Using Scenario Planning for Decision Making in the Energy Industry
Wednesday, October 21, 2020
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Scenario planning is a methodology that is employed by majors such as Royal Dutch Shell and Equinor, but also for example by the International Energy Agency (IEA). The primary purpose of scenario planning is to develop a better understanding of the business environment to aid corporate strategic visioning. A secondary purpose can be to engage in the public domain on energy policy topics. The methodology provides a useful framework for getting to grips with the key uncertainties and risks in the broader business environment. For globally operating energy companies these include geopolitics, macroeconomic developments, regulation, climate change and technology. Many of such trends cannot be predicted. However, it is possible to distinguish possible future alternate outcomes and consider how these might hang together. In this way two to four images of alternative futures can be composed and presented through narratives, selectively underpinned by quantification. In the presentation we will look at some examples of scenarios as these have been developed by Shell, Equinor and IEA.
It is also useful to distinguish between exploratory scenarios, for gaining deep understanding, and focused scenarios. This latter category is aimed at specific investment decision making. Scenario planning can be linked to enterprise risk management and decision analysis methodologies. In this way, operationally embedding the scenario planning practice in a company becomes meaningful and visible.
Henk Krijnen graduated with a MSc in geodetic engineering from Delft University, the Netherlands. He joined Shell in 1980 and spent the first half of his 35 year career with the company in technical roles in Indonesia, Thailand, the United States and the Netherlands. The second half of his time with Shell he held several senior roles in Economics. The last five years he spent in the Corporate Strategy and Planning department, the home of the Shell scenario practice. After he retired from Shell in 2015 he established his own consultancy NavIncerta.