There are many questions as to how the oil and gas industry will respond to the social, political, and economic forces transforming the sector as the world transitions to lower carbon energy sources. On the one hand, oil and gas are still being used to meet more than half of the world’s primary energy needs. On the other, significant challenges are stacking up, not least of which is the COVID-19 pandemic. COVID-19 has sent oil and gas demand plunging — turning oil prices negative for the first time ever — slashed industry jobs, and left uncertainty in its wake. Despite these massive challenges, the industry will continue to play an important part in the transformation of the global energy landscape for the foreseeable future.
To help explain how the oil and gas sector is transforming, the many challenges the industry is facing, and the intersecting factors that will shape its role in the energy transition, the Center on Global Energy Policy (CGEP) partnered with the World Economic Forum on the Oil and Gas Transformation Map, an interactive tool for users to explore and make sense of the complex and interlinked forces that will dictate the future of the industry.
Transformation maps are the World Economic Forum’s dynamic knowledge tool. Users can explore the complex and connected forces that are transforming industries, economies and global affairs. The maps display analysis written by experts along with machine-curated content, allowing users to visualize and digest more than 250 topics and the connections and inter-dependencies between them, and help leaders make more informed decisions.
CGEP scholars provided essays on seven trends contributing to the transformation of the sector:
- Supply: Both oil and gas supply has plummeted, with reduced production and investment, in response to reeling demand from the COVID-19 pandemic. It has hit transport and hence oil demand harder than gas, but both markets have had to cut supplies in response.
- Demand: Oil and natural gas demand outlooks have always been fraught with uncertainties, but in the wake of the global pandemic, the uncertainties have risen to a new level. COVID-19 has shuttered economies, dramatically reduced mobility and introduced significant new uncertainty in oil demand.
- Finance: The oil and gas industry has increasingly found itself under a microscope, especially in OECD countries, in regard to its long-term viability in the face of a changing climate. To date, such concerns have not yet impaired fundamentally the capacity of the oil and gas industry to raise capital, but escalating concerns about climate change may have contributed to low valuations in the sector.
- Innovation: Rapid technology changes and innovations are upsetting traditional operations in the oil and gas industry, creating new efficiencies and enabling alternatives. Technology adoption and innovation are sources of competitive advantage.
- Workforce: The global oil and gas industry will need to find new and innovative approaches to recruit and retain women and younger workers, while investing in training and development in order to address the potential skills shortages the sector may face.
- Environment/Climate: Climate change has become the defining environmental issue of the 21st century, and this development can be expected to affect the oil and gas industry profoundly. Concerns about climate will in time affect all aspects of the industry, ranging from shareholder votes to field operations and from planning functions to social license-to-operate.
- Geopolitics: For decades, the geopolitics of oil and gas reflected a fundamental fact: Scarcity of oil and gas conveyed power to resource holders. More recently, the geopolitics of oil and gas stem from a new, dual dynamic — abundant supply, and an uncertain future driven by the transition to low-carbon energy.
Because the transformation maps are interlinked, they provide a single place for users to learn about each topic from multiple perspectives. Each of the maps has a feed with the latest research and analysis drawn from leading research institutions and media outlets around the world, including Columbia University’s Center on Global Energy Policy.
The global energy landscape continues to adapt and grow. New technologies, market forces, policy intervention, and geopolitical developments will shape not only oil and gas, but the whole global energy economy. It is imperative that policy makers, business leaders, and decision makers have access to timely, actionable research and analysis, and the Oil and Gas Transformation Map offers a holistic view of the most salient issues in the industry, what we can expect their effects to be, and how they will impact the energy transition.