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.
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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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