As the global community accelerates efforts to combat climate change, the future of oil and gas is increasingly being questioned. Once the undisputed backbone of industrial progress, fossil fuels now face mounting pressure from governments, investors, and environmental groups to reduce their carbon footprint. Yet, the path forward is not as straightforward as replacing oil and gas with renewables overnight. In a low-carbon world, the oil and gas industry is not disappearing—but it must transform.

The Reality of Current Demand

Despite the push for clean energy, oil and gas still supply over half of the world’s energy needs. In sectors like aviation, heavy industry, and shipping, alternatives are not yet fully scalable or economically viable. Even in a rapidly decarbonising world, demand for certain petroleum-based products—such as plastics, lubricants, and petrochemicals—is expected to remain for decades.

That said, the nature of this demand is changing. The International Energy Agency (IEA) projects that under net-zero scenarios, oil demand will peak before 2030 and decline steadily thereafter. Gas may hold on slightly longer as a “transition fuel” due to its lower emissions compared to coal, but it too faces long-term decline unless paired with carbon capture technologies.

Decarbonising the Industry

The future of oil and gas depends largely on the sector’s ability to decarbonise its operations. This involves reducing methane leaks, improving energy efficiency, and investing in carbon capture, utilisation, and storage (CCUS). Leading companies like BP, Shell, and Equinor have already begun diversifying into renewables and setting net-zero targets, though critics argue progress is still too slow.

CCUS is a particularly critical area. If scaled effectively, it allows fossil fuels to be used with significantly reduced climate impact. However, the technology remains expensive and under-deployed. To succeed, it will require significant investment and government policy support.

Diversification and New Business Models

Many oil and gas companies are redefining themselves as “energy companies,” expanding into solar, wind, hydrogen, and bioenergy. For example, TotalEnergies and Shell are building large-scale renewable portfolios, while others are exploring green hydrogen as a clean fuel alternative.

This diversification is not just about environmental responsibility—it’s about long-term survival. Investors are increasingly steering capital toward companies with sustainable, future-proof strategies. Those that fail to adapt risk losing relevance, market share, and financial backing.

Policy and Market Forces

Governments play a key role in shaping the future of the oil and gas sector. Carbon pricing, emissions regulations, and renewable energy subsidies all impact the pace of transition. International climate agreements, like the Paris Accord, are pushing countries to align national energy policies with global net-zero goals.

At the same time, consumers are also driving change. As public awareness of climate change grows, so does demand for cleaner energy, greener transportation, and sustainable products.

Conclusion

The oil and gas industry stands at a crossroads. In a low-carbon world, its survival depends not on resisting change, but on leading it. By embracing innovation, decarbonising operations, and investing in clean energy, the sector can play a constructive role in the global energy transition. The journey ahead is complex, but it offers a rare opportunity for reinvention—and long-term resilience.

Published: 6th June 2025

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