Page 7 - MEOG Week 08 2023
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MEOG                                  PRICES & PERFORMANCE                                            MEOG

       BP predicts faster decline in demand

        GLOBAL           BP released its flagship annual report, Energy  increased.
                         Outlook, at the end of January, forecasting an   Oil demand will decline over the period of
                         accelerated decline in oil and gas consumption  the outlook, BP notes, as its use in road trans-
                         as a result of fallout from the Russia-Ukraine war  port declines in favour of electrification, and
                         and the impact of the broader energy crisis.  vehicles become more efficient. The outlook for
                           In light of soaring global oil and gas prices,  natural gas will depend on the pace of the energy
                         caused in part by Moscow’s invasion of Ukraine  transition and how demand grows in emerging
                         and the subsequent severing of energy ties  economies.
                         between Russia and the EU, countries will pur-  BP warns that the current energy crisis
                         sue greater energy security over the next decade,  demonstrates that the transition away from
                         and this will result in a faster decline in global oil  oil and gas should be orderly, so that supply
                         and gas demand, BP said. At the same time, the  declines in line with demand and not at a faster
                         UK major predicts an accelerated shift towards  rate. Upstream investment must continue over
                         renewable energy – in part because of high oil  the next three decades to offset natural decline at
                         and gas prices, and in part because of hydro-  already-developed fields, the company stresses.
                         carbon importers developing more domestic   The decarbonisation of the global power sys-
                         energy supply. And this will mean that global  tem will be driven by the greater deployment
                         emissions reduce more quickly, BP said.  of wind and solar power, BP notes, and both
                           BP outlines three scenarios in its outlook.  low-carbon hydrogen and carbon capture uti-
                         The first two – Accelerated and Net Zero – are  lisation and storage (CCUS) will play critical
                         broadly in line with IPCCs scenarios that are  roles in decarbonising hard-to-abate industries,
                         consistent with Paris Agreement goals. These  according to the company.
                         scenarios envisage the substantial cut in car-
                         bon emissions – 75% in Accelerated and more  A break from the past
                         than 95% in Net Zero. Net Zero will also involve  In contrast with its previous outlooks, all three of
                         a shift in societal behaviour and preferences  BP’s scenarios now envisage final energy peaking
                         to support increased energy efficiency and the  within the next three decades, owing to energy
                         greater adoption of low-carbon technologies.  efficiency gains. But as was the case in previous
                         This is to say that they are scenarios based on  reports, BP warns that in the New Momentum
                         predetermined outcomes.              scenario, the world is lagging far behind the nec-
                           BP’s third scenario, New Momentum, fore-  essary course to reach net zero by 2050. In New
                         casts the current trajectory of the global energy  Momentum, global carbon emissions will only
                         system, based on current trends and known pol-  be around 30% lower than the level they were
                         icy directions. It stresses “the marked increase in  at in 2019. Electrification will drive emissions
                         global ambition for decarbonisation in recent  reductions in all three scenarios, with electricity
                         years, as well as on the manner and speed of  demand climbing 75% by 2050.
                         decarbonisation seen over the recent past.”  In New Momentum, global oil demand pla-
                           The UK cautions that “the scenarios are not  teaus at around 100mn barrels per day of the
                         predictions of what is likely to happen or what  next decade, and then shrinks to 75mn bpd by
                         BP would like to happen.” Furthermore, it states  2050. Natural gas demand will keep rising out
                         that “the many uncertainties surrounding the  to 2050, on the other hand, potentially climbing
                         transition of the global energy system mean  to 20% above the 2019 level by that year. LNG
                         that the probability of any one of these scenarios  trade will increase in the near term, but the out-
                         materialising exactly as described is negligible.”  look is more uncertain after 2030. But in New
                         Nevertheless, the outlook provides useful insight  Momentum, the LNG market is set to double in
                         on how global energy trends may play out over  size by 2040 versus 2019, with extra supply pre-
                         the next three decades.              dominantly coming from the US and the Mid-
                           BP bases all three scenarios on a number  dle East. Growth will be driven by demand in
                         of present trends. First, it notes that the global  emerging Asian markets, as these countries shift
                         carbon budget is running out, and that despite  away from coal while continuing to industrialise.
                         all efforts made by governments and compa-  The pace of wind and solar development
                         nies so far, CO2 has continued to rise every year  will be rapid in all three scenarios. Even in New
                         since the Paris Agreement was reached in 2015,  Momentum, installed wind and solar capacity
                         with the exception of 2020, when coronavirus  will increase ninefold by 2050, primarily on the
                         (COVID-19) restrictions caused energy demand  back of declining costs. In Accelerated and Net
                         to tank.                             Zero, about a quarter to a third of the capacity
                           Second, BP notes that the Russia-Ukraine  in 2050 will be used to produce green hydrogen.
                         war is having long-lasting implications for the   China and the developed world will dom-
                         global energy system, and is causing the pace  inate new wind and solar capacity, accounting
                         of the energy transition to accelerate. Third, the  for 30-40% of the overall increase between now
                         importance of fossil fuels is declining as renew-  and 2035.
                         ables expand their share and electrification is   Electrification will expand in all end-user

       Week 08   22•February•2023               www. NEWSBASE .com                                              P7
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