Emerging economies to lead energy growth to 2030 and renewables to out-grow oil, says BP analysis
BP's 'base case' - or most likely projection - points to primary energy use growing by nearly 40% over the next twenty years, with 93% of the growth coming from non-OECD (Organisation of Economic Co-operation and Development) countries. Non-OECD countries are seen to rapidly increase their share of overall energy demand from just over half currently to two-thirds.
Over the same period, energy intensity, a key measure of energy use per unit of economic output, is set to improve globally led by rapid efficiency gains in the same non-OECD economies, under these projections
According to the BP Energy Outlook, diversification of energy sources increases and non-fossil fuels (nuclear, hydro and renewables) are together expected to be the biggest source of growth for the first time. Between 2010 to 2030 the contribution to energy growth of renewables (solar, wind, geothermal and biofuels) is seen to increase from 5% to 18%.
Natural gas is projected to be the fastest growing fossil fuel, and coal and oil are likely to lose market share as all fossil fuels experience lower growth rates. Fossil fuels’ contribution to primary energy growth is projected to fall from 83% to 64%. OECD oil demand peaked in 2005 and in 2030 is projected to be roughly back at its level in 1990. Biofuels will account for 9% of global transport fuels.
The BP Energy Outlook 2030 is the first of BP’s forward-looking analyses to be published, after 60 years of producing definitive historical data in the BP Statistical Review of World Energy.
In launching the BP Energy Outlook 2030, Group Chief Executive Bob Dudley said: “The issues covered in this document are huge ones – the effort to provide energy to fuel the global economy, sustainably, in an era of unprecedented growth. I believe one of our responsibilities is to share the information we have, to inform the debate on energy, and now on climate change.”
“What producers, governments and consumers all want is secure, affordable and sustainable energy. But on a global scale, this remains an aspiration. And to meet that aspiration over the next two decades, we need smart, market-oriented policies to deliver the energy we need in a manageable way – without inhibiting economic development or jeopardising the improvements in living standards now being experienced by billions of people worldwide.”
“I need to emphasize that the BP Energy Outlook 2030 base case is a projection, not a proposition. It is our dispassionate view of what we believe is most likely to happen on the basis of the evidence. For example, we are not as optimistic as others about progress in reducing carbon emissions. But that doesn’t mean we oppose such progress. As you probably know, BP has a 15-year record of calling for more action from governments, including the wide application of a carbon price. Our base case assumes that countries continue to make some progress on addressing climate change, based on the current and expected level of political commitment. But overall, for me personally, it is a wake-up call.”
Highlights
BP’s ‘base case’ projections are that world primary energy demand growth averages 1.7% per year from 2010 to 2030 although growth decelerates slightly beyond 2020. Non-OECD energy consumption will be 68% higher by 2030 averaging 2.6% per year growth, and accounts for 93% of global energy growth. In contrast, OECD growth averages 0.3% per year to 2030; and from 2020 OECD energy consumption per capita is on a declining trend of -0.2% per year.
Transport growth is seen to slow because of a decline in the OECD. The region’s total demand for oil and other liquids peaked in 2005 and will be back at roughly the level of 1990 by 2030. Toward the end of the period, coal demand in China will no longer be rising and China is projected to become the world’s largest oil consumer.
OPEC’s share of global oil production is set to increase to 46%, a position not seen since 1977. At the same time, oil - and gas - import dependency in the US is likely to fall to levels not seen since the 1990s, because of improved fuel efficiency and the increased share of biofuels. Global consumption growth is also impacted by higher oil prices in recent years and a gradual reduction of subsidies in oil-importing countries.
The fuel mix changes over time, reflecting long asset lifetimes. Oil, excluding bio-fuels, will grow relatively slowly at 0.6% per year; natural gas is the fastest growing fossil fuel with more than three times the projected growth rate of oil at 2.1% per year. Coal will increase by 1.2% per year and by 2030 it is likely to provide virtually as much energy as oil excluding biofuels. The strong carbon policy drive in OECD countries risks being more than offset by growth in emerging economies.
Wind, solar, bio-fuels and other renewables continue to grow strongly, increasing their share in primary energy from less than 2% now to more than 6% projected by 2030. Biofuels will provide 9% of transport fuels and nuclear and hydropower will grow steadily and gain market share in total energy consumption.
“The slowing of growth in total energy in transport is related to higher oil prices and improving fuel economy, vehicle saturation in mature economies, and expected increases in taxation and subsidy reduction in developing economies,” said Christof Rühl, BP's chief economist. “In percentage terms, oil demand is reduced the most in the power sector (-30%) because this is the easiest oil to displace with gas or renewables and is the sector most likely to employ carbon pricing.”
