Oil and gas companies struggle to come up with a feasible transition plan Investor pressure is rapidly evolving to shift to low- to medium-cap energy companies

In a new July 19 report, Sustainable Fitch, a unit of Fitch ratings, noted that oil and gas companies are working to come up with a viable transformation plan, and while Europe's big oil companies are leading the transition, investor pressure is rapidly evolving and shifting to mid-cap and lower-cap energy companies
.

The use of fossil fuel products in the energy industry is one of the world's largest sources of greenhouse gas emissions and one
of the most carbon-intensive industries.
As the world transitions to a low-carbon world, disruptive demand and pressure to decarbonize pose unique risks
to the oil and gas industry.

Most companies have yet to address the potential demand breach.

90% of the world's GDP and 85% of the population have their own national net-zero policies or targets, which are expected to have a profound impact on
the long-term demand for oil and gas products.
However, the vast majority of oil and gas companies' revenues still come from the production and sale of fossil fuels, and investments in upstream production and exploration still far exceed capital expenditures
under low-carbon business models.

New business models are developing slowly
.
European oil majors, as well as some low- to medium-cap energy companies, are increasing their investments in renewables and other alternative fuels, while U.
S.
oil majors are focusing on blue hydrogen and carbon capture solutions (CCS) as possible new revenue streams
.
In the short term, no oil and gas company has developed a clear and robust business strategy to move away from fossil fuel production
.

The shift from oil to gas brings long-term uncertainty
.
Both large and small companies have begun to shift significantly from oil to natural gas production
.
Natural gas has long been seen as a "transition fuel," and many in the industry believe that it is a viable, long-term low-carbon source of energy that can shift from coal to natural gas power generation before switching to renewable energy
.
The coal-to-gas transition is one of
the main reasons the United States has achieved considerable emissions reductions in recent decades.
Especially in emerging markets, which is a key reason for continued investment in natural gas exploration, gas demand forecasts continue to predict that gas demand will increase over the next few decades, particularly in Asia
.