The inexorable march of time has exposed the global oil and gas industry to vast external pressure to begin adapting to the new realities of the future. And yet history would suggest that oil and gas companies are nothing if not reactive and adaptive in the face of paradigm-shifting change. This characterization includes national oil companies (NOCs), a disparate group of influential players of varying sizes, but with a common ultimate mission: to produce and monetize resources for the benefit of the nation in which they’re headquartered. All NOCs today should be of two minds, thinking of both the future and how the definition of ‘resources’ will expand from hydrocarbons to include many other sources of energy, while also with a foot planted firmly in the present, taking advantage of existing and near-term opportunities in the space they know so well. The first half of 2024 has seen several examples of both, and the second half of the year is set to be a continuation of the first in this duality of purpose.

There is no question that the world still needs oil and will continue to do so for some time to come. Oil demand is expected to grow in the medium-term, with peak demand coming sometime in the next decade. Long-term demand, although decreasing from the 2030s onward, remains relatively robust. More than half of the oil consumed today will still be needed in 2050. This demand outlook means there is also a continued call for exploration activity, as the collective amount of oil that will come from currently-producing fields, as well as from projects that are under development and other discoveries that have yet to be developed, will not be enough to meet long-term demand.

Several NOCs have embraced this need in the first half of 2024. Petrobras, for example, is continuing to push exploration efforts in the Equatorial Margin of Brazil. CNOOC has recently seen drilling success in the South China Sea. Qatar Petroleum continues to invest in exploration licenses globally, including in the prolific Guyana-Suriname Basin. Even Equinor has stated it will continue its search for oil on the Norwegian continental shelf through infrastructure-led exploration (ILX) as well as deepwater wildcatting in the Argentina Norte Basin, testing the South Atlantic conjugate margin opposite the Orange Basin in Namibia. These efforts and others, if successful, will provide the supply needed to meet demand in the late 2030s and beyond.

Concurrently, there is a growing recognition that each NOC, in order to remain a going concern, will have to create realistic plans for the diversification of their business lines to include more than just the extraction of hydrocarbons. Although the future energy mix is still somewhat amorphous, there are already bets being placed on the table. Saudi Aramco’s CEO said recently that the world’s largest oil-producing company has earmarked US$7.5 billion for venture capital investments in cleantech. Petrobras revealed in its five-year strategic plan last November that it aims to invest US$5.2 billion through 2028 in domestic solar and wind projects. Malaysian NOC Petronas plans to allocate 20% of its total capital expenditure from 2022 through 2026 to intensify its decarbonization efforts and pursue cleaner energy solutions. And in Angola, Sonangol signed a memorandum of understanding with Eni last year to “jointly identify and assess opportunities in the areas of energy transition, including agro-industrial supply chains for the production of low carbon fuels, and valorization of residual biomass and green ammonia for agro-industrial applications”.

At this early stage in the game, it seems as though most NOCs are testing the waters, trying to adopt a broad perspective while the future energy system comes into focus. NOCs like certain types of projects, which are often long-term, capital intensive, technically complex, and can be done at scale. This combination of investment criteria means that certain energy transition projects that would be unattractive to publicly-traded companies can be perfect for mixed-economy or state-owned enterprises.

NOCs are, by their very nature, disruptive thinkers. The advent of state-controlled extraction firms in the mid-20th century significantly altered the balance of power in the oil business, pulling the polarity away from the traditional, privately controlled ‘seven sisters’. The raison d'être of an NOC is, at its heart, to benefit the people of the country from which it was born. To do this effectively going forward, NOCs will have to walk a fine line between business as usual and embracing the unknown. By reframing the definition of the word ‘resource’ to include such things as wind, solar, water, and crops, NOCs can position themselves enviably to ride the energy transition wave. At the same time, they’ll need to deliver on their core business, building off decades of experience and monetizing the molecules that are available to them to meet demand. Whatever the energy mix looks like in the future, it’s certain that NOCs will be playing a big part in delivering it to the world.

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