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Changing fuels but affordable energy BP energy outlook predicts continued energy demand growth in developing world & increased use of natural gas & renewable energy Alan Bailey Petroleum News
Over the next couple of decades global energy supplies can be both available and affordable, although energy security will remain an issue, the BP Energy Outlook 2030, published in January, concludes. The report presents BP analysts’ views of future energy trends — this is the second year in which BP has made public the results of its internal analysis.
And in an introduction to the report BP Group Chief Executive Bob Dudley stressed that the report represents BP’s view of what is likely to happen in the world of energy, and not necessarily what the company would wish to see take place.
Key assumptions The analysis is based on some assumptions about the global factors that would determine the future supply and demand picture for energy and the mix of fuels that would generate that energy. In particular, BP’s forecasts assume a slowing rate of growth in the world population but an accelerating growth in world economic activity as developing economies expand. However, a continuing improvement in the efficiency with which people use energy would decelerate the growth in global energy consumption, the report says.
Almost all of the growth in energy consumption would take place in developing countries, with the mix of fuels used slowly changing as natural gas and non-fossil fuels gradually replace some coal and oil usage.
Power generation and the industrial use of energy are likely to be the main drivers of energy usage growth, with the use of energy for transportation only growing relatively slowly, the report says.
BP thinks that all parts of the world will tend to converge on similar efficiencies in energy use. And, as the world moves away from the past dominance of oil as a fuel, by 2030 oil, coal and natural gas will likely all somewhat equally share the bulk of energy production, while growth in renewable energies will place renewables about on a par with current nuclear and hydropower energy, each at about six to seven percent of total energy production.
Liquid fuel growth BP anticipates growth in the use of liquid fuels (including liquid biofuels) coming entirely from developing countries, with liquid fuel use in the developed world actually declining. Countries in the Organization of Petroleum Exporting Countries should be the primary suppliers of liquid fuels to meet the growing global demand, although new liquid fuel resources in the United States, Canada and Brazil would result in increased production from those countries, the report says.
BP expects expanding transportation activity in the developing world to be the primary driver for the growth in the use of these liquid fuels. For, although the number of vehicles as a proportion of the population is leveling off in the developing world, and may even decline in the United States, the total number of vehicles is rapidly increasing in developing countries. And this increase in vehicle numbers in use around the world will more than offset major improvements in car fuel efficiency.
In Europe and the United States, in particular, government policies for reduced emissions, coupled with high oil prices, will lead to improved vehicle efficiency. However, BP expects the increased use of hybrid cars and the development of more efficient car engines to become a worldwide phenomenon.
But with liquid fuels primarily used for powering vehicles and with fuel oil consumption declining, oil-product demand growth will move towards refinery middle distillates.
That change in fuel demand mix will create problems for refineries that have limited upgrade potential, BP thinks. At the same time, growth in the use of biofuels and natural gas liquids will probably dampen the demand for refinery products. There is also likely to be an increase in the production of liquid fuels from coal and natural gas.
Natural gas Natural gas is likely to be the fastest growing fossil fuel, with developing countries accounting for perhaps 80 percent of the demand growth. Gas producers in the Middle East and the former Soviet Union will make the biggest contribution to the needed growth in gas supplies, but with Australia, the United States and China also making significant contributions. Liquefied natural gas will form a growing proportion of the overall global gas market, the report says.
New shale gas and coal bed methane production have become particularly important in North America, with the possibility of North America exporting liquefied natural gas by 2030.
Industrialization and the need for power generation primarily drive natural gas use in developing countries, while fuel substitution for oil and coal will heighten gas demand, particularly in developed countries. And, although growth in Chinese coal consumption will tail off after 2020, as the country diversifies its energy mix, coal usage will likely continue growing in India, albeit at a lower level than in China.
Renewables The relatively high cost of much renewable energy places a constraint on the speed with which renewables can move into the energy mix. But, supported by government policies, new technologies will drive down costs, the report says.
And the use of renewable energies will grow faster than use of other energy types, BP thinks — the substitution of new energy sources for traditional fuels, a phenomenon driven by energy pricing, technical innovation and government policy, is likely to be especially evident in developed countries.
Europe is initially leading the expanding use of renewable energy, but the United States and China will likely take a lead in this area after 2020. BP anticipates renewables supplying 11 percent of world electricity by 2030.
China and India Rapid economic expansion in China and India will play a particularly important role in determining future energy trends, with China set to become the world’s largest economy, and India the third largest, by 2030. These two countries alone are likely to account for the entire net increase in worldwide coal demand, 94 percent of oil demand growth, 30 percent of gas demand growth and 48 percent of the growth in the use of non-fossil fuels, the report says.
But with energy trends in these two countries dominating energy forecasts, there are questions over the extent to which uncertainties in those trends create uncertainties in the global forecasts. What will the future level and pattern of energy usage in these two countries actually look like?
BP’s forecast anticipates the mix of economic activities in each of these countries maturing, with industrial activity becoming a somewhat smaller percentage of a growing economic pie. At the same time efficiency in the use of energy should improve. These trends may constrain the growth in energy demand, especially in China, as the need for new urbanization and infrastructure declines, the report says.
In the Middle East, easy access to cheap energy resources has led to soaring energy use and relatively low energy efficiency. The subsidization of oil and gas by many Middle Eastern countries discourages energy efficiency, but BP’s outlook assumes that governments will push improved efficiency in the future.
The region relies on the use of oil and gas for most of its energy supplies, with industry and power generation driving most energy demand. However, gas is likely to increasingly replace oil for power generation in the Middle East, BP thinks. And the region’s crucial role in world oil supplies will continue.
Imbalance change Putting together all of the various predicted energy trends for the next 20 years, BP sees a likelihood that the imbalance of energy demand over domestic energy supplies will improve in the Americas but worsen in Asia and Europe. A growth in supplies of biofuels and new unconventional oil and gas development will probably turn a current North American energy deficit into a small surplus by 2030, BP says. Meantime, increasing imports of natural gas will push up Europe’s deficit. The import of oil and gas into China will increase, to meet growing demand, while India will depend on the import of oil, gas and coal.
Fuel supply growth in the Middle East; the former Soviet Union; Africa; and South and Central America will fill the energy deficits in Europe and the Asia Pacific region.
However, the projected pattern of future fuel use would result in carbon dioxide levels in the atmosphere well above the levels recommended by scientists to address concerns about global warming. And a major political commitment to address carbon emissions could impact fuel usage — a declining emissions trend by 2030 is achievable if there is the political will to shoulder the cost, the report says.
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