The energy sector has played a key role in global warming, mainly as the supplier of fossil fuels, and it will continue to be an important element of the world’s transition to a net-zero future. Yet, the specific place of this element in the grand scheme of things is far from certain as there are multiple scenarios and pathways the transformation of the global energy system may take until 2050 and beyond.

The inevitable presence and importance of the oil & gas industry in the next several decades brings with it a number of risks. These include financial risks associated with stranded assets, energy supply instability during the carbon transition, high dependence of some countries on oil & gas revenues, and many other threats. These risks differ in magnitude for assets with various levels of emissions, as well as for private vs. state-owned enterprises. How the industry goes through the transition also depends on each company’s strategy.

These strategies will define the role of energy companies in the carbon transition. Should the fossil fuel assets be divested and/or decommissioned as soon as possible? Should some or all oil & gas companies remain in operation, and if so, for how long? How should they allocate their investments? What should these companies’ net zero targets look like? Is the current state of affairs different in emerging markets (EM) compared to developed markets (DM)? Many of these questions are still being debated. In our research brief, we will try to provide information and food for thought for investors to come to some conclusions and to help them engage with the management of oil & gas companies more effectively.