Challenging established truths

Whereas predicting the future is nearly impossible, analyzing its likely scenarios is a good way of preparing for the worst – or the best. The goal of scenario-analysis is to provide insights and challenge established truths, so managers and decision- makers question their own assumptions and stay on their toes for future challenges and possibilities.

“Scenario-analysis helps by giving decision-makers a broad and long-term perspective. An important effect is to move discussion from ‘what will happen?’ to ‘what do we do if this happens?’” says Kristin Karlsrud Haugse, manager in Ramboll Management Consulting.

She notes that the analysis cannot predict specific incidents but can identify key driving forces and trends which could influence future trends:

“Taking good decisions is often a matter of identifying the current problem and solving it. But concentrating on this alone can lead to big surprises. Technological changes, new business models and different ways of working, to name a few, are examples of conditions which can alter scenarios in dramatic ways.”

“In purely practical terms, we can test ideas and decisions to see if they’re robust, or we can make changes which might fit several of the scenarios. Decisions or investments can sometimes be delayed until we see which of the outcomes we’re heading for.”

Four likely scenarios

An example of how scenario-analysis can be helpful is PSA’s (Norway’s Petroleum Safety Authority) and Ramboll’s recent analysis of four scenarios which explore what the petroleum industry might look like in 2035. These scenarios can make it easier to face the future in the energy sector - both for the PSA and for the rest of the industry.

Nobody can know with any certainty what tomorrow holds for Norway’s petroleum activity,” says Ingvill Foss, one of the PSA’s directors of supervision.

But, as she also points out, the authority knows a good deal about trends, development aspects and what it has called certain drivers which can lead to valuable predictions:

“We’ve now assembled what we know – and not least what we don’t know. On that basis, we’ve considered 4 scenarios which we believe can help us move forward – regardless of what happens.”

The four scenarios, named after Beatles-songs, address a series of questions which include how the petroleum industry could develop and what the health, security and environment (HSE) position might be in 2035, are as follows:

Scenario A: Norwegian Wood

• Renewable sources have greatly expanded, but are still unable to meet energy demand on a global basis. Oil, and not least gas, remain important components in the mix. Crude prices are relatively high. A high level of demand has led to extensive exploration, and substantial discoveries have been made.

Scenario B: Yesterday

• Norway’s petroleum sector is now yesterday’s news. After a period of exploration and technological optimism, most people have accepted the approaching end of the oil and gas adventure. Renewable energy forges ahead

Scenario C: Ticket to Ride

• Oil and gas face strong competition from renewable energy, but remain necessary elements in the energy mix for a world with sharply rising demand. People have got used to low oil prices, and the industry has been forced to make drastic changes. Extensive exploration and big new discoveries mean that an optimistic mood nevertheless prevails on the NCS.

Scenario D: Hello, Goodbye

• Stringent environmental standards are imposed by society. No political will exists to open new areas for exploration. Renewable energy has taken big market shares, and oil prices are low. This means goodbye to Norway’s golden age of oil and gas. But technological progress says hello to a new era – characterised by exciting solutions.

Read more about the 4 scenarios here from page 20 and forward

“We’ve identified a lot of interesting and relevant information about coming challenges related to health, security and environment. These scenarios will be good tools for discussion by all sides of the industry. “Nobody knows for certain what tomorrow will look like. But the point is to be ready when it comes.”

The resulting four scenarios point in fairly different directions. Their purpose is not to show exactly what the world will look like, but to describe extremities which collectively delineate the opportunity space. The world of 2035 is unlikely to look exactly like the description in any of these scenarios, but the aim is to be prepared for developments which can take different paths.