Facing change: The Oil & Gas industry in the face of the energy transition
The Oil & Gas industry faces significant challenges in the transition to a sustainable energy model, highlighting the need for a profound cultural change to adapt and lead in a world that demands renewable energy.
Despite being a profitable sector that employs nearly 12 million people worldwide, the Oil & Gas industry is at a crossroads that defines its future. Projections point to a significant decline in demand for oil and gas in the coming decades, driven by the urgency of achieving net-zero emissions and limiting global warming to 1.5 °C. This reality poses a challenge for a sector that used to be (and still is) a pillar of the global economy. But will it be able to adapt to a world moving towards sustainability?
The transition to a more sustainable energy model seems inevitable. The International Energy Agency (IEA) projects that global demand for oil and gas will peak in 2030, and then fall sharply if energy and climate commitments are met. In a scenario where the net-zero emissions target is reached by 2050, oil and gas use could fall by more than 75%. This means a blow to the profitability of the industry and calls into question the long-term viability of many projects.
Against this backdrop, Oil & Gas companies are faced with the need to rethink their business model. It is no longer just a matter of discovering new reserves or improving extraction efficiency, but of redefining their role in a changing energy system. If the sector does not adapt and continues to cling to a fossil fuel-centered model, it risks being relegated to a secondary role in the economy of the future.
Technology plays a key role in this reconversion, but it is not enough on its own. Without a change in the mindset of leaders and employees, technological implementations tend to fail or be underutilized. Therefore, the real transformation must begin at the cultural level.
In order for Oil & Gas companies to embrace change, they must first modify their mindsets rooted in an asset- and production-centric view, and move towards a more people- and customer-oriented mindset.
An example of this transformation is the adoption of carbon capture and storage technologies, or even diversification into renewable energies. However, the key is not only to acquire these tools, but also to train teams, break down resistance to change and generate strategic alignment at all levels of the organization. This cultural process will enable companies in the sector to anticipate new demands and be pioneers in the energy transition.
The circle is virtuous: this cultural change will make it possible to adopt new technologies more effectively and, at the same time, will help organizations adapt to the expectations of a society that demands sustainability and social responsibility.
One of the biggest challenges of this transition is the shift to a “people-centric” approach, an imperative to meet the challenges and seize the opportunities in today's world. Companies that succeed in involving their people in this transformation process will be better prepared for the future. This means focusing on both internal talent as well as how company decisions impact communities and end consumers.
Success in the transition to sustainability in the Oil & Gas industry will depend on the ability of companies to implement a profound cultural change. This is the first step towards a transformation that goes beyond technology and redefines the role of these companies in a world in transition to clean energy.
We invite you to download a new ebook “The race against the clock in the Oil & Gas industry”.
By Alberto Bethke, Partner at Olivia Mexico.
