The future is not what it used to be: oil and gas strategies for a carbon-conscious world

Abstract

The COP 21 Paris climate deal in December 2015 signalled a landmark shift in a world increasingly conscious of the need to address greenhouse gas emissions. On the day it came into force – 4 November 2016 – 10 of the world’s leading oil and gas companies launched a US$1 billion fund to fast-track the development of low-emission technologies. While admittedly a fraction of their combined annual budgets, it marked a collective and public affirmation of changing attitudes within the industry towards supporting lower-carbon and renewable fuel sources.

The global energy industry is at a turning point. Lower-carbon fuels have overtaken coal and oil in investment and market growth terms. Hydrocarbons will still dominate the future global energy mix, although natural gas and zero-carbon fuels are expected to drive at least 60% of global energy demand growth to 2035.

The new energy landscape will challenge traditional business models in oil and gas production, coal extraction and power utilities. Searching questions can be expected from capital markets in the months and years ahead. Companies could come under pressure to de-risk their existing portfolios and diversify. But judging the pace and scale of transition from old to new will be key.

In this paper, Wood Mackenzie will draw on its global industry expertise and emerging research into how the oil and gas sector can adapt to the increasingly pertinent carbon challenge.