RESEARCH REPORT

In brief

In brief

  • Our research confirms that, in the area of Competitiveness, reinvention leaders are getting several things right.
  • As a result, their expectations for outsized returns are likely warranted.
  • But even leaders are overlooking what we believe is a critical source of differentiation.
  • Others in the industry can learn from what leaders are doing—and not doing—to build their own competitive edge.


Turn the volume down

In the area of Competitiveness, leaders have a clear focus on boosting profitability. To that end, they are no longer defining success by the volumes of oil and gas they produce. They’re looking to compete on the basis of environmental, social and governance (ESG) criteria and also the returns they can generate on capital employed (ROCE). All leaders in our survey expect their competitiveness initiatives to heavily impact these measures.

Nothing is off the table for leaders. They are rethinking their business models and operating models in tandem. Their actions include expanding their reach to new geographies and asset classes, introducing new products and services (both within and outside of the oil and gas industry), and developing their operating capabilities to deliver on their new business ambitions. A move to low-carbon businesses holds particular appeal for leaders. That’s where they expect to see the most margin growth.

Leaders know that achieving reinvention requires more than one-off solutions or continuous improvement. More than two-thirds (69 percent) consider enterprise-wide transformation essential to their success. Only 15 percent of laggards agree.

Reinvention leaders’ expectations for margin growth are much higher.

100%

Of leaders expect at least 20% growth from low-carbon business (vs. 14% of laggards).

65%

Of leaders expect at least 10% growth from downstream business (vs. 14% of laggards).

55%

Of leaders expect at least 10% growth from midstream business (vs. 0% of laggards).

Follow the leaders. But not always.

In the area of Competitiveness, leaders are doing many things right. They are aiming for profitable reinvention through enterprise-wide transformations. They’re diversifying their asset, product and service portfolios. And they‘re improving their operating capabilities across the value chain. For these reasons, they are likely to achieve the lion’s share of their reinvention goals.

However, our analysis also revealed a significant blind spot in leaders‘ competitiveness agenda. Unlike leaders in other industries, oil and gas executives aren’t thinking as holistically about ecosystems and partnerships as a source of competitive differentiation. This oversight may jeopardize their goals for reinvention—particularly when it comes to achieving profitability in low-carbon businesses.

Think (and act) like a leader

  • Focus on ROCE, not volumes. Make systemic cost takeout, zero-based principles and a reduction in capital intensity part of your standard operating procedures to materially improve full-cycle returns.
  • Ensure your operations and functions are in “lock-step.” Accept that piecemeal efforts won’t fully unlock the potential that exists within the organization. Collaborate internally to design and execute successful enterprise-wide transformations.
  • Leverage new and existing ecosystems and partnerships to open new frontiers of efficiency in logistics and supply chain (e.g., resource hubs), drive innovation and develop profitable low-carbon solutions and services.
  • Capture the green multiple. Put sustainability at the center of your strategy and
    decision-making to not only differentiate your company in the eyes of the market, but also attract investor capital.

About the Authors

Muqsit Ashraf

Senior Managing Director, Lead – Energy Industry Sector


Aleek Datta

Managing Director – Strategy & Consulting, Energy


Silvia Rigato

Managing Director – Strategy & Consulting, Energy


Lasse Kari

Senior Principal – Accenture Research, Energy


Diana Alcala

Senior Manager – Strategy & Consulting, Energy


Kyle Gardner

Senior Analyst – Strategy & Consulting, Energy

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Oil and gas reinvention index

Read how 179 oil and gas companies are progressing toward reinvention.

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Executive summary

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Learn how reinvention must be anchored on the “5Cs”.

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Infographic

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See how the industry can potentially achieve up to $500bn in value annually through reinvention.

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