Once again the message is, this time from BP, oil is here to stay. Another 20 years. At least.
Contrary to projections given by environmentalists, and in spite of a phenomenal increase in renewable energy, the demand for oil will continue to grow for the next 20 years.
BP is finally giving in. In the recently published BP Enegry Outlook 2017 Edition the key message is that an energy transition is taking place that is “likely to continue to take place over the next 20 years», meaning that «the story is one of a continuing shift in the fuel mix towards lower carbon fuels».
This is all in response to the exponential growth in renewable energy like solar and wind that we have experienced the last 10 years.
So how does such a transition effect oil and gas production, in terms of volume? Put it another way, do we need to continue to explore in order to find more oil and gas, or have we already found enough to meet a declining demand?
In the BP base case, the world’s economy almost doubles in size over the period, but the extent of this growth is substantially offset by rapid gains in energy efficiency. The energy demand will thus increase by only around 30%.
“Renewable energy is the fastest growing energy source and will be quadrupling over this period of time” (7.6% per year, down from 15% growth the last 10 years), says Spencer Dale, group chief economist of BP. That does not, however, mean it is doomsday for the oil exploration industry, because fossil fuels will provide about half of the total increase in primary energy over the next 20 years.
Consequently, in terms of carbon emissions the projected growth during the next 20 years will be far slower than in the past (about 1/3). This is in contrast to the current trend with no or minimal increase in CO2 emissions. As stated by CarbonBrief, “the topline from the Global Carbon Project is that the amount of CO2 we put into the atmosphere from burning fossil fuels, gas flaring and cement production has held steady for three years in a row, neither increasing nor decreasing significantly”.
The oil demand will, according to BP, keep growing by 0.7% per year in response to transport demand, in particular in the fast growing Asian economies. But the pace of growth will slow over time because of increased fuel efficiency. In fact, BP is of the opinion that fuel efficiency will reduce demand with about 16 MMbopd through the next 20 years, while electric cars will reduce the demand by only 1 MMbopd. So even if the amount of electric vehicles will grow from about 1 million today to 100 million by 2035, according to BP’s “best guess”, “the implication for oil demand is not a game changer”.
In conclusion, the world will consume 98.2MMbopd in 2035. Keep exploring!