Strategy Development in Oil and Gas Industry: a Balance between External Pressures and Internal Adaptations

Abstract

In recent years, there are escalating concerns with respect to the congruence of the Oil and Gas (O&G) industry with the goals of a sustainable future (Okeke, 2021, p. 1). The O&G sector is distinguished by its operational complication and resource-demanding nature, which demand efficient operating processes and organizational versatility. Its unstable nature has encouraged companies to place a great emphasis on process efficiency and cost reductions as crucial strategies for upholding competitiveness. Moreover, a turbulent economic environment, mounting sustainability awareness, and severe regulatory policies force O&G companies to implement pioneering strategies to mitigate environmental footprint from all their supply chain activities (Onukwulu et al., 2023, p.59). O&G companies are the central participants in the present energy environment and have evolved through robust collaborations among countries and industries. Nevertheless, these corporations are experiencing a profound transformation owing to two key “global shifts”, such as economic globalization, which is transforming tendencies of energy demand, and climate change, which is redefining changes in energy systems and transition toward decarbonization. Both shifts necessitate companies to reassess their business strategies (Guo et al., 2023, p.1). The rationale of this thesis is to investigate strategy development in the O&G industry, with an emphasis on how the strategies of O&G companies differ in response to evolving institutional pressures. Furthermore, the study assesses how companies balance external pressures with internal adaptations, and explores how regulatory and societal pressures encourage companies to adopt sustainable initiatives to abate their environmental footprint.The research question of this thesis is: How do European and non-European oil and gas companies differ in their strategic responses to regulatory and environmental pressures? This study was grounded in two core theoretical concepts, including Institutional Theory and Resource-Based View. The methodology of this thesis was based on a qualitative multiple case study conjoined with a quantitative scoring approach. The primary goal of adopting both approaches was to analyze and compare the strategic responses of ten European and non-European O&G companies to institutional pressures, and societal expectations. Qualitative and quantitative content analyses were performed to assess the annual and corporate management reports of the companies for the period of 2020, 2023, and 2024. In the qualitative analysis, thematic coding analysis was employed, whereas the quantitative analysis utilized a score-based scheme on five key variables. Every company was assigned a score arising from 1 (lowest) to 5 (highest). Both European and non-European companies were ranked in accordance with their degree of compliance with governmental regulations, their genuine dedication toward a sustainable future, and their geographical location. This thesis signified how institutional environment in which companies operate, along with their internal capabilities, encouraged O&G companies to distinguish, respond and evolve strategies toward a low-carbon future. This research offered a comprehensive examination of every company’s strategy toward a decarbonized future, as well as companies’ responses to regulatory policies, industry norms, and societal expectations. It is appeared that both European and non-European O&G companies, as stated in their reports, demonstrated a great commitment to sustainability and its environmental, social, and governance principles. The findings further indicated that both European and non-European companies are dedicated to sufficient carbon intensity targets, paired with huge investments into renewable energy alternatives. However, the outcomes exhibited that European companies placed larger emphasis on decarbonization strategies, compared to non-European counterparts. Some non-EU companies did not achieve any carbon abatement goals, instead they stated long-term abatement ambitions. According to the outcomes, the energy transition has progressed slowly. It showed that only two European companies genuinely transitioned while the other companies undertaken symbolic actions. To conclude, this thesis demonstrated that the successful implementation of sustainability strategies is based on the synergy among institutional pressures, companies’ internal resources and capabilities, and the regulatory environments in which they operate.