An oversupply of resources, combined with reduced energy intensity and changing consumer behaviors, has created a new normal that requires a fundamental rethink of value-creation opportunities in the oil and gas industry.
Investors are demanding change and for good reason. While the erosion in oil and gas revenue and EBITDA (earnings before interest, taxation, depreciation and amortization) will continue over many years, share prices are being impacted today. Even as demand grows, enterprise value will likely take a further hit.
Electricity consumption is growing fast and by 2040 is expected to account for approximately two-thirds of primary energy demand growth. It’s no wonder that the power sector, on average, is performing better than oil and gas in terms of market capitalization. But the power sector has its own set of challenges. Regulatory hurdles. Flattening power supply curves. Market fragmentation. The list goes on.
Oil and gas companies considering a move to power must, therefore, proceed with caution. They need to understand those areas of the power value chain where they might have the greatest success—and where they are more likely to fail. They need an ambitious vision—tethered to a realistic plan.
What are the right "Power Plays"?
Accenture believes there are five "Power Plays" worth considering.
Each of these opportunities comes with its own degree of uncertainty, complexity and capital requirements—but also with a unique value potential. Each has room for just a handful of disruptors to stake their claim. Success will depend on the strategic choices the companies make, the paths they choose, and the speed with which they get going.