Energy intensity
Since 1900 the world’s population has more than quadrupled, real income (as measured by Gross Domestic Product) has grown by a factor of 25, and primary energy consumption by a factor of 23. “The modern energy economy has been shaped by the trends of industrialisation, urbanisation, motorisation and rising income levels,” said Rühl.
Energy per unit of income as measured by GDP continues to fall, and at an accelerating rate. “This is true in our outlook to 2030 not only for the global average, but for almost all of the key countries and regions. The combination of energy efficiency gains and a long-term structural shift towards less energy intensive activities as economies develop underpins this trend,” said Rühl.
Non-OECD growth
Global liquids demand is forecast to reach 102.4 million barrels per day (mmbpd) in 2030. The net growth of 16.5 mmbpd over the next 20 years comes exclusively from the emerging economies of the non-OECD. “Non-OECD Asia will account for nearly two-thirds of non-OECD consumption growth over the next 20 years and more than three-quarters of the net global increase, rising by nearly 13 million barrels a day,” said Rühl.
“The largest increments of new supply will come from OPEC – conventional crude in Saudi Arabia and Iraq, as well as OPEC natural gas liquids (NGLs) which are not subject to OPEC quotas.”
Non-OPEC liquids are likely to rise modestly, driven by a large increase in biofuels, along with smaller increments from Canadian oil sands, deepwater Brazil, and the FSU which offset continued declines in mature provinces.
Fuel substitution
According to the Energy Outlook’s projections, oil continues to suffer a long run decline in market share, while gas steadily gains share. Coal’s recent gains in market share, on the back of rapid industrialisation in China and India in particular, are reversed by 2030, with all three fossil fuels converging on market shares around 27%. The diversifying fuel mix can be seen most clearly in terms of shares of growth. Over the period 1990-2010 fossil fuels contributed 83% of the growth in energy; over the next twenty years fossil fuels are likely to contribute 64% of the growth. Renewables (excluding hydro) and biofuels together account for 18% of the growth in energy to 2030.
“The diversifying fuel mix is being driven largely by developments in the power sector. Energy used to generate power remains the fastest growing sector, accounting for 53% of the growth in primary energy consumption 1990-2010 and projected to account for 57% of the growth to 2030. In terms of end use, industry drives the growth of final energy consumption. The role of transport is weakening; over the past 20 years transport sector energy demand grew at about the same rate as total energy demand, but over the next 20 years it grows much less rapidly than total energy,” said Rühl.
“OECD oil demand declines are concentrated primarily outside the transport sector, where it is relatively easier to displace oil by gas and renewables; post-2015, OECD transport demand is also expected to fall as technology and policy drive improved engine efficiency.”
Growth in biofuels
Biofuels production is expected to reach 6.7 mmbpd by 2030 from 1.8 mmbpd in 2010 and will contribute 125% of net non-OPEC supply growth over the next 20 years. Continued policy support, high oil prices, and continued technological innovations all contribute to the rapid expansion.
The US and Brazil will continue to dominate biofuel production with 76% of total output in 2010 but falling to 68% in 2030 as output from Asia-Pacific begins to rise.
“The global fuel mix continues to diversify – but for the first time, non-fossil fuels will be major sources of supply growth,” said Rühl.
Environmental policy
The Energy Outlook 2030 assumes continued policy action to address concerns about both climate change and energy security, based on the current trend of political commitment. BP has developed an alternative ‘policy case’ to explore the implications of a significant increase in the level of political commitment which translates into a tightening of policy.
“The key focus of the policy case is to reduce dependence on carbon intensive fuels. This can be achieved through a wide range of policy instruments, including various ways of putting a price on carbon,” said Rühl.
In BP’s policy case “global emissions peak just after 2020, but will still be 20% above 2005 levels. The emissions path is still expected to be well above the International Energy Agency’s 450 Scenario1 , indicating how much more effort will be required after 2030 to put the world onto a ‘safe’ path,” said Rühl.
The cut in emissions in the policy case would be achieved through a combination of more rapid efficiency gains, fuel switching – from coal to gas and from fossil fuels to nuclear, hydro and renewables – and the introduction of carbon capture and storage (CCS) for both coal and gas power plants.
Cautionary statement
This presentation contains forward-looking statements, particularly those regarding global economic growth, population growth, energy consumption, policy support for renewable energies and sources of energy supply. Forward-looking statements involve risks and uncertainties because they relate to events, and depend on circumstances, that will or may occur in the future. Actual results may differ depending on a variety of factors, including product supply, demand and pricing; political stability; general economic conditions; legal and regulatory developments; availability of new technologies; natural disasters and adverse weather conditions; wars and acts of terrorism or sabotage; and other factors discussed elsewhere in this presentation.
