Global demand for energy could triple by 2050 compared with 2000 levels, and production of easily accessible oil and natural gas will not match the projected rate of demand growth worldwide by the end of this decade, according to a report from Royal Dutch Shell. And environmental concerns could make gas even more popular.

"We are seeing a step change in energy use," Shell said in its "Signals and Signposts" report. "Developing nations, including population giants China and India, are entering their most energy-intensive phase of economic growth as they industrialise, urbanize, build infrastructure and increase their use of transportation. Demand pressures will stimulate alternative supply and more efficiency in energy use -- but these alone may not be enough to offset growing demand tensions completely."

While the recession "interrupted the oil and commodity price boom...it may return," according to Shell. A tighter market "will continue to put pressure on prices and generate volatility" and, while improvements in policy making and productivity gains over the past 20 years have helped economies grow without inflation, "we do not believe the moderating effect of this combination of good policies, good practices and good luck will continue into the future."

Environmental stresses are also increasing, and "remaining within desirable levels of CO2 [carbon dioxide] concentration in the atmosphere will become increasingly difficult," according to the report.

Natural gas could "give the world an early opportunity to reduce overall CO2 emissions from energy by displacing coal with gas. At the same time, a continued strong focus on energy efficiency and market-based CO2 pricing will keep demand growth in check."

Demand for natural gas is likely to grow strongly, thanks to economic growth and a push toward lower-carbon fuels. Gas-fired generation will replace coal-fired generation "where possible," Shell said.

"Growth in renewable energy also means more gas-fired power plants are required to proved flexibility. The success in unconventional gas production in the U.S., which may be replicated elsewhere in the world, will underpin this demand growth."

Such growth was also foreseen by ExxonMobil Corp., which last month said gas would become the second-largest energy source after oil (see Daily GPI, Jan. 28). Unconventional gas is expected to meet more than one-half of global gas demand by 2030, the Irving, TX-based supermajor stated. And BP plc recently speculated that gas would be the fastest growing fossil fuel in the world over the next 20 years (see Daily GPI, Jan. 11).

But in a second scenario, in which coal remains strong in the global electricity mix, "the availability of abundant and affordable gas would depress the need for accelerating energy efficiency, particularly in industry and buildings...capital-intensive renewable energy developments would slow to relieve pressures on government budgets, especially in countries severely affected by the financial crisis," Shell said in its report. "More gas production would boost the liquid supply profile, reducing the need for early efficiency measures in transport."

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