Representatives of the 197 countries that are parties to the United Nations Framework Convention on Climate Change world will gather in Glasgow for the 26th meeting of the Conference of the Parties, or COP26 as it is better known.
They arrive at the meeting informed by the IPCC Sixth Assessment that human activity, principally the burning of fossil fuels, has led to global warming of 1.1oC, with changes to the climate seen in every region on earth. The IPCC states that limiting warming to 1.5oC is still possible, but only if we make strong, rapid, and sustained reductions to emissions now.
Agreements made in Glasgow will have a significant impact on the climate for generations to come. The emissions targets set will define the changes required to the world energy system and have direct consequences to oil and gas companies.
In this paper, we set out our insights on the challenges that climate change and the world response present to the oil and gas industry and make recommendations on how companies can analyse their physical and transition risks, mitigate their operational emissions, and create low-carbon businesses, such that they can thrive through the energy transition.
Key findings from the report include:
- Energy producers can make similar returns from renewables as they have made from oil and gas, with less risk. We believe the focus of energy companies should be on establishing a leading position in power generation as the most lucrative part of the low-carbon power value chain, as upstream is in the oil and gas value chain. We estimate the market size of this to be c.$240bn on a net profit basis in the US and Europe alone.
- Leading generation-focused global power companies are currently focusing on renewable energy and are achieving comparable financial performance to oil and gas investments, at c.10% ROACE. Therefore, we believe oil and gas companies can profitably enter this market.
- Establishing a renewables business can not only be profitable to oil and gas in the near term, but also provide a critical foundation to being a major player in the rapidly emerging green hydrogen fuel and electric vehicle markets. Given the scale of generation required and the time needed to take projects from development to operation, energy companies must start now.
For more information on Baringa's work in this area, please contact:
Johan Nell, Energy & Resources sector
E-mail: Johan.Nell@baringa.com
Andrew Mercer, Energy & Resources sector
E-mail: Andrew.Mercer@baringa.com
Related Insights
![](/globalassets/industries/energy-and-resources/low-carbon-solutions/role-of-the-state-original.jpg?width=560&height=299&quality=90&format=webp&rxy=0.5%2c0.5&rmode=crop)
The role of the state in the GB energy market
What is the state’s role in the GB energy sector and how could it be extended to support decarbonisation objectives?
Read more![](/contentassets/d28ccdf3a6cc423484e71b02114ba71b/data-driven-decarbonisation-teaser.png?width=560&height=299&quality=90&format=webp&rxy=0.5%2c0.5&rmode=crop)
Data-driven decarbonisation: how analytics and AI are supporting the energy transition
Data and AI are key to enabling mass-market decarbonisation. From standardisation to sharing, everyone has a role in ensuring their approach delivers industry-wide benefits alongside individual competitive advantages.
Read more![Two people looking towards a nuclear plant](/globalassets/insights/low-carbon-futures/nuclear-delivery-sweden-teaser.jpg?width=560&height=299&quality=90&format=webp&rxy=0.61%2c0.39&rmode=crop)
Delivery options for new nuclear power in Sweden
Read our study on financing and delivery models for new nuclear power, carried out for the Confederation of Swedish Enterprise providing key recommendations.
Read more![Happy woman looking at her home in a room with green plants](/globalassets/industries/energy-and-resources/low-carbon-solutions/women-green-home.png?width=560&height=299&quality=90&format=webp&rxy=0.5%2c0.5&rmode=crop)
The benefits of cleantech homes: healthier living, lower bills
Read this report written by Baringa on behalf of Octopus Energy and the members of King Charles’s Sustainable Markets Initiative (SMI) Cleantech Homes Lighthouse Project, which involves leading UK businesses committed to the net-zero transition.
Read more