Despite the dramatic recent weakening in global energy markets, ongoing economic expansion in Asia – particularly in China and India – will drive continued growth in the world's demand for energy over the next 20 years. According to the new edition of the BP Energy Outlook 2035, global demand for energy is expected to rise by 37% from 2013 to 2035, or by an average of 1.4% a year.
The Outlook looks at long-term energy trends and develops projections for world energy markets over the next two decades. The new edition was launched today in London by Spencer Dale, BP's group chief economist, and Bob Dudley, group chief executive.
"After three years of high and deceptively steady oil prices, the fall of recent months is a stark reminder that the norm in energy markets is one of continuous change," said Spencer Dale. "It is important that we look through short term volatility to identify those longer term trends in supply and demand that are likely to shape the energy sector over the next 20 years and so help inform the strategic choices facing the industry and policy makers alike."
US tight oil grows
The Outlook projects that demand for oil will increase by around 0.8% each year to 2035. The rising demand comes entirely from the non-OECD countries; oil consumption within the OECD peaked in 2005 and by 2035 is expected to have fallen to levels not seen since 1986. By 2035 China is likely to have overtaken the US as the largest single consumer of oil globally.
The current weakness in the oil market, which stems in large part from strong growth in tight oil production in the US, is likely to take several years to work through. In 2014, tight oil production drove US oil output higher by 1.5 million barrels a day – the largest single-year rise in US history. But further out, the growth in tight oil is likely to slow and Middle East production will gain ground once more.
By the 2030s the US is likely to have become self-sufficient in oil, after having imported 60% of its total demand as recently as 2005.
Gas rising fast; coal slow
Demand for natural gas will grow fastest of the fossil fuels over the period to 2035, increasing by 1.9% a year, led by demand from Asia.
Half the increased demand will be met by rising conventional gas production, primarily in Russia and the Middle East, and about a half from shale gas. By 2035, North America, which currently accounts for almost all global shale gas supply, will still produce around three quarters of the total.
Coal had been the fastest growing of the fossil fuels over the past decade, driven by Chinese demand. However over the next 20 years the Outlook instead sees coal as the slowest growing fossil fuel, growing by 0.8% a year, marginally slower than oil. The change is driven by three factors: moderating and less energy-intensive growth in China; the impact of regulation and policy on the use of coal in both the US and China; and the plentiful supplies of gas helping to squeeze coal out from power generation.
LNG grows, becoming dominant in trade
As demand for gas grows, there will be increasing trade across regions and by the early 2020s Asia Pacific will overtake Europe as the largest net gas importing region. The continuing growth of shale gas will also mean that in the next few years North America will switch from being a net importer to net exporter of gas.
The overwhelming majority of the increase in traded gas will be met through increasing LNG supplies. Production of LNG will show dramatic growth over the rest of this decade, with supply growing almost 8% a year through the period to 2020. This also means that by 2035 LNG will have overtaken pipelines as the dominant form of traded gas.
Increasing LNG trade will also have other effects on markets. Over time it can be expected to lead to more connected and integrated gas markets and prices across the world. And it is also likely to provide significantly greater diversity in gas supplies to consuming regions such as Europe and China.
Energy flowing east
Energy self-sufficiency in North America - which is expected to become a net exporter of energy this year - and increasing LNG trade are also over time expected to have fundamental impacts on global energy flows.
Increased oil and gas supplies in the US and lower demand in the US and Europe due to improving energy efficiency and lower growth will combine with continuing strong economic growth in Asia to shift the energy flows increasingly from west to east.
Carbon emissions continue to grow
The Outlook also considers global CO2 emissions to 2035 based on its projections of energy markets and the most likely evolution of carbon-related policies. Its projection shows emissions rising by 1% a year to 2035, or by 25% over the period, on a trajectory significantly above the path recommended by scientists as illustrated, for example, by the IEA's "450 Scenario."
To abate carbon emissions further will require additional significant steps by policy makers beyond the steps already assumed, and the Outlook provides comparative information for possible options and their relative impacts on emissions. However, as no one option is likely to be sufficient on its own, multiple options will need to be pursued. This underlines the importance of policymaking taking steps that lead to a meaningful global price for carbon which would provide incentives for everyone to play their role in meeting the world's increasing energy needs in a sustainable manner.
Commenting on the Outlook, Bob Dudley concluded: "The energy industry works on strategies and investments with lifespans often measured in decades. This is why an authoritative view of the key trends and movements that will shape our markets over this long term is essential... and is precisely why this Outlook is so valuable."
Go to www.bp.com/energyoutlook to download the Outlook or additional country & regional insights, and view other material such as videos or an animation.
2014 saw the submarine fiber optics market surge to its highest demand for new cable since 2007 and the second highest since the early years of the 21st Century, before the market collapsed in late 2001.
This is the conclusion of the 2015 edition of TSC's Radar Screen Report (RSR), which analyzes the demand for submarine fiber optic cable based on new contract awards.
For the previous five years, the Radar Screen Report identified steady demand, rather than the traditional boom and bust pattern that had been a staple of the market since its inception. This steady-growth period was caused by various pressures pushing the market up, while similarly strong pressures pushed it down, keeping it to a steady middle ground. The result was an annual demand between 40,000 and 50,000 route-kilometers between the years 2009 and 2013 – far from a complete bust but not high enough for the industry to thrive.
