Companies will refocus on low breakeven oil and gas opportunities as they begin to adapt their upstream portfolios for the energy transition. High-carbon and high-cost/low margin assets — such as oil sands — will be sold down.
The larger players will also start sowing the seeds in renewable energy. But we expect the switch to renewables to be a gradual process led by the majors, some of which have large legacy positions that they’ll use as a platform for expansion. By 2030, we anticipate that renewables will account for 20% of capital investment for the majors that truly embrace this new asset class.
Moving forward, we see two extremes in strategic response. At one end of the spectrum will be the low-cost producers. Some companies will focus on building E&P portfolios with the lowest breakeven opportunities and flexibility to adjust investment to changing macro conditions. At the other extreme will be larger players that emerge from their traditional role as oil and gas producer to ‘energy supplier’
The range of approaches between these two extremes will lead to even greater differentiation within the corporate sector.
As part of our coverage on peak demand, we asked Tom Ellacott, Senior Vice President – Corporate Research, to discuss his outlook for companies, including what steps companies are taking to prepare for peak oil and what he expects the energy company of the future to look like.