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The Writing’s on the Well – Resources Re-imagined

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Oil and gas companies are about to enter a new paradigm. It is being shaped by a combination of factors that are flipping the energy industry on its head.

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The Writing’s on the Well – Resources Re-imagined

  1. 1. A NEW PARADIGM FOR OIL AND GAS HYDROCARBONS’ DOMINANCE in the energy mix will fall by some estimates, from 80 percent today to just above half by 2060 Source: Accenture Strategy analysis TECHNICAL ADVANCES HAVE SWELLED RECOVERABLE RESERVES BREAKEVEN COMPRESSION HAS ESTABLISHED LOWER PRICE CEILINGS
  2. 2. Billions of dollars in new sources of Are waiting for oil and gas companies that take the RIGHT ACTION NOW PROFITABILITY
  3. 3. As margins shift from upstream to other parts of the value chain, diversified energy companies are reaping the rewards THE RESOURCE REVOLUTION: SUPPLY Average return on capital investment comparisons across oil price cycles Full-cycle 2010-2016 Oil Up- cycle 2010-2013 Oil Down- cycle 2014-2016 Downstream IOCUpstream 4% 7% 10% 9% 6% 13% (6)% 8% 3% FollowersBest PerformerSource: Accenture Strategy analysis UPSTREAM RETURNS will be less significant than today possibly dropping from 80 percent to a fifth or less
  4. 4. THE RESOURCE REVOLUTION: DEMAND CUSTOMERS WANT CLEANER Electricity, petrochemical and gas-powered solutions LIQUEFIED NATURAL GAS is set to make up ~20 percent of all gas production by 2035 The use of gas for electrification is projected to grow 50 percent BY 2035 Source: Accenture Strategy analysis
  5. 5. THE RESOURCE REVOLUTION: RENEWABLES 6 Solar and wind are on track to be than coal and gas by 2035 30% CHEAPER Cost of energy from are nearing parity with fossil fuels SOLAR AND WIND Source: Energy BP Outlook 2017, Accenture Strategy analysis
  6. 6. Cheap renewables may set the stage for an irreversible decline in HYDROCARBON CONSUMPTION INDUSTRY BOUNDARIES ARE SURE TO
  7. 7. RESOURCE REVOLUTION To capture value from these disruptive forces, oil and gas leaders need to: TRANSFORM their core capabilities with the help of digital technologies RE-IMAGINE where they compete and how they will harness future growth
  8. 8. TRANSFORMING THE CORE THE IMPERATIVES These attributes require a new ENTERPRISE DNA FUTURE DNA ESSENTIAL CAPABILITIES PORTFOLIO MANAGEMENT VALUE CHAIN INTEGRATION CONNECTED ENTERPRISE TECHNOLOGY INNOVATION ECOSYSTEM MANAGEMENT RISK MANAGEMENT CUSTOMER ORIENTATION Maximize the value of every molecule Embrace digital technologies for hyper-efficiency Work across functional areas and with external partners to deliver new solutions Source: Accenture Strategy
  9. 9. PIVOTING TO THE NEW Nearly One-third of oil and gas leaders believe their primary source of growth in 2020 will come from existing products and services TO ACCESS NEW SOURCES OF VALUE, OIL AND GAS COMPANIES WILL NEED TO DO NEW THINGS, IN NEW WAYS… Almost half see new products and services as most critical to their future growth From dominance to diversity From extracting energy sources to extracting value From resources to relevance Source: Accenture Strategy revenue growth research
  10. 10. CUSTOMER CENTRICITY GLOBAL ENERGY FLOW Electricity demand is set to double by 2040. Demand for petrochemical solutions is on track to surge by 75 percent The shifts of energy flows will profoundly affect how resources are sourced, managed and used FROM DOMINANCE TO DIVERSITY WISE PIVOT #1 Source: IEA WEO 2016, Accenture Strategy analysis
  11. 11. Four opportunities hold particular potential OIL AND GAS LEADERS WILL ADOPT NEW ROLES LIGHT GAS VALUE CHAIN INTEGRATION Retail provider, high-frequency trader, etc. CONSUMPTION-LED PETROCHEMICAL SOLUTIONS A “materials” company, joint venture participant, etc. CUSTOMER-CENTERED ENTERPRISE NexGen retailer, connected home manager, etc. POWER MARKET ACCESS Wind farm operator, storage provider, etc. WISE PIVOT #2 FROM EXTRACTING ENERGY SOURCES TO EXTRACTING VALUE
  12. 12. Ride-sharing companies arbitrate supply and demand Online retailers manage vast ecosystems of suppliers Media companies deliver the streaming content users want, based on granular assessments of viewing habits and entertainment needs Placing customers at the center of investments is critical Use customer insights to develop new hyper- relevant services WISE PIVOT #3 FROM RESOURCES TO RELEVANCE WHY CAN’T OIL AND GAS COMPANIES DO THE SAME?
  13. 13. GETTING STARTED Establishing a framework for funding, evaluating and developing businesses Incubating an innovation culture Channeling the right talent and leadership Rethinking the capabilities you need to flourish A WINNING APPROACH REQUIRES...
  14. 14. GETTING STARTED The days of extracting value from new business models and changing customer behaviors have just begun The days of focusing solely on EXTRACTING RESOURCES ARE OVER
  15. 15. JOIN THE CONVERSATION: @AccentureStrat Follow us on LinkedIn Learn more about how oil and gas companies can pivot to the new energy landscape. Read the full report: THE WRITING’S ON THE WELL

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