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Climate change,
all change?

Oil and gas companies in the transformation to a low carbon economy

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The need to limit climate change requires radical action

The oil industry’s role in the transition to a low carbon economy is critical

The move to a low carbon economy raises some difficult challenges for oil and gas executives as they anticipate and position themselves in the energy industry of the future. That’s why we asked Beth Mitchell, specialist advisor for oil and gas sector, to assess the risks, challenges and opportunities for the oil and gas industry when facing the energy transition. It will be the first of a series of articles and videos on the topic, answering the questions on the minds of all energy executives.

The global economy needs to be more transparent about how they plan to change their operations as part of the global shift to a low carbon economy, in order to keep global warming below 2 degrees. The oil and gas industry will play a huge role in that transition.

Read Chapter 1: Climate change, all change?

Client perspectives on the energy transition

Video interviews on the transformation to a low carbon economy

The benefits and limitations of a gas-weighted energy portfolio

For the global economy, gas provides a universal opportunity to limit climate change and reduce air pollution. Companies in the energy sector are implementing large investment programmes in gas facilities in response. However, gas energy is not without its drawbacks, as Beth Mitchell says in the video interview. The cost of transportation poses a huge obstacle for the sector, and the demand for advanced technology to overcome it, has never been greater.

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BP says the energy transition demands a more integrated and synergistic approach to succeed

Energy transition no longer means replacing one system with another – as it has been in the past. Over the last 15 years, the evolution of the energy sector has seen a push towards a blended energy mix. For energy transformation to succeed, the industry must become more integrated and complementary, says Dev Sanyal, Chief Executive, Alternative Energy and Executive Vice President, Regions at BP. And to cope with peak demand, factors such as sustainability, security and affordability are paramount to long-term success.

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An exploration of the consumer’s impact on energy transition

Growing numbers of consumers are increasingly concerned about the protection of the environment and sustainability, and they expect the businesses they buy from to demonstrate those same values. Within BP, they are investing in home energy, natural systems, and industrial scale management systems, to satisfy the demand says Dev Sanyal, Chief Executive, Alternative Energy and Executive Vice President, Regions at BP. But elsewhere, tech companies and those in other industries are also demanding renewable power to demonstrate to consumers that their brand values are also ‘green’.

Watch video

“The stone age didn’t end for lack of stones”

Excelling in core oil and gas businesses will be the foundation of any successful energy transition strategy

Next step for oil, gas and petrochemicals?

No matter how much the discussion for oil companies focuses on diversification; oil executives should focus on running core businesses really well, says Beth Mitchell. In this chapter, Beth explores the futures of:

  • Oil: The stone age didn’t end for lack of stones
  • Gas: Not quite as simple as a golden age of gas
  • Refining and petrochemicals: Problem child, golden child?

Read Chapter 2: What next for oil, gas and petrochemicals?

The temptation of diversification

This is not the first time that the oil sector has experimented with diversification. What lessons can be learnt? What about shareholder returns?

Lessons from the past

In this chapter, Beth remembers the 1980’s, when oil prices were very low, and oil companies owned a variety of businesses, including mining, pet food and typewriter manufacturing. When looking at the opportunities for diversification this time round, Beth considers the key questions that oil executives should ask themselves before investing in new businesses.

Read Chapter 3: The temptation of diversification

The digital revolution is reshaping energy transition

Dev Sanyal, Chief Executive, Alternative Energy and Executive Vice President, Regions at BP, reflects on the transformative impact of technology in the energy sector

Implementing innovative technology to accelerate energy transformation

Technology is making energy more accessible, creating new opportunities and business models, and intensifying the competition across traditional and new forms of energy, suggests Dev Sanyal, Chief Executive, Alternative Energy and Executive Vice President, Regions at BP.

Unknowns in the energy transition

Many aspects of an oil business are going to change in the energy transition, some of them out of all recognition. So what should executives do?

Advice for oil and gas executives

Many aspects of the businesses are going to change, some of them out of all recognition and at different paces. Beth Mitchell, specialist oil and gas advisor, outlines core advice to executives when facing the challenges of energy transition.

Read Chapter 4: Unknowns in the energy transition

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Beth Mitchell

Author biography

Beth Mitchell

Beth Mitchell is a specialist advisor for the oil & gas sector, bringing an investor perspective, she has contributed to various articles and co-authored What Next for the Oil & Gas Industry  (2012) and Oil & Gas Mismatches: Finance, Investment and Climate Policy (2015) and Paris Mismatches: The Impact of the COP21 Climate Change Negotiations on the Oil & Gas Industry’s (2016) for Chatham House as well as various briefing papers and workshops. She contributed to States and Markets in Hydrocarbon Sectors Palgrave Macmillan (2014), Structural Crisis in the Oil & Gas Sector for the Energy Policy Journal (2014) and wrote an OpEd for MEES in 2015. She has written studies for and presented to a variety of clients including oil companies, Oil & Gas UK, KPMG, (New Rules, New Game 2015, and contributes to the KPMG Oil & Gas Roundtable dinners) and the Chatham House New Producers Discussion Group supporting governments building capacity and good governance, including work in Tanzania, Kenya, Uganda, Guyana (twice) and in Suriname. She has successfully completed the FT Non-Executive Diploma.

Beth was born in what is now Zimbabwe, graduated from Magdalen College, Oxford in PPE and started work in the City in September 1987. She worked in asset management from 1989-2009 as specialist advisor for many sectors and portfolio manager in UK, European and global equities, for GRE, Deutsche Bank (Morgan Grenfell), Sun Life (Axa), State Street, Dresdner Bank (Allianz) and Mitsubishi UFJ. She is particularly interested in company and industry lifecycles and portfolio analysis.

Contacts

Find out how our expert teams can help energy companies transition to low carbon

Simon Virley CB FEI

Simon Virley CB FEI

UK Head of Energy and Natural Resources, KPMG in the UK

Simon was Director General for Energy Markets and Infrastructure at the UK Department of Energy and Climate Change between 2009-2015. In that role, he advised Government on oil and gas, nuclear, decentralised energy, retail markets, and energy security issues. He now leads the KPMG Energy and Natural Resources Practice in the UK.

Contact Simon Virley

Emma Wild

Emma Wild

UK Head of Upstream Oil and Gas, KPMG in the UK

With 20 years experience in the oil and gas sector, Emma has held various senior technical and commercial roles at Santos, RISC Ltd and Bank of Scotland. Now she is a Partner in our oil and gas Deal Advisory practice.

Contact Emma Wild

Mark Andrews

Mark Andrews

UK Head of Oil and Gas, KPMG in the UK

Mark is transaction services specialist in the oil and gas sector and leads the Oil and Gas Practice in the UK.

Contact Mark Andrews

Andy Cox

Andy Cox

Partner, UK Chair of Energy & Natural Resources, KPMG in the UK

Andy is UK Chair of Energy and Natural Resources and advises a range of oil and gas and power and utilities clients. He specialises in M&A advice to Corporates, Infrastructure Funds, Major Asian investors and Private Equity.

Contact Andy Cox