Oil and gas companies are facing challenges as the global energy transition reduces demand.
A report by Carbon Tracker emphasises the importance of adapting to declining upstream production to protect shareholder value.
Clean technology adoption and stringent climate policies are expected to impact future demand.
Despite the current surge in oil and gas prices, the risk of oversupply looms as global demand weakens. Oversupply could lead to price declines, affecting project viability.
Mike Coffin, Head of Oil & Gas and Mining at Carbon Tracker, suggests that managed investments in short-cycle projects or natural depletion strategies can mitigate risks.
The International Energy Agency predicts a peak in global fossil fuel demand this decade.
Oil demand is expected to decrease if current government policy commitments are maintained.
The report highlights the impact of falling commodity prices and reduced demand on the net present value (NPV) of company portfolios, particularly for planned developments.
However, some major companies, like ExxonMobil and Saudi Aramco, still anticipate demand growth based on OPEC forecasts.