The oil and gas industry is renowned to be an indispensable pillar of the global economy, serving as the world’s chief source of energy. According to the International Energy Agency’s (IEA) report (May 25, 2023), the global fossil fuel industry earned a record-high income of $4 trillion in 2022, which is expected to cause a considerable boost in fossil fuel investments by 6%, up to $950 billion in 2023. Such statistics corroborate the reality that the O&G industry is firmly capable of withstanding price volatility and disruptions in supply. Given the recent geopolitical and economic factors influencing the market, the industry is bound to face further highs and lows, which poses the question of how companies will adapt to not just survive, but thrive in the face of uncertainty.

The above graphs showcase that the primary consumers of energy in the form of oil are the large economies of the US, China and India. Notably, India ranks second in the leading consumers of coal in the world, with coal forming the greatest share of primary energy demand (57%), as compared to oil (27%) and gas (6.3%). As for oil supply, India’s Reliance Industries ranks fourth among the leading oil and gas companies worldwide based on market capitalization, after ExxonMobile and Chevron of the US, and Royal Dutch Shell of the UK respectively. However, India does not even feature in the top 15 list of leading oil producers worldwide based on revenue, suggesting that Indian companies are generally unable to compete with the profits earned by the US, China and the UK.

Sanctions on Russian O&G

Russia’s aggressions against its neighbour Ukraine have mobilised spectator nations to step in and attempt to curb Russian revenues and hinder its war efforts. The Russian economy is extremely dependent on its energy sector, hence the sanctions imposed on its O&G industry is expected to deliver a severe impact. With this notion in mind, the EU nations have ended imports of Russian oil brought in by sea, and co-ordinated a ban on refined oil products. The US and UK have also implemented bans on Russian crude and refined oil product imports in late 2022. Further, the G7 and Australia, as members of the Price Cap Coalition agreed that the maximum price per barrel of Russian-origin crude oil would be restricted at $60. As for Russia’s gas sector, the EU stated that it would slash gas imports from Russia by two-thirds within a year. The UK, which only imported small quantities of Russian gas, has now ended this altogether. The effects of these measures may be quantified with the help of the forthcoming list of leading global oil suppliers for 2023. In 2022, three Russian companies were among the list of top 15 suppliers; the success of these sanctions would be affirmed by their removal, or lowering in position. This potential change may empower other companies from countries like Norway or Brazil to climb the ladder.


Data reveals that as intended, the price of Urals crude oil originating from Russia has been rapidly dropping following the imposition of sanctions. However, it is believed that it is the EU oil embargo impacting the price, not the price cap. Moscow is losing out on about $175 million per day from fossil fuel exports due to these sanctions, according to a study by the Centre for Research on Energy and Clean Air (CREA). However, the price cap had been specifically designed to diminish Russia’s revenues, while ensuring that global energy markets remain stable. It was, therefore, expected to address inflation and keep energy costs rigid as well. Despite these efforts, the continually declining prices of Russian oil has attracted other nations to increase their purchase, through the loophole of making purchases in their own local currencies. Most European nations still rely on Russia for their supply of LNG as well.

The Cheaper, The Better – India's Advantages

Having drastically increased their purchase, India, China and Turkey currently form the 70% of all Russian crude flows by sea. As Russia’s oil is priced much lower than the global benchmark Brent oil, Russia is now on course to become India’s largest single supplier, whereas Russia supplied less than 2% of India’s oil imports at the start of 2022. India’s actions are in line with its firm stance that it will purchase oil from the cheapest source. The continued purchase of Russian oil will have a favourable impact on the Union Budget of India, owing to a smaller crude import bill. Moreover, the EU’s impositions have expanded India’s export opportunities, especially in the private sector; by creating a demand-supply gap in the market, the sanctions enable Indian refiners to fill this gap. As India utilises the discounted Russian crude oil to produce its petroleum products, it may be concluded that Russian crude ultimately reaches European markets through Indian exports. Hence, Indian companies such as Reliance Industries may grow

