What is the Role of Oil and Gas Companies in the Energy Transition?

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What is the Role of Oil and Gas Companies in the Energy Transition?

As long as humans and technology have been evolving, so have energy systems. The shift is caused by new demands and changes in resources. Before petroleum, whale oil was used for lighting and, even earlier, hickory wood for smelting iron. And now, we’re currently on the cusp of another energy transition.

After the COVID-induced stall in the oil and gas industry, the U.S. is back on track. As of March, there were already 460 active and working rigs; this is two-thirds more than the industry’s lowest number of rigs. Plus, Goldman Sachs forecasts the Brent price to stay at a robust $75 per barrel, indicating a West Texas Intermediate (WTI) price of $72 as 2023 approaches. While this is a bright outlook for oil, there’s also a rising demand for sustainable and alternative energy. Oil and gas companies need to take the helm and adjust, lest they risk falling behind.

Addressing shifts in supply and demand

Over the last year, many smaller players in the oil and gas industry have been battling depleted cash flows. Compounded with dipping oil prices, the situation is dire for many businesses. This restricts them from investing their limited financial resources into renewable initiatives.

It then falls upon Big Oil to lead product cycle transitions and implement restructuring in the supply chain. Ultimately, they’ll have to invest in adding different sources of energy, such as wind and solar, to keep the entire supply chain afloat. These industry players have the capacity to dole out capital expenditure even with a high oil price risk. As renewable energy claims a significant share of the electricity market, Big Oil will have to make accommodations.

Focusing on Environmental, Social, and Governance (ESG)

The industry is in need of more investors than it ever has been. However, most socially responsible investors are seeking ESG-compliant products. Fortunately, business analysts across various oil and gas companies have found that there is a clear and present opportunity for brands to shift to ESG principles – this is one of the primary goals of the energy shift anyway.

Business analytics is fast becoming vital to oil and gas companies, which is why it is considered one of the most important business administration careers. All companies involved in the oil, gas and energy supply chain all rely on data-backed insights from these analysts. They’ve recently reported that global investors are looking for sustainable action. The only way the industry can do this is by collaborating with each other to ensure that there’s a high level of health and safety standards, empowerment of communities and commitment to reducing emissions throughout the supply chain process. It’s only through seamless governance and management that the industry can attract more investors.

Becoming intermediaries

In a further bid to gain more investments, oil and gas companies are also intermediaries between clean energy producers and clients. In this arrangement, they serve as a medium between businesses. This is a role taken up by many major oil companies. For one, Royal Dutch Shell has presented a strategy wherein it connects billion-dollar investors who are looking to support renewable projects to green energy producers. Instead of joining the highly competitive renewable power market, they’re banking on their expertise in power trading.

The global market is gradually, but surely, lessening its dependency on fossil fuels. This has led major oil firms like Shell to roll out new business models and strategies to survive in a low-carbon reality, even if it means that they become mediators and brokers when it comes to sustainable energy generation.

Energy transitions are disruptive, and that’s not always a bad thing. Oil and gas companies can adopt more sustainable methods and new business strategies to smoothly transition into the new energy system.

Post specially produced for shalemag.com/tag/cyber

Produced by: JBroy

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