Global natural gas production in 2008 jumped 3.8%, above the 10-year trend of 3%, driven mostly by the United States, which recorded its highest ever annual increase in output, according to BP plc's annual review of world energy trends.
However, "the center of gravity of the global energy markets has tilted sharply and irreversibly toward the emerging nations of the world, especially China," BP CEO Tony Hayward said Wednesday.
BP's 58th Statistical Review of World Energy, which was unveiled by Hayward in London, found that in general, global energy markets in 2008 followed the "same extreme pattern" as the world economy. In the first half of 2008 commodity prices rose to record highs as economic growth boomed. In the last half of the year prices collapsed as the global economy abruptly reversed.
However, for energy markets 2008 was remarkable for another reason, BP noted. For the first time ever, the developing world, led by China, leapfrogged developed nations that are members of the Organization for Economic Cooperation and Development (OECD).
"This is not a temporary phenomenon but one that I believe will only increase still more over time," said Hayward. "It will continue to affect prices and bring with it new challenges over economic growth, energy security and climate change.
"This shift will bring volatility in the short term. But I have no doubt that the diversity and flexibility of modern energy markets will continue to ensure that energy supplies continue to reach consumers efficiently and without interruption."
In spite of the dramatic gyrations in the world economy and energy prices, the review data showed how well energy markets served energy security during the year, noted BP chief economist Christof Ruehl.
"Allowing markets to continue to function freely and without interference remains key to managing the inevitable ups and downs in prices as we go forward," Ruehl said.
Global gas production in 2008 was led by the United States, with activity in the unconventional onshore resources lifting output by 7.5% -- 10 times the 10-year average growth rate, BP noted. The second highest increment was reported in Qatar, as pipeline exports to the United Arab Emirates increased. Production rose in Europe overall as increases in Denmark, Netherlands and Norway "more than offset falls in the UK and Germany."
According to the review, 2008 global gas consumption grew by 2.5% in 2008, below the 10-year average. Consumption in the United States rose by 0.6% "as spot prices remained well below oil prices." Only the Middle East saw above-average growth, lifted by high domestic demand. Oil-indexed gas prices in OECD Europe and Asia-Pacific rose more rapidly, which, coupled with the recessionary impact, "meant that consumption growth was below average."
The largest incremental growth in gas consumption was found in China, which saw 15.8% growth. Gas consumption in the United Kingdom grew by 3%, with gas now supplying nearly 4-% of the nation's total primary energy -- well above the global average of 24%, BP said.
According to BP, the world's remaining proved oil reserves are estimated at 1,258 billion bbl, excluding Canadian oilsands, which is enough for 42 years at 2008 production rates. On the same basis, global gas reserves "are sufficient for 60 years" and coal reserves would last 122 years.
BP's review also found that overall primary energy consumption nudged up only 1.4%, which is the smallest increase since 2001. China alone accounted for almost three quarters of the increase, with most of the remaining growth coming from the wider Asia-Pacific region. In OECD nations, energy consumption fell by 1.3%, with demand in the United States down 2.8%, the steepest decline in a single year since 1982.
For the sixth consecutive year, coal remained the fastest growing fuel globally, even though its 3.1% growth in consumption was below the 10-year trend, said BP.
China, which accounts for fully 43% of global coal demand, accounted for 85% of coal's growth, with an increase of almost 7%. Outside China, however, global demand growth was weak, climbing only 0.6% and "reflecting the fact that coal prices in liberalized markets increased more than for any other fossil fuel," the report said. Coal use in the United Kingdom dropped 7.6% to the lowest level in a decade, in part because of fuel switching driven by carbon dioxide prices in the European Union emission trading scheme, said BP.
Nuclear output was down for the second consecutive year, falling 0.7%, led by a 10% decline in Japanese output. Japan's largest nuclear power station remained shuttered last year following a 2007 earthquake.
Hydroelectric output jumped 2.8% worldwide, which was above the 10-year average for the fourth time in the past five years. However, "again, all of the global increase could be accounted for by growth in China -- climbing by 20.3%, nearly twice the country's 10-year average rate," said BP. Hydroelectric generation outside China was off by 0.4%.
Renewable energy production climbed again in 2008, with wind generating capacity up 30% and solar generation rising almost 70% -- both above their 10-year average rates, said BP.
"The use of renewable fuels again rose rapidly, often benefiting from government support," said Hayward. "Although renewable energy continues to play only a small role in the world's energy mix, the share is rising rapidly in some countries, and there are the beginnings of a material impact."
The "world was no longer supply-constrained" in 2008, said Hayward, "as production growth exceeded that of consumption for all fossil fuels, particularly later in the year...Seen in this context, fundamental market forces help to explain the downward pressure seen on energy prices later in the year. Our data confirms that the world has enough proved reserves of oil, natural gas and coal to meet the world's needs for decades to come.
"The challenges the world faces in growing supplies to meet future demand are not below ground, they are above ground. They are human, not geological."
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