Energy Transition: The evolving role of oil & gas companies in a net-zero future

While there is an expanded awareness and also ambitious goals coming out of fora, like the COPs, and policy developments, such as the EU’s REPowerEU initiative, the continuing year-on-year increase (aside from in the Covid years) in global CO2 emissions serves as a reminder that the transition to a low carbon global economy remains enormously complex, challenging and a work in progress.

This report illuminates how oil and gas majors across three key regions – Europe, North America, and Asia – are responding to the ongoing transition. We see growing alignment around net-zero emissions targets for 2050, aggressive methane reduction goals and more standardised sustainability reporting frameworks. However, companies are pursuing quite differentiated strategies based on their specific geographic and policy contexts, shareholder pressures and existing asset bases. 

European firms like Shell, TotalEnergies, Eni and Equinor are diversifying most aggressively into large-scale renewable power generation, leveraging not only growing policy support but also their resources and expertise as utilities serving European markets. In contrast, US majors like ExxonMobil, Chevron and ConocoPhillips are maintaining comparatively more focus on their core oil and gas portfolios while directing investments into developing lower carbon solutions for their fossil fuel customers – seen by many as a pragmatic strategy given uncertainty around US national climate policy. We see state-owned national oil companies in Asia and the Middle East charting pathways reflecting their home countries’ evolving climate priorities and development needs.

While overall spending on renewables and low carbon initiatives averaged 7.4% of capital expenditure in 2022 for the sampled companies, the wide variances between individual companies underscores how the energy transition remains in its early days as a collective strategic priority. The majors must still make difficult trade-offs balancing investments to maintain returns from existing oil and gas assets, while staking out a future space in the wider landscape opened up by the energy transition. As yet, there are no uniform pathways or dominant models.

This report seeks to provide objective benchmarks to assess how the oil and gas industry is progressing on the road towards a net-zero carbon economy, recognising that the pivotal years still lie ahead.

Preparing this report illuminated the complexities of any comparative analysis, which is why transparency and information sharing is likely to become increasingly essential. For an economic shift as monumental as the global energy transition, there are no easy answers or straight lines. Honest dialogue and innovative thinking will be required to maintain affordable access to energy while ensuring buy-in to measures addressing the impact of our energy choices on climate change.

The companies assessed here face pressures from all sides. But their commitments and initiatives demonstrate the energy transition is nevertheless now underway and augmenting business as usual, even as the destination for each of them remains unclear.