Global energy demand to grow by 1.4 pc a year

By: Vinod Nair

MUSCAT: Regardless of the recent weakening in global energy markets, ongoing economic expansion in Asia — particularly in China and India will drive continued growth in the world’s demand for energy over the next 20 years, said the BP’s Energy Outlook for 2035. Speaking exclusively to the Observer, Mark Finley, General Manager, Global Energy Markets and United States, BP, said as per The Outlook 2035, the population growth and increases in income per person are the key drivers behind growing demand for energy, among other factors.

By 2035, the world’s population is projected to reach 8.7 billion, which means an additional 1.6 billion people will need energy. Accordingly, global demand for energy is expected to rise by 37 per cent from 2013 to 2035, or by an average of 1.4 per cent a year. The Energy Outlook 2035 projects that demand for oil will increase by around 0.8 per cent each year to 2035. The rising demand comes entirely from the non-OECD countries; oil consumption within the OECD peaked in 2005 and by 2035 is expected to have fallen to levels not seen since 1986.

By 2035 China is likely to have overtaken the US as the largest single consumer of oil globally. He said that India is expected to surpass China in growth for energy demand and added that the only time the oil supply disruptions have been higher than it is now was in the early nineties following Iraq’s invasion of Kuwait and the collapse of Soviet Union.

Finley said that while the oil production in the US is expected to plateau towards the later years of the outlook, the cost of production for shale oil in the US is no longer around $75 or $90 per barrel, it is much cheaper.

The Outlook predicts over the same period, GDP is expected to more than double, with non-OECD Asia contributing nearly 60 per cent of that growth. Globally, GDP per person in 2035 is expected to be 75 per cent higher than today, an increase in productivity which accounts for three-quarters of global GDP growth.

China and India are key drivers of non-OECD growth and are projected to grow by 5.5 per cent per annum till 2013 and 2035. By 2035, they will be the world’s largest and third largest economies respectively, jointly accounting for about one-third of global population and GDP. As China’s level of productivity catches up with the OECD, its rate of growth is expected to slow from 7 per cent in this decade to four per cent in the decade to 2035. India’s growth moderation is more gradual – slowing from six per cent in this decade to five per cent in the final decade to 2035.

The current weakness in the oil market, which stems largely due to strong growth in tight oil production in the US, is likely to take several years to work through. In 2014, tight oil production drove US oil output higher by 1.5 million barrels a day. But further out, the growth in tight oil is likely to slow and Middle East production will gain ground once more.

Finley said the demand for renewable energy will continue to grow, especially in the electricity generation. While the growth of bio-fuel is expected to be limited, the demand of electric vehicles will be constrained due to the cost factor. He said the governments often tend to look for alternatives during crisis. “For example, the French started building nuclear plants following the oil shocks of the seventies.”

Finley said there is always this challenge before the governments to find an efficient and cost-effective ways for oil production.

The Outlook 2035 says technically recoverable resources are estimated to be around 340 billion barrels for tight oil and 7,500 trillion cubic feet for shale gas globally. Asia has the largest resources, followed by North America. Although unconventional resources are spread across the globe, production is likely to remain concentrated in North America. Cumulative North American production of tight oil and shale gas is roughly equivalent to 50 per cent of tight oil and 30 per cent of shale gas technically recoverable resources. The comparable numbers for the rest of the world are expected to be just three per cent and one per cent respectively. While production increases outside North America, the factors that have enabled the growth of North American production are unlikely to be quickly replicated elsewhere.

The report also said that by the 2030s, the US is likely to have become self-sufficient in oil, after having imported 60 per cent of its total demand as recently as 2005.

Demand for natural gas will grow fastest of the fossil fuels over the period to 2035, increasing by 1.9 per cent a year, led by demand from Asia.

Half the increased demand will be met by rising conventional gas production, primarily in Russia and the Middle East, and about a half from shale gas. By 2035, North America, which currently accounts for almost all global shale gas supply, will still produce around three quarters of the total.

As demand for gas grows, there will be increasing trade across regions and by the early 2020s Asia Pacific will overtake Europe as the largest net gas importing region. The continuing growth of shale gas will also mean that in the next few years North America will switch from being a net importer to net exporter of gas.

Regional energy imbalances are set to increase markedly over the next 20 years, with consequent implications for energy trade. North America switches from being a net importer of energy to a net exporter this year (2015). Asia’s imports of energy continue to expand, accounting for around 70 per cent of inter-regional net imports by 2035. Among exporting regions, the Middle East remains the largest net energy exporter, but its share falls from 46 per cent in 2013 to 36 per cent in 2035. Russia remains the world’s largest energy exporting country. Asia’s import dependency rises from 23 per cent in 2013 to 27 per cent by 2035.

Oil accounts for 60 per cent of that rise, with imports accounting for over 80 per cent of Asian oil consumption by 2035. Asia’s oil imports in 2035 are almost as large as Opec’s current entire oil production.

The global vehicle fleet (commercial vehicles and passenger cars) more than doubles from around 1.2 billion today to 2.4 billion by 2035. Most of that growth is in the developing world (88 per cent), while some OECD markets are already at saturation levels. Fuel economy has improved in recent years, driven by consumer choice, tightening policy and improved technology.

Finley said while Africa continues to be one of the fastest growing economies, the consumption base continues to remain on the lower side.

SOURCE: OMAN DAILY OBSERVER

You May Also Like