Released July 19, 2024 | SUGAR LAND
en
Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--BP plc (NYSE:BP) (London, England) has for decades used scenario planning to explore how its business could be impacted by a variety of strategic changes. Earlier this month, it shared with the world its assessment of how global energy supply and demand could look under two scenarios that extended to 2050.
The 2024 edition of BP's Energy Outlook is the 13th time the British integrated oil and gas supermajor has looked at how global energy markets could unfold over a 25-year period.
And, in laying out these two scenarios, BP Chief Economist Spenser Dale gave his traditional caution: The Energy Outlook was not a prediction of where global energy markets and carbon emission trends will play out over the next few decades, or where BP would like those trends would go. Rather, it sought to show where worldwide energy usage and carbon emissions might stand in 2050 under two scenarios: Current Trajectory and Net-Zero Emissions.
The Current Trajectory case is, in effect, business as usual: "It places weight on climate policies already in force and on global aims and pledges for future decarbonization. At the same time, it also recognizes the myriad challenges associated with meeting these aims."
The Net-Zero case, on the other hand, is broadly consistent with the guidelines in the Paris Agreement of 2015, which sought to keep the long-term global average temperature gain to 2 degrees Celsius or less since pre-industrial times.
The Net-Zero scenario assumes "a significant tightening in climate policies. It also embodies shifts in societal behavior and preferences which further support gains in energy efficiency and the adoption of low-carbon energy."
The two scenarios are based on existing technologies and do not consider the possible impact of entirely new or unknown technologies, the report noted.
BP identified four drivers that could determine whether worldwide demand for energy in 2050 looks more like the Current Trajectory or the Net-Zero case:
"Despite marked increases in government climate ambitions and actions, and rapid growth in investment in low carbon energy," Dale noted in his introduction to the report, "carbon emissions continue to rise. Indeed, other than the COVID-induced fall of 2020, carbon emissions have risen every year since the Paris climate goals were agreed in 2015. The carbon budget is running out."
The BP report projected that, in the Current Trajectory case, worldwide CO2 emissions from the energy sector would trend down slowly from today's level, slightly over 40 gigatons of CO2 equivalent per year to slightly over 30 gigatons of CO2 equivalent per year by 2050. In calculating CO2 equivalent emissions from the energy sector, BP included emissions from energy use, industrial processes, natural gas flaring and methane emissions from energy production. It did not include emissions from the agricultural sector, a major emitter of CO2.
But implementing a series of changes contained in the Net Zero case could lower annual worldwide emissions of CO2 equivalent from the energy sector by about 95% by 2050, to virtually zero, it said.
Click on the image at right to see BP's projection of worldwide CO2 equivalent emissions from the energy sector under two scenarios to 2050.
Looking broadly at global energy use, the Energy Outlook said primary energy use would increase slightly over the current 600 exajoules (EJ) over the next 25 years in the Current Trajectory case. But the Net-Zero scenario would see worldwide primary energy fall sharply over the next two-and-a-half decades, to about 430 EJ in 2050. The composition of worldwide primary energy use would change dramatically in the Net-Zero scenario, with sharp reductions in the use of hydrocarbons and a sharp gain in renewable energy.
Click on the image at right to see how global primary energy use could unfold over the next 25 years under the two scenarios.
Under the Current Trajectory case, global oil demand would fall about 25% from its current level of about 100 million barrels per day (BBL/d) to approximately 75 million BBL/d in 2050. But in the more aggressive Net-Zero case, oil demand would fall about 70%, to between 25 million and 30 million BBL/d in 2050. In either scenario, growing electric transportation and rising vehicle mileage efficiency would be the leading reasons for the displacement of oil.
Worldwide demand for natural gas, including liquefied natural gas (LNG), would rise over the next quarter-century in BP's Current Trajectory case, driven by developing nations' demand for LNG to generate electricity. But in a Net-Zero case, global gas demand would plummet over the next 25 years.
