The energy transition is putting as much as $14 trillion worth of oil and gas assets at risk, Wood Mackenzie said today, as quoted by Reuters, in the latest doomsday scenario for the energy industry.
Over the short term, the future looks good for oil and gas, according to the consultancy. Demand for oil and gas will rebound to pre-pandemic levels and even exceed them, reaching 160 million barrels of oil equivalent daily.
What's more, oil and gas companies are getting still leaner and meaner, and will this year be able to generate as much cash flow at $60 per barrel as they did at $100 per barrel of Brent seven years ago, Wood Mac analysts also said.
Over the long term, however, things begin to look different, with every energy transition scenario involving a decline in oil demand.
In the scenario most optimistic about oil and gas, global demand would decline slowly and gradually, to reach 90 million barrels daily in 2050. This would encourage investments in new production and see prices climb above $80 per barrel by 2030.
Yet if the world decides to pursue the 2-degree warming scenario, demand for crude oil could fall to as little as 35 million bpd by 2050, with demand growth peaking by 2025. That would mean Brent prices of $40 per barrel on average in 2030, and lower afterwards, according to the Wood Mac report.
Even in the more ambitious scenario, "The world will still need oil and gas supply for decades to come, and the scale of the industry will remain enormous," according to Wood Mackenzie vice president Fraser McKay.
The report comes just a day after the International Energy Agency called on the energy industry to stop investments in new oil production right now so the world could reach its 2050 Paris Agreement targets.
By Irina Slav for Oilprice.com
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That is why the claim that energy transition could threaten oil and gas assets is self-delusion and stupid.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London