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Regime change in the oil and gas industry

How disruption and value migration could undermine the dominance of today’s leading firms


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Since its inception in the late 1800s, the oil and gas industry has undergone multiple structural changes that have altered its global competitive landscape. But for all the seeming turmoil that has characterized its history, the industry’s fundamental competitive dynamics have remained essentially stable for decades: the major international players have sought access to plentiful and cheap reserves to serve predominantly developed world markets, global scale to maximize utilization of assets, and ownership of a verticallyintegrated value chain to promote quality and drive customer loyalty via widely-recognized brand names.

These long-stable dynamics could be about to change. In each of the three segments of the oil and gas value chain – retail, refining, and exploration and production – forces are at work that threaten disruption, a specific kind of innovation that has historically spelled the end of even the most powerful incumbent organizations. A wide variety of industries have been shown to be vulnerable to disruptive forces, and it would appear that the oil and gas industry is similarly at risk. 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.

In this report, internationally recognized expert Michael Raynor explores the concept of disruption—a specific kind of innovation that has historically threatened the end of even the most powerful incumbent organizations — and the impact it may have on three segments of the oil and gas value chain: retail, refining, and exploration and production (E&P).

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