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There’s no doubt that those in the business of discovering, producing and distributing hydrocarbons are worried about the energy transition.
For some of the oil and gas Majors, such as Shell and Total, sustainability has become the primary driver of corporate strategy – with portfolios undergoing profound change in recent years.
But the rest of the oil and gas sector is still struggling to understand what the energy transition means for them. Embracing the change is very challenging, especially when most forecasts, including Wood Mackenzie’s, show that fossil fuel will still dominate the primary energy mix in 20 years. Even coal continues to grow through 2040, declining thereafter.
If a business’ primary purpose is to provide affordable and reliable energy to market, and there continues to be a market for those core products and services, why change? No doubt some boards have asked themselves that question and failed to identify any business imperative to do so.
“I’m often asked if the majors are really serious about diversifying into clean energies, or they are just greenwashing. This is an extremely complicated question. In my view, no, they are not greenwashing. But at the same time, it’s almost impossible to grow their low-return, emerging renewables businesses, as long as they have to compete for capital with high-return oil and gas assets.”Valentina Kretschmar, quoted in Total’s Empowered newsletter, July 2019
Find out more about the relationship between diversity and the energy transition here