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Paris Agreement to render conventional oil & gas activity less and less viable

Economy Materials 31 July 2021 09:15 (UTC +04:00)
Paris Agreement to render conventional oil & gas activity less and less viable

BAKU, Azerbaijan, July 31

By Leman Zeynalova – Trend:

Paris Agreement will render conventional oil and gas activity less and less viable, Trend reports with reference to GlobalData.

Hydrocarbon demand is set to fall in the coming decades due to the measures the Paris Agreement signee governments will take to discourage emissions and ensure the success of net-zero goals. This agreement will render conventional oil and gas activity less and less viable. In order to reduce emissions and minimize loses, oil and gas companies should adopt measures such as carbon pricing by altering processes across the value chain, says GlobalData, a leading data and analytics company.

GlobalData’s report reveals that technological innovation and increased consumer mindfulness will make sustainable alternatives to hydrocarbon-intensive products more and more attractive. For example, in transport, historically the largest hydrocarbon-demanding sector, conventional cars will be displaced almost entirely by electric vehicles (EVs).

George Monaghan, Oil and Gas Analyst at GlobalData noted that though some demand will remain, survival for most current oil and gas companies will mean transitioning to a new product. While there are many options for products, with renewable energy being the most popular, companies will only succeed if they invest while demand is there to capitalise on already strong cashflows by the time demand falls. Companies that wait until hydrocarbon revenues dry up will have insufficient cash to fund a transition.

“Oil and gas companies will need effective governance to steer themselves through the existential disruption that the next three or four decades will bring. A balancing act will be necessary: meeting net-zero objectives while retaining scale demands deft leadership. For example, companies must sustain sufficient cashflows to handle demand volatility, overhaul their asset portfolios, make astute investments, and satisfy sustainability-minded stakeholders, all while providing stable dividends.”

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Follow the author on Twitter: @Lyaman_Zeyn

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