Pathways for Transformation: What Today’s Energy Uncertainty Means for National Oil Companies

As global energy debates become increasingly polarized, governments are pulling in different directions. Some are advancing plans to transition away from fossil fuels—including Brazil’s COP30 roadmaps process and the upcoming Santa Marta conference organized by Colombia and The Netherlands—while others are doubling down on oil and gas for fiscal stability and energy security. National Oil Companies (NOCs)—which produce more than half of the world’s oil and gas—lie at the heart of these debates and of the choices countries now face.  

But beyond political narratives, the energy system is already shifting. For instance, in 2025 twice as much capital flowed to renewables and related technologies compared to oil, coal and natural gas.

And while the conflict in the Middle East has pushed oil prices above $100 a barrel, boosting short-term revenues for some NOCs, future demand remains uncertain, even if it is expected to peak around 2030.

For NOCs, this is a defining moment. Charting a path forward that balances fiscal risk and opportunity, and unlocks inclusive development at this moment of extreme uncertainty is vital—for governments, NOC executives and citizens in oil and gas producing countries. 

Our new report, National Oil Company Transformation: Strategic Choices for an Uncertain Energy Future, explores how governments can define transformation pathways that align NOC strategy with national development priorities in an increasingly volatile energy system, building on two decades of experience and country examples.

The future of oil and gas is increasingly the future of NOCs 

NOCs produced about 54 percent of global oil and 50 percent of gas in 2025, with their combined share projected to rise to around 62 percent by 2050. 

This dominance reflects structural advantages: large, low-cost reserves and sustained investment capacity. In 2025, NOCs spent more than US$240 billion in capital expenditure—more than oil majors (US$73 billion) and independent producers (US$109 billion) combined. As private firms scale back or divest, NOCs are increasingly taking on a larger share of global assets.

 This growing role creates opportunity but also risk. What once looked like market leverage—greater control over supply and investment—now increases public exposure in a context of energy uncertainty. 

Business as usual is no longer a neutral strategy

NRGI has previously warned that long-lived, capital-intensive oil and gas investments by NOCs risk becoming unprofitable under faster transition scenarios. This risk is already visible. Projects approved under more optimistic demand expectations can generate much lower returns if market conditions turn out weaker.

Recent modelling illustrates the scale of this exposure. As the figure below shows, even under relatively moderate transition assumptions, some NOCs could see projected company value—based on expected future cash flows—decline by more than 50 percent.

This reflects a core challenge: while NOCs cannot control how demand evolves, their investment decisions determine how exposed they are. Unlike oil majors, which face shareholder and legal pressures that can constrain capital allocation, NOCs often operate under political and fiscal pressures to sustain production, revenues and employment, even as uncertainty grows.

For governments that rely on NOCs for development, this makes business-as-usual far from neutral. Asset devaluation at NOCs carries real public costs—weakening balance sheets and shrinking fiscal space for healthcare, education and economic diversification.

When planning for decline is delayed, these risks become harder to manage. The burden often falls on subnational regions and communities through job losses, reduced revenues and limited alternatives.

In this context, short-term gains from high oil prices can mask longer-term vulnerabilities. Uncertainty will shape the sector. The real issue is how prepared countries are to respond.

Why NOC transformation matters now

Vast oil and gas reserves do not translate into development on their own. In some cases, governments have used NOCs to drive more industrial activity and capture more value domestically. In others, weak governance had led to inefficiencies, political capture and fiscal risk. 

Today, the stakes are higher. The energy transition is narrowing the window to use hydrocarbon wealth for long-term economic transformation. Delaying decisions about a NOC’s future role risks channeling short-term profits into activities that fail to deliver lasting benefits for citizens before market conditions tighten. At the same time, the opportunity to use these revenues to support diversification and low-carbon transformation pathways may not remain open indefinitely.

NOCs are not a single type of actor. They differ widely in mandates, resource bases, capabilities, governance and exposure to transition risks—and in how they recognize and respond to these challenges.

The question is no longer whether NOCs should transform, but how. What matters is identifying pathways that are fiscally credible, aligned with national development goals, politically feasible, and part of a fair and orderly energy transition. Our new report sets out a practical framework to help governments navigate these choices.

For countries advancing national transition roadmaps, including under the COP30 Brazilian Presidency, NOC reform offers a concrete way to connect climate ambition with fiscal and development strategy. But even for those continuing to invest in fossil fuels, clarifying the future role of the NOC is equally essential to managing long-term risk. 

From insight to action

These are decisions countries are already facing—and often without a clear strategy. NRGI’s National Oil Company Transformation: Strategic Choices for an Uncertain Energy Future report provides detailed analysis, country examples and a five-step framework to support policymakers and NOC representatives to navigate these decisions.