“A confluence of factors, including climate, the pandemic, supply-demand imbalances, changing trends in end-markets and growing appetite for sustainability investments, has given oil, gas and chemicals companies the need to progress faster around portfolio transformation,” Amy Chronis, Deloitte’s vice chairman and U.S. oil, gas and chemicals leader said in a statement. “By taking a strategic, purpose-driven approach, companies can sustainably and profitably build a future-ready portfolio.”
TRANSITION: U.S., European oil companies make opposing bets on future
Oil and gas companies are under increasing pressure to invest in renewable energy and other green technologies as countries and consumers shift toward a low-carbon future. Some companies, such as BP and Shell, have pledged to become net-zero emission companies by 2050, and are reinvesting their oil and gas revenues to transform their company into clean energy giants. Others, such as Exxon Mobil and Occidental Petroleum, are investing in carbon-capture technology to store carbon deep underground and lower their carbon footprint.
If crude prices stay above $60 a barrel, oil companies will have more capital to devote to this so-called energy transition. The largest oil companies have the potential to redeploy as much as a third of their future capital budgets toward renewable energy, Deloitte said.
However, there are still questions over how quickly oil and gas companies should make this transition and what new technologies and markets they should enter into. The oil industry appears to be most interested in investing in solar and wind energy, but other technologies, such as hydrogen and carbon capture, are picking up steam, Deloitte said.
That transition will take time. Deloitte forecasts that oil demand will remain above 87 million barrels per day by 2030, lower than the 100 million barrels of demand seen before the global pandemic, but still a substantial demand.