Strategies for energy transition

In a changing world, large energy companies in Europe and the United States differ on how to approach decarbonisation. This was one of the topics in debate on the first day of Open Days 2021

The world is changing. Its energy system, based on fossil fuels, is evolving towards the use of low carbon technologies and renewable energies due to climate change. It is an essential transition for the environment of our planet, but it is something that cannot be done hastily since is necessary to maintain the economic sustainability of countries and their companies. In other words, it is necessary that the new system also generates economic prosperity.

On the first day of the Open Days initiative, this year dedicated to the main strategies for the energy transition of large international O&G companies, it was immediately highlighted that there are big differences in the way North American and European companies are facing it. The first remain attached to their traditional gas and oil business and are mainly committed to the efficiency of their operations as a way of lowering their emissions. "They consider that, in this way, they have competitive advantages", explained Daniel Rogers, GlobalData analyst. As “they have low decarbonization targets, they are betting little on diversification, while most European companies are investing in diversification, seizing this opportunity to expand their portfolio,” said Olga Saveenkova, analyst at Rystad Energy. But this hasn't been a linear process in Europe, as the main companies are facing change in relation to their O&G businesses differently.

Although the bet on diversification is common to most, according to the panel's analysts, there are those who are reducing its assets, maintaining or even expanding. Tom Ellacott, Vice President of WoodMac noted that "the wide range of strategic options is natural given that there is a significant level of uncertainty on the horizon." The executive also defended that, "in the future, everyone will have to bet on low carbon energy sources". An idea also stressed by Chris Delucia, director of IHS Markit, highlighting that "investors will attach even more importance to low carbon strategies".

DIVERSIFY IS ESSENTIAL

To implement a successful strategy and maintain a resilient business, large O&G companies have to diversify their sources and make their transitions to energy producing companies in the long term, also getting involved in the multiple aspects of the value chain of energy, also defended Daniel Rogers, stating that "it is necessary to take some risk to maintain the competitive capacity".