Page 7 - AsianOil Week 08 2023

AsianOil COMMENTARY AsianOil

the next three decades. The pace of wind and solar development
BP bases all three scenarios on a number of will be rapid in all three scenarios. Even in New
present trends. First, it notes that the global car- Momentum, installed wind and solar capacity
bon budget is running out, and that despite all will increase ninefold by 2050, primarily on the
efforts made by governments and companies so back of declining costs. In Accelerated and Net
far, CO2 has continued to rise every year since Zero, about a quarter to a third of the capacity
the Paris Agreement was reached in 2015, with in 2050 will be used to produce green hydrogen.
the exception of 2020, when coronavirus restric- China and the developed world will dom-
tions caused energy demand to tank. inate new wind and solar capacity, accounting
Second, BP notes that the Russia-Ukraine for 30-40% of the overall increase between now
war is having long-lasting implications for the and 2035.
global energy system, and is causing the pace Electrification will expand in all end-user
of the energy transition to accelerate. Third, the sectors over the period of the outlook, but the
importance of fossil fuels is declining as renew- greatest scope for growth is in buildings, where
ables expand their share and electrification is BP envisages that at least half of final energy
increased. demand will be electrified by 2050 in all three
Oil demand will decline over the period of scenarios.
the outlook, BP notes, as its use in road trans- While demand for oil and gas falls in all three
port declines in favour of electrification, and scenarios, continued investment will still be
vehicles become more efficient. The outlook for needed to meet future demand, representing
natural gas will depend on the pace of the energy a break from the position of the International
transition and how demand grows in emerging Energy Agency, which stated in 2021 that no
economies. new oil and gas projects would be needed on the
BP warns that the current energy crisis path to net zero.
demonstrates that the transition away from BP notes that an accelerated energy transition
oil and gas should be orderly, so that supply will result in a spike in demand for critical min-
declines in line with demand and not at a faster erals, and this will mean a significant increase
rate. Upstream investment must continue over in investment in the mining sector. But there
the next three decades to offset natural decline at should also be greater scrutiny about the sus-
already-developed fields, the company stresses. tainability of existing and new mining activity.
The decarbonisation of the global power sys-
tem will be driven by the greater deployment An orderly transition
of wind and solar power, BP notes, and both Despite its projections, BP’s chief economist
low-carbon hydrogen and carbon capture uti- Spencer Dale stresses that the transition from
lisation and storage (CCUS) will play critical hydrocarbons must be orderly to avoid future
roles in decarbonising hard-to-abate industries, energy price spikes and shortages.
according to the company. “The scale of the economic and social dis-
ruptions over the past year associated with the
A break from the past loss of just a fraction of the world’s fossil fuels
In contrast with its previous outlooks, all three has also highlighted the need for the transi-
of BP’s scenarios now envisage final energy tion away from hydrocarbons to be orderly,
peaking within the next three decades, owing such that the demand for hydrocarbons falls
to energy efficiency gains. But as was the case in line with available supplies, avoiding future
in previous reports, BP warns that in the New periods of energy shortages and higher prices,”
Momentum scenario, the world is lagging far Dale notes.
behind the necessary course to reach net zero This is a warning that should be heeded by
by 2050. In New Momentum, global carbon those advocating for an immediate end to new
emissions will only be around 30% lower than upstream investment.
the level they were at in 2019. Electrification “The events of the past year have served as a
will drive emissions reductions in all three sce- reminder to us all that this transition also needs
narios, with electricity demand climbing 75% to take account of the security and affordability
by 2050. of energy,” Dale says.
In New Momentum, global oil demand pla- BP also highlights the drawback of renew-
teaus at around 100mn barrels per day of the ables: their intermittent supply. As such, they
next decade, and then shrinks to 75mn bpd by will need to be combined with baseload power
2050. Natural gas demand will continue rising supply – ideally natural gas plants equipped with
through 2050, on the other hand, potentially carbon-capture technology.
climbing to 20% above the 2019 level by that Interestingly, while BP is predicting a faster
year. LNG trade will increase in the near term, decline in oil and gas consumption, the com-
but the outlook is more uncertain after 2030. pany’s CEO Bernard Looney recently said he
But in New Momentum, the LNG market is wanted to “dial back” its own green energy push,
set to double in size by 2040 versus 2019, with in response to lower returns from investments
extra supply predominantly coming from the in renewables. BP said in 2020 it wanted to curb
US and the Middle East. Growth will be driven its oil and gas production by 40%, but it has now
by demand in emerging Asian markets, as these scaled back that target to 25%. It is also ramping
countries shift away from coal while continuing up oil and gas investments to $8bn annually by
to industrialise. 2030 to “meet near-term demand.” ™

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