Page 7 - NorthAmOil Week 08 2023

NorthAmOil COMMENTARY NorthAmOil

Under the New
Momentum scenario,
the LNG market is set
to double in size by
2040 versus 2019,
with extra supply
predominantly coming
from the US and the
Middle East.

reductions in all three scenarios, with electricity transition will result in a spike in demand for
demand climbing 75% by 2050. critical minerals, and this will mean a signifi-
In New Momentum, global oil demand pla- cant increase in investment in the mining sec-
teaus at around 100mn barrels per day of the tor. But there should also be greater scrutiny
next decade, and then shrinks to 75mn bpd by about the sustainability of existing and new
2050. Natural gas demand will keep rising out mining activity.
to 2050, on the other hand, potentially climb-
ing to 20% above the 2019 level by that year. An orderly transition
LNG trade will increase in the near term, but Despite its projections, BP’s chief economist
the outlook is more uncertain after 2030. But Spencer Dale stresses that the transition from
in New Momentum, the LNG market is set to hydrocarbons must be orderly to avoid future
double in size by 2040 versus 2019, with extra energy price spikes and shortages.
supply predominantly coming from the US “The scale of the economic and social dis-
and the Middle East. Growth will be driven by ruptions over the past year associated with the
demand in emerging Asian markets, as these loss of just a fraction of the world’s fossil fuels
countries shift away from coal while continuing has also highlighted the need for the transition
to industrialise. away from hydrocarbons to be orderly, such that
The pace of wind and solar development will the demand for hydrocarbons falls in line with
be rapid in all three scenarios. Even in New available supplies, avoiding future periods of
Momentum, installed wind and solar capacity energy shortages and higher prices,” Dale notes.
will increase ninefold by 2050, primarily on the This is a warning that should be heeded by In contrast with
back of declining costs. In Accelerated and Net those advocating for an immediate end to new
Zero, about a quarter to a third of the capacity upstream investment. its previous
in 2050 will be used to produce green hydrogen. “The events of the past year have served as a outlooks, all three
China and the developed world will domi- reminder to us all that this transition also needs
nate new wind and solar capacity, accounting to take account of the security and affordability of BP’s scenarios
for 30-40% of the overall increase between now of energy,” Dale says.
and 2035. BP also highlights the drawback of renewa- now envisage
Electrification will expand in all end-user bles: their intermittent supply. As such, they will
sectors over the period of the outlook, but the need to be combined with baseload power sup- final energy
greatest scope for growth is in buildings, where ply – ideally natural gas plants equipped with peaking within
BP envisages that at least half of final energy carbon-capture technology.
demand will be electrified by 2050 in all three Interestingly, while BP is predicting a faster the next three
scenarios. decline in oil and gas consumption, the com-
While demand for oil and gas falls in all three pany’s CEO Bernard Looney recently said he decades.
scenarios, continued investment will still be wanted to “dial back” its own green energy push,
needed to meet future demand, representing in response to lower returns from investments
a break from the position of the International in renewables. BP said in 2020 it wanted to curb
Energy Agency (IEA), which stated in 2021 that its oil and gas production by 40%, but it has now
no new oil and gas projects would be needed on scaled back that target to 25%. It is also ramping
the path to net zero. up oil and gas investments to $8bn annually by
BP notes that an accelerated energy 2030 to “meet near-term demand.”™

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