International oil companies, decarbonisation and transition risks

Long before the perfectly timed one-two punch of an oil supply glut and spectacular demand destruction in 2020, the global oil industry was already facing structural challenges. In the context of the accelerating energy system transformation (EST), they include decarbonisation efforts to depress fossil fuel demand and an increasingly competitive renewable and low-carbon technologies. In combination with a post-pandemic ‘green recovery', these structural challenges will likely have a dramatic effect on the industry, particularly on international oil companies (IOCs). Compared to their nationally owned competitors, the transition risks for IOCs are much higher and therefore urgently require a strategic repositioning. In this chapter, we examine the transitions risks facing the IOCs in an age of decarbonisation and climate change, analyse their respective coping strategies and explain the difference in strategic approach among them. While some IOCs are doubling down on production, others are seeking to reinvent themselves as ‘integrated energy companies,' spanning a broad field of energy-related activities, including renewables. Clearly, much has changed since BP rebranded itself as ‘Beyond Petroleum' at the turn of the century. So, understanding whether the IOCs are finally seriously engaging with climate change and EST is crucial to comprehending the future of the industry.