In a rapidly evolving global economy, with significant changes taking place, the oil and gas sector is entering a key juncture, which will reshape traditional industries. Even the most entrenched fossil fuel giants are being pressured to change their business models by investors, regulators, and the public.

Global ESG investments exceeding $35 trillion are redirecting capital away from fossil fuels.

Globally, ESG assets of more than $35 Trillion have moved away from industries that struggle to meet modern conceptual sustainability standards. The story is equally compelling in Pakistan, where the country is fighting its way through energy security and environmental issues for renewable projects.

Today a local commitment to a sustainable energy future has been made as renewable energy capacity has grown approximately 5,000 MW, or roughly 10 percent of the country’s total installed capacity, as noted by the Pakistan Ministry of Energy (2022).

Yet, the oil and gas industry has caused environmental degradation and generated social controversies historically. However, change is coming in the future. Shell and BP are global titans that have publicly committed to be net zero-emitting by 2050 and, in Shell’s case, it plans to spend $2bn a year on low-carbon technologies by 2025. These are powerful commitments to a fundamental change of corporate priorities.

Stakeholders have become more and more demanding of comprehensive ESG disclosures, which have become a prerequisite for the capture of investment. According to a McKinsey survey, more than 70 percent of institutional investors are integrating ESG criteria into their decision-making processes, and it shows how financial risks posed by ignoring climate change have accelerated recently.

It is compelling for oil and gas firms to re-examine their traditional business strategy so as to integrate ESG principles. Digital technologies, connected with or combined with advanced analytics, are now straws in the wind that are inspiring companies to develop opportunities to transform their operations, more specifically, in reducing emissions, improving efficiency and reducing energy consumption thus providing a significant change in industry standards that are being redefined through smart grids, blockchain-enabled supply chain transparency and artificial intelligence for predictive maintenance.

Digital innovation is transforming operational efficiencies in Pakistan’s energy sector.

These advances that are being brought in by technological advancement mitigate environmental impact and bring about tremendous cost savings which further strengthens the case for a broader application of ESG frameworks.

The sector is stuck in trying to achieve profitability while simultaneously bringing down its carbon footprint. While everyone is talking about ESG transformation journey, oil prices are still fluctuating, and the geopolitical dynamics are unpredictable. Some critics say that some of these initiatives may appear to be shallow in terms of appeasing regulators and investors, but nothing else will work except real change.

The increasing incorporation of ESG determinations into risk management and strategic planning indicates that sustainable actions are less the option, and are instead important only for staying afloat in the future.
The oil and gas sector pivots toward ESG in Pakistan, where soaring energy needs and high environmental vulnerabilities can provide a road map for ensuring sustainable development.

Pakistani energy companies are confronted with both an unprecedented challenge and an unprecedented opportunity due to the fact that global capital increasingly favors green investments. With the convergence of international ESG trends and local imperatives, there is ample possibility for a transformative shift in how energy is produced and consumed in the region.

Integrating renewable energy is essential to break free from traditional, volatile energy sources. Strategic policy reforms are crucial to secure long-term competitiveness in a low-carbon economy.

In this age of unprecedented climate crisis, the future of the oil and gas sector will most probably depend upon its commitment to ESG principles. This is not about moral imperatives, this is about a strategic necessity, and the transition of an economy to a low-carbon economy.

If they do not adapt, companies risk going out of business in a market where sustainable practices are the currency of imminent growth. In the end, the legacy of the past will not be oil and gas, but the power to change and make the new world of sustainability the future of oil and gas.

Disclaimer: The opinions expressed in this article are solely those of the author. They do not represent the views, beliefs, or policies of the Stratheia.