BP sees oil demand growth slowing gradually: Update
Adds revisions to previous report
London, 25 January (Argus) — Global liquids demand does not peak until the 2040s but growth slows gradually to around 400,000 b/d by 2035 from about 1mn b/d in the near-term, BP said today in its 2017 Energy Outlook.
The report again reduces the energy demand projection for 2035, compared with the previous report. The outlook for Chinese demand is significantly reduced although this is mitigated by increases in other emerging Asian economies.
Liquids demand, which includes oil, biofuels and other liquid fuels, increases by about 15mn b/d to 110mn b/d in 2035 compared with 2015, BP said. Global liquids supply increases only by 13mn b/d over the same period of time, because of the excess in liquids production in 2015.
The company's Energy Outlook covers the period to 2035 and is centred on a base case that BP sees as the most likely course of events.
"Supply increases are driven by holders of large-scale, low-cost resources," BP said. "The abundance of oil resources may prompt low-cost producers to use their competitive advantage to increase market share."
The share of global liquids supply from Middle East Opec members, Russia and the US rises to 63pc in 2035 from 56pc in 2015, BP's base case assumes. Middle East Opec production rises by 9mn b/d by 2035 and US production rises by 4mn b/d to 19mn b/d, "with growth concentrated in the first half of the outlook, driven by tight oil and NGL production", BP said. Russian output increases by 1mn b/d to 12mn b/d in 2035.
BP chief economist Spencer Dale said US tight-oil supply continues to grow over the outlook period, rising to around 7mn-8mn b/d by 2035.
Global refinery runs grow by only 300,000 b/d a year in 2015-35. "Announced start-ups and plans for new capacity between 2015 and 2020 already total around 8mn b/d, which would be sufficient to meet the entire projected increase in refinery throughput over the next 20 years," BP said.
The transport sector's share of global liquids demand remains just under 60pc over the period to 2035, but "the stimulus from transport demand gradually fades, as fuel efficiency improves significantly and there is increasing penetration of non-oil fuels", BP said.
The base case envisages global gross domestic product (GDP) almost doubling between 2015 and 2035, while total energy demand increases by only 30pc because of rapid gains in efficiency. Energy consumption grows by 1.3pc/yr in 2015-35, compared with 2.2pc in 1995-2015.
Fossil fuels remain the dominant sources of energy, accounting for more than three-quarters of global energy supply in 2035, compared with 85pc in 2015. But renewables, nuclear and hydroelectric power provide half of the growth in supplies out to 2035, BP said. Renewables are the fastest growing fuel source, at 7.1pc/yr, and they quadruple over the next two decades as they become more cost competitive. Their share will increase to 10pc in 2035 from 3pc in 2015.
Gas will grow at a faster rate than oil and coal, driven by US shale gas, with "the rapid expansion of LNG likely to lead to a globally integrated gas market, anchored by US gas prices". Gas grows by 1.6pc/yr "with its share in primary energy increasing as it overtakes coal to be the second-largest fuel source by 2035", BP said. Oil supply increases by about 0.7pc/yr and coal by 0.2pc/yr over the 20 years to 2035.
The number of electric vehicles increases by about 100mn by 2035, but they reduce oil demand only by 1.2mn b/d, which is "around a tenth of the impact of the gains in vehicle efficiency", BP said.
Dale said the current oil price does not look very sustainable. While $100/bl crude is unlikely to be seen over the next few years, in the near term "there will always be shocks, and as a result of which we will continue to see the volatility in oil prices", he said.
The report's forecast of global energy demand in 2035 is cut by 0.9pc, or 150mn tonnes of oil equivalent (toe), relative to the 2016 outlook. The revision is similar to that made last year but is large relative to historic revisions, BP said. Demand for coal is cut by 6pc while renewables demand receives a 15pc boost. Gas consumption is downgraded by 2.5pc and oil by 1.9pc. Nuclear demand is put 7.9pc higher than previously and hydropower down by 0.2pc. This results in a 3.7pc downward revision in CO2 emissions, relative to the last outlook.
China's energy demand in 2035 is put 8pc or 400mn toe lower than in the 2016 report because of slower actual and projected economic growth and falling energy intensity.