The BP Energy Outlook, published last week, gives a long-term and broad perspective on the global energy outlook to 2035. The main expectation is that, although global GDP will more than double over the period, energy consumption will only grow by approximately one-third because energy intensity is predicted to fall more quickly than in recent history.
China will see a move towards less energy-intensive industries, as well as improved energy efficiency so that its energy intensity declines by 46%. As its economy rebalances, the extent of energy demand growth slows but China’s energy consumption is still expected to increase by 48% by 2035. Its energy policy directs a shift away from coal and towards cleaner energy. Nuclear generation is forecast to increase by 12% per annum between 2014 and 2035.
Renewables are predicted to be fast-growing due to falling costs, as well as the pledges made as part of the Paris agreement. However, because the current scale is small, it is still only predicted to grow from 3% of the global energy mix today to 9% in 2035.
Growth in carbon emissions halved compared to the last 20 years, at 0.9% instead of 2.1%, due to energy efficiency and switching to cleaner forms of energy. However, the actual level of emissions is predicted to have increased by 20% between 2014 and 2035 due to growth in energy consumption, which widens the extent of the remaining challenge to address climate change. BP calls for a meaningful price for carbon and explores the effects of this under different scenarios in their outlook report.
BP predicts that fossil fuels will continue to be the main source of energy, at 80% of the energy mix in 2035, but that gas will continue to grow its share due to a combination of new shale sources, being the cleanest of the fossil fuels and the fact that it is being transported internationally. Liquefied Natural Gas (LNG) surpasses pipeline gas by the end of the outlook period, which will bring price integration by region as LNG deliveries respond to price signals.
BP has made continual upward revisions to its US shale gas trends over the last three years as vast levels of resources have been unlocked. A fall in oil prices this year has led to a decline in output, but is forecast to grow by just over 4% per annum over the outlook period. On a global scale, shale gas is predicted to constitute nearly 25% of total gas production by 2035, with China being the greatest contributor to growth. Meanwhile, coal growth is seen to be just 0.5% per year and its share of primary energy the lowest on record.
The outlook report predicts that the oil market will slowly rebalance as low oil prices increase demand and dampen supply. One form of support for oil demand will be found outside the OECD where the number of vehicles is predicted to triple. There will be some counterbalance by significant gains in the efficiency of car engines although investment in electric cars will be limited because of the cost of batteries.
Overall, global GDP growth is expected to double over the next 20 years, with China and India together accounting for nearly half of the increase. BP forecasts that this will lead to an increase in energy consumption of 34% between 2004 and 2035, which reflects a slower increase than would have been seen in the past due to reductions in energy intensity levels. The full BP Energy Outlook 2016 report can be found here.
Written By – Nikki Wilson
