Namely, the industry has to unite to boost its role through its engineering capabilities, financial resources and project-management expertise.

IEA highlights that the oil and gas sector is diverse, meaning that there is not a specific strategic response but a variety of options based on each company's conditions and circumstances.

Thus, Dr Fatih Birol commented that

No energy company will be unaffected by clean energy transitions. Every part of the industry needs to consider how to respond. Doing nothing is simply not an option.

In addition, Dr Birol suggests that the first step need to be taken by companies is to reduce their environmental footprint, as "a large part of these emissions can be brought down relatively quickly and easily."

The most cost-effective way that the industry can lower emissions is the reduction of methane leaks to the atmosphere.

Yet, expect this solution, IEA notes that there are additional ways to reduce emissions intensity of delivered oil and gas by eliminating routine flaring and integrating renewables and low-carbon electricity into new upstream and LNG developments.

As such:

  1. Some oil and gas companies include renewables and other low-carbon technologies in their operations; However, average investment by oil and gas companies in non-core areas has so far been limited to around 1% of total capital spending, with the largest outlays going to solar PV and wind.
  2. Some oil and gas companies have also diversified by acquiring existing non-core businesses – for example in electricity distribution, electric-vehicle charging, and batteries – while stepping up research and development activity.
  3. Another solution is to boost the investment in fuels, such as hydrogen, biomethane and advanced biofuels – that can deliver the energy system benefits of oil and gas without net carbon emissions.

Dr Birol added that

With their extensive know-how and deep pockets, oil and gas companies can play a crucial role in accelerating deployment of key renewable options such as offshore wind, while also enabling some key capital-intensive clean energy technologies – such as carbon capture, utilisation and storage and hydrogen – to reach maturity.

It is mentioned that although low-carbon electricity will be to centre stage in the future energy mix, investment in oil and gas indusry will be still needed. If investment in existing oil and gas fields were to stop completely, the decline in output would be around 8% per year. This is larger than any plausible fall in global demand, so investment in existing fields and some new ones remains part of the picture.

Concluding, national oil companies play a crucial role, as they account for more than half of global production and even larger share of reserves. Global energy trends have prompted a number of countries to renew their commitment to reform and to diversify their economies, and fundamental changes to development models in many major resource holders look unavoidable. National oil companies can provide important elements of stability for economies during this process, if they are operating effectively and alert to the risks and opportunities.

To learn more on IEA's report click here.