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Providing coverage of Alaska and northern Canada's oil and gas industry
January 2014

Vol. 19, No. 4 Week of January 26, 2014

BP expects diverse energy future, mix of oil, gas, coal, renewables

Alaska could be facing some tough competition.

Global energy consumption will slow and diversify over the coming two decades as demand rises in emerging economies, according to the BP Energy Outlook 2035.

The fourth edition of the annual forecast presents a world where technology is scrambling the global energy trade. Unconventional oil and gas are tilting the balance of supplies toward North America and improved efficiencies are slowing demand.

Those changes would have big implications as Alaska looks to sell its oil and gas.

Oil growth to slow

Oil loses market share in the forecast, growing at just 0.8 percent per year.

Even with that slim growth, oil production in 2035 would be 19 million barrels per day higher than 2012. BP expects more than half of the additional supplies to come from non-OPEC countries, particularly from tight oil from the United States and oil sands from Canada.

The forecast predicts that the United States will overtake Saudi Arabia as the leading liquids producer this year and expects oil imports to fall nearly 75 percent between 2012 and 2035 as the country becomes increasingly self-sufficient. The rapid growth in North American oil supplies would likely force OPEC to cut back production, according to BP Chief Economist Christof Ruhl, creating spare capacity at levels not seen since the 1980s.

In such a situation, Middle Eastern exports to the West would likely go to Asia instead.

“Trade becomes heavily concentrated,” Ruhl said.

This growing self-sufficiency in the United States oil markets has led policymakers such as Sen. Lisa Murkowski to call on the federal government to lift its ban on oil exports.

The situation is even knottier for natural gas.

The forecast expects gas to be the fastest growing fuel, with demand growing at 1.9 percent per year to reach 497 billion cubic feet per day by 2035, according to the forecast.

Shale gas will handle some 46 percent of the growth in demand, according to the forecast, but the global impact of shale gas should remain limited, accounting for just 21 percent of global production and 68 percent of domestic production by 2035. That’s because even with all the talk of shale, the forecast expects conventional gas production from developing countries to grow faster than global production of unconventional gas.

The boom in shale gas in the United States is currently “under laboratory conditions,” according to Ruhl. The large increase in production combined with limited exports is allowing forecasters to study how shale gas production changes energy markets within a country. “What we are seeing is that natural gas first penetrates the power sector, then penetrates industry, and then transport. So there’s a sequence of it. And on top of that penetration, in all areas of application, we see exports of course increasing,” Ruhl said.

According to the forecast, this trend will make the U.S. the second largest gas exporter by 2035, when a proposed Alaska liquefied natural gas project would be well into operation.

The forecast expects North America to account for 71 percent of global shale gas production by 2035, but it also expects North American production to slow after 2020 and it expects China to gradually edge into the market toward the end of the forecast.

—Eric Lidji






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