Emerging Economies to Lead Energy Growth to 2030 and Renewables to Out-Grow Oil, Says BP Analysis

BP website, Jan 19, 2011
World energy growth over the next twenty years is expected to be dominated by emerging economies such as China, India, Russia and Brazil while improvements in energy efficiency measures are set to accelerate, according to BP’s latest projection of energy trends, the BP Energy Outlook 2030.

BP's 'base case' - or most likely projection - points to primary energy use growing by nearly 40% over the next twenty years, with 93% of the growth coming from non-OECD (Organisation of Economic Co-operation and Development) countries. Non-OECD countries are seen to rapidly increase their share of overall energy demand from just over half currently to two-thirds.

Over the same period, energy intensity, a key measure of energy use per unit of economic output, is set to improve globally led by rapid efficiency gains in the same non-OECD economies, under these projections.

According to the BP Energy Outlook, diversification of energy sources increases and non-fossil fuels (nuclear, hydro and renewables) are together expected to be the biggest source of growth for the first time. Between 2010 to 2030 the contribution to energy growth of renewables (solar, wind, geothermal and biofuels) is seen to increase from 5% to 18%. [According to BP, the rate at which renewables penetrate the global energy market