A unique opportunity for change in the energy sector

A unique opportunity for change in the energy sector 4 This provided a unique opportunity to evaluate ways to make supply chains and balance sheets more resilient, operations more efficient, and business choices more responsive to stakeholders looking for companies to demonstrate their ESG credentials. For its part, the energy sector is accustomed to various shocks with rebounds to business- as-usual. However, the current crisis caused by the pandemic seems to hallmark a different outcome. Lockdowns and the slow easing or recurrence of restrictions has created gaps in demand across sectors that use energy products, challenging companies throughout the energy value chain to examine their business models and financing. It has been a unique opportunity to undergo a strategic renovation for the energy industry and reprioritize many initiatives which support environmental objectives. A turning point For the entire energy value chain, there is an opportunity to infuse new vigour into environmental strategies and renewable energy businesses in response to stakeholders’ expectations. It is the ideal environment to build on existing strategies and to provide private sector leadership at a time when many governments around the world may need to make difficult choices between pandemic recovery spending and capital intensive renewable or retrofit projects. Most of the supermajors and many independents are increasing investment in environmental projects and renewable energy such as offshore wind, solar projects, and zero-emission vehicle fuels. Investing in lower carbon technology and carbon capture, utilization and sequestration technologies (CCUS) including mobility options such as hydrogen, setting net-zero carbon emission targets, and publishing sustainability initiative reports is common. And using joint ventures to advance strategies is also prevalent, such as six of the world’s largest energy companies forming the Northern Endurance Partnership (NEP) to develop offshore infrastructure, part of a larger goal around carbon capture, fuel switching and hydrogen. These projects highlight a challenging transition period between investment and return. Renewable energy projects are often valued on expected future earnings, whilst more traditional energy is valued on its ability to pay dividends in the near-term. Having the balance sheet strength to be patient while consumer demand develops as well as the ability to invest in infrastructure and in the expansion of renewable projects, is key. More importantly, the industry can leverage its balance sheets to invest in economies of scale to get markets to change more rapidly. Investing in projects and infrastructure could also yield wider availability, another component in consumer appeal. Appropriate use of a robust balance sheet could enable energy companies to accelerate the journey towards a lower carbon world. Some of the largest NOCs (National Oil Companies) are also using their balance sheets to scale-up projects. Among the boldest projects is NEOM city in Saudi Arabia where government, investment in diversification