Oil and water, as everyone knows, do not mix – and until now – the same was true of oil and electricity. The two industries have different cultures and are run by different types of people.
Over time, however, three things began to change: First was the rise of natural gas – increasingly used for power generation – within what was traditionally oil-dominated business. Second – a more recent phenomenon – is the rise of renewables also playing a growing role in power generation, especially in countries and states with mandatory carbon-reduction and/or rising renewable targets.
A third reason, at least for oil majors who are forward-looking, is the realization that the continued growth in demand for oil, which has historically been driven by the transport sector, may be coming to an end due to the expected rise of electric vehicles (EVs).
It should, therefore, come as no surprise that virtually all oil majors have been internalizing what may be the potential impacts of these 3 trends on their long-term business prospects and whether the time has arrived to adjust how they invest and plan for the future.
Aggressively expanding
The change in focus has been in the making for some time. All oil majors, for example, have come to recognize the growing role of natural gas – now extensively used for power generation the world over – in their portfolios. But the threat posed by the expected rise of EVs and renewables is yet to be acknowledged by most, at least publicly.
In April 2018 the French oil major Total announced that it was not only aggressively expanding its footprint into gas and renewables but went a step further by acquiring an electricity distribution company.
During the CERAWeek conference in Houston, Texas in March 2018, Patrick Pouyanné, Total’s CEO, revealed that Total was pivoting to become a major natural gas and electricity company as it moves towards lower carbon energy sources. Perhaps people listening to his speech did not read between the lines when he said instead of being an oil-and-gas company, “maybe we will become … a gas-and-oil company,” as reported in the April 2018 issue of this newsletter.
He then stunned many in the audience when he revealed that he was an EV driver. When the CEO of an oil company publicly admits that he is driving an electric car, you know you have reached a tipping point. Mr. Pouyanné is simply the latest convert. He has discovered what many have been saying for some time.
Read more at Big Oil Pivots to Electricity, Total Leads the Way
No comments:
Post a Comment