Gartner Predicts Upstream Capital Projects Will Invest More in Alternative Energy Than Hydrocarbons by 2026

By 2026, 50% of upstream capital projects will be mixed projects where investment in alternative energy exceeds that in hydrocarbon production, according to Gartner, Inc. IT leaders and CIOs will need to build fit-for-future competencies in the IT team by investing in the development of business understanding in alternative and renewable energy domains.

“Many of the major international oil and gas companies have begun work toward goals targeting net zero around the middle of this century due to increased customer, investor and regulatory pressure,” said Simon Cushing, senior research director at Gartner. “This pressure to become more sustainable will only increase. As new energy systems alter geopolitics and decarbonisation intensifies competition, national oil companies will also steer away from dependence on hydrocarbons for wealth generation and social support.”

Gartner predicts that upstream companies’ missions will shift to supporting still-rising energy demand with as-low-carbon-as-possible oil and gas, while using established competencies and technology innovation to enable the energy transition.

Major Diversification from Traditional Business Underway for Global Oil & Gas Companies

By 2025, Gartner predicts that 40% of oil and gas companies will have a formal strategy for major diversification away from their traditional business sectors. According to Gartner, the period between 2020 and 2030 will emerge as the “decade of deep redesign” because all oil and gas companies will need to make significant changes in their investments and operations.

Oil and gas companies are currently addressing three disruptions simultaneously — COVID-19, digitalisation and the energy transition. As digital is a significant factor in addressing all three disruptions, CIOs need to reduce transition costs and accelerate the pace of change.

“Methods like scenario planning can help in consolidating future uncertainties into more manageable forms and can build direction for IT investments. Additionally, development of digital operating platforms or advanced cybersecurity to consolidate common elements across independent business strategies can help,” said Cushing.

Oil and gas CIOs face a chaotic and confusing business environment that is likely to continue through the next decade. While the redesign challenge is well within the normal strategic planning horizon of these organisations, the demand destruction that the industry experienced during the COVID-19 pandemic has made the potential risks of avoiding redesign more tangible.

Gartner clients can read more in the reports "Predicts 2021: Oil and Gas — The End of “Standard” Oil" and "Predicts 2022: Oil and Gas — The Last Golden Era."

By 2026, 50% of upstream capital projects will be mixed projects where investment in alternative energy exceeds that in hydrocarbon production, according to Gartner, Inc. IT leaders and CIOs will need to build fit-for-future competencies in the IT team by investing in the development of business understanding in alternative and renewable energy domains.

“Many of the major international oil and gas companies have begun work toward goals targeting net zero around the middle of this century due to increased customer, investor and regulatory pressure,” said Simon Cushing, senior research director at Gartner. “This pressure to become more sustainable will only increase. As new energy systems alter geopolitics and decarbonisation intensifies competition, national oil companies will also steer away from dependence on hydrocarbons for wealth generation and social support.”

Gartner predicts that upstream companies’ missions will shift to supporting still-rising energy demand with as-low-carbon-as-possible oil and gas, while using established competencies and technology innovation to enable the energy transition.

Major Diversification from Traditional Business Underway for Global Oil & Gas Companies

By 2025, Gartner predicts that 40% of oil and gas companies will have a formal strategy for major diversification away from their traditional business sectors. According to Gartner, the period between 2020 and 2030 will emerge as the “decade of deep redesign” because all oil and gas companies will need to make significant changes in their investments and operations.

Oil and gas companies are currently addressing three disruptions simultaneously — COVID-19, digitalisation and the energy transition. As digital is a significant factor in addressing all three disruptions, CIOs need to reduce transition costs and accelerate the pace of change.

“Methods like scenario planning can help in consolidating future uncertainties into more manageable forms and can build direction for IT investments. Additionally, development of digital operating platforms or advanced cybersecurity to consolidate common elements across independent business strategies can help,” said Cushing.

Oil and gas CIOs face a chaotic and confusing business environment that is likely to continue through the next decade. While the redesign challenge is well within the normal strategic planning horizon of these organisations, the demand destruction that the industry experienced during the COVID-19 pandemic has made the potential risks of avoiding redesign more tangible.

Gartner clients can read more in the reports "Predicts 2021: Oil and Gas — The End of “Standard” Oil" and "Predicts 2022: Oil and Gas — The Last Golden Era."