Deconstructing the role of oil and gas in the energy transition.
It’s no longer news that the energy landscape is in a state of disruption. But change continues to happen at a dizzying pace for the myriad forces affecting it. Evidence of climate change continues to accumulate, and we foresee increasing pressure on governments, consumers and the energy industry to decarbonize the production and use of energy.
Major factors at play are:
- Developing markets
Monumental questions line the path toward clean (or cleaner) energy and the future of oil and gas. For example, companies must determine how to balance the financial expectations of investors and growing concerns about climate change. So, should oil and gas invest in what it knows or what it thinks will happen? We took a deep dive to help companies understand the opportunities and risks.
To say that the future of oil and gas is complex is an understatement. We looked at it through three different lenses — consumer, technology and regulatory — and developed four scenarios without preference. They range from a very gradual movement from hydrocarbons to rapid adoption of renewables. We named them Meet Me in Paris, The Long Goodbye, Slow Peak and Critical Gas.
Meet Me in Paris:
Technology improves rapidly; alternative energy quickly becomes cheap enough to displace existing infrastructure.
The Long Goodbye:
Renewables take a place in the market. Oil demand peaks, but stock effects, consumer inertia and continued growth in aviation and petrochemicals keep it from a drastic drop.
Peak oil does not happen soon, thanks to developing countries’ demand for petrochemicals, energy-intense industrial usage and aviation.
Oil demand peaks and trails off fairly quickly as consumers migrate to electric vehicles. Capital moves toward gas-focused upstream and LNG assets.
The impact of disruptive forces on asset returns