The transition towards a clean energy future has begun. Following on governments’ footsteps, many leading energy companies are publicly announcing their commitments for 2050. These commitments include targets to reduce greenhouse gas emissions, lower environmental impact and mitigate climate-related risks associated with their business activities. While these targets are for the long term, most companies have started to develop and execute near-term action plans to ensure they progress toward their stated goals. At the same time, they are assessing the risks and opportunities arising from their plans and seek to understand the impacts on their operations and markets.
The 2030 decarbonisation challenge report by Deloitte explores strategies of leading energy companies that aim to achieve carbon neutrality by 2050 to highlight how they intend to accelerate decarbonisation activities and reach interim targets by 2030.
Pressure to decarbonise comes from a variety of sources: stakeholders, including employees, customers, investors and local communities; government regulation; and cost reduction opportunities from new technologies. Responding to the pressure requires substantial financial commitment, time and effort. Decarbonisation calls for a transformational shift in how companies operate and engage with their stakeholders and wider ecosystems.
The oil and gas sector has been hard hit by the contraction in global demand caused by the pandemic. While companies are still reeling from the impact of low oil prices on their businesses, they also need to articulate the decarbonisation pathway they are going to pursue. To that end, it is imperative they understand how their business models need to change to reach their decarbonisation targets and take advantage of opportunities that energy transition offers. Helping businesses collaborate and understand where the opportunities lie makes the roles of UK industry associations and the regulator on energy transition and integration crucially important.
A number of cost-conscious oil and gas companies make carbon emission reduction a priority because of its potential to improve operational efficiency. They employ techniques to enhance energy efficiency, optimise production and reservoir management by using digital tools or improve logistics to reduce fuel consumption. Others are considering electrifying their operations, replacing fossil fuels in operations with renewable power, switching to low or no emissions fuels, reducing routine flaring or capturing methane emissions.
An increasing number of oil and gas companies are also diversifying into other forms of energy, such as renewables, and enabling technologies, such as smart tech and ancillary sectors. Yet others explore business opportunities offered by the circular economy. These opportunities include carbon capture, utilisation and storage and where innovative technologies are looking to turn carbon dioxide emissions into new products such as building materials, chemicals or fuels. Hydrogen is another up-and-coming subject that attracts the attention of oil and gas companies due to the transferability of skills, infrastructure and supply chain. Deloitte’s forthcoming report, Investing in hydrogen, explores the cost of the hydrogen value chain to help identify opportunities for investment and cost reduction and highlight areas where government support will be needed.
Other energy sectors face different decarbonisation challenges. The chemicals sector is focusing on improving resource and energy efficiency and using sustainable waste. The power, utilities and renewables industry, which is ahead of other energy sectors on its decarbonisation path, needs to adopt advanced analytics faster to manage and derive insights from data better.
The energy landscape will change significantly by 2030. There will be lots of uncertainties in play and companies in every industry need to adopt different approaches. Deloitte’s Future of Energy scenarios help visualise these new circumstances. The four scenarios help leaders make flexible decisions in the short term, while allowing their businesses to earn, learn and influence environments as the future unfolds.
Contact Daniel Grosvenor, Renewables Leader, Deloitte UK (Email: firstname.lastname@example.org Tel: +44 20 7007 1971)