With people back to work and on the road following the relentless Covid restrictions in 2020, energy consumption made a historic comeback last year – particularly natural gas and renewables – according to BP plc.

BP

Primary energy demand rebounded overall by 5.8%, eclipsing the pre-Covid levels in 2019, according to the 71st edition of the Statistical Review of World Energy, which was published on Tuesday. 

Chief economist Spencer Dale, whose team compiles the industry’s energy bible, warned, though, that the “challenges and uncertainties facing the global energy system are at their greatest for almost 50 years, at the time of the last great energy shocks of the 1970s.”

Threats To Energy Security

The most immediate concern for now, Dale said, is the energy impact following Russia’s invasion of Ukraine, which has upended natural gas and oil markets. 

“The war also threatens to lead to shortages in food and energy, which could detract materially from health and wellbeing across the globe,” Dale said. “From an energy perspective, the growing shortages and increasing prices highlight the continuing importance of energy ‘security’ and ‘affordability’ alongside ‘lower carbon’ when addressing the energy trilemma.”

The war also parallels the continued need for global economies “to achieve a deep and rapid decarbonization” in line with the United Nations climate accord, aka the Paris Agreement. 

“Considerable progress has been made in sovereign pledges to achieve net zero,” Dale said, “but in global aggregate terms, those growing ambitions have yet to translate into tangible progress on the ground.” Carbon emissions “have risen every year since the Paris goals were agreed,” except in 2020 because of the pandemic. 

“The world remains on an unsustainable path.”

In addition, as worldwide economic activity recovers, energy consumption is expanding sharply, “increasing the demands on available energy supplies, and highlighting fragilities in the system.”

Rebounding Natural Gas Prices

Natural gas prices last year jumped across all three major gas regions – in Asia, Europe and the United States. 

“Henry Hub prices nearly doubled to average $3.80/MMBtu in 2021 – their highest annual level since 2014,” BP researchers noted. 

Prices in Europe were up fourfold to record annual levels, with the Title Transfer Facility averaging $16/MMBtu. In Asia, liquefied natural gas (LNG) spot market prices tripled, with the Japan Korea Marker averaging $18.60.

“Global natural gas demand grew 5.3% in 2021, recovering above pre-pandemic 2019 levels and crossing the 4 trillion cubic meter (Tcm) mark for the first time,” BP reported. However, the share of natural gas in primary energy last year was unchanged from the previous year at 24%.

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Last year, global LNG supply grew by 5.6% year/year, up 26 billion cubic meters (Bcm) to 516 Bcm. That was the “slowest rate of growth since 2015 (other than in 2020),” the researchers noted. 

“LNG supply from the U.S. rose by 34 Bcm, accounting for most of the new incremental supplies and more than offsetting declines from mainly other Atlantic Basin exporters.”

What’s Driving Energy Growth? Renewables

Meanwhile, primary energy demand in 2021” is estimated to be more than 1% above its 2019 level,” Dale noted. 

The increase was driven by emerging economies, mostly reflecting growth in China. In contrast, energy demand in developed economies was 8 exajoules (EJ) below 2019 levels. 

“The increase in primary energy between 2019 and 2021 was entirely driven by renewable energy sources,” according to BP. ‘The level of fossil fuel energy consumption was unchanged between 2019 and 2021, with lower oil demand (minus 8 EJ) offset by higher natural gas (5 EJ) and coal (3 EJ) consumption.”

Dale said it was encouraging that renewable energy, led by wind and solar, “continued to grow strongly” last year, and it now accounts for 13% of total generation. 

“Renewable generation (excluding hydro) increased by almost 17% in 2021 and accounted for over half of the increase in global power generation over the past two years.”