How The Energy Transition Could Be Structured

An extensive study by Accenture attempts to measure and organize the various ways in which oil and gas companies tackle the energy transition and their corresponding need to expand the reach of their business model. The study is titled “Necessity is the mother of (re)invention”, and it is based on a 2021 survey of executives from a total of 179 oil and gas companies focused on what kind of policy and culture they were adopting in regards to the energy transition. These companies understand that extensive changes will be necessary throughout the 2020s, but they differ greatly on their grasp of what exactly those changes will be, how their fundamentals will be affected and how quickly the changes will need to be adopted. The study frames these disagreements in terms of the difference between change and reinvention. One of the central claims made in the survey is that 66 percent of oil and gas companies are planning to fundamentally change or radically reinvent themselves in the next three years.

The study measures the planned reinvention of these companies on the bases of five categories, which it calls its “5Cs” approach: competitiveness, connectivity, carbon, customer and culture. “Connectivity” is at the base of these categories, since this is the measure of how much companies will invest in technology to turn themselves into much more efficient and autonomous enterprises; without the willingness to invest, it becomes significantly more difficult to enable any of the other necessary changes. “Carbon” measures the concrete actions being taken towards carbon neutrality. “Customer” measures the new channels and services being developed to improve the B2B and B2C customer experiences and “Culture” measures the degree to which employees are being directed by a purpose-led strategy towards innovation. Finally, “Competitiveness” measures the degree to which all the previous categories amount to an improved market standing and better survivability odds in an entirely transformed market environment. 

The study uses these categories to determine a score out of 100 for each company, which it called that company’s “Oil and Gas Reinvention Index” (RI). Depending on their RI, companies would fall into three categories: leaders, followers and laggards. 18 companies turned out to be leaders, representing the top ten percent of RI scores, with an average RI of 77. The vast majority of companies surveyed, 117 to be exact, were categorized as followers, which meant that “they are taking some steps to fundamentally change their business or operating model but falling short of true reinvention.” The 44 remaining companies were categorized as laggards and represent the bottom 25 percent of RI scores, with an average RI of 58. What might prove to be one of the study’s most important conclusions is the opportunity this distribution represents: “The potential value upside for the industry from each player achieving leaders level ambition can be up to $500 billion annually.”