Crude Oil Price Drop

Crude prices have been steadily declining over the last year, and have stayed below $90 for the last six months. Although crude prices rose slightly in April due to production cuts by the OPEC and its allies (reduced by 1.16 million bbl/day), they have fallen again in May. Benchmark oil Brent crude, which was trading at around $85 per barrel a month ago, closed in at $72.61 per barrel on May 4th. Similarly, WTI prices have fallen from $83.26 per barrel on April 12th to $68.85 on May 3rd. The duration of these dramatic downward trends is unpredictable; however, if prices continue to drop, oil refiners will be the first to benefit through lower costs, and these benefits may quickly reach consumers.


Investor Insights

Between 2020 and 2022, surveys were conducted of 250 institutional investors in the O&G industry conducted by a leading consulting organisation; the findings reveal that against the backdrop of price fluctuations in the O&G industry, investors expressed optimism regarding the maintenance of impressive short-term shareholder returns. As depicted in the below graphs, nearly 70% of respondents in 2022 expect oil prices to remain above $60 per barrel in 2024, which is significantly higher than recorded in the 2021 survey, in which the majority of investors projected an oil price between $40 and $60 per barrel. Moreover, nearly 70% of respondents agree that O&G companies should actively pursue growth in natural gas, as they believe it will play a crucial role in gradually decarbonizing the world.

Investors also believe that O&G firms must increase or at least maintain their payouts to investors, through dividends as well as buybacks. Irrespective of the level of oil and gas prices, preserving dividends and growing the top line must remain the focus of Big Oil’s value proposition for shareholders. Majority of investors (about 80%) concur that it was “somewhat” or “extremely important” for O&G companies to maintain or grow their investor payouts.


The rising attention given to climate change and environment sustainability has led investors to have mixed sentiments about the long-term results of their fossil-fuel investments. The below graph displays that almost two-thirds of the surveyed investors are of the opinion that demand for oil will peak in 2030, and consequently, 60% feel the pressure to divest their O&G stocks, as they believe that such stocks will retain much importance in their portfolios in the next decade.

Stemming from the growing pressure, investors are convinced that firms need to take these steps:
While investors acknowledge that most companies have previously undertaken measures to improve their green performance, they believe that those measures will not be enough to combat climate change. Investors want to see firms produce substantial results by creating goals and achieving them.

The Energy Trilemma

The immediate importance of clean energy has never before been emphasised as it is in the present, with a clean energy revolution sweeping across the world. This has allowed the global renewable energy sector to steadily expand, and the industry to generate hundreds of billions in economic activity and rapidly develop in the coming years. The Energy Trilemma relates to finding a balance between the three pillars – security, affordability, and sustainability – in how we access and use energy.

Security refers to the ability to access energy in the quantity and at the time that it is needed, that is, ready/uninterrupted availability of energy – in the short term this could refer to an energy system that is able to respond to sudden changes in supply and demand. In the long term, renewable energy sources such as wind, solar and hydropower can improve energy security, as the limited supply of fossil fuels like oil, gas and coal will eventually run out. Affordability refers to the ability to comfortably acquire energy within one’s means – solar and wind power are ranked as the most affordable as compared to fossil fuels, due to efficient energy generation through solar plants and wind turbines. Sustainability focuses on meeting the energy demands of today without negatively impacting future generations – our leading sources of energy, oil and gas, are highly unsustainable as they release mass amounts of greenhouse gases and contribute to the climate crisis. Overall, the energy trilemma suggests that three pillars are fundamentally at odds with one another, and attempts to find a balance between them without entirely sacrificing one to achieve another. The goal of the clean energy revolution would be to slowly phase the existing oil and gas industry out of its present state of production, as the world switches to clean and sustainable sources.

