When crude oil demand will peak is anyone’s guess. Forecasts vary widely. Wood Mackenzie says that peak demand is “very real,” and sees a decline of 4 million bpd between 2020 and 2035. Other majors including BP and Total SA see peak demand as coming between 2025 and 2040, as a result of clean energy government initiatives, slower economic growth, and wider use of electric vehicles.
Not everyone is that concerned with peak oil demand, however. Recently, Norway’s Energy Minister said the biggest problem for Europe’s largest oil and gas producer is satisfying near-term demand, which is growing faster than Norwegian continental shelf operators are making discoveries.
It might sound a bit weird that Europe’s greenest country is still so big on oil and gas, but in reality, there’s nothing weird: Oil and gas exports account for a substantial portion of Norway’s export revenues, with their value for 2016 standing at $43.84 billion (350 billion crowns), accounting for 47 percent of the country’s total export value.
Norway’s biggest customer is the European Union. Together with Saudi Aramco, Norway’s state major Statoil accounted for a fifth of the EU oil market last year. Yet demand in the EU is supposed to be falling, with rigorous policies designed to encourage acceleration of the shift to renewable energy.
Indeed, according to European Union statistics, demand is on a stable downward curve thanks to greater energy use efficiency, “structural changes in the economy”, and lower demand for fuels. Still, Eurostat notes, crude oil and its derivatives account for the biggest share of energy consumption in the 28-strong union.
That’s good news for Norway, and there’s more good news from Wood Mackenzie. The energy consultancy has forecast that although in places like Europe, Japan, the United States, and even China, crude oil consumption will plateau by 2035, the demand for petrochemicals will jump considerably.
Wood Mac expects that petrochemicals will turn into the top driver for demand growth in crude oil in the long run as fuels lose their top spot. This will continue until about 2035, the consultancy estimates.
So how is Norway responding to this demand outlook? Statoil has been on a hunt for new discoveries for a while now as oil prices rebounded from their tough last year, but it reports disappointing results at home—its Arctic drilling campaign this year produced no meaningful results, and the company said it will be back next summer to drill more.
At the same time, there are large oil fields slated to start pumping crude in the next few years. Johan Sverdrup, which is estimated to hold between 1.9 billion and 3 billion barrels of oil equivalent, is scheduled to start production in 2019. Johan Castberg, with proven reserves of some 400-600 million barrels, should start production in 2022.
This may not be enough to meet growing crude demand, but then, no demand and supply forecast is final or undisputable, so it may turn out that Minister Terje Soviknes’s worry about Norway’s ability to meet and benefit from higher oil demand might turn out to be unfounded.
By Irina Slav for Oilprice.com
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