BP predicts slowdown in global energy demand

The fourth annual edition of the BP Energy Outlook 2035 includes the oil company’s view of the most likely developments in global energy markets further 2035, based on up-to-date analysis.

The outlook reveals that global energy consumption is expected to rise by 41% from 2012 to 2035―compared to 55% over the past 23 years (52% over the past 20 years) and 30% over the past 10 years. 

Also, 95% of that demand growth is expected to come from the emerging economies. Energy use in the advanced economies of North America, Europe and Asia as a group is expected to grow very slowly and to decline in the later years of the forecast period.

Shares of the major fossil fuels are converging with oil, natural gas and coal; each is expected to make up around 27% of the total energy mix by 2035. The remaining shares will come from nuclear, hydroelectricity and renewables. Among the fossil fuels, natural gas is growing fastest hydrocarbon; it is increasingly being used as a cleaner alternative to coal for power generation as well as in other sectors.

Bob Dudley, BP CEO, said the outlook “highlights the power of competition and market forces in unlocking technology and innovation to meet the world’s energy needs. These factors make us optimistic for the world’s energy future.”

Dudley added, “The outlook leads us to three big questions: Is there enough energy to meet growing demand? Can we meet demand reliably? And what are the consequences of meeting demand? In other words, is the supply sufficient, secure and sustainable?”

“On the first question, our answer is a resounding ‘yes’. The growth rate for global demand is slower than what we have seen in previous decades, largely as a result of increasing energy efficiency. Trends in global technology, investment and policy leave us confident that production will be able to keep pace. New energy forms such as shale gas, tight oil and renewables will account for a significant share of the growth in global supply.”

On the question of security, the outlook offers a mixed, though broadly positive, view. Among today’s energy importers, the US is on a path to achieve energy self-sufficiency, while import dependence in Europe, China and India will increase. Asia is expected to become the dominant energy importing region. 

Dudley noted, “This need not be a cause for concern if the market is allowed to do its work, with new supply chains opening up to these big consuming regions.”

On the question of sustainability, global carbon dioxide (CO2)emissions are projected to rise by 29%, with all of the growth coming from the emerging economies. The outlook notes some positive signs:

• CO2 emissions are expected to increase slowly as natural gas and renewables gain market share from coal and oil
• CO2 emissions are expected to decline in Europe and the US. By the end of the forecast period, BP expects many advanced countries will experience economic growth while decreasing their energy use.

“This process shows the power of economic forces and competition," said BP chief economist Christof Rühl. "Put simply, people are finding ways to use energy more efficiently because it saves them money. This is also good for the environment― the less energy we use the less carbon we emit. For example, CO2 emissions in the US are back at 1990s’ levels."

The 2014 outlook also examines transportation more closely and takes an in-depth look at the North American natural gas revolution.

The outlook shows global energy demand continuing to increase at an average of 1.5%/yr to 2035. Growth is expected to moderate, climbing at an average of 2%/yr to 2020 and then by only 1.2%/yr to 2035. 

About 95% of this growth is expected to come from non-Organization for Economic Co-operation and Development (non-OECD) economies, with China and India will account for more than half of the increase. By 2035, energy use in the non-OECD nations is expected to be 69% higher than in 2012. 

In contrast, energy demand by OECD nations will have grown by only 5%, and it will actually decline after 2030, even with continued economic growth.

While the fuel mix is evolving, fossil fuel consumption will continue to be the primary sources. Oil, natural gas, and coal are expected to converge on market shares of around 26%-27% each by 2035, and non-fossil fuels (nuclear, hydro and renewables) on a share of around 5%-7% each.

Oil is expected to have slowest growth trend of the major fuels to 2035, with demand growing at an average of just 0.8%/yr. Nonetheless, the demand for oil and other liquid fuels will be 19 million bpd higher in 2035 than 2012. All of the net oil demand growth is expected to come from outside the OECD nations. Oil demand growth from China, India and the Middle East will account for almost all of net demand growth.

Growth in the supply of oil and other liquids (including biofuels) to 2035 is expected to come primarily from the Americas and Middle East.

More than half of the growth will come from non-OPEC sources, with rising production from US tight oil, Canadian oil sands, Brazilian deepwater, and biofuels more than offsetting mature declines elsewhere. Increasing production from new tight oil resources is expected to result in the US overtaking Saudi Arabia to become the world’s largest producer of liquids in 2014. US oil imports are expected to fall nearly 75% between 2012 and 2035.

OPEC’s share of the oil market is expected to fall early in the period, reflecting growing non-OPEC production together with slowing demand growth due to high prices and increasingly more-efficient transport technologies. OPEC market share is expected to rebound after 2020.

Natural gas is expected to be the fastest growing of the fossil fuels, with demand rising at an average of 1.9%/yr. Non-OECD countries are expected to generate 78% of demand growth. Industry and power generation account for the largest increments of new demand. LNG exports are expected to grow more than twice as fast as gas consumption, at an average of 3.9%/yr, and accounting for 26% of the growth in global gas supply to 2035.

Shale gas supplies are expected to meet 46% of the growth in gas demand and account for 21% of world gas and 68% of US gas production by 2035. North American shale gas production growth is expected to slow after 2020 and production from other regions to increase, but in 2035, North America is still expected to account for 71% of world shale gas production.

After oil, coal is expected to be the slowest growing major fuel, with demand rising on average 1.1%/yr to 2035. Over the forecast period, growth flattens to just 0.6%/yr after 2020. Nearly all (87%) of the net growth in demand to 2035 is expected to come from just China and India, whose combined share of global coal consumption will rise from 58% in 2012 to 64% in 2035.

Nuclear energy output is expected to rise to 2035 at around 1.9%/yr. China, India and Russia will together account for 96% of the global growth in nuclear power. In contrast, nuclear output in the US and EU declines due to expected plant closures.

Hydroelectric power will experience moderate demand growth of 1.8%/yr to 2035, with nearly half of the growth coming from China, India and Brazil.

Renewables are expected to continue to be the fastest growing energy class. The gain in market share is from a small base as this energy group will rise at an average of 6.4%/yr to 2035. Renewables’ share of global electricity production is expected to grow from 5% to 14% by 2035. 

While the OECD economies have led in renewables growth, renewables in the non-OECD are catching up and are expected to account for 45% of the total by 2035. Including biofuels, renewables are expected to have a higher share of primary energy than nuclear by 2025.

The full BP Energy Outlook 2035 is available online at www.bp.com/energyoutlook.