ITMAGINATION Presents — The Energy Industry’s Top Challenges

The New York Times talked to participants in the 38th Oil & Money Conference to ask about challenges facing the energy industry. Here’s what they had to say!

Laurence Tubiana, Chief Executive of the European Climate Foundation and chairwoman of the Board of Governors at the French Development Agency, claimed that from 60 to 80 percent of coal, oil, and gas reserves held by publicly listed companies could be classified unburnable after a new round of climate change negotiations. The value of these potentially stranded assets has been estimated at $30 trillion in the oil sector alone, meaning that there is huge potential shareholder value destruction in oil companies that don’t adapt to a carbon-constrained world.

Charles Freeman, Chief Executive at Projects International, former assistant secretary of defense for International Security Affairs, and former ambassador to Saudi Arabia, sees a future of uncertain demand, compounded by growth of economic nationalism and protectionism, rising opposition to continued reliance on hydrocarbons for energy, the rapid fall in the price of energy from renewable sources and the shift toward electric vehicles.

Lara Sidawi Moore, Chief strategy officer and director at the Energy Intelligence Group, claims that the single greatest challenge facing the industry is the uncertainty of the geopolitical landscape as an enabler for new sources of energy. She also believes that to deal with climate issues, new energy sources for transportation will need to be developed.

Mark Lewis, Managing Director of European Utilities Research and Barclays Capital Investment Research, believes that the risks faced by the global oil-and-gas industry can be divided into three main categories — policy risk, technology risk and investor risk. The policy risk comes from increasing efforts to address climate change and resource dependency, the technology risk comes from rapid improvements in renewable energy and electric vehicles, and investor risk stems from greater engagement on the part of institutional investors.

In the opinion of Otto Waterlander, Senior Partner at McKinsey & Company, the global oil and gas industry is playing catch-up and needs to further reset its productivity and cost base to produce its resources economically. The need for productivity improvements will continue to increase. Oil companies will need to innovate and shift to cost-effective operating models, including supply chain reconfiguration, production efficiency and field recovery, and going digital.

Finally, Isabel dos Santos, Chairwoman of Sonangol of Angola, strongly believes that the greatest challenge the industry is price volatility, as forecasting oil and gas prices has gotten even more complex in the past few years due to several new factors affecting supply and demand. These factors include the deceleration of economic growth in emerging economies (especially in Asia), the gradual substitution of oil with cleaner sources, and the increasing use of more eco-friendly buildings and transportation.

For a more detailed look at what experts think about the future of energy, you can view the article in its entirety here.

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