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More future oil demand
BP Energy Outlook anticipates growing need despite carbon emissions challenge
Alan Bailey Petroleum News
When introducing this year’s BP Energy Outlook in mid-February, Spencer Dale, BP group chief economist, expressed a theme that his company has been promoting in recent months.
“The biggest theme that comes out of this year’s Energy Outlook is the dual challenge, the need for more energy and less carbon,” Dale said.
Human development in the poorest parts of the world is inherently linked to increased energy consumption. At the same time, the current trajectory for energy supply and usage will not meet goals for reducing carbon emissions. And whatever realistic trajectory future energy demand and supply takes, oil demand is set to increase, with supplies of almost all fuels needing to grow between now and 2040, the timeframe for the Energy Outlook’s analysis, Dale said.
The Energy Outlook sees a rapid increase in the use of renewable energy, in particular wind and solar, with this type of energy source penetrating the global energy system more rapidly than any fuel in history.
Demand from the developing world The Outlook sees future growth in energy demand coming from the developing world, particularly from Asia, where around 2.5 billion people are expected to move from poverty into middleclass lifestyles in the next 20 years. One outcome of this will be the increased need for energy in buildings for applications such as air conditioning, lighting and electrical appliances.
On the other hand, the effect of growing productivity on energy demand will be significantly offset by a reduction in energy usage per unit of economic activity. And one change since last year’s Energy Outlook is a view that India rather than China will see the fastest growth in energy needs. In China overall growth has been slowing, while the pattern of growth is shifting from industrial activity more towards less energy intensive sectors of the economy, the Energy Outlook says.
However, Dale emphasized that, rather than trying to make predictions, the Energy Outlook considers different energy scenarios for the future, to provide a better understanding of the energy uncertainties that the world faces, clarifying which factors will make a big difference to the energy future and which factors matter less.
The evolving transition One future scenario, the evolving transition scenario, involves the continuing evolution of government policies, technologies and social preferences, along the lines currently observed. Under this scenario, renewable energy grows the fastest of any energy sector, accounting for more than half of the increase in primary energy and overtaking the use of coal in power generation. However, the Energy Outlook also anticipates natural gas demand growing strongly, accounting for about one-third of primary energy growth. Oil demand would continue to grow for around the next 10 years, before plateauing in the 2030s. The oil demand growth would come from the use of oil as a feedstock for petrochemicals and also from use in transportation. This level of oil demand will require trillions of dollars in investment in finding and developing oil resources, Dale pointed out. There would be some increase in liquid fuel use beyond 2030 but this demand increase would likely be filled by non-oil fuels such as biofuels.
Oil would remain dominant as a fuel in the transportation sector but its use in the sector would fall to 85 percent by 2040 compared with 94 percent currently. Much of the demand would come from marine transportation and aviation. The use of electric road vehicles would grow rapidly.
Future oil supplies The Energy Outlook sees U.S. tight oil as initially leading the required increase in oil supplies. However, the analysis takes a view that after 2030 U.S. tight oil production will decline, with OPEC playing an increasing role in the oil supply situation. One scenario envisages a situation in which low cost producers in the Middle East and Russia can reform their economies in ways that enable them to increase their share in the oil market.
The projected growth in natural gas demand is linked to the use of gas in both power generation and in industry driven by increasing industrialization in the developing world. And key to this expansion is the growing use of liquefied natural gas as a means of transporting gas to market.
Overall growth in coal consumption is expected to slow sharply, but with significant differences in consumption profiles in different parts of the world. The Energy Outlook anticipates output of nuclear and hydro power growing, but at a slower rate than overall power generation.
The Energy Outlook sees two primary factors in the anticipated rapid increase in renewable energy use: government policies supporting this type of energy source and, more importantly, technical advances that are driving down the cost of solar and wind energy.
“Renewables are likely to become an ever-increasing part of the global energy system,” Dale said.
However, under the evolving transition scenario carbon emissions would continue to grow, at a slower rate than in the past, but above the levels needed to achieve goals set in the Paris agreement on climate change.
Rapid transition scenario In anticipation of the possibility of government measures that would address climate change concerns, the Energy Outlook also considers a scenario in which carbon emissions would drop by about 45 percent, to meet the goals of the Paris agreement. Under this “rapid transition” scenario policy measures would impact a wide range of factors both in power generation and in transportation. But despite an assumed major increase in the use of electrically propelled cars and trucks, about two-thirds of the reductions in carbon dioxide would come from the power sector.
“The power sector is key to ensuring a rapid transition to a lower carbon energy system over the next 20 years,” Dale said.
The low carbon scenario would also require the use of carbon capture, use and storage technologies in power generation and in industry, the Energy Outlook says.
The Energy Outlook also considers a scenario, the less globalization scenario, in which current international trade disputes escalate, driving a reduction in global GDP growth and causing countries to become concerned about dependency on energy imports. Surprisingly, some relatively modest assumptions in this scenario triggered some significant impacts on the global energy system, with the big losers being major energy exporters such as Russia and the United States, Dale said.
Plastics ban? Another scenario considers the potential impact of a worldwide ban on single use plastics in applications such as packaging, given growing environmental concerns about plastic usage. The consequence of this plastic abatement would be a reduction in oil demand by about one-half. However, with plastics being popular because they provide practical solutions to many everyday needs, alternative ways of meeting these needs would need to be found. And these alternatives would, in turn, have other effects, potentially increasing energy demand, carbon emissions and creating environmental impacts, the Energy Outlook says.
A “more energy” scenario assumes that a higher quantity of energy would become available to populations where energy consumption per capita is currently relatively low. This scenario, along with the general challenge of supplying more energy with less carbon emissions, would require improved energy efficiency in countries that consume disproportionately large amounts of energy, the Energy Outlook says.
A scenario involving efficiency gains in industry and buildings could increase the proportion of electricity used in the overall energy mix and somewhat reduce total energy consumption in these two settings. That, in turn, would reduce carbon emissions.
Low carbon transportation A low-carbon transportation sector scenario would see factors such as tightening fuel efficiency standards and increased electrification. The result would be a greater proportion of vehicles being powered by natural gas, biofuels and electricity. However, improved energy efficiency rather than fuel switching would have the greatest impact in reducing carbon emissions, the Energy Outlook says.
In a lower carbon power sector scenario carbon pricing and government policies would drive power generation towards low carbon technologies. Coal fueled generation would tend to be phased out, while renewables would become particularly dominant in the power generation mix.
Moving beyond 2040 a wide range of technologies will need to come into play, if net carbon emissions are to drop to zero by the second half of the century, Dale said. Possibilities include the greater use of hydrogen, bioenergy, improved energy efficiency and carbon capture.
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