Last year's Radar Screen Report noted slight changes in the landscape, particularly in the availability of financing, and correctly forecast the probability of breaking out from this steady-as-she-goes pattern to reach the highest levels of demand since the last boom in 2007-2008. The surge was even greater than forecast, with demand in 2014 approximately 100% higher than the average full-year totals during the previous five years.
RSR projections indicate the market is not likely to maintain this same momentum in 2015 as the surge took several large-scale systems out of the development pipeline. But the shifting dynamics and still-sizable number of cable projects in the pipeline are positive indications that the market is healthy, and in the near term will maintain the potential to thrive.
NYC-based PIRA Energy Group believes that Saudi Arabian production is likely increasing. In the U.S., another record U.S. crude and total commercial stock level reported. In Japan, crude runs near seasonal maximums and product demands are better. Specifically, PIRA's analysis of the oil market fundamentals has revealed the following:
Saudi Arabian Production Is Likely Increasing
In discussions with Saudi customers and after reviewing recent U.S. refiner earnings calls, it is becoming clear that production from Saudi Arabia is rising. Saudi production had been averaging around 9.7 MMB/D since last June but PIRA would now guess likely additional demand has pushed output to just under, if not above, 10 MMB/D.
Another Record U.S. Crude & Total Commercial Stock Level Reported
The equation driving the U.S. crude balance is as simple as it is powerful: the 1.4 MMB/D year-on-year increase in domestic crude supply has only been met by a 0.3 MMB/D decline in imports, and the combined increase in crude runs plus exports is not nearly enough to prevent large stock builds in crude from continuing, especially this year versus last. Total commercial stocks built last week to a new record high. However, with a similar build last year, the year-over-year surplus inched up only about 0.1 million barrels.
Japan Crude Runs Near Seasonal Maximums, Product Demands Better
Crude runs rose fractionally, but crude imports rebounded and stocks built. Finished product stocks drew with a pickup in gasoil, gasoline, and kerosene demands. The indicative refining margin remained strong.
U.S. NGLs Stronger Last Week
A large decline in U.S. propane stocks propelled April Mont Belvieu futures over 8% higher to just under 60¢/gal, the highest price for C3 since December 4th. Propane's price relative to WTI rallied to over 45%, the strongest yet this year. April butane was 6% stronger week-on-week despite a disappointing decline in other NGLs stocks as reported by the DOE on Wednesday.
Ethanol Output Increases
U.S. ethanol production rebounded to 961 MB/D the week ending February 6, regaining around half of the sharp loss that occurred in the previous week. The production of ethanol-blended gasoline fell sharply.
Asia-Pacific Oil Market Forecast
Crude stock builds continue at a reduced pace and will give way to product stock builds. Global demand growth, year-on-year, is beginning to look better. The macroeconomic environment in Asia shows no large-scale deterioration in performance that would put our 5.3% Asian GDP growth assumption for 2015 at risk.
The information above is part of PIRA Energy Group's weekly Energy Market Recap - which alerts readers to PIRA's current analysis of energy markets around the world as well as the key economic and political factors driving those markets.
As the second largest oil producer in Africa, Angola is heavily dependent on the oil sector, making it vulnerable to oil price fluctuations. In addition, drilling costs offshore Angola are very high, and DW forecasts a resultant drop in deepwater completions in Angola in 2016. Despite this set-back, Angola's deep and ultra-deep projects are key to driving offshore production during a period of reduced spending and retrenchment. We do not expect to see projects that are past FID being cancelled and many projects have been under construction for a number of years and will start up in the coming three years. The recent start-up of Eni's West Hub and Total's CLOV projects form the basis of our positive short-term forecast: DW expects Angola to meet its 2015 target production of 2 million barrels of oil per day.
As cuts to expenditure are announced, operators like BP and Total are looking to core assets in Angola as a focal point for spending over the next three years. Importantly, Total launched the development of the Kaombo ultra-deep project in April 2014, bringing online a potential 230,000 barrels of oil per day following start-up in two years' time. Chevron, ExxonMobil and Eni also have major deepwater oil projects in Angola, collectively adding a peak capacity of nearly 1 million barrels per day. These are all due to start production before 2018. DW forecasts a dip of 2.3% in offshore oil production in 2016, before recovering to 2.2 million barrels of oil per day in 2021.
The downturn offers exploration opportunities for larger oil companies, with potential for expansion in Angola as smaller companies apply for farm-in partners and Sonangol aims to sustain investment. Eni have staked their claim, securing a three year extension for exploration work near their Angolan assets. Repsol has also displaced an exploratory vessel from the Canary Islands for a venture offshore Angola.
A focus on core assets, and even the expansion of assets in Angola has been the message from several major oil companies at the start of 2015, safeguarding Angola through a period of oil price turbulence.
Celia Hayes, Douglas-Westwood London
+44 1795 594747 or This email address is being protected from spambots. You need JavaScript enabled to view it.
www.douglas-westwood.com
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