The oil and gas industry finds itself at a critical juncture. While fossil fuels continue to dominate the global energy mix, mounting concerns around climate change and the transition to cleaner energy sources have cast uncertainty over the future of this sector. However, oil and gas are expected to remain an important part of the energy landscape for years to come. So, this article will explore expert predictions on the future of oil & gas industry over the next decade and discuss potential pathways to balance economic, environmental, and social priorities.

Future of oil & gas: Decline or endurance?

The International Energy Agency (IEA) predicts oil declining from around 100 million barrels per day (mb/d) to 77 mb/d by 2030. Moreover, oil demand is forecast to decline 75% from current levels to around 24 mb/d in 2050. It will mainly be used for petrochemicals, aviation, and shipping. The IEA stresses that reaching net zero does not mean the end of oil and it continues to play a role, just a significantly reduced one.

So, even with climate goals, hydrocarbon infrastructure/investment cannot be phased out overnight. Many industry professionals wonder what is the future of the oil and gas industry 2040. To this, oil and gas majors like BP predict oil demand may only fall 10-20% by 2040.

The consensus about the future of oil & gas is that it will remain integral to the global economy, albeit with a declining market share. Industry leaders recognize the shift toward clean energy is irreversible. Moreover, it is even changing business models. However, renewable energy adoption has limits. Furthermore, existing assets give oil and gas unrivaled scale advantages. So, barring aggressive policy intervention, hydrocarbons will likely dominate through 2040. Nevertheless, it can come with declining growth rates.

The sustainability imperative

Sustainability has become an existential issue for the future of oil & gas. Investor pressure and changing social attitudes around climate change are becoming heavier. It is forcing the industry to transform how it operates and also create long-term value. So, reducing greenhouse gas (GHG) emissions is now a strategic priority.

Many companies have set ambitious emissions reduction targets. It includes reaching net zero by 2050. So, strategies include:

• electrifying operations
• deploying carbon capture systems
• increasing renewable energy investment, etc. 

Companies are also scrutinizing portfolio emissions across the value chain. It is to prioritize the lowest carbon barrels. So, these efforts aim to lower the industry’s carbon footprint and align with global climate goals.

Producers are also striving to limit methane leakage, toxic air pollution, freshwater use, and more. So, deploying leak detection systems, consolidating facilities, and improving reporting transparency help manage risks. Moreover, tighter regulations on drilling, pipeline infrastructure, etc. also act as a catalyst. Ultimately, the industry must demonstrate concrete progress on ESG metrics. It is a sure-shot method to secure its future license to operate.

Future of oil & gas: The role of technology and innovation

Technology and innovation will be a key lever for the industry. It will help thrive in a carbon-constrained world. Moreover, existing fields can be optimized through advanced analytics. It can also use automation, sensors, and smarter wells to extend field life. So, digitalization unlocks energy efficiency gains across the value chain.

Emerging innovations like carbon capture and storage, hydrogen, biofuels, etc aim to reduce emissions from operations. It also helps to create lower-carbon products. As a result, many companies are investing in startups and cleantech ventures. It helps to incubate new solutions. Partnerships with governments and academia also bolster R&D efforts.

While these technologies hold promise, many remain commercially unproven or not yet deployable. Substantial investment and policy support are required. It will help to drive down costs and facilitate widespread adoption. However, focusing innovation on sustainability can help reinvent oil and gas for a low-carbon future.

New business models and diversification

To remain competitive, oil and gas companies are evolving business models. They are also acquiring new capabilities beyond hydrocarbons. Many are aiming to become “energy companies”. They are doing it by expanding into renewables, hydrogen, biofuels, EV charging, and more. Furthermore, acquiring existing low-carbon businesses allows quicker entry into fast-growing markets.

Companies are also looking to leverage core capabilities to find adjacencies. Leveraging strengths in offshore operations, project management, and liquefaction offers paths. This is to scale up other resources like offshore wind, carbon storage, hydrogen, and LNG. So, focusing on the most profitable hydrocarbon assets and divesting higher-cost projects can free up capital for new ventures.

However, balancing oil and gas with green investments has proved challenging. Profitability still centers on fossil fuel production. Shareholders also remain skeptical of diversification efforts. However, developing material revenues from low-carbon ventures could future-proof portfolios. So, the right strategy for the future of oil & gas depends on asset profiles. It also depends upon geographic focus, risk appetite, and availability of investment capital.

Natural gas: Bridging fuel or liability?

Natural gas is often touted as a “bridging fuel”. It can smooth the energy transition giving a direct solution for experts wondering what is the future of the oil and gas industry 2040. It offers lower emissions than oil and coal. Moreover, gas will play an important role in backing up variable renewable power. It will also provide feedstock for hydrogen production. LNG also stands to displace higher carbon energy sources, especially coal power, in import markets like China and India.

However, gas infrastructure and reserves risk becoming “stranded assets” if the energy transition accelerates. Gas faces competitive threats from cheap renewables and falling battery storage costs. It also faces competition from tighter methane regulations and waning social licenses. Financing gas projects is also getting harder with banks committing to net zero.

While relatively cleaner than other hydrocarbons, gas still emits CO2 when combusted. It also has high methane leakage rates. Some scenarios envision renewables leapfrogging natural gas. These could leave assets devalued if demand peaks earlier than expected. However, given its current abundance and affordability, gas retains an advantage over other fuels. So, the industry must improve its environmental performance. This helps to secure gas’ position in a net zero world.

What steps can give you immediate results?

The future of Oil & gas faces growing climate pressures. However, they are likely to remain dominant energy sources over the next decade. This is barring aggressive policy intervention. While renewables eat into demand, developing economies and complex sectors will sustain hydrocarbons. However, the industry must dramatically improve its sustainability or face mounting backlash.

Technology and business model innovation focused on efficiency, etc can reinvent oil and gas for a net zero future. However meaningful investment and collaboration will be vital. This is to develop and deploy solutions at a commercial scale. Tackling methane leakage, aligning operations with climate goals, etc are also crucial. With pragmatic pathways, oil and gas can balance economic, environmental, and social imperatives. However, the clock is ticking to act decisively. So, this decade will prove decisive for both the industry and global climate ambitions.

The most effective step that you can take is attending summits. These summits have the presence of industry leaders and some eye-opening insights. The Net Zero Energy Production Summit in Amsterdam, Netherlands on 30-31 January 2024 is one such unmissable event. It stands ideal for anyone looking to gain insight. This is into the oil and gas industry’s pivotal role in the global energy transition. As both a major energy producer and consumer, the industry has significant potential. It can curb emissions through innovation across its value chain. 

This summit will bring together leading experts to discuss critical technologies and strategies. It ranges from reducing methane leakage and flaring to electrifying upstream facilities with renewable energy. This is through deploying carbon capture systems and ramping up low-carbon hydrogen output. Attendees will gain invaluable perspective on the most impactful steps companies can take today. It will prove to be powerful to cost-effectively decarbonize operations and assets. So, register right away!