Page 7 - AfrOil Week 08 2023

AfrOil COMMENTARY AfrOil

Drivers The pace of wind and solar development
BP bases all three scenarios on a number of pres- will be rapid in all three scenarios. Even in New
ent trends. First, it notes that the global carbon Momentum, installed wind and solar capacity
budget is running out, and that despite all efforts will increase ninefold by 2050, primarily on the
made by governments and companies so far, back of declining costs. In Accelerated and Net
CO2 has continued to rise every year since the Zero, about a quarter to a third of the capacity
Paris Agreement was reached in 2015, with the in 2050 will be used to produce green hydrogen.
exception of 2020, when coronavirus (COVID- China and the developed world will domi-
19) restrictions caused energy demand to tank. nate 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 While BP is
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 predicting a
port declines in favour of electrification, and three scenarios, continued investment will still
vehicles become more efficient. The outlook for be needed to meet future demand, representing faster decline
natural gas will depend on the pace of the energy a break from the position of the International in oil and gas
transition and how demand grows in emerging Energy Agency (IEA), which stated in 2021 that
economies. no new oil and gas projects would be needed on consumption,
BP warns that the current energy crisis the path to net zero.
demonstrates that the transition away from BP notes that an accelerated energy tran- the company’s
oil and gas should be orderly, so that supply sition will result in a spike in demand for crit-
declines in line with demand and not at a faster ical minerals, and this will mean a significant CEO is talking
rate. Upstream investment must continue over increase in investment in the mining sector. about “dialing
the next three decades to offset natural decline at But there should also be greater scrutiny about
already-developed fields, the company stresses. the sustainability of existing and new mining back” green
The decarbonisation of the global power activity.
system will be driven by the greater deployment energy plans
of wind and solar power, BP notes, and both An orderly transition
low-carbon hydrogen and carbon capture uti- Despite its projections, BP’s chief economist
lisation and storage (CCUS) will play critical Spencer Dale stresses that the transition from
roles in decarbonising hard-to-abate industries, hydrocarbons must be orderly to avoid future
according to the company. energy price spikes and shortages.
“The scale of the economic and social disrup-
A break from the past tions over the past year associated with the loss
In contrast with its previous outlooks, all three of just a fraction of the world’s fossil fuels has
of BP’s scenarios now envisage final energy also highlighted the need for the transition away
peaking within the next three decades, owing to from hydrocarbons to be orderly, such that the
energy efficiency gains. demand for hydrocarbons falls in line with avail-
But as was the case in previous reports, BP able supplies, avoiding future periods of energy
warns that in the New Momentum scenario, the shortages and higher prices,” Dale notes.
world is lagging far behind the necessary course This is a warning that should be heeded by
to reach net zero by 2050. In New Momentum, those advocating for an immediate end to new
global carbon emissions will only be around upstream investment.
30% lower than the level they were at in 2019. “The events of the past year have served as a
Electrification will drive emissions reductions reminder to us all that this transition also needs
in all three scenarios, with electricity demand to take account of the security and affordability
climbing 75% by 2050. of energy,” Dale says.
In New Momentum, global oil demand pla- BP also highlights the drawback of renewa-
teaus at around 100mn barrels per day of the bles: their intermittent supply. As such, they will
next decade, and then shrinks to 75mn bpd by need to be combined with baseload power sup-
2050. Natural gas demand will keep rising out to ply – ideally, natural gas-fired plants equipped
2050, on the other hand, potentially climbing to with carbon-capture technology.
20% above the 2019 level by that year. LNG trade Interestingly, while BP is predicting a faster
will increase in the near term, but the outlook is decline in oil and gas consumption, the com-
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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