Economic Report 2019

ECONOMIC REPORT 2019

Pathway 4 — Expanding Low-Carbon Business Opportunities Oil and gas companies can make a significant direct contribu�on to the pace and success of the energy transi�on through investment and the provision of assets, services and exper�se, in a wide range of alterna�ve energy sources. Companies are, at both a global and local level, responding to the energy transi�on in a variety of different ways, including modifying their business strategies, developing important new technologies and inves�ng in alterna�ve energy sources. A diverse energy mix is required to achieve a low-carbon, affordable energy supply with minimal disrup�on and therefore investment is required across all sources. A posi�ve framework is required to increase renewable and low-carbon investment, whilst maintaining conven�onal energy supplies. Achieving the net-zero ambi�on could require in the region of £1 trillion of investment, presen�ng significant opportuni�es for companies within the oil and gas supply chain through diversifica�on. Many companies con�nue to increase their footprint in a variety of future-facing energy solu�ons, such as solar, biofuels, and wind. When polled, over half of OGUK members indicated that they have explored, or are ac�ve in, diversifica�on into projects outside of oil and gas. It has been es�mated that the world’s largest 24 publicly listed oil and gas companies invested $3.4 billion in low-carbon energy in 2018, and a total of $22 billion since 2010. 42 Although this s�ll represents a rela�vely small por�on of upstream companies’ capital budgets, it is growing rapidly. Along with this many companies are also making their alterna�ve energy investment targets public. These investments are complementary, rather than in compe��on with investment in oil and gas por�olios

WHAT INDUSTRY HAS ALREADY DONE:

Oil and gas companies are active in a range of different alternative technologies both in the UK and globally. Oil and gas companies are taking the lead in many of the technologies and investment that will be required to achieve a net-zero outcome.

Investment in alternative energy sources will grow over time if there is an attractive framework in place. However, appetite for particular opportunities will remain dependent on individual company strategies. Companies within the supply chain can also apply their expertise, resources and capabilities to advance the development of low-carbon energy sources.

WHAT INDUSTRY CAN DO:

All successful companies, including oil and gas businesses, evolve their business strategy to reflect political and societal demands. Initiatives aimed at divestment based on crude characterisations of businesses are likely to be a disincentive for companies to invest in any one technology type and removes a valid stakeholder voice in strategy formation.

WHAT WILL BE REQUIRED:

42 www.cdp.net/en/investor/sector-research/oil-and-gas-report

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