In explaining the divergent future demand for gas, the Energy Outlook explained, "The prospects for natural gas are shaped by two significant but opposing trends: increasing demand in emerging economies as they grow and industrialize, offset by a shift away from natural gas to greater electrification and lower carbon fuels (in advanced economies). The net impact of these two opposing forces depends on the speed of the energy transition."
The BP report offers further insight into trends driving divergent estimates of future LNG supply and demand over the next 25 years, an area of keen interest to companies developing LNG export terminals in the U.S. and elsewhere. "The range of outcomes for LNG trade widens post-2030. In the Current Trajectory case, LNG demand increases by more than 25% over the subsequent 20 years. This demand growth requires 300 billion cubic meters per year of additional liquefaction capacity to come online post-2030. In contrast, the gains in LNG demand out to 2030 in Net Zero are reversed over the following decade, and by 2050 global trade in LNG is around 40% below its 2022 level, implying that no additional liquefaction capacity beyond that already under construction is required."
It noted, "This widening range of outcomes adds to the uncertainty associated with investments in LNG facilities, which typically have an economic life of 15-20 years."
Speaking more generally about global energy trends, the Energy Outlook noted, "The world is in an 'energy addition' phase of the energy transition in which it is consuming increasing amounts of both low carbon energy and fossil fuels. The history of energy has seen several past phases of 'energy additions,' for example the rapid increase in coal as the world shifted from the use of wood as its primary energy source to coal, and later the sharp increases in oil as it displaced coal as the dominant energy form."
"But in each of these cases," BP continued, "the world continued to consume similar or greater amounts of all types of energy. The challenge is to move--for the first time in history--from the current 'energy addition' phase of the energy transition to an 'energy substitution' phase, in which low carbon energy increases sufficiently quickly to more than match the increase in global energy demand, allowing the consumption of fossil fuels, and with that carbon emissions, to decline."
It concluded, "The longer it takes for the world to move to a rapid and sustained energy transition, the greater the risk of a costly and disorderly adjustment pathway in the future."
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
The 2024 edition of BP's Energy Outlook is the 13th time the British integrated oil and gas supermajor has looked at how global energy markets could unfold over a 25-year period.
And, in laying out these two scenarios, BP Chief Economist Spenser Dale gave his traditional caution: The Energy Outlook was not a prediction of where global energy markets and carbon emission trends will play out over the next few decades, or where BP would like those trends would go. Rather, it sought to show where worldwide energy usage and carbon emissions might stand in 2050 under two scenarios: Current Trajectory and Net-Zero Emissions.
The Current Trajectory case is, in effect, business as usual: "It places weight on climate policies already in force and on global aims and pledges for future decarbonization. At the same time, it also recognizes the myriad challenges associated with meeting these aims."
The Net-Zero case, on the other hand, is broadly consistent with the guidelines in the Paris Agreement of 2015, which sought to keep the long-term global average temperature gain to 2 degrees Celsius or less since pre-industrial times.
The Net-Zero scenario assumes "a significant tightening in climate policies. It also embodies shifts in societal behavior and preferences which further support gains in energy efficiency and the adoption of low-carbon energy."
The two scenarios are based on existing technologies and do not consider the possible impact of entirely new or unknown technologies, the report noted.
BP identified four drivers that could determine whether worldwide demand for energy in 2050 looks more like the Current Trajectory or the Net-Zero case:
- Faster and wider decarbonization of the Power and Industrial sectors, particularly in developing nations
- Faster and wider deployment of energy-efficient technologies in industrial settings
- Faster embrace of electric transportation, and
- Faster decarbonization in buildings, meaning replacement of gas appliances with electric ones and increased weatherization
"Despite marked increases in government climate ambitions and actions, and rapid growth in investment in low carbon energy," Dale noted in his introduction to the report, "carbon emissions continue to rise. Indeed, other than the COVID-induced fall of 2020, carbon emissions have risen every year since the Paris climate goals were agreed in 2015. The carbon budget is running out."
