O&G companies across the value chain are no longer avoiding or postponing the transformation needed to achieve profitability and maintain relevance in the years ahead.
Accenture believes that significant or even fundamental changes will not be enough. The disruption is so pervasive, and the stakes so high, that nothing short of industry reinvention will do.
To identify the actions that will guide their unique journeys to reinvention, O&G companies must first understand the tangible consequence of the disruptive forces at play. Only then can they rally an effective response.
As the energy system continues to expand, so do the consequences of six disruptive forces including an expanding (and disrupted) energy system, supply diversification, demand evolution, technology disruption, stakeholder pressures, and a shift in value pools.
What does reinvention look like?
To address the structural shifts, challenges and disruptions roiling the O&G industry, companies have no choice but to reinvent. This means reconsidering what they do, what they stand for, how they compete, and how they measure and deliver value to customers, investors and employees.
Our research shows that companies leading the race to reinvention set themselves apart not only through their actions, but also through their ambition.
Reinvention leaders expect high returns. Their actions make attaining these results realistic.
Source: Necessity is the mother of (re)invention (2021).
Note: All figures shown are based on self-reported expectations in the next three years. Global
Achieving these types of returns requires a focused strategy for reinvention which must be grounded on three building blocks:
The journey starts with a clear purpose—one that drives relevance by balancing critical elements: energy equity, energy sustainability and energy fundability. These elements serve as a north star for reinvention. Regardless of the course the journey may follow, all companies will need to do their part to deliver reliable energy to all, achieve carbon net neutrality by 2050 and deliver competitive returns to investors.
Finally, our research shows that reinvention must anchor on five key areas we call the "5Cs": Competitiveness, Connectivity, Carbon, Customer and Culture. While every O&G company will need to prioritize and address the 5C dimensions of change, the specific actions needed to achieve their reinvention will differ, depending on the archetypal role they hope to play in the future energy system.
How to reinvent
Accenture believes that there are nine transformational bets every company should make regardless of the archetype they choose. Each activates two or more of the 5C dimensions of change. Each has the potential to help companies unlock new value and deliver the promise of reinvention. Collectively, they are no-regret actions that will position O&G companies for success in the years ahead.
The 2020s will be the make-or-break decade for the O&G industry. It kicked off with a continuation of challenges that were years in the making, including dwindling cashflows and investment returns. Then came the COVID pandemic, which destroyed hydrocarbon demand and flooded an already over-supplied market. Now, O&G companies face an additional set of structural shifts that will permanently change the environment in which they operate.
Competition from new energy sources, environmental accountability, talent scarcity and investor apathy top the list. These challenges are all on the rise with no signs of slowing. O&G companies are finally saying “enough is enough.” They are recognizing that they have the opportunity—and an obligation—to address the disruption that is roiling the industry with a bit of disruption of their own.
They just need to take the first step. Reinvention awaits.