- DAILY GPI
- MEXICO GPI
- SHALE DAILY
North America is expected to become a net energy exporting region by 2020 and remain the world’s largest natural gas producer, BP plc predicts in its latest global outlook.
The BP Energy Outlook, an annual compilation by a team of energy economists, was extended this year by five years to 2040.
The United States is forecast to become “energy self-sufficient” in the early 2020s and should maintain its position as the world’s largest producer of liquids fuels and natural gas through the outlook period to 2040.
Chief economist Spencer Dale and CEO Bob Dudley helmed a webinar on Tuesday from London, putting broad strokes on an increasingly diverse picture for fossil fuels and renewables.
“Predicting to a degree of certainty how these changes will turn out is a tricky business,” Dudley said. “Competitive pressures within global energy markets continue to intensify as demand for energy continues to grow. However, technological advances mean our ability to produce energy is growing even faster, be that in unconventional oil and gas or in renewables like wind and solar energy.
“The continuing rapid growth of renewables means that, in a couple of decades, we can expect the fuel mix to be the most diverse ever seen. This combination of diversity and abundance is going to mean the marketplace will be highly competitive for some time to come.”
Economists in the new report highlighted the “speed of the transition” from traditional fossil fuels to renewables, along with “the intensifying competition and most importantly, the need to keep downward pressure on carbon emissions,” Dudley said. “While no one can say exactly how
these trends will play out, the outlook can help manage the uncertainties ahead to ensure we are fit and ready to play our role in meeting the energy needs of tomorrow.”
An ‘Evolving Transition’
Dale said economists detailed six different scenarios for energy through 2040. He concentrated his comments on the “evolving transition,” or ET view.
The United States to 2040 s set to extend its lead in oil and gas production, enhancing its position as the largest global producer, Dale said.
By fuel, North American natural gas growth, estimated to be up 35% over the outlook period, and growth from renewables, with a forecast 226% increase, are expected to largely offset declines by coal (-69%), oil (-16%) and nuclear power (-27%) in the ET scenario.
“Natural gas and renewables see the largest growth increments,” Dale said. “Natural gas becomes the region’s leading fuel, accounting for 41% of energy consumption, up from 32% today.” Renewables, with an increase to 15% market share in 2040, outstrips coal’s share at 4% and oil, down to 29%, by 2040.
Gas in the “next few years” is expected to overtake coal as the largest source of power generation in North America by fuel input. The continent should not only remain the largest gas producing region in the world but become the largest liquefied natural gas (LNG) exporting region.
In the ET scenario, North America’s gas production by 2040 is forecast to increase by 55 Bcf/d to 146 Bcf/d; gross LNG exports should rise to 20 Bcf/d.
North America also is seen as the second largest oil-producing region in 2040 after the Middle East. By 2025, North America should slip to second largest for nuclear power after Asia.
For the United States specifically, the ET scenario estimates that its share of global oil production, i.e. crude plus natural gas liquids, “increases from about 12% today to about 18% by 2040, well above Saudi Arabia, the world’s second largest producer, which has a market share of about 13% by 2040,” Dale said.
“For natural gas, the U.S. lead is even more pronounced: accounting for 24% of total gas production in 2040, compared with Russia’s share of 14%.”
However, the United States by 2040 also looks to remain the world’s largest consumer of gas and second largest consumer of oil.
Gas by 2040 should become the leading U.S. fuel, accounting for 40% of domestic energy consumption from 32% today.
U.S. Tight Oil to Flatten In 2030s?
In the ET scenario, most of the initial growth in oil demand is to be met by increases in U.S. tight oil, Dale said. U.S. tight oil should begin to “flatten off in the early 2030s,” and then handed off to members of the Organization of the Petroleum Exporting Countries (OPEC).
“OPEC members are assumed to gradually diversify their economies, reducing their dependency on oil, allowing them to adopt a more competitive strategy of increasing their market share,” Dale said.
“A key uncertainty when thinking about the precise split between U.S. tight oil and OPEC is the potential for U.S. tight oil to keep growing,” he said. “In the ET scenario, U.S. tight oil grows by around 5 million b/d from current levels, peaking at close to around 10 million b/d in the early 2030s.
“This is consistent with rigs remaining around current levels...with rig productivity increasing by around 40% or so. But there's significant uncertainty concerning both the pace and duration of tight oil growth, depending on the availability of finance and other inputs required to support rapid expansion in the short run, the pace and, over the longer run, the total volume of resources that can be economically extracted, the longer run duration of that growth.”
One possibility, laid out in BP’s “early peak” scenario” is that the “availability of finance and resources allows a more rapid expansion in production without that peaking around 12 million b/d in the mid-2020s.
“But if overall production is the same as in the ET scenario of around 70 billion b/d produced by 2040, this would then be followed by more rapid decline...This is purely a timing issue here, rather than telling us anything about the underlying resource.”
If U.S. tight resources prove to be more plentiful, putting total cumulative production around 50% higher than in the ET scenario, “this would allow U.S. tight oil to potentially grow to around 15 million b/d by 2030 and remain around that level for the rest of the outlook.”
U.S. renewables are expected by 2040 to hold 17% of the market in the ET scenario, while coal would account for 5% and oil for 30%.
Of all fuels used in the United States, economists are projecting that renewables grow the fastest by around 5% a year.
However, by the end of the forecast period, the United States is seen relinquishing its position as the largest renewable energy producer, with its share of global output falling to 15% from current levels of 24%. In contrast, China’s share of renewables increases to around 30%.