Navigant Research Blog

Big Oil Redraws the Energy Map

Brittany Gibson — December 22, 2011

A wave of reports trumpeting the oil industry’s shift to unconventional fuels has appeared in recent weeks.  The Wall Street Journal and the New York Times are among the major publications covering changes in the global fossil fuel industry.  With their investments in new technologies and new resources, the world’s largest fossil fuel companies are rapidly redrawing the map of the global energy industry, at a global and local scale.  Unfortunately, this changing map leaves significantly reduced territory for the cleantech industry. 

In the last several years the world’s largest oil companies have shifted their upstream fossil fuel production investments back to OECD (Organization for Economic Co-operation and Development) countries, typically the largest importers of fossil fuels.  What used to look like a 50-50 division of investments between OECD and non-OECD, is now closer to 70-30 for some oil companies, according to The Wall Street Journal.  From Australia to Canada, and from the United States to Poland, the exploration and production of oil and gas in the developed world is exploding.  Thanks to innovative (and often controversial) new technologies such as horizontal drilling, ultra-deepwater wells, and hydraulic fracturing, oil companies are now exploiting the market for previously inaccessible fossil fuels.  A majority of the future value for Big Oil companies – as much as $1.7 trillion, according to energy consulting firm Wood Mackenzie – is anticipated to come from Australia, Europe, and North America. 

Oil companies are leveraging technology innovation to become diversified energy companies.  That does not necessarily translate into additional investment in cleantech.  Oil company investments are rapidly moving them toward the production of liquefied natural gas, shale oil, and coal gasification, not wind or biofuels.  In a time when the future of the Section 1603 tax breaks, which benefit clean energy and mass transit programs, is up in the air, massive new investment in fossil fuels may dampen the momentum the cleantech sector has built over the last couple years. 

It certainly does when investment in unconventional oil and gas actively displaces investment in the cleantech industry.  This may be the case in Colorado, where ConocoPhillips, the US’s third largest oil company, has indefinitely postponed its plans for a technology research and education campus in the Denver-Boulder area.  Following significant investments in the local biofuels industry through 2008, ConocoPhillips (which is in the process of splitting into two companies, ConocoPhillips and Phillips 66) now appears to be more actively pursuing the “unconventional” opportunity.  Not until later in 2012 will the full effects of the transformation of Big Oil on the cleantech sector become apparent.

One Response to “Big Oil Redraws the Energy Map”

  1. Edward Kerr says:

    For those of us who are concerned about the possibility that burning fossil fuels is actually the cause of the planet getting warmer and all of the other reasons why we should we move to renewable energy sources, this article represents bad news. In my mind it’s actually a disaster. We will eventually need to make the transition regardless but if we make the planet uninhabitable in the process, what will all the dollars that they “earn” now be worth then. Ironically, one would surmise that oil companies would think of themselves as “energy companies” and be leading the way to a saner energy future. Oh well!!!

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