Efforts In Sustainability

The O&G industry is facing a critical challenge with respect to sustainability; failure to address growing calls to reduce greenhouse gas emissions could threaten their long-term social acceptability and profitability. Increasing demands to clarify the implications of energy transitions for their operations and business models, and to explain the contributions that they can make to reducing greenhouse gas (GHG) emissions and to achieving the goals of the Paris Agreement are imposed on the industry. A report put forth by IISD commissioned climate scientists at the University of Manchester prescribes that O&G production must be phased out by 2034 for rich countries, and by 2050 for the poorest. However, such suggestions to completely eradicate O&G have fostered scepticism. The core question to be asked is: should today’s O&G companies be viewed only as part of the climate problem, or could they also be crucial in solving it?

According to the IEA, the industry faces the strategic issue of balancing short-term returns with its long-term licence to operate. Societies are simultaneously demanding energy services and also reductions in emissions. Companies have been proficient at delivering the fuels that form the bedrock of today’s energy system; whether they can help deliver climate solutions is under study. As the industry landscape is diverse, there is no single strategic response that will make sense for all firms, however, some general steps to be followed can be determined. Listed below are few steps of many:
Shifting from “oil and gas” to “energy” allows companies to diversify while managing transition risks. Such a shift would entail the supply of a range of fuels, electricity and other energy sources to consumers. This involves entering sectors, notably electricity, where there is already a large range of specialised actors and where the financial characteristics and scale of most low-carbon investment opportunities are drastically different from traditional oil and gas projects. Electricity offers long-term opportunities for growth and opens the door to broader reductions in company emissions, although investors will carefully watch the industry’s ability to balance diversification with expected returns and dividends.

Challenges & Solutions

While oil and gas remains a lucrative industry, it faces ever-evolving challenges, owing to the changing landscape of the energy sector and the pressing need to transition to a cleaner, greener state. The following are some challenges faced by O&G firms and solutions to them:
To remain competitive, reducing the costs of producing raw materials and derivatives extracted from them to as low as possible is vital. Cost reduction has to be a crucial strategy in workflow to achieve the planned production quantity at lower cost.
Cost reduction can be accomplished by various means, such as upgrading equipment leading to higher revenues, updating safety systems to prevent accidents and keep production running, using the most advanced radar technology to prevent spills and monitor the process from extraction to shipping.
The economic value of oil resources makes it a prime target for theft, terrorism, piracy and sabotage, causing great damage to companies. Hence, protecting the assets becomes important.
This concern can be abated by employing distinct technologies such as installing panoramic thermal imaging technology to ensure security in remote or high risk locations. Enhanced visibility and early warnings of potential threats can allow operators to protect O&G rigs. The use of automated monitoring, alarms and instant messages reduces the need for manual surveillance and the risk of human errors.
Companies often search for innovative solutions to meet their production and revenue goals. Such innovations are indispensable in ensuring that the company is able to retain/grow its market share, that is, improving overall performance.
The performance of a company can be improved by actively implementing an amalgamation of the above solutions. For instance, companies may improve their performance through the modernisation of their equipment, leading to fewer accidents and risks, which in turn leads to better data collection and higher rates of production
The O&G industry has faced a talent shortage due to an ageing workforce and limited new/young talent entering the industry, and growing competition for talent with the technology industry. This difficulty in getting and retaining talent may pose significant issues for the future of the industry.
The onus is on O&G companies to make sure they get and retain the necessary talent by reviewing their recruiting and retention efforts. They also need to find ways to upskill or retrain their current workforce, which is what over 92% of energy companies plan on doing to address “climate skills gaps”. Employees with engineering and PBMS degrees are the type of skills needed to develop technology operationalise decarbonisation investments in the oil and gas industry.
In recent years, greater competition from alternative energy products poses another threat to the industry, owing to changes in consumer preferences.
To remain competitive in the face of alternative energy industries, O&G companies must make it an immediate priority to implement as many sustainability measures as possible. By doing so, they may successfully influence consumer perceptions about the industry and bring in more continued demand for their products.

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