Page 4 - AsiaElec Week 09 2023

AsiaElec COMMENTARY AsiaElec

BP predicts faster decline in oil and

gas demand

Sky-high oil and gas prices coupled to issues related to net-zero goals and
increased renewables use points to beginning of the end for oil and gas

ASIA BP released its flagship annual report, Energy governments and companies so far, CO2 has contin-
Outlook, at the end of January, forecasting an ued to rise every year since the Paris Agreement was
WHAT: Global rates accelerated decline in oil and gas consumption reached in 2015, with the exception of 2020, when
of oil and gas use set to as a result of fallout from the Russia-Ukraine war coronavirus (COVID-19) restrictions caused energy
crash. and the impact of the broader energy crisis. demand to tank.
In light of soaring global oil and gas prices, Second, BP notes that the Russia-Ukraine war is
WHY: caused in part by Moscow’s invasion of Ukraine having long-lasting implications for the global energy
Renewables and soaring and the subsequent severing of energy ties system, and is causing the pace of the energy transition
prices combine to mark between Russia and the EU, countries will pur- to accelerate. Third, the importance of fossil fuels is
fossil fuel’s decline. sue greater energy security over the next decade, declining as renewables expand their share and elec-
and this will result in a faster decline in global oil trification is increased.
WHAT NEXT: and gas demand, BP said. At the same time, the Oil demand will decline over the period of the out-
Drawback awareness - UK major predicts an accelerated shift towards look, BP notes, as its use in road transport declines in
renewables at present renewable energy – in part because of high oil favour of electrification, and vehicles become more
are not all they are and gas prices, and in part because of hydro- efficient. The outlook for natural gas will depend on the
cracked up to be. carbon importers developing more domestic pace of the energy transition and how demand grows
energy supply. And this will mean that global in emerging economies. BP warns that
emissions reduce more quickly, BP said. BP warns that the current energy crisis demon-
BP outlines three scenarios in its outlook. strates that the transition away from oil and gas should the current
The first two – Accelerated and Net Zero – are be orderly, so that supply declines in line with demand energy crisis
broadly in line with IPCCs scenarios that are and not at a faster rate. Upstream investment must
consistent with Paris Agreement goals. These continue over the next three decades to offset natu- demonstrates
scenarios envisage the substantial cut in carbon ral decline at already-developed fields, the company
emissions – 75% in Accelerated and more than stresses. that the
95% in Net Zero. Net Zero will also involve a The decarbonisation of the global power sys-
shift in societal behaviour and preferences to tem will be driven by the greater deployment transition away
support increased energy efficiency and the of wind and solar power, BP notes, and both from oil and gas
greater adoption of low-carbon technologies. low-carbon hydrogen and carbon capture uti-
This is to say that they are scenarios based on lisation and storage (CCUS) will play critical should be orderly
predetermined outcomes. roles in decarbonising hard-to-abate industries,
BP’s third scenario, New Momentum, fore- according to the company.
casts the current trajectory of the global energy
system, based on current trends and known pol- A break from the past
icy directions. It stresses “the marked increase In contrast with its previous outlooks,
in global ambition for decarbonisation in recent all three of BP’s scenarios now envisage final
years, as well as on the manner and speed of energy peaking within the next three decades,
decarbonisation seen over the recent past.” owing to energy efficiency gains. But as was
The UK cautions that “the scenarios are not pre- the case in previous reports, BP warns that
dictions of what is likely to happen or what BP would in the New Momentum scenario, the world
like to happen.” Furthermore, it states that “the many is lagging far behind the necessary course to
uncertainties surrounding the transition of the global reach net zero by 2050. In New Momentum,
energy system mean that the probability of any one of global carbon emissions will only be around
these scenarios materialising exactly as described is 30% lower than the level they were at in 2019.
negligible.” Nevertheless, the outlook provides useful Electrification will drive emissions reductions
insight on how global energy trends may play out over in all three scenarios, with electricity demand
the next three decades. climbing 75% by 2050.
BP bases all three scenarios on a number of pres- In New Momentum, global oil demand pla-
ent trends. First, it notes that the global carbon budget teaus at around 100mn barrels per day of the
is running out, and that despite all efforts made by next decade, and then shrinks to 75mn bpd by

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