Global energy demand has grown by more than 50 percent during the past two decades, and BP Group Chief Executive Bob Dudley recently said the growth of energy demand will continue for the next two decades.
“Demand will increase substantially for the foreseeable future,” Dudley said. “Nearly all of that growth is accounted for by emerging economies — China and India particularly. And what we can now see more clearly is we are part way through a big hump in energy demand — largely created by the growth of industry in China.
“You may think things don’t change much year-on-year in the energy business, but the past decade has shown that’s not the case,” Dudley said. “The U.S. shale boom, for example, wasn’t really on the radar 10 years ago. Now it means the United States is weaning itself off imported energy — with profound global implications.”
BP projects the growth of energy demand will rise by about 41 percent through 2035. Dudley recently discussed the state of energy in London while introducing BP’s annual projections for world energy markets, “BP Energy Outlook 2035.”
He said the projections highlight the power of competition and market forces in unlocking technology and innovation to meet the world’s energy needs. While the company is optimistic for the world’s energy future, the Energy Outlook 2035 raises the questions of whether the world’s energy supply is sufficient, secure and sustainable.
Sufficiency
“Looking briefly at sufficiency first, the picture in terms of resources in the ground is a good one,” Dudley said. “The growth rate for global demand is slower than what we have seen in previous decades, largely as a result of increasing energy efficiency. Trends in global technology, investment and policy leave us confident production will be able to keep pace. New energy forms such as shale gas, tight oil and renewables will account for a significant share of the growth in global supply.
“The theory of peak oil seems to have, well, peaked. New technologies mean we can get more from existing sources and multiple new sources are opening up.”
The BP chief executive said the energy resources are there — the company had seven new discoveries in deepwater during 2013.
“That’s not to say there aren’t plenty of challenges involved in getting them produced and delivered affordably, but we are confident production will be able to keep pace, given the trends in technology, investment and policy,” Dudley said.
Security
As the energy industry carries bigger risks than most, there may be challenges ahead for energy security, but BP is optimistic about the situation. Among today’s energy importers, the United States is on a path to achieve energy self-sufficiency, while import dependence in Europe, China and India will increase. Asia is expected to become the dominant energy-importing region.
“This need not be a cause for concern if the market is allowed to do its work, with new supply chains opening up to these big consuming regions,” Dudley said. “Many countries are opening up their domestic resources, the United States particularly from shale, but also India and places like Oman, where we signed a major agreement in December to develop the Khazzan tight gas field.
“This is all about turning on more taps. And the more taps running the less danger of the energy supply being turned off.”
Dudley expects the energy diversification to continue to the point that for the first time, the world will have no dominant single fuel.
“Gas and oil from shale will be a big influence,” he said. “As the United States becomes increasingly self-sufficient in energy, so Asia is going to become the world’s big importer, followed by Europe. Piping Russian gas to China in big volumes is already being discussed and planned. So overall, we are optimistic about prospects for energy security.”
Sustainability
A consequence of the 41-percent rise in energy demand is the projected rise of carbon emissions by 29 percent by 2035, with all of the growth coming from the emerging economies. Emissions growth is expected to slow as natural gas and renewables gain market share from coal and oil, and emissions are expected to decline in Europe and the United States. By the 2030s, BP expects many advanced countries will be seeing their economies grow while their energy use falls.
People are finding ways to use energy more efficiently because it saves money. This is also good for the environment as the less energy that is used, the less carbon is emitted.
“A projection doesn’t have to come to pass,” Dudley said. “It wasn’t projected five years ago that 2012 emissions in the United States would be below 1994 levels. That’s been down to two big factors — energy efficiency improving rapidly and the shale boom allowing cheaper, cleaner gas to displace coal in U.S. power stations. And it contrasts with an upturn in emissions in 2012 in the United Kingdom and Germany — a consequence of displaced U.S. coal becoming a cheaper alternative to gas in Europe, despite the many green incentives there.
“The obvious conclusion to draw from this is a profound reduction in emissions is possible and the composition of the fuel mix matters and deserves more attention. This can happen spontaneously through competition and the power of the market, as in the United States, but to be sure it will work, we believe, you need carbon pricing.”
Without universally accepted carbon pricing, Dudley explained, knocking emissions down in one country with low carbon gas could mean they would rise in a country with displaced coal. While that is a long-term concern, BP suggests two shorter-term priorities.
“One is maximizing energy efficiency — especially in developing economies where most of the growth is going to come from — and the other is encouraging the switch from coal to gas,” Dudley said. “In 2035, we project gas and coal will account for 54 percent of global energy demand. While renewables will grow rapidly, their share will reach just 7 percent.”
For more information and to view the “BP Energy Outlook 2035,” visit www.bp.com/energyoutlook or call +44 (0)20 7496 4076.
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The fourth annual edition of the “BP Energy Outlook” is the first time BP has set out its view of the most likely developments in global energy markets beyond 2030 to 2035, based on up-to-date analysis. It can be viewed at www.bp.com/energyoutlook. Some highlights of the outlook include:
• Ninety-five percent of growth in demand is expected to come from the emerging economies.
• Shares of the major fossil fuels are converging with oil, natural gas and coal each expected to make up around 27 percent of the total mix by 2035 and the remaining share coming from nuclear, hydroelectricity and renewables.
• Among fossil fuels, gas is growing fastest, increasingly being used as a cleaner alternative to coal for power generation as well as in other sectors.
• Global energy demand will continue to increase at an average of 1.5 percent a year to 2035. Growth is expected to moderate during this period, climbing at an average of 2 percent a year to 2020 and then by only 1.2 percent a year to 2035.
• While the fuel mix is evolving, fossil fuels will continue to be dominant. Oil, gas and coal are expected to converge on market shares of around 26-27 percent each by 2035, and non fossil fuels — nuclear, hydro and renewables — on a share of around 5-7 percent each.
• Oil is expected to be the slowest growing of the major fuels to 2035, with demand growing at an average of just 0.8 percent a year. Nonetheless, this will still result in demand for oil and other liquid fuels being nearly 19 million barrels a day higher in 2035 than 2012.
• Growth in the supply of oil and other liquids (including biofuels) to 2035 is expected to come mainly from the Americas and Middle East. More than half of the growth will come from non-OPEC sources, with rising production from U.S. tight oil, Canadian oil sands, Brazilian deepwater and biofuels more than offsetting mature declines elsewhere.
• Increasing production from new tight oil resources is expected to result in the United States overtaking Saudi Arabia to become the world’s largest producer of liquids in 2014. U.S. oil imports are expected to fall nearly 75 percent between 2012 and 2035.
• OPEC’s share of the oil market is expected to fall early in the period, reflecting growing non-OPEC production together with slowing demand growth due to high prices and increasingly efficient transport technologies. OPEC market share is expected to rebound somewhat after 2020.
• Natural gas is expected to be the fastest growing of the fossil fuels — with demand rising at an average of 1.9 percent a year.
• LNG exports are expected to grow more than twice as fast as gas consumption at an average of 3.9 percent per year, and accounting for 26 percent of the growth in global gas supply to 2035.
• Shale gas supplies are expected to meet 46 percent of the growth in gas demand and account for 21 percent of world gas and 68 percent of U.S. gas production by 2035. North American shale gas production growth is expected to slow after 2020 and production from other regions to increase, but in 2035, North America is still expected to account for 71 percent of world shale gas production.
