For me it's a 'no brainer': energy companies (big and small) of today and tomorrow are all part of the solution. What we’re talking about here is an all-hands-on deck approach, bringing together the necessary financial and human capital to shape the future of energyMark Pellerin, Americas Head of Energy and Natural Resources
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The energy sector is vital to the climate challenge. As the world decarbonizes, discover how energy can be part of the solution for a more sustainable future.
Oliver Wyman Takes On Series
In this video series, energy and natural resources experts share their take on how businesses can harness risk, turn climate intent into action, and lead in the age of acceleration.
As the world transitions towards net zero and decarbonizes, the question often asked regarding the energy sector is, “are we part of the problem or are we part of the solution?”
My name is Mark Pellerin and I have the privilege of leading our Energy and Natural Resources team here in the Americas.
I gravitated towards capital and commodity markets early in my career, working with investment banks in the 2000s to scale their physical energy trading businesses. Fast forward a little bit, I pivoted into the corporate space, which brought me here to Houston, where we continue to scale our global energy hub — not only advising traditional energy companies, but equally if not more important, alternative energy providers that are fueling the energy transition.
One of the great highlights in my career has been creating and driving major growth in the global renewable energy industry.
Over my 20 plus years at Oliver Wyman a lot has changed, and I feel the pace of change will only continue to accelerate. There is no question the energy industry plays a vital role, and with any great challenge comes great opportunity for our generation and those to come.
We're talking about $150 – $200 – $250 trillion of capital investment. So for me, it's a no brainer. Big energy, small energy, energy companies of today and tomorrow are all part of the solution.
What we're talking about here is an all-hands-on-deck, bringing together the necessary financial, but also human capital to shape the future of energy.
There are two reasons why I know energy companies must play a vital role in the energy transition and why I'm very optimistic that the best years lie ahead. First, it's the forward-looking and dynamic nature of the sector. Long-term capital allocation, making big bets in the face of uncertainty is exciting. Financing the future of energy will be critical — admittedly, I do wish big energy were reinvesting more into their portfolios versus returning unprecedented amounts of cash to investors through buybacks.
At the core of energy investing is assessing risk and return, especially given the volatile world where early-stage technology is being developed, tested, and implemented at scale, and energy security and affordability have been threatened by war, weather, geographical dislocations in supply and demand.
I guess it's a lot like my prior life as a college athlete. You need to learn how to shake off the losses, learn from them, and move forward.
Second, the sector is filled with smart, innovative, and entrepreneurial people. Looking beyond financial capital, it's really the human capital that stands out for me. I continue to be humbled by the technical and commercial expertise within the sector, which is filled with STEM backgrounds.
That said, if not only for the planet and stock valuations, it is important for energy companies to attract the next generation of talent. Gen Z’ers are unique, wanting more flexibility, but also purpose and direct impact in what they do and where they work. Our story has room to improve for why and how you build a life within the energy sector.
However, perhaps the biggest change of all will be the intra- and cross-industry collaboration that is required to succeed. Today, investors look at energy companies differently. At first, it was all supply driven. For example, for an oil company, it was all about their proven and probable reserves. Then it was driven by margins, cost-driven programs, but also buying, selling, and transporting the molecule to make the highest profit. And today it's far more focused on meeting the needs of the end user and lowering the carbon footprint of your portfolio. As a result, pumping more money into traditional assets is no longer the primary focus, but I will say it remains necessary and, done correctly, it will help self-fund the material part of the transition.
Equally, going at this alone won't get us to net zero and more partnering is required. The interconnectivity between industries will only become more prevalent. For example, electrification requires collaboration between utilities, infrastructure developers, and mobility players, whereas sustainable aviation fuel is bringing together the oil and gas and aviation sector. And finally, recycled plastics are creating new loops between chemical and environmental services companies.
As long as I can remember, energy companies have been investing, innovating in new technologies, and in turn managing our trilemma — balancing energy security, affordability, and sustainability. The only question left to ask is “what happens next?”
I'm Mark Pellerin, and this is my take on the energy transition.
This transcript has been edited for clarity