Despite current weakness in global energy markets and the slowdown in China’s growth, demand for energy will continue to grow over the next 20 years and beyond as the world economy expands and more energy is required to power the higher level of activity.
According to the 2016 edition of the BP Energy Outlook, global demand for energy is expected to increase by 34% between 2014 and 2035, or by an average of 1.4%/y. This growth in overall demand includes significant changes in the energy mix, with lower carbon fuels growing faster than carbon intense fuels as the world begins to transition to a lower carbon future.
The Outlook looks at long term energy trends and develops projections for world energy markets over the next two decades. The 2016 edition was launched in London by Spencer Dale, BP’s Group Chief Economist, and Bob Dudley, Group Chief Executive.
“In the middle of a downturn in oil and gas prices, it is important not only to adapt to the current tough conditions, but also to prepare for the next set of challenges. Energy is a long wavelength industry and we need a long term perspective of how the energy landscape we operate in is likely to evolve,” said Bob Dudley.
“As this year’s Outlook demonstrates, the world is going to continue to demand growing supplies of energy but the mix of those supplies is changing and becoming less carbon intense. However, further policy action may be necessary to meet international targets to limit carbon emissions.”
Oil and gas remain a key source of growth
Despite the rapid growth of other sources, the Outlook projects that fossil fuels will remain the dominant form of energy over the period to 2035, meeting 60% of the projected increase in demand and accounting for almost 80% of the world’s total energy supplies in 2035.
Gas will be the fastest growing fossil fuel, increasing 1.8%/y and oil will grow steadily at 0.9%/y, although its share of the energy mix continues to decline. Growth of coal is projected to slow sharply, such that by 2035 its share in the energy mix is at an all time low, with gas replacing it as the second largest fuel source.
Non-fossil fuels are projected to grow even faster than anticipated in last year’s Outlook. Renewables, including biofuels, are projected to grow at around 6.6% per year, and as a result their share in the energy mix increases from 3% today to 9% by 2035.
Drivers of demand
“The outlook for the next 20 years is for continuing growth of energy demand as the world economy expands and more energy is required to power higher levels of activity,” said Spencer Dale.
Income and population are the key drivers behind the growing demand for energy. By 2035 the world’s population is expected to reach nearly 8.8 billion, meaning an additional 1.5 billion people will need energy. Over that same period, GDP is expected to more than double, with China and India accounting for half of the projected increase.
“The continuing reform of China’s economy towards a more sustainable pattern of growth causes growth in its energy demand to slow sharply – weighing most heavily on global coal, which grows at less than a fifth of the rate seen over the past 20 years,” explained Dale. “The world is fundamentally changing and we see evidence of this in how and what type of energy is consumed.”
More than half of the increase in global energy is used for power generation, with much of that increase taking place in regions where a large part of the population have limited access to electricity.
Power generation is a sector where all fuels compete and it will play a major role in the evolution of the fuel mix as renewables and gas replace coal-fired power stations. Renewables account for over a third of the expected growth in power generation.
Strong growth in emerging economies will drive the demand for oil, with China and India accounting for over half of the increase in world demand, as the number of vehicles on the planet more than doubles.
Increases in supply
The supply of natural gas grows robustly, underpinned by strong increases in shale gas production around the world – this is projected to grow at 5.6%/y. The share of shale gas in total gas production rises from 10% in 2014 to nearly 25% by 2035.
Global liquids supply will expand by nearly 19 million bpd by 2035, led by growth in non-OPEC supply, particularly US shale oil. OPEC is likely to act to maintain its market share of around 40%.
Carbon emissions growth halves over the next 20 years
The growth rate of carbon emissions over the period of the Outlook is expected to more than halve relative to the past 20 years – growing by 0.9%/y, compared to 2.1%/y. The sharp reduction in the rate of emissions growth reflects, in almost equal parts, faster improvements in energy efficiency and a reduction in the carbon intensity of energy.
The world is starting to make the transition to a lower carbon energy system, and the COP21 meeting in Paris last December represented a significant step on this journey.
But carbon emissions are still projected to be growing, suggesting the need for further policy action. A meaningful global price for carbon is likely to be the most efficient mechanism through which to achieve an even faster transition to a low carbon world.
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Adapted from press release by Rosalie Starling
Read the article online at: https://www.hydrocarbonengineering.com/refining/11022016/bp-releases-2016-energy-outlook-2447/