Page 6 - LatAmOil Week 08 2023

LatAmOil COMMENTARY LatAmOil

BP predicts faster decline

in demand for oil and gas

Fallout from Russia-Ukraine war and broader energy crisis seen affecting demand

BP released its flagship annual report, Energy present trends. First, it notes that the global
Outlook, at the end of January, forecasting an carbon budget is running out, and that despite
WHAT: accelerated decline in oil and gas consumption all efforts made by governments and compa-
BP expects the decline in as a result of fallout from the Russia-Ukraine nies so far, CO2 has continued to rise every
oil and gas consumption war and the impact of the broader energy crisis. year since the Paris Agreement was reached in
to gain momentum as a In light of soaring global oil and gas prices, 2015, with the exception of 2020, when corona-
result of the Ukraine war caused in part by Moscow’s invasion of Ukraine virus (COVID-19) restrictions caused energy
and due to the broader and the subsequent severing of energy ties demand to tank.
energy crisis.
between Russia and the EU, countries will pur- Second, BP notes that the Russia-Ukraine
WHY: sue greater energy security over the next decade, war is having long-lasting implications for the
The quest for increased and this will result in a faster decline in global oil global energy system, and is causing the pace
energy security is likely and gas demand, BP said.At the same time, the of the energy transition to accelerate. Third, the
to spur a search for alter- UK major predicts an accelerated shift towards importance of fossil fuels is declining as renew-
natives to fossil fuels. renewable energy – in part because of high oil ables expand their share and electrification is
and gas prices, and in part because of hydro- increased.
WHAT NEXT: carbon importers developing more domestic Oil demand will decline over the period of
The current energy crisis energy supply. And this will mean that global the outlook, BP notes, as its use in road trans-
highlights the need for an emissions reduce more quickly, BP said. port declines in favour of electrification, and
orderly transition from oil BP outlines three scenarios in its outlook. vehicles become more efficient. The outlook for
and gas. The first two – Accelerated and Net Zero – are natural gas will depend on the pace of the energy
broadly in line with IPCCs scenarios that are transition and how demand grows in emerging
consistent with Paris Agreement goals. These economies.
scenarios envisage the substantial cut in carbon BP warns that the current energy crisis
emissions – 75% in Accelerated and more than demonstrates that the transition away from
95% in Net Zero. oil and gas should be orderly, so that supply
The latter will also involve a shift in societal declines in line with demand and not at a faster
behaviour and preferences to support increased rate. Upstream investment must continue over
energy efficiency and the greater adoption of the next three decades to offset natural decline at
low-carbon technologies. This is to say that already-developed fields, the company stresses.
they are scenarios based on predetermined The decarbonisation of the global power
outcomes. system will be driven by the greater deployment
BP’s third scenario, New Momentum, fore- of wind and solar power, BP notes, and both
casts the current trajectory of the global energy low-carbon hydrogen and carbon capture uti-
system, based on current trends and known pol- lisation and storage (CCUS) will play critical
icy directions. It stresses “the marked increase roles in decarbonising hard-to-abate industries,
in global ambition for decarbonisation in recent according to the company.
years, as well as on the manner and speed of
decarbonisation seen over the recent past.” A break from the past
The company cautions that “the scenarios In contrast with its previous outlooks, all three
are not predictions of what is likely to happen or of BP’s scenarios now envisage final energy
what BP would like to happen.” Furthermore, it peaking within the next three decades, owing to
states that “the many uncertainties surrounding energy efficiency gains.
the transition of the global energy system mean But as was the case in previous reports, BP
that the probability of any one of these scenar- warns that in the New Momentum scenario, the
ios materialising exactly as described is negligi- world is lagging far behind the necessary course
ble.” Nevertheless, the outlook provides useful to reach net zero by 2050. In New Momentum,
insight on how global energy trends may play global carbon emissions will only be around
out over the next three decades. 30% lower than the level they were at in 2019.
Electrification will drive emissions reductions
Drivers in all three scenarios, with electricity demand
BP bases all three scenarios on a number of climbing 75% by 2050.

P6 www. NEWSBASE .com Week 08 22•February•2023