Page 7 - EurOil Week 42

EurOil COMMENTARY EurOil

However, the IEA’s report was more bullish
on oil than other recent outlooks such as BP’s,
which warned that peak oil demand would
occur within a few years, or may never regain
its pre-pandemic level. In both STEPS and DRS,
demand flattens out in the 2030s. But a pro-
longed economic downturn will mean that con-
sumption will be 4mn barrels per day lower than
in STEPS, keeping it below 100mn bpd.
“The longer the disruption, the more some
changes that eat into oil consumption become
engrained, such as working from home or avoid-
ing air travel,” the IEA said. “However, not all the
shifts in consumer behaviour disadvantage oil.
It benefits from a near-term aversion to public
transport, the continued popularity of SUVs
and the delayed replacement of older, inefficient
vehicles.” policy, the IEA notes.
“In the absence of a larger shift in policies, it “Gas faces significant uncertainty as these
is still too early to foresee a rapid decline in oil economies emerge from the COVID-19 crisis,”
demand,” the IEA continued. the agency said. “Despite a lower price outlook,
Demand will be supported by rising incomes growth prospects for gas continue to rely heavily
in emerging and developing economies, off- on policy support in the form of air quality reg-
setting declines elsewhere. Even so, oil use for ulations or other restrictions on the use of more
passenger cars peaks in both STEPS and DRS, polluting fuels, and on significant investment in
thanks to improvements in fuel efficiency and a new gas infrastructure.”
surge in electric car sales. Some $70bn per year will be needed to
“Upward pressure on oil demand increas- expand infrastructure to enable greater gas use
ingly depends on its rising use as a feedstock in under STEPS, the IEA said. But economic fallout
the petrochemical sector,” the IEA said. “Despite from the pandemic will limit how much fund-
an anticipated rise in recycling rates, there is still ing is available to major gas consumers. What
plenty of scope for demand for plastics to rise, is more, this is the IEA’s first outlook to predict
especially in developing economies.” a decline by 2040 in gas demand in advanced
In STEPS, oil demand rises by 5mn bpd in economies under STEPs. Gas will face stiff com-
2021 and returns to pre-crisis levels by around petition in these markets from renewables. In
2023, rising thereafter by 0.7mn bpd annually up the EU, demand will not return to the 2019 level,
until 2030. In the following decade growth slows even though gas will benefit from the retiring
to 0.1mn bpd per year. This means consumption of coal and nuclear plants in countries such as
will exceed 104mn bpd in 2040, versus 97.9mn Germany.
bpd last year. In DRS, demand will take until 2024 to
In DRS, consumption does not get back to rebound to the level in 2019, as weaker power
the pre-pandemic level until 2027 and flattens at consumption and subdued industrial activity
just under 100mn bpd. Under SDS, meanwhile, drag on growth rates. Gas exporters will also
demand contracts greatly to 92.5mn bpd in 2025, struggle from low prices and “a delayed recov-
86.5mn bpd in 2030 and 66.2mn bpd in 2040. ery also casts a long shadow over the economics
of already sanctioned gas projects expected to
Gas come online in the next few years,” the IEA said.
Gas demand will decline by only 3% this year, Revenue constraints will also mean less is
according to the IEA, though this still represents spent on infrastructure developments in coun-
its biggest contraction since emerging as a major tries with the most growth potential. In the DRS
fuel in the 1930s. Gas has proved more resilient demand, consumption will grow by only 24% by
than oil and gas, as less gas use in commercial 2040.
and public buildings has been countered by In SDS, gas demand rises by only 3.5% to
increased residential consumption. A decline in 4.166 tcm by 2025 and will then begin declin-
industrial demand was meanwhile offset by oil/ ing in the late 2020s, sliding back to 3.998 tcm
coal-to-gas switching. in 2030 and 3.554 tcm in 2040. Even in this sce-
Its outlook is also far stronger than for oil. nario, however, gas will retain the same share in
Under STEPS, consumption will surge by 15% primary energy consumption in two decades’
by 2030 and 30% by 2040, reaching 5.221 trillion time that it had last year.
cubic metres. This growth will mostly be driven “There is a robust long-term case for gases
by gains in south and east Asian countries look- in the energy system. In the SDS, there are ser-
ing to improve their air quality and support an vices that gases provide that it would be difficult
expansion in manufacturing. Gas will have a to provide cost effectively using other sources,”
25% share of the global primary energy mix in the IEA said, citing “high-temperature heat for
2040, versus 23% last year. industry, winter heat for buildings and seasonal
Still, rates of growth will depend greatly on flexibility for power systems. ™

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