In the wake of December’s climate change agreement in Paris, the momentum to replace fossil fuels with cleaner energy sources is gathering pace, and other factors, from low oil prices to geopolitical events, continue to shake the industry.
But despite these pressures, the report is clear about the vital - albeit changing - role the industry has to play in the energy transition and the opportunities for those that are able to adapt to the changing times.
"While, for understandable reasons, the current depressed oil price dominates the headlines, it’s also important to look beyond that to consider what forces are shaping the future of the industry. US shale supply has contributed substantially to the current position - what other disruptors does the sector face?" Chris Bredenhann, PwC Africa Advisory Oil & Gas Industry leader, says.
“Global demand for affordable, reliable energy will continue to grow for the foreseeable future, but there is a new longer-term backdrop, as the world transitions to a low carbon system. Momentum to replace fossil fuels with cleaner energy sources is building, and oil and gas companies need to consider their futures in this context.”
The report proposes a framework that could help companies successfully navigate an increasingly complex and volatile global market over the next five to fifteen years. The framework evaluates four potential futures, where the level of disruption and the pace of change fluctuate:
1. The oil and gas sector evolves along current lines with limited government intervention. Ongoing price volatility across pricing and demand presents funding challenges, encouraging greater collaboration between operators and service providers to drive efficiency and reduce cost. Gas increasingly becomes an essential transition fuel.
2. Demand from energy consumers (retail & commercial) for cleaner energy drives the transition towards a low carbon world resulting in significant private investment in low carbon technologies. The link between economic growth and energy intensity breaks.
3. As governments follow through on COP21 with regulation, incentives and direct investment, it drives increased energy efficiency, expansion of renewable energy demand and accelerated development of disruptive technologies. This puts further pressure on fossil fuel providers who need to find new ways of working.
4. Supply constraints are triggered through direct government action, such as implementing carbon legislation or withholding licences (e.g. shale, arctic), or geopolitical disruption, which can also contribute to increased volatility on a periodic and regional basis.
The report explores the impact of these four future perspectives on the oil and gas value chain. It states that while various elements may play out in distinct ways across different regions, it will be increasingly vital that companies are able to demonstrate:
“Future economic development depends on solving Africa’s energy challenges. The role that oil and gas will play in these solutions will be informed by a wide range of drivers, as well as clarity and the relative priority of governments in the competition between oil and gas and renewable energy solutions,” adds Bredenhann.
For all the uncertainty that may cloud the industry’s future, one thing is certain - the oil and gas industry has continually demonstrated resilience and innovation to adapt to a dramatically changing world.
