BP expects oil demand to grow over the next 20 years but at a slowing rate, as the transport sector rises in efficient consumption, and natural gas and renewables take a larger share of the energy mix, the oil major said in its 2017 Energy Outlook.
“The overall demand for energy looks set to continue to expand, as increasing prosperity in fast-growing emerging economies lifts billions of people from low incomes,” Bob Dudley, chief executive of BP said in the report. “The extent of this increase is likely to be curbed by improvements in energy efficiency, as increasing attention around the world is devoted to using energy more sustainably.”
According to BP forecasts, oil demand growth over the period is set to slow from around 1 million barrels per day to 400,000 bpd by 2035, when consumption will reach around 110 million bpd.
More efficiencies and cleaner fuel mix will also lead to a slowdown sharply in carbon emissions, BP said, growing at less than a third of the rate of the past 20 years.
Energy demand is set to grow by just 30 per cent over the next 20 years, despite a sharp rise in population. BP forecasts this trend to be offset by sharp gains in energy efficiency.
“The increasing penetration of electric cars and the broader mobility revolution will have an important bearing on future oil demand,” BP said.
Oil demand from cars will rise from around 19 million bpd in 2015 to 23 million bpd in 2035, BP said. That will come amid rapid growth in the car fleet and despite improvements in engine efficiencies and an expected 100-fold expansion in the number of electric vehicles to 100 million over the period.
Renewables, with nuclear and hydroelectric power, will provide half of the additional energy required out to 2035, while gas will grow more quickly than oil and coal, led by US shale gas, it said.
Electricity, biofuels, coal and natural gas together account for 13 per cent of transport fuel demand in 2035, up from 7 per cent in 2015.
Brent crude plummeted to $27.88 per barrel in Jan. 2016 from its peak of $118.9 Feb 2013, triggering many oil firms to shut down projects that were no longer economically viable. With a recent OPEC and non-OPEC deal to cut production during the first six months of 2017, Brent has stabalised over $53 per barrel. While sentiment in the oil and gas sector has buoyed, investments have not yet returned to their pre-slump momentum.
“Oil inventories are at record-high levels and the impact on supply of the significant cutbacks in investment spending on new energy projects over the past two years has not yet been fully felt,” Dudley said.
BP said global oil supplies will shift towards holders of large-scale, low-cost resources - the share of global liquids supply accounted for by Middle East OPEC, Russia and the US increases from 56 per cent in 2015 to 63 per cent by 2035, it said in its report on Wednesday.
Middle East OPEC production is set to increase by over 9 Mb/d, accounting for all the growth in OPEC production. Other OPEC production, which typically has a higher cost base, will fall slightly over the next 20 years, causing its share to edge lower.
US output is expected to grow by 4 Mb/d reaching 19 Mb/d by 2035, with growth concentrated in the first half of the outlook period, driven by tight oil and NGL production. Russia’s production is assumed to increase by 1 Mb/d to 12 Mb/d by 2035, the report said.
Meanwhile, BP said if the practice of non-OECD countries to expand refining capacity beyond demand continues, this could lead to substantial refinery spare capacity and ultimately closures in mature markets such as Europe, OECD Asia and parts of North America.