Balancing the energy transition challenge in hydrocarbon-rich nations

The energy transition is a critical strategic priority for the Middle East. Yet pursuing this goal can also put pressure on hydrocarbon revenues. Silvia Rigato, Tom Beswetherick and Britta Daum of Accenture outline how policymakers can navigate the best of both worlds in delicate balancing act.

For decades, oil and gas production has been the cornerstone of Middle Eastern economies, fueling their rise as regional powerhouses, enabling global ambitions, and powering the world’s progress. These resources have driven unprecedented economic growth, underpinned by unique competitive advantages such as low-cost, low-carbon production, vast reserves, and a high export-to-consumption ratio.

Looking ahead, the Middle East will remain critical in meeting the world’s demand for affordable, reliable, and low-carbon energy. Primary energy demand is projected to rise 7% over 2022 levels, with the region expected to supply around 8% of global consumption.

While renewable energy is set to expand by 210% above 2023 levels, fossil fuels will still account for nearly 58% of the global energy mix in 2050. Successfully navigating this transition will require GCC nations to strike a delicate balance – strategically diversifying their energy portfolios and economies while maximizing the value of their core hydrocarbon assets.

An evolving role for NOCs

At the heart of this transformation are National Oil Companies (NOCs). Traditionally focused on oil and gas production, NOCs are now evolving into strategic enablers of national objectives, expanding their role in the hydrocarbon value chain to capture greater value while advancing sustainability and economic diversification.

Besides renewables, hydrogen, and carbon capture, these investments extend beyond energy into infrastructure, sustainable urban projects, green technologies, digitalization, and AI – all aimed at enhancing economic resilience, creating jobs, and attracting foreign investment.

To fulfill this new mandate of creating a more dynamic, innovative and future-ready economy, NOCs face three intertwined, critical challenges.

• Building resilient portfolios – They must strategically expand into new sectors that, while essential for diversification, typically offer lower returns than hydrocarbons.
• Establishing a competitive edge – They must carve out a strong position in industries where they lack the structural competitive advantages present in oil and gas.
• Developing new capabilities – They must build new capabilities, carefully balancing organic growth and strategic acquisitions, alongside effective management of domestic and global operations.

While these challenges are significant, NOCs possess unique strengths that provide a strong foundation for success:

• Strategic positioning – Their geopolitical and geographical advantage enables them to bridge Western and Eastern markets.
• Talent & demographics – A growing, highly educated workforce offers a strong talent base for emerging industries.
• Energy transition leadership – Untapped gas reserves present opportunities for near-term decarbonization and low-carbon fuels, while abundant solar and wind resources position the region as a potential global leader in renewables.
• Unmatched capabilities – Decades of engineering and project management expertise, coupled with robust financial resources and state backing, empower NOCs to pursue transformative ambitions with fewer constraints than many of their global peers.

An accelerated path to impact

To fully capitalize on their unique strengths, NOCs must take bold, deliberate action across three key horizons:

Build Resilience in the Core Portfolio
Advancing lower-carbon oil initiatives and diversifying into carbon-based chemicals and materials will create more stable, future-proof hydrocarbon revenue streams.

Accelerate Entry into New Markets
Developing world-class M&A and venturing capabilities will enable NOCs to rapidly access critical capabilities, emerging technologies, and new geographies, reducing the time needed to establish a foothold in unfamiliar sectors.

Establish Leadership in Emerging Sectors
Pivoting from in-house, incremental innovation to ecosystem-supported strategic innovation will allow NOCs to establish strategic influence in high-growth industries, attract top global talent, strengthen their competitive edge.

To execute this transformation effectively, NOCs should consider six critical actions:

Set a Long-Term Strategy with Built-In Agility
Develop a dynamic, continuously refreshed strategy framework that can adapt to rapid technological advancements, market shifts, and evolving priorities.

Foster Local Innovation Ecosystems
Build a thriving innovation network to capture and shape emerging markets, address diverse technology needs, and de-risk large-scale investments.

Leverage Digital to Drive Efficiency and Innovation
Deploy data analytics, AI, and automation to enhance operational efficiency, decision-making, and cross-functional collaboration, enabling smarter resource allocation and faster innovation cycles.

Upskill Employees for the Future
Equip the workforce with digital, technical, and sector-specific expertise, ensuring they are prepared for roles in AI, clean energies, and advanced materials

Integrate Sustainability into Core Strategy
Align decarbonization efforts with strategic expansion into low-carbon sectors, ensuring that investments in carbon capture, hydrogen, renewables, and circular economies are interconnected and commercially viable.

Build a High-Impact Corporate Venture Arm
Establish a dedicated M&A and corporate venturing unit to acquire, invest in, or partner with emerging energy and technology startups, accelerating market entry and capability building in high-growth, low-carbon industries.

As the energy transition progress, NOCs have a unique opportunity to lead rather than follow. By leveraging their strengths, executing a strategic transformation, and embracing new capabilities, NOCs can secure long-term growth and reinforce their role as key global players in the new energy economy.

About the authors: Silvia Rigato is Practice Lead of Strategy & Consulting in the Middle East, where Tom Beswetherick is a Senior Manager and Britta Daum is a Manager.