Societies need both energy services and pollution reductions. Oil and gas firms have proven to adapt to supplying the fuels that constitute the foundation of energy infrastructure; the question now is whether they can also deliver climate solutions. The costs of creating low-carbon technologies are an investment in the long-term prosperity of businesses. Every oil and gas corporation must decide how to adapt to sustainable energy changes. Each strategy works for only some industries.

The Majors, integrated oil and gas giants, dominate industry practices and direction. National oil companies (NOCs)—owned by federal governments—produces almost half of the world's oil and possess most of its reserves. Some NOCs work well, but many are unprepared for global energy dynamics. Oil and gas corporations have invested in the capital beyond their core businesses, and company investment spending isn't changing yet. Diversifying energy operations requires attractive investment possibilities in new energy markets and new company competencies. While increasing R&D, some oil and gas firms have acquired non-core industries like energy distribution, electric car charging, and batteries. Accelerating energy transitions requires a more significant capital allocation change.