Page 6 - LatAmOil Week 20 2021

LatAmOil COMMENTARY LatAmOil

IEA’s net-zero plan calls for

ending oil, gas investment

The IEA has adopted its hardest line yet against investment in fossil fuel production

THE International Energy Agency (IEA) has hailed as a key transition fuel, will fare better
taken its hardest line against oil and gas invest- than oil but will still see a significant contrac-
WHAT: ment yet, forecasting that if the world continues tion in demand. The IEA predicts consumption
A new report by the IEA on a net-zero path, no further upstream projects will keep rising into the mid-2020s, but will then
concludes that no more are needed beyond those already approved. shrink from a peak of 4.3 trillion cubic metres to
upstream projects are The Paris-based agency published its Net 3.7 tcm in 2030 and 1.75 tcm in 2050, or 55% less
needed if the world em- Zero by 2050: a Roadmap for the Global Energy than the level in 2020.
barks on a path towards Sector report on May 18, concluding that the “No new natural gas fields are needed in the
net-zero emissions by path towards carbon neutrality within three NZE beyond those already under development,”
2050. decades was “narrow but still achievable.” How- the IEA states. “Also not needed are many of the
ever, it will entail dramatic contractions in oil, LNG liquefaction facilities currently under con-
WHY: gas and coal demand. struction or at the planning stage.”
The report envisages In its Net-Zero Emissions by 2050 Scenario The decline in gas trade is shared fairly evenly
dramatic contractions in
oil, gas and coal demand (NZE), the IEA projects that coal use declines between LNG and piped supplies, which will
over the coming decades. from 5.25bn tonnes in 2020 to a mere 2.5bn contract by 60% and 65% respectively. Demand
tonnes in 2030 and just under 600mn tonnes in will fall by 5% per year on average during the
WHAT NEXT: 2050. Oil consumption will never return to its 2030s, which may mean some fields are closed
Most countries will not 2019 peak, the agency estimates, shrinking from prematurely or shut in temporarily, the IEA
follow this recommen- 88mn barrels per day in 2020 to 72mn bpd in notes. By 2050, half of the remaining gas con-
dation, and given the 2030 and 24mn bpd in 2050. sumed will be used to produce hydrogen.
great uncertainties in the “The trajectory of oil demand in the NZE
outlook for many clean means that no exploration for new resources is Risks and rewards
technologies, this might required and, other than fields already approved Were the IEA’s predictions to come true, it would
be prudent. for development, no new oilfields are necessary,” entail millions of job losses across the fossil fuel
the IEA said. “However, continued investment industry in the years to come, and many billions
in existing sources of oil production [is] needed.” of dollars of lost investment. Shrinking demand
The refining industry will also face consid- over the coming years would mean weak prices,
erable headwinds. “Refinery throughput drops squeezing out all but the lowest-cost producers
considerably and there are significantly changes such as Saudi Arabia. No surprise, then, that the
in product demand,” the report states. “With IEA envisages OPEC accounting for at least half
rapid electrification of the vehicle fleet, there is of the world’s oil production in 2050.
a major drop in demand for traditional refined The energy transition presents significant
products such as gasoline and diesel, while risks to the hydrocarbon industry, the report
demand for non-combusted products such as concludes, but there are also certain opportu-
petrochemicals increases.” nities. Coal-mining operators can shift towards
While 55% of oil today is used to produce the extraction of minerals needed for clean
gasoline and diesel, the share will fall to only energy technologies, for instance. The oil and
15% in 2050. Meanwhile, the amount used to gas industry is meanwhile well-positioned to
produce ethane, naphtha and LPG will grow develop carbon capture utilisation and storage
from 20% to nearly 60% in 2050. Many refin- (CCUS), low-carbon hydrogen, biofuels and
ers are already adjusting to this trend by shifting offshore wind.
their product slate more towards petrochemi- “Scaling up these technologies and bringing
cals, while others are converting their facilities down their costs will rely on large-scale engi-
to produce biofuels. neering and project management capabilities,
“Refiners are used to coping with changing qualities that are a good match to those of large
demand patterns, but the scale of the changes in oil and gas companies,” the IEA explains.
the NZE would inevitably lead to refinery clo- Minimising emissions from oil and gas oper-
sures, especially for refineries not able to con- ations should be a “first-order priority” for the
centrate primarily on petrochemical operations industry, with a 75% drop in methane emissions
or the production of biofuels,” the IEA said. envisaged over the next 10 years, as well as an
Natural gas, which the IEA has previously elimination of flaring.

P6 www. NEWSBASE .com Week 20 20•May•2021