AI Could Make Big Oil Even Bigger

AI is changing energy systems, but data centers are only a small part of the impact.

Much has been written and said about how the data center and AI boom are consuming and will consume increasingly higher shares of global electricity demand, and grids are struggling to meet soaring demand.

Fossil Fuel Gains Could Outweigh Emissions Cuts from Renewables

Arguably, a fundamental change in the energy system may not come from surging power demand, but from the efficiencies and productivity gains AI will help energy companies achieve, according to a new paper published in the journal npj Climate Action by co-authors some of whom have worked for Microsoft and its sustainability initiatives.

The authors of the paper argue that AI-driven productivity gains in fossil fuels could outweigh the emissions savings from using AI tools in the renewable energy industry.

AI-enabled productivity solutions and the resulting efficiency and productivity gains in the fossil fuel industry have often been overlooked, according to the paper.

Emissions from productivity gains in the oil and gas industry would exceed the emissions reduction AI could help achieve in the renewable energy sector, the authors argue. 

“Net emissions reductions require renewables gains 4–5x greater than fossil fuel gains,” they wrote in the paper.

The models used for the analysis in the paper suggest that AI could “reinforce fossil fuel incumbency,” the study notes.   

The findings in the paper challenge the narrative that AI-driven efficiencies in renewables could offset the growth in emissions from fossil fuels. It is the same AI tools and capabilities that help avoid emissions that also help productivity gains in the oil and gas industry, according to the paper.

AI Could Unlock Additional Oil and Gas Opportunities

The study highlights the impact of AI on the energy system as unlocking productivity and efficiency gains in all sources of energy, including oil and gas.

Energy companies, including the biggest oil and gas supermajors, are already using AI-enabled tools in their operations. It’s naïve to think that the energy firms with the deepest pockets will stay on the sidelines of the biggest technology revolution of the decade and that AI would be used only for sustainability initiatives.

AI and digitalization are expected to create nearly $500 billion in cumulative value for exploration and production (E&P) companies between 2026 and 2030, Rystad Energy said in an analysis earlier this year.

The additional value will be captured through cost reductions from more efficient operations, production increases from higher uptime and increased recovery, and compressed development timelines, according to the energy consultancy.

Cost reductions and production increases would be the biggest contributors to this additional value by the end of the decade. E&P firms that already invest in digital and AI are expected to capture an additional value of $80 billion per year in 2030 compared to 2025, according to Rystad Energy.

Yet, deployment at scale – not technology availability – has emerged as a key barrier to widespread adoption of AI and digitalization in the upstream sector, the consultancy noted.

Another energy research group, Wood Mackenzie, said last year that AI could unlock an extra trillion barrels of oil from producing reservoirs. WoodMac analysts used AI-enabled tools to identify reservoirs globally from which producers could “wring substantially more oil.”

WoodMac’s analysts also noted that AI won’t replace subsurface teams at E&P companies, saying that “Despite AI’s analytical power, subsurface expertise is irreplaceable – the two are complementary.”

The WoodMac analysis “suggests the industry possesses more choices than previously recognised and strengthens operators’ negotiating positions with host governments,” the experts said.

In one of the recent mentions of AI tools helping E&P companies, ExxonMobil said it had identified potential new drilling opportunities offshore Guyana, its star asset alongside the U.S. Permian basin, with the help of artificial intelligence tech.

Darren Woods, Exxon’s chairman and chief executive, told analysts on the Q2 earnings call at the end of July that in Guyana “we’ve really put a lot of effort into artificial intelligence and training models based on what we’ve found already, all the drilling that we’ve done, the characterization of that subsurface.”

Exxon has used the AI and training models in the analysis of the rest of the Stabroek Block offshore Guyana, the executive added.

The U.S. firm has “four new discovery opportunities above and beyond what we thought were opportunities,” Woods noted.   

“We’re optimistic there. Obviously, a lot more work to do to confirm those. I think our view is we’re not done yet in Guyana, and we continue to see a really bright future there.”

Mike Wirth, chairman and CEO at the other U.S. supermajor, Chevron, said on the Q2 earnings call that the company would use the new AI technology tools in its exploration efforts, although it would be disciplined in advancing its global exploration portfolio.

“We’re going to be using these new tools, and this is an area where AI [artificial intelligence] will definitely change cycle time, it will change our ability to see things that previously we may not have been able to see, and I expect that it will change outcomes,” Wirth said.

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