To begin with, although a rising number of oil and gas businesses are committing to net-zero targets, not all are sure how to get there. With that, energy transition is viewed by oil and gas companies as a mixed bag of possibilities, hazards, and a complicated phenomenon. The current crisis has demonstrated how sensitive the global economy is to underlying threats, one of which is climate change. Even before COVID-19, there was growing demand to transform the energy system away from one dominated by hydrocarbons further towards one driven by low-carbon sources.
The Trend to Transitioning to Low Carbon
The transition to a low-carbon future may release a multiplier effect and build a new equation for businesses across the spectrum, regardless of timescales. Companies that strike a balance between internal change and corporate strategy, allow for innovation and agility, and build a solid “low-carbon” basis are generally on the right trackAs per the law of supply and demand, energy demographics, and the responsibilities of all corporations in the energy value chain to reduce emissions, oil and gas will probably continue to play a part in the energy mix for years to come. The changeover, on the other hand, is not that simple. Even altering hydrocarbon needs would be difficult without a shift in the primary resource requirements of numerous industries outside of the energy industry.
The interaction of energy transition with conventional hydrocarbons generates a range of possibilities that may be categorized under four categories: (i) hydrogen trailblazers, (ii) low-carbon developers, (iii) green enthusiasts, and (iv) net-zero innovators. Low-carbon developers and hydrocarbon trailblazers continue to focus on fossil fuel production, while net-zero innovators and green enthusiasts are focusing on renewables and sustainable energy. Each category’s success measures are distinct, but they are all consistent with the processes required to be a “winner” in that category. A net-zero innovator, for instance, will be concerned with asset divestitures, but a low-carbon producer will be focused with decarbonization field activities.
Each low-carbon oil and gas category considers different roles and focuses points. For example, hydrocarbon trailblazers are essentially concerned with acquiring a share of the market and developing their petrochemical company in zones that have the least upstream expenses and the lowest compliance risk. Consequently, low-carbon developers have a primary goal to create a compact, efficient, and decarbonized hydrocarbon resource. Furthermore, green enthusiasts engage with the new oil sector following the monetization of hydrocarbon assets and the commercialization of clean technology. Finally, net-zero enthusiasts are focused on establishing a new energy-heavy strategy by liquidating the majority of their hydrocarbon company and would be the first to fully accept the green revolution.
Furthermore, a brand may shift between these categories as time goes on: a low-carbon developer may eventually become green enthusiasts. The function of each category will likely become more essential as the market matures, as the sector strives to fulfill both growing energy demand and climate goals. As suggested by a Sustainability Advisor in the Energy Sector, “we [Egypt] have many goals in terms of carbon emissions and implementing renewable energy in our projects in the oil and gas sector. However, the only way our companies can achieve these goals is for us to slowly add these new ideas and technologies in our operations and shifting without stopping operations in one go.”
The net-zero mindset is real, and it’s just going to get stronger. Apart from authorities devising policies to encourage a shift to a lower-carbon future, the business promises to attain net-zero objectives are flooding in, with an increasing number of oil and gas corporations joining the race. These commitments show that the global energy sector is about to experience transformative changes, regardless of the time frame—2030, 2040, or 2050. This might represent a variety of things, but most notably, it indicates a lower role for fossil fuels in the energy supply, a bigger percentage of renewables in the energy mix, more consumer trends, and higher levels of incorporation and rivalry for low carbon technologies.
It should be noted that Exxon Mobil, BP, Shell, and other big oil giants are all vowing to plan for a low-carbon or “lower-carbon” future under severe pressure. Recent triumphs for climate activists include the election of three new members to Exxon’s board of directors, a clear rebuke to Exxon’s oil-centric investment plans, and a judgement from a Dutch court forcing Shell to reduce emissions.
However, there is no agreement on how a world with less petroleum would appear to firms that have benefited immensely from the carbon fuels that are causing climate change. European firms such as Total, a French giant, and bP, located in the United Kingdom, are betting big on a shift away from oil and toward renewable energy. Meanwhile, American conglomerates are betting modest quantities on more fledgling systems like carbon capture, with no intentions to abandon crude. Regardless of the amount invested in green power, most oil firms continue to put substantially more money into oil and gas-based initiatives, indicating that they don’t anticipate a transformation to occur spontaneously.
To conclude, the concept of a net-zero mindset is real and it’s just going to get stronger. Apart from governments devising policies to encourage a shift to a lower-carbon future, the business promises to attain net-zero objectives are flooding in, with an increasing number of oil and gas corporations joining the race.
A smaller oil market, which would be more competitive, would ultimately characterise the low-carbon era. Efficient processes and low production costs are projected to give enterprises that continue to focus on hydrocarbon production a strategic advantage. Organizations that leave the oil markets to look for new low-carbon business models will have to stand out in these new industries. Once the industry has mastered the interplay between economics and the environment, it will be able to easily succeed in the forthcoming energy market.