The BP report projected that, in the Current Trajectory case, worldwide CO2 emissions from the energy sector would trend down slowly from today's level, slightly over 40 gigatons of CO2 equivalent per year to slightly over 30 gigatons of CO2 equivalent per year by 2050. In calculating CO2 equivalent emissions from the energy sector, BP included emissions from energy use, industrial processes, natural gas flaring and methane emissions from energy production. It did not include emissions from the agricultural sector, a major emitter of CO2.
But implementing a series of changes contained in the Net Zero case could lower annual worldwide emissions of CO2 equivalent from the energy sector by about 95% by 2050, to virtually zero, it said.
Looking broadly at global energy use, the Energy Outlook said primary energy use would increase slightly over the current 600 exajoules (EJ) over the next 25 years in the Current Trajectory case. But the Net-Zero scenario would see worldwide primary energy fall sharply over the next two-and-a-half decades, to about 430 EJ in 2050. The composition of worldwide primary energy use would change dramatically in the Net-Zero scenario, with sharp reductions in the use of hydrocarbons and a sharp gain in renewable energy.
Under the Current Trajectory case, global oil demand would fall about 25% from its current level of about 100 million barrels per day (BBL/d) to approximately 75 million BBL/d in 2050. But in the more aggressive Net-Zero case, oil demand would fall about 70%, to between 25 million and 30 million BBL/d in 2050. In either scenario, growing electric transportation and rising vehicle mileage efficiency would be the leading reasons for the displacement of oil.
Worldwide demand for natural gas, including liquefied natural gas (LNG), would rise over the next quarter-century in BP's Current Trajectory case, driven by developing nations' demand for LNG to generate electricity. But in a Net-Zero case, global gas demand would plummet over the next 25 years.
In explaining the divergent future demand for gas, the Energy Outlook explained, "The prospects for natural gas are shaped by two significant but opposing trends: increasing demand in emerging economies as they grow and industrialize, offset by a shift away from natural gas to greater electrification and lower carbon fuels (in advanced economies). The net impact of these two opposing forces depends on the speed of the energy transition."
The BP report offers further insight into trends driving divergent estimates of future LNG supply and demand over the next 25 years, an area of keen interest to companies developing LNG export terminals in the U.S. and elsewhere. "The range of outcomes for LNG trade widens post-2030. In the Current Trajectory case, LNG demand increases by more than 25% over the subsequent 20 years. This demand growth requires 300 billion cubic meters per year of additional liquefaction capacity to come online post-2030. In contrast, the gains in LNG demand out to 2030 in Net Zero are reversed over the following decade, and by 2050 global trade in LNG is around 40% below its 2022 level, implying that no additional liquefaction capacity beyond that already under construction is required."
It noted, "This widening range of outcomes adds to the uncertainty associated with investments in LNG facilities, which typically have an economic life of 15-20 years."
Speaking more generally about global energy trends, the Energy Outlook noted, "The world is in an 'energy addition' phase of the energy transition in which it is consuming increasing amounts of both low carbon energy and fossil fuels. The history of energy has seen several past phases of 'energy additions,' for example the rapid increase in coal as the world shifted from the use of wood as its primary energy source to coal, and later the sharp increases in oil as it displaced coal as the dominant energy form."
"But in each of these cases," BP continued, "the world continued to consume similar or greater amounts of all types of energy. The challenge is to move--for the first time in history--from the current 'energy addition' phase of the energy transition to an 'energy substitution' phase, in which low carbon energy increases sufficiently quickly to more than match the increase in global energy demand, allowing the consumption of fossil fuels, and with that carbon emissions, to decline."
It concluded, "The longer it takes for the world to move to a rapid and sustained energy transition, the greater the risk of a costly and disorderly adjustment pathway in the future."
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
