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Deloitte forecasts five trends to expect from energy companies in 2022

Deloitte forecasts five trends to expect from energy companies in 2022

As many energy companies look to reinvent themselves by practising capital discipline, committing to climate change, and transforming business models; one of the “Big Four” accounting organizations Deloitte has highlighted five major trends to expect this year.

In its latest energy industry report published on April 22, the consulting firm looked at the top five trends fostering industry collaboration and presented a market outlook for 2022.

According to Deloitte, the first trend expected in 2022 is how higher oil prices would boost energy transition plans, thereby challenging conventional wisdom which states “higher oil price would slow the energy transition.”

“76 percent of surveyed Oil and Gas executives state that oil prices above $60 per barrel will most likely boost or complement their energy transition in the near term,” Deloitte said.

It noted that a strong oil price enables investment in riskier and more expensive green energy solutions, such as carbon capture, utilization, and storage (CCUS).

“Given that no single stakeholder can provide the necessary investment and absorb all commercial risks associated with building a CCUS industry, all participants in the entire Oil and Gas value chain become important, as they are involved in more than half of planned CCUS projects,” Deloitte said.

In 2022, Deloitte also expects Environmental, Social, and Governance (ESG) to play a larger role in Mergers & Acquisitions transactions.

Read also: Global LNG market trends for 2022

“Companies pursuing their net-zero goals are either looking to acquire low-carbon-intensity barrels or divest the high-intensity ones, implying that there might be an acreage consolidation or portfolio restructuring on the horizon,” Deloitte explained.

Thirdly, Deloitte admitted that business models would shift to enable a new energy era as the industry would likely see a permanent structural shift as rapid energy transition shifts the scales of oil and gas revenues and spending.

“With a broadening decarbonization mandate across industries, companies have an opportunity to lead the way for customers by fully reengineering traditional OFS business models and solutions outside the traditional “oilfield” services and to other industries,” the consulting firm noted.

Concerning fuel retailing, Deloitte expects a generational shift in consumer preference from brand and price to convenience and user experience.

“The interplay of the energy transition with changing demographics is creating a challenge for many fuel retailers, who must transform their operations to attract and retain a new generation of customers while also adapting to a changing fuel mix,” Deloitte said.

Deloitte advised that companies that would be best suited to thrive during the energy transition are likely to be those that strive to move beyond fuel offerings.

On workforce and talent, Deloitte said the cyclical hiring and laying off of employees is adversely affecting the industry’s reputation as a reliable employer, and a tenured, aging workforce is reducing the available talent pool.

“The commitment to decarbonization could be the best recruiting pitch, but more than 75percent of our survey respondents believe that flexible and agile workforce structures that empower remote, hybrid, and cross-border teams would help companies compete and retain talent in today’s tight labour market,” Deloitte concluded.