Natural gas will be the fastest growing fossil fuel globally to 2030, but growth will slow as the market base expands and demand-side efficiency measures take hold, according to a forecast by BP plc.
BP's "Energy Outlook 2030" was unveiled on Wednesday by CEO Bob Dudley. The annual report, which until this year had been an internal document, is one of BP's outreach efforts, he said.
"As you know, BP's top priority in recent months has been to respond fully to the tragedy that occurred in the Gulf of Mexico last April," said Dudley. "As well as the physical clean-up activity and the payment of claims, we have been making changes in the way we work, particularly by strengthening our approach to safety and risk management...This requires us to understand our market in depth -- how it has developed in the past and how it is likely to change in the future.
"This is why our economics team produces a Statistical Review of World Energy each year, recording the way different forms of energy are produced and consumed" (see Daily GPI, June 11, 2009). "The Statistical Review is turning 60 this year. It was an internal document at first, but in 1956, our predecessors decided to make it public. The aim was to share information, and to support the debate on energy and energy policy by putting them on a factual footing."
The Energy Outlook is the Statistical Review's "forward-looking counterpart," said Dudley. "I believe one of our responsibilities is to share the information we have, to the extent possible, to inform a debate which, if anything, has become even more important: the debate on energy, and now on climate change."
Over the next 20 years, said Dudley, "we will see a truly integrated, global, multi-polar economy with less distinction between OECD and non-OECD players." Through each wave of global growth, "we have...experienced fears that there would not be enough energy to meet demand. But in reality, the market has been effective in driving innovation to avert such crises.
"On the supply side the market has prompted explorers and innovators to find new ways to meet demand when new sources are needed. The start of the oil age 150 years ago can be seen in this light -- so too today can the revolution in unconventional gas, the acceleration in renewable energy and the drive for exploration in challenging frontier areas such as the Arctic and the deepwater."
BP's energy outlook report is "not a charter for complacency," Dudley said. "The task of fueling growth will always be a challenge. But history does teach us that economic signals, including price signals, drive rational responses among consumers and producers."
BP's report, which covers all types of energy growth globally using base-case scenarios over the coming two decades, is forecasting natural gas production to grow "in every region except Europe, where decline rates at mature fields are likely to reverse the gains since 1975. Asia accounts for the world's largest production and consumption increments. China drives 56% of the region's consumption growth."
North America, which has seen a surge in gas production, eventually will be "outpaced by other regions and its share in the global total declines from 26% in 2010 to 19% in 2030," according to the report.
"Of the major sectors globally, growth is fastest in power (2.6%/year) and industry (2%/year) -- consistent with historic patterns. While trebling from today's level, compressed natural gas use in transport is confined to 2% of global transport fuel demand in 2030."
BP's "base case assumes policy efforts to curb emissions via carbon prices, mandates and low carbon technologies. The precise policy details will determine the fuel mix -- particularly the role of gas." Gas is expected to displace coal in power generation across the countries that are members of the Organization for Economic Cooperation and Development, or OECD.
"Coal displacement is likely to be strongest in Europe, where regulation is most advanced. The gas share in fossil fuel generation grows from 42% in 2010 to 65% in 2030. Yet the growth in renewables means that the gas share in total generation increases modestly from 20% to 24%. In North America "gas' share in fossil fuel generation reaches 41% in 2030."
According to the report, "the world had 6,621 Tcf of proved gas reserves in 2009, sufficient for 63 years of production at current levels. Unconventionals remain to be appraised in detail globally, but could add another 30 years of supply." Unconventionals have transformed the North American gas market, BP said. "Shale gas and coalbed methane (CBM) are forecast to account for 57% of North American production by 2030 and could make LNG [liquefied natural gas] exports economically viable. However, risks from costs and access exist."
Unconventionals also are likely to play a growing role outside of North America, the report said. "The ability to overcome technical and regulatory hurdles will determine their pace of development."
Global LNG supply is projected to grow 4.4% a year to 2030, more than twice as fast as total global gas production (2.1%/year), said the report. "Its share in global gas supply increases from 9% in 2010 to 15% in 2030."
LNG supply will expand in three phases, according to BP.
"The first (2009-2011) is predominantly from the Middle East and adds 10 Bcf/d (44%) of LNG. This overhang will dissipate as demand grows and the next significant wave does not occur until 2015. Half of the 10 Bcf/d (29%) growth in the period 2015-2017 is on the start of major Australian projects. The phase to 2030 is largely determined by demand, with 41% of supply coming from Africa."
BP's analysts assumed that policies would support "the continued rapid growth of nonfossil power generation -- especially renewables, which attain a global share of 10% by 2030. Where gas is available at a competitive price, it continues to displace coal."
The "greatest scope for fuel switching is in power generation, where renewables are the big winner (up 33% versus the base case in 2030) and coal the big loser (down 23%). Gas gains share but loses volume overall."
In North America and China in particular, said the report, "sizeable switching opportunities from coal remain and indigenous gas production could grow more strongly on further technological progress and policy support...
"The import share of oil and gas in the U.S. will fall to levels not seen since the 1980s, largely due to rising domestic production of natural gas and ethanol (which displaces oil imports). Three-quarters of the overall reduction in net imports is from oil."
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