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June 11, 2015
Is natural gas back on leading companies’ energy transition agenda?
By: Julie Adams

Stronger demand, projected at over a million barrels a day for 2015, has fuelled a rally in oil prices over the past few months. The pickup in gas demand is not however as strong as in oil. More encouraging, however, are signs that natural gas, also called the transition fuel, as well as renewable energy is coming back into focus in the portfolios of oil and gas companies.

The larger oil and gas companies started reassessing their portfolios in the context of the energy transition a long time ago. They have been focusing on gas as they see its demand growing the fastest among the hydrocarbons and as a cleaner fuel than oil or coal. There are also other, shorter term, factors, driving natural gas and clean energy back on to corporate agendas. This includes the upcoming multilateral talks on climate change and clean energy. The restructuring we are seeing by some oil companies and M&A deals also reflect this growing spotlight on natural gas.

There continues to be a lot of uncertainty in the market in regards to gas. This is driven by a growing imbalance between gas supply and demand, decreasing gas prices, and also increasingly competitive gas markets. It is hard and complex for companies to navigate. Many are looking at their long term strategies, testing things like organic growth over M&A and are evaluating where natural gas fits into their operating models and how it drives value for them generally. Companies are also trying to understand the consumer environment where behaviors are changing rapidly and quite randomly, and this will influence some demand patterns for gas as it has for oil. Companies are also looking at how technology and digital which have the great potential to create new revenue streams but can also disrupt the value chain and change risk outlooks as well. All of these factors are coming into the mix when companies are looking at creating, what they are calling integrated gas businesses and how to really drive value out of gas in the longer term.

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