BP has just released the latest version of its Energy Outlook to 2035. Although it contains the usual themes we have come to know and trust, such as energy demand growth being driven by developing nations, renewables grappling for a greater share of power generation, etc – there were as usual some great observations and takeaways. Here they are…
1) The US is expected to become a net exporter of natural gas by 2018, with net exports reaching 10.6 Bcf/d by 2035. Australia is set to overtake Qatar as the largest LNG exporting country by 2019, followed by the US overtaking Qatar in 2030.
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Africa as a region is projected to surpass the Middle East. Australia is expected to be the largest LNG exporter in 2035 with a share of 21% of global LNG trade. (Qatar is currently the largest exporter, with a 32% share of the global market).
2) The non-OECD’s vehicle population more than triples from 0.4 to 1.5 billion by 2035, although fuel demand only rises by 82% due to efficiency improvements (…demand falls 15% in the OECD for the same reason). Car ownership grows quickest in India (8.4% p.a. to 130 vehicles per 1000), with China following (6.9% p.a. to 360 per 1000).
By 2035, sales of conventional vehicles will only make up a quarter of total sales, while hybrids dominate (full hybrids 23%, mild hybrids 44%). Plug-in vehicles, including full battery electric vehicles (BEVs), are forecast to make up 7% of sales in 2035. Meanwhile, natural gas will account for 8% of US transport sector fuels, almost matching biofuels.
3) The chart below is my favourite from the whole outlook, as it shows the changing dynamics of the fuel mix across key global regions. While coal was leading the way before the 1940′s, the increasing reliance on oil for transportation in the US sees it take the helm post-World War II, while Europe joined them in the 1960′s.
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China’s reliance on coal – albeit gradually falling – is expected to continue, accounting for 51% of global consumption in 2035 (about the same as now). China and India combined will contribute 87% of global coal growth to 2035.
By mid-next decade, the US will see natural gas overtake oil to become the leading fuel source – driven by cheap and plentiful gas, courtesy of the domestic shale revolution. Europe (well Euro4*, see below), meanwhile, will see non-fossil fuels become the leading fuel source, as renewables in power generation increase from 13% in 2012 to 32% in 2035. While this move has been originally policy (and subsidy) driven, by the end of this decade it is much more likely to be driven by economics (lower wind power costs, more expensive carbon permits).
4) The above chart may be my favorite, but the below charts are perhaps the most telling. For the key takeaway from the chart on the right is that although both oil and coal’s share of total primary energy may be falling in the coming decades, fossil fuels of oil +coal + natural gas will all be clustered around 27%, to make up a total of 81% of the total energy mix (although down from 86% in 2012). In terms of growth, renewables make the biggest headway, growing from 2% to 7% of the total mix.
The key takeaway from the chart at left is that energy consumption grows much less rapidly than GDP, as energy intensity declines at an increasing pace. This is of comfort to me, as I’ve been scratching my head in the last year trying to explain the detachment in oil and equity markets.
As ever, thanks for playing. To get my daily thoughts you can sign up for a free one-month trial of The Daily Distillation.
By. Matt Smith