In "Regime Change in the Oil and Gas Industry," internationally recognised Michael Raynor explores the concept of disruption - a specific kind of innovation that has historically threatened even the most powerful incumbent organisations - and the impact it may have on three segments of the oil and gas value chain: retail, refining, and exploration and production (E&P). In the retail sector, incumbent companies face competition from hypermarkets and other discount chains that can lead to lower profit margins. The refining process still produces some products that fail to meet an aspect of the specifications for a planned production grade. Waste-oil blenders purchase such products and are beginning to gain a foothold in certain areas of the market such as blending it to manufacture automotive fuel. In E&P, most of the easy oil has been found and developed with much of the remaining oil located in remote areas of the globe where technical expertise is critical. More and more, the innovation in these highly specialised areas is occurring at the oil services companies and not at the oil majors.

The purpose of this report is to demonstrate at least three areas of the industry that are currently at risk in ways that could result in a significant shift in the relative profitability and even dominance of today's leading firms. By applying disruption theory to their industry, incumbent oil and gas firms may be able to capitalise on changes in market dynamics and become one of the few populations of dominant companies to exploit and even profit from disruption rather than be victimised by it.

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