Page 7 - LatAmOil Week 42

LatAmOil COMMENTARY LatAmOil

“The longer the disruption, the more some looking to improve their air quality and support
changes that eat into oil consumption become an expansion in manufacturing. Gas will have a
engrained, such as working from home or 25% share of the global primary energy mix in
avoiding air travel,” the IEA said. “However, not 2040, versus 23% last year.
all the shifts in consumer behaviour disadvan- Still, rates of growth will depend greatly on
tage oil. It benefits from a near-term aversion policy. “Gas faces significant uncertainty as
to public transport, the continued popularity these economies emerge from the COVID-19
of SUVs and the delayed replacement of older, crisis,” the agency said. “Despite a lower price
inefficient vehicles.” outlook, growth prospects for gas continue to
“In the absence of a larger shift in policies, it rely heavily on policy support in the form of air
is still too early to foresee a rapid decline in oil quality regulations or other restrictions on the
demand,” the IEA continued. use of more polluting fuels, and on significant
Demand will be supported by rising incomes investment in new gas infrastructure.”
in emerging and developing economies, off- Some $70bn per year will be needed to
setting declines elsewhere. Even so, oil use for expand infrastructure to enable greater gas
passenger cars peaks in both STEPS and DRS, use under STEPS, the IEA said. But economic
thanks to improvements in fuel efficiency and a fallout from the pandemic will limit how much
surge in electric car sales. funding is available to major gas consumers.
“Upward pressure on oil demand increas- What is more, this is the IEA’s first outlook to
ingly depends on its rising use as a feedstock in predict a decline by 2040 in gas demand in
the petrochemical sector,” the IEA said. “Despite advanced economies under STEPs. Gas will face
an anticipated rise in recycling rates, there is still stiff competition in these markets from renew-
plenty of scope for demand for plastics to rise, ables. In the EU, demand will not return to the
especially in developing economies.” 2019 level, even though gas will benefit from the
In STEPS, oil demand rises by 5mn bpd in retiring of coal and nuclear plants in countries
2021 and returns to pre-crisis levels by around such as Germany.
2023, rising thereafter by 0.7mn bpd annually up In DRS, demand will take until 2024 to
until 2030. In the following decade growth slows rebound to the level in 2019, as weaker power
to 0.1mn bpd per year. This means consumption consumption and subdued industrial activity
will exceed 104mn bpd in 2040, versus 97.9mn drag on growth rates. Gas exporters will also
bpd last year. struggle from low prices and “a delayed recov-
In DRS, consumption does not get back to ery also casts a long shadow over the economics
the pre-pandemic level until 2027 and flattens of already sanctioned gas projects expected to
at just under 100mn bpd. Under SDS, mean- come online in the next few years,” the IEA said.
while, demand contracts greatly to 92.5mn bpd Revenue constraints will also mean less is
in 2025, 86.5mn bpd in 2030 and 66.2mn bpd spent on infrastructure developments in coun-
in 2040. tries with the most growth potential. In the DRS
demand, consumption will grow by only 24%
Gas by 2040.
Gas demand will decline by only 3% this year, In SDS, gas demand rises by only 3.5% to
according to the IEA, though this still represents 4.166 tcm by 2025 and will then begin declin-
its biggest contraction since emerging as a major ing in the late 2020s, sliding back to 3.998 tcm
fuel in the 1930s. Gas has proved more resilient in 2030 and 3.554 tcm in 2040. Even in this sce-
than oil and gas, as less gas use in commercial nario, however, gas will retain the same share in
and public buildings has been countered by primary energy consumption in two decades’
increased residential consumption. A decline in time that it had last year.
industrial demand was meanwhile offset by oil/ “There is a robust long-term case for gases
coal-to-gas switching. in the energy system. In the SDS, there are ser-
Its outlook is also far stronger than for oil. vices that gases provide that it would be difficult
Under STEPS, consumption will surge by 15% to provide cost effectively using other sources,”
by 2030 and 30% by 2040, reaching 5.221 trillion the IEA said, citing “high-temperature heat for
cubic metres. This growth will mostly be driven industry, winter heat for buildings and seasonal
by gains in South and East Asian countries flexibility for power systems.” ™

Week 42 22•October•2020 www. NEWSBASE .com P7