Oil and gas companies are investing significantly to be future-ready and sustainable. While they are taking positive steps to move to clean energy, crafting a compelling strategic narrative that reflects the organisation’s past, current, and future intentions is key to their transformation, explains Keogh Consulting‘s MARGIT MANSFIELD.
Oil and gas companies are taking positive action to move to clean energy, but there is more they can do in terms of articulating and disseminating the narrative – to all stakeholders, including the sceptics, says Keogh Consulting organisational transformation expert Margit Mansfield.
“Strategic narrative” may be the latest buzzword but as Mark Bonchek explained in the Harvard Business Review, it is critical for organisations as it “defines the company’s vision, communicates the strategy, and embodies the culture”.
“It’s a chance for companies to tell their unique story – why they exist, who they are, where they have been, and where they are going,” says Margit.
However, as Margit explains, this positive narrative needs to be followed up by real action.
“Actions speak louder than words. Organisations can’t just articulate what they stand for, they need to walk the talk,” she says.
By 2050, fossil fuels are set to account for only around 20 percent of the energy supply, down from almost 80 percent today, according to the International Energy Agency (IEA).
“The global shift from using traditional fossil fuels as our primary energy sources towards renewable energy means oil and gas companies will continue to be completely disrupted,” explains Margit.
“All organisations need to adapt but I think oil and gas, in particular, is in the spotlight and is being forced to transition quicker than most others.
“But while fossil fuel producers are often being criticised for contributing to global warming, the world needs to remember that petroleum-based products are used for far more than running combustion engines.
“So, as well as transitioning to renewable energy, it is important for the industry to shift the conversation to highlight the multiple other uses of the resources that, for the most part, are being responsibly and cleanly extracted.”
As Kevin Gallagher, Managing Director and CEO of Santos explained in his chairman’s address at the recent APPEA oil and gas conference held in Perth last month: “There is no doubt the world wants a faster energy transition and many people see that as a world without fossil fuels.
“This is despite the historical fact that the utilisation of oil and gas has probably been the single biggest boost to living standards in the history of humankind.”
Mr Gallagher went on to explain that 60 percent of clothing fibres are synthetic and made from conventional hydrocarbon commodities. So are components used in smartphones, computers, milk bottles, sporting equipment, and even medical supplies and equipment being used around the world to help during the pandemic
In May 2021, the IEA released a comprehensive report on how to transition to a net-zero energy system by 2050.
As the report reveals, this will require a complete overhaul of the global energy system – and huge leaps in clean energy innovation are crucial.
To reach net-zero emissions by 2050, annual clean energy investment worldwide will need to more than triple by 2030 to around $4 trillion.
There is no denying COVID has accelerated the movement for clean energy, and we are starting to see tangible outcomes from oil and gas companies.
Earlier this month, the West Australian Government announced plans for the world’s biggest renewable energy hub to be built on the southern coast of WA.
Meanwhile, the Australian Financial Review reported that Andrew Forrest had joined a Bill Gates-led venture capital fund focusing on emerging greenhouse gas-reducing technologies.
Other investors in Breakthrough Energy Ventures (BEV) – who have invested a minimum of $US50 million – include Virgin founder Richard Branson, former New York City mayor Michael Bloomberg, and LinkedIn executive chairman Reid Hoffman.
In other news, it was also announced Carnarvon Petroleum had formed a joint venture with Frontier Impact Group to produce renewable diesel and other sustainable products. The company is also committed to delivering a net-zero carbon emissions business before 2050.
Margit agrees a shift away from combustible fossil fuels is inevitable and happening at a faster rate than many industry analysts may have predicted, but it will still be a transition rather than an overnight change.
“Solar and wind are already in the market. Hydrogen is a key focus, and while it is not yet cost-competitive, this could happen sooner than we think,” says Margit.
“However, there are still many millions of barrels of oil and gas that these companies have committed to producing, and shareholders and customers relying on them doing so.
“For that reason, producers need to be more overt in what they are doing to move towards a clean energy future, and also emphasise the role – albeit reduced – that fossil fuels will continue to play.”
Right now, the climate activists have a louder voice and there needs to be a balanced story, says Margit.
“It’s not a binary situation in which we will completely switch fossil fuels off,” she says. “It’s not about saying oil and gas companies are bad, and renewables are good. It’s not that simple.”
Margit explains that we are always likely to have carbon emissions, but the ways in which we capture and store them are going to be important.
“Oil and gas companies, as well as any other industries that are being disrupted, are investing significantly in new technologies,” Margit says.
“They are reducing their costs and taking every opportunity to run as efficiently as they can. They are innovating in new products and services, exploring, and developing external partnerships, and reviewing and refreshing their game plans. They are seriously committed to transforming their businesses.”
“Looking ahead, it is important they have a strong, positive narrative around the role they are playing in moving towards a clean energy future, the investments they are making to achieve this and the role they play in improving the lives of millions of people.”
Working on diverse problems across many industries, Keogh Consulting specialise in culture, leadership, and business transformation consulting.
“A core part of our transformation work is to help boards and executive teams clearly establish, confirm and consistently communicate their reason for being – one that goes beyond creating value for shareholders, and then developing the plans to turn that into reality.”
