BP Energy Outlook: Gas the fastest growing fossil fuel, oil market to rebalance
British oil giant BP has issued its Energy Outlook 2016, forecasting how the energy landscape will look between now and 2035.
According to the report fossil fuels are expected to remain the dominant form of energy powering the global expansion: providing around 60% of the additional energy and accounting for almost 80% of total energy supplies in 2035.
Of the fossil fuel mix containing oil, gas and coal, gas is expected to be the fastest growing fossil fuel supported by strong supply growth, particularly of US shale gas and liquefied natural gas (LNG), and by environmental policies oil will grow steadily (0.9% p.a.), although the trend decline in its share will continue.
As for the oil, BP expects that oil market will gradually rebalance, with the current low level of prices boosting demand and dampening supply.
On the demand side, BP expects oil demand to increase by almost 20 Mb/d over the Outlook, with growing use in Asia for both transport and industry. The company says that the growth in the world economy means more energy is required; energy consumption is expected to increase by 34% between 2014 and 2035.
Also, BP expects the continuing reform of China’s economy to cause growth in China’s energy demand to slow sharply. This slowing should weigh heavily on global coal, which will grow at less than a fifth of its rate over the past 20 years.
However, the sharp slowing in China’s energy demand growth will partially be offset by a pickup in other developing countries. India is expected to account for more than a quarter of the growth in global energy demand in the final decade of the Outlook, and double its contribution over the past decade.
Renewables are expected to grow rapidly, almost quadrupling by 2035 and supplying a third of the growth in power generation, causing their share in primary energy to rise from around 3% today to 9% by 2035.
BP’s CEO Bob Dudley said:
“Our industry remains focussed on the continuing weakness in the oil market. There are clear signs that the market is adjusting and that it will gradually rebalance. But the adjustment process is likely to be painful, and energy companies need to adapt to weather the storm.That is what BP has been doing over the past year and will continue to do. But in order to adapt successfully, we must have a clear sense of where we are heading, so that we not only emerge from the current weakness leaner and fitter, but do so better equipped to meet the longer-term challenges facing our industry. That is the role of the Energy Outlook: to help lift our focus from the here-and-now and consider how the energy landscape might evolve over the next twenty years. With that in mind, three key features of this year’s Outlook stood out for me. First, energy demand will continue to grow.
Put simply, as the world economy expands, more energy will be needed to fuel the higher levels of activity and living standards. The growth in energy will be curbed by faster gains in energy efficiency. And there is of course considerable uncertainty as to exactly how quickly global GDP will grow. Even so, it seems clear that significantly more energy will be required over the next twenty years to enable the world economy to grow and prosper.
Second, the fuel mix continues to shift. Fossil fuels remain the dominant source of energy powering the world economy, supplying 60% of the energy increase out to 2035. Within that, gas looks set to become the fastest growing fossil fuel, spurred on by ample supplies and supportive environmental policies. In contrast, the growth of global coal consumption is likely to slow sharply as the Chinese economy rebalances. Renewables are set to grow rapidly, as their costs continue to fall and the pledges made in Paris support their widespread adoption.
Third, the outlook for carbon emissions is changing significantly. In particular, the rate of growth of carbon emissions is projected to more than halve over the Outlook period relative to the past twenty years. That reflects both faster gains in energy efficiency and the shift towards lower-carbon fuels. Despite this, carbon emissions are likely to continue to increase, indicating the need for further policy action. In BP, we believe carbon pricing has an important part to play as it provides incentives for everyone to play their part. 2016 looks set to be another tough year for our industry. But we have faced similar episodes in the past and we know that the market will eventually rebalance.
We need to respond to the near-term challenges, but we mustn’t lose sight of the longer-term role of our industry in providing the energy the world needs to grow and prosper, and doing so in a safe and sustainable manner. We hope that this edition of the BP Energy Outlook (PDF) can make a useful contribution to informing discussions about future energy needs and trends.”