The financial pages have been awash with analysis of BP’s latest study of the energy market through 2030. It certainly makes interesting reading, but the Telegraph’s focus on the changing role of the oil majors is not our topic of interest here, although the reasons for it are. Is that a little opaque? Let me explain.
As a Financial Times article covering the BP report explains, oil’s share of global energy markets will continue its long-term decline over the next 20 years as the overall fuel mix will gradually shift. While fossil fuels contributed 83 percent of the growth in energy from 1990-2010, over the next 20 years they will contribute just 64 percent of the growth, the BP Energy Outlook study says. The contribution of renewables will grow across all sectors, but particularly biofuels. Crucially for the oil majors, OPEC’s importance is expected to grow, with its share of global production expected to rise from 40 percent in 2010 to 46 percent by 2030, a level not reached since 1977, as fields are developed in Saudi Arabia, Iraq and Angola, among others. A separate analysis in a Telegraph article lists out some of the expected trends.
Primary energy use is expected to grow by some 40 percent over the next 20 years almost solely due to emerging market demand, met initially by rising coal consumption, but with natural gas making the fastest inroads, such that by 2030 coal, oil and natural gas will each meet roughly 27 percent of energy needs. The balance will be met by rising renewables such as nuclear, hydro, wind, solar and geothermal which will grow from 5 percent to 18 percent of primary energy needs.
Oil consumption in OECD markets peaked in 2005 and is expected to be roughly back to where it was in 1990 by 2030, but will continue to rise in emerging markets. Global liquids as a whole will rise from 85.5 million tons per day to an estimated 102.4 million tons by 2030, while biofuels will make up about 9 percent of transport fuels and will contribute 125 percent of non-OPEC liquid fuel supply growth over the period meaning oil production will decrease from non-OECD markets as biofuels rise.
These are of course BP’s projections and they are subject to considerable degrees of error depending on prices, new discoveries, political developments, economic growth and so on in between. Clearly BP sees the rise of largely Middle Eastern and West African supply sources as a key part of the next two decades’ growth, and that will see a massive transfer of emerging market wealth into the region. Specifically BP sees increased oil supplies to come from Saudi Arabia, which should be able to add another 3 million barrels; Iraq increasing its output from 2.5 million to 5.5 million barrels per day; and an additional 2 million barrels of production should come from Canada’s oil sands. No mention is made in the news coverage of rising crude oil supply from Russia, even though BP has just completed a $5 billion share swap with Rosneft in the expectation that the joint venture will lead to new reserves being opened up in the Arctic; nor of Brazil which has major offshore finds (although considerable challenges ahead of it in terms of exploitation.)
Depressingly, BP does not think the world will achieve its carbon dioxide targets of 24 billion tons by 2030, saying in their estimation the world will over-produce by 27 percent to the tune of an additional 9 billion tons. If that is the case, pressure for carbon taxes will mount dramatically, and the ramifications for energy use and trade can only be guessed at. No doubt BP have factored their estimations into the report, but action on climate change alone adds such a level of uncertainty that BP’s projections could prove to be a Ëœbest case’ scenario.
To see the original BP Energy Outlook 2030 report click here.
MetalMiner and its sister site, Spend Matters, along with Nucor, will host a live simulcast, International Trade Breaking Point on March 1, 2011. If your company sources products from overseas, you will not want to miss this half-day event: