With commodity prices rapidly changing and technological advances escalating, BP plc's economists on Thursday published an updated forecast of the likely path of global energy markets to 2035, less than two months after issuing the initial outlook.
The underlying methodology remains unchanged, the economists said. They built a single "most likely" view based on assumptions about changes in policy, technology and the economy. "But there are many uncertainties surrounding the base case and in the process of building the outlook we explore the impact of alternative assumptions." The data is based on the BP Statistical Review of World Energy and the outlook to 2035, which was issued in mid February (see Daily GPI, Feb. 17). BP usually updates its outlook once every year.
What has changed are BP's assumptions about how much and how soon the United States becomes a net exporter of natural gas and oil -- and how much faster gas is expected to overtake coal as the primary power generation fuel.
"North America becomes a net exporter this year (2015), and accounts for 66% of net global export growth 2015-35," according to the updated forecast. North America is expected to switch from importing 6% of its energy in 2013 to exporting 19% by 2035. Oil is seen accounting for more than 60% of that reversal, with North America becoming a net exporter in 2018. In February, BP economists said they expected net oil exports to begin in 2031.
Global net inter-regional natural gas imbalances now are expected to more than double by 2035, and North America is forecast to become a net gas exporter in 2019. By 2035, the region's gas exports are expected to reach 16 Bcf/d.
"In particular, the U.S., supported by 164% growth in shale gas production, becomes a net natural gas exporter in 2017 and exports nearly 18 Bcf/d by 2035," the economists said. BP in February had said it expected U.S. net gas exports to begin for the first time by 2016. "The U.S. also becomes a net pipeline exporter in 2019 with net exports of about 4 Bcf/d.
North America's natural gas still is seen growing to about 37% of market share in 2035 from 30% in 2013, but it now is seen overtaking oil as the leading fuel around 2025. BP's original forecast had pegged North American gas overtaking oil use by 2028. Gas now is expected to overtake coal in 2025, five years earlier than had been forecast. Gas is seen rising from a 22% share in 2013 to 33% in 2035. Renewables also are expected to overtake coal in the forecast period.
"More than half of the increase in energy demand from 2013-2035 is met by natural gas," said economists. BP is forecasting the oil market share to be about 31% in North America by 2035, the lowest share on record and down from a high of 48% in 1977. Coal's share over the period is set to decline to 9%, also the lowest on record. The renewables share is expected to continue on a fast track to displace coal as the third largest fuel by market share, with 19% of the North American market by 2035.
BP's economists said new sources of energy, aided by improved technology and productivity, now account for all of the net growth in North American supply.
"Renewables, shale gas, tight oil and oilsands in aggregate grow at 5%/year and reach a 45% market share by 2035, compared to 21% today and just 4% a decade ago. The growth of new energy forms has been enabled by the development of technology and underpinned by large-scale investments and supportive policy, and these conditions are assumed to continue over the outlook."
Cumulative North American production of tight oil and shale gas between 2013 and 2035 is expected to be "roughly equivalent to 50% of tight oil and 30% of shale gas technically recoverable resources. The comparable numbers for the rest of the world are expected to be just 3% and 1%, respectively."
Growth in U.S. tight oil is expected to flatten out in coming years, reflecting high well decline rates and less extensive resources than natural gas, but U.S. shale gas production is expected to grow rapidly over the outlook period by 4.5%/year. Growth rates in gas are expected to moderate gradually.
"Shale gas production continues to grow strongly in the U.S. (48 Bcf/d); later in the outlook, shale gas production grows in Canada and Mexico (6 Bcf/d). Growth in shale gas offsets declines in regional conventional supplies (minus 5 Bcf/d). The U.S. remains the largest producer of natural gas in the world, accounting for 23% of production in 2035. Shale gas supplies account for nearly 60% of regional output by 2035."