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BP presents its 2017 Statistical Review
Energy demand up, led by natural gas; strong growth in renewables; OPEC-led cuts exceed goals, offset by US tight oil production Kristen Nelson Petroleum News
BP’s 2017 Statistical Review was released June 13, with Spencer Dale, BP group chief economist, providing an overview from London.
Growth in overall energy demand was up in 2017 over 2016, he said, along with an increase in coal consumption - the first in four years. And carbon emissions were up after three years of little or no growth.
The growth in energy demand in 2017 was 2.2 percent, up from 1.2 percent in 2016 and above a 10-year average of 1.7 percent. Dale said much of the growth can be attributed to the increase in economic growth, but there was also a slight slowing in improvements in energy intensity, the amount needed for a unit of output.
While there was strong growth in Organization for Economic Cooperation and Development countries, 80 percent of the expansion came from developing countries, with China contributing over a third to the growth, reflecting a rebound in some of that country’s most energy-intensive sectors.
Some 60 percent of the increase in primary energy came from natural gas and renewables, Dale said, with a 3 percent growth in natural gas and a 14.8 percent growth in renewables.
Oil When the 2016 Statistical Review came out, Dale said, oil production and consumption were broadly in balance, but inventories remained at record highs. The Organization of the Petroleum Exporting Countries together with 10 non-OPEC countries led by Russia, collectively called the Vienna group, had begun to implement production cuts but tight oil production in the U.S. had begun to increase, he said.
In 2017, oil demand grew by 1.7 million barrels per day, similar to 2016 and well above the 10-year average of a little over 1 million bpd, Dale said.
On the production side, growth was some 600,000 bpd, similar to 2016, but output by the Vienna group, which increased by 1.6 million bpd in 2016, fell 900,000 bpd last year, while production outside the group, which had fallen in 2016, grew by 1.5 million bpd led by the U.S. and Libya.
Dale said the target for cuts by the Vienna group was almost 1.8 million bpd, relative to October 2016, but the cuts totaled nearly 2.5 million bpd in April 2018.
Those cuts were instrumental in reducing oil stocks, which fell to normal levels in 2017, he said. The combination of reduced production and increased demand meant consumption exceeded production for much of 2017, reducing OECD inventories to a five-year average.
U.S. tight oil and natural gas liquids production increased by almost 2 million bpd since October 2016, but Dale said bottlenecks in the supply chain in the U.S. and signs investors were becoming wary suggest some limit to tight oil growth.
Natural gas Dale characterized 2017 as “a bumper year” for natural gas, with a 3 percent increase in consumption and a 4 percent increase in production. Consumption growth, he said, was led by Asia, particularly China with a 15.1 percent consumption growth rate. Increasing production came from Russia, up 8.2 percent, Iran, up 10.5 percent, Australia up 18 percent and China up 8.5 percent.
The surge in Chinese gas demand was the most significant factor in the expansion in gas consumption, Dale said, led by switching in the industrial sector. The surge led to severe strains in that country, with sharp price increases for natural gas, some caused by the increase in gas demand, the limit to how quickly liquefied natural gas imports can be increased, an incomplete network of pipelines across China and inadequate gas storage - some 3 percent of consumption compared to 20 percent in the U.S. and Europe.
LNG trade There was a continued expansion of LNG in 2017, up 10 percent, the strongest growth since 2010, with about half of the global expansion attributable to China’s need for LNG.
Dale said the numerous projects sanctioned between 2009 and 2014 had led to predictions of an LNG surplus, but that has not developed. He said this was partly because new supplies have come online less quickly than planned, while surplus LNG which did occur produced periods of unstainable low prices rather than a buildup of idle capacity. He said Asian spot prices over the last two ears have fluctuated between U.S. LNG exporters’ full-cycle costs and their short-term operating costs, with U.S. suppliers willing to supply LNG as long as operating costs were covered.
Coal Coal had a mini-revival in 2017, Dale said, with both consumption and production increasing. Consumption rose by 1 percent, led by India, with increases also in China. World oil production was up by 3.2 percent, with China at 3.6 percent and the U.S. at 6.9 percent, with U.S. consumption falling and producers there exporting to Asia.
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