New energy futures - perspectives on the transformation of the oil and gas sector

The oil and gas industry has entered a period of transition as it faces the onset of a low carbon world. Against this backdrop, there are many other trends that will impact the sector and oil and gas companies will need to rapidly evolve their business models and become more responsive to emerging trends if they are to thrive in a challenging new global marketplace.

A framework for considering the future

New Energy Futures has been designed to help consider the potential sources of disruption and uncertainty and to help frame questions in order to respond. It looks at four perspectives and highlights some of the fundamental trends reshaping the oil and gas sector, and viewed through a medium term lens of 5 to 15 years.

 

1. Oil and gas sector evolves along current lines. Ongoing price volatility presents investment challenges

Against a backdrop of limited government intervention and price led investment cycles, the oil and gas sector swings between surplus and deficit of supply, with associated price volatility. Pressure for, and investment in, alternative energy sources is also cyclical. The oil and gas sector responds gradually to a 'greener' world, however, security of supply and affordability remain vital.

2. Energy consumers, retail and commercial, drive the transition to low carbon world and more efficient energy system

Retail and commercial consumers in key markets actively seek to reduce their environmental impact and turn away from use of fossil fuels. reducing demand ahead ofsupply. Energy efficiency and a move to alternative fuels for power and transport de-link economic growth and energy intensity as compared to historical norms. Significant private investment in new low carbon technologies as the onset of a low carbon world is accelerated.

New Energy Futures perspectives

4. Government actions and / or geopolitical events trigger supply constraints

Supply constraints apply either through direct government action such as implementing carbon legislation affecting supply, or constraints over permitting and licences (eg. Shale, Arctic). Geopolitical disruption also contributes on a periodic and regional basis. This leads to volatile prices and significant variations in the producing environment. The focus on secunty of supply is addressed alongside an accelerated transition to a low carbon world.

3. Governments stimulate a broad and accelerated 'green' demand environment

Governments follow through on climate conference commitments and drive a greener demand environment through a combination of regulations, incentives and direct investments that balance affordability and low carbon objectives. This stimulates increased energy efficiency, expansion of renewable energy demand and an accelerated development of disruptive technologies, particularly in transport.

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Mark Coughlin

Energy Utilities & Mining Leader, PwC Australia

Tel: +61 3 8603 0009

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