Strong growth in production from unconventional sources of gas and oil will have a major impact on global energy markets to 2030, redefining expectations for major economies and rebalancing global trade flows, according to BP’s latest Energy Outlook 2030, published today.
This is the third annual edition of the Outlook, which sets out BP’s view of the most likely developments in global energy markets to 2030, based on up-to-date analysis and taking into account developments of the past year. Last year’s Outlook led the way in showing how North America is likely to become self-sufficient in energy. This year’s edition examines more closely the revolution in shale gas and tight oil – the phenomenon driving America’s energy revival – including its global prospects.
The Outlook’s overall expectation for growth in global energy demand to 2030 is little changed from last year, with demand expected to be 36% higher in 2030 than 2011 and almost all the growth coming from emerging economies. However, expectations of the pattern of supply of this growth are shifting strongly, with unconventional sources – shale gas and tight oil together with heavy oil and biofuels – playing an increasingly important role and, in particular, transforming the energy balance of the US.
Growing production from unconventional sources of oil – tight oil, oil sands and biofuels – is expected to provide all of the net growth in global oil supply to 2020, and over 70% of growth to 2030. By 2030, increasing production and moderating demand will result in the US being 99% self-sufficient in net energy; in 2005 it was only 70% self-sufficient. Meanwhile, with continuing steep economic growth, major emerging economies such as China and India will become increasingly reliant on energy imports. These shifts will have major impacts on trade balances.
BP Group Chief Executive, Bob Dudley said: “The Outlook shows the degree to which once-accepted wisdom has been turned on its head. Fears over oil running out – to which BP has never subscribed – appear increasingly groundless. The US will not be increasingly dependent on energy imports, with energy set to reinvigorate its economy. And China and India are expected to need a lot more imports to keep growing.
“The projections demonstrate yet again that we inhabit a diverse and dynamic energy market. The future is full of opportunities for job-creating businesses with world-leading technology and capability and for countries that want to work with them.”
Although major shale gas and tight oil resources exist around the world, significant exploitation of these resources has so far taken place only in North America. While advances in technology and high prices offer the potential for development of resources elsewhere, a combination of other factors is also necessary.
BP Group Chief Economist Christof Rühl said: “Vast unconventional reserves have been unlocked in the US, with oil production following gas. This delivery has been made possible not only by the resources and technology, but also by ‘above-ground’ factors such as a strong and competitive service sector, land access facilitated by private ownership, liquid markets and favourable regulatory terms.
“No other country outside the US and Canada has yet succeeded in combining these factors to support production growth. While we expect other regions will adapt over time to develop their resources, by 2030 we expect North America still to dominate production of these resources.”
Primary energy The Outlook shows global energy demand continuing to increase at an average of 1.6% a year to 2030. Growth is expected to moderate over this period, climbing at an average of 2% a year to 2020 and then by only 1.3% a year to 2030. 93% of this growth will come from non-OECD economies, with China and India accounting for more than half of the increase. By 2030, energy use in the non-OECD economies is expected to be 61% higher than in 2011 whereas use in the OECD will have grown by only 6%, and actually to have fallen in per capita terms.
While the fuel mix is evolving, fossil fuels will continue to be dominant. Oil, gas and coal are expected to converge on market shares of around 26-28% each by 2030, and non-fossil fuels – nuclear, hydro and renewables – on a share of around 6-7% each.
Oil Oil is expected to be the slowest growing of the major fuels to 2030, with demand growing at an average of just 0.8% a year. Nonetheless, this will still result in demand for oil and other liquid fuels being 16 million barrels a day higher in 2030 than 2011. All the net demand growth will come from outside the OECD – demand growth from China, India and the Middle East will together account for almost all of net demand growth.
Growth in the supply of oil and other liquids (including biofuels) to 2030 will come mainly from the Americas and Middle East. More than half of the growth will come from non-OPEC sources, with rising production from US tight oil, Canadian oil sands, Brazilian deepwater and biofuels more than offsetting mature declines elsewhere. Increasing production from new tight oil resources will result in the US overtaking Saudi Arabia to become the world’s largest producer of liquids in 2013. US oil imports are expected to fall 70% between 2011 and 2030.
OPEC’s share of the oil market is expected to fall early in the outlook, reflecting growing non-OPEC production together with slowing demand growth due to high prices and increasingly efficient transport technologies. OPEC market share is expected to rebound somewhat after 2020.
Christof Rühl commented: “As OPEC cuts production in response over the coming decade, by 2015 we expect spare capacity to reach the highest levels since the late 1980s. While this will be a key oil market uncertainty over the next decade, we believe OPEC members will be able to manage the challenge of maintaining production discipline despite high spare capacity.”
Natural gas is expected to be the fastest growing of the fossil fuels – with demand rising at an average of 2% a year. Non-OECD countries will generate 76% of demand growth. Power generation and industry account for the largest increments to demand by sector. LNG production is expected to grow more than twice as fast as gas consumption, at an average of 4.3% a year and accounting for 27% of the growth in gas supply to 2030.
Shale gas supplies are expected to meet 37% of the growth in gas demand and account for 16% of world gas and 53% of US gas production by 2030. North American shale gas production growth is expected to slow after 2020 and production from other regions to increase, but in 2030 North America is still expected to account for 73% of world shale gas production.
After oil, coal is expected to be the slowest growing major fuel, with demand rising on average 1.2% a year to 2030. Over the period, growth flattens to just 0.5% a year after 2020. Nearly all (93%) of the net growth in demand to 2030 will come from just China and India, whose combined share of global coal consumption will rise from 57% in 2011 to 65% in 2030. India is expected to overtake US as second largest coal consumer in 2024.
Despite the setback of the Fukushima disaster, nuclear energy output is expected to rise robustly to 2030 at around 2.6% a year – compared to average growth of 1.6% from 1990 to 2010. China, India and Russia will together account for 88% of the global growth in nuclear power. China is expected to increase its share of global nuclear power generation from 3% in 2011 to 30% in 2030, and to overtake the US as the largest producer of nuclear power in 2026.
The growth in hydroelectric power is expected to moderate to 2.0% a year to 2030, with growth led by China, India and Brazil. For Brazil in particular, hydro is expected to account for 72% of power demand by 2030 – and 32% of total energy demand.
Renewables will continue to be the fastest growing class of energy, gaining market share from a small base as they rise at an average of 7.6% a year to 2030. Renewables’ share of global electricity production is expected to grow from 4% to 11% by 2030. While the OECD economies have led in renewables growth, renewables in the non-OECD are catching up and are expected to account for 41% of total by 2030. Including biofuels, renewables are expected to have higher share of primary energy than nuclear by 2030.
Carbon While the rate of growth is moderating, carbon emissions are still expected to increase by 26% from 2011 to 2030. Most of the growth will come from non-OECD countries, so that by 2030 70% of CO2 emissions are expected to come from outside the OECD. However, per capita emissions in non-OECD regions will still be less than half those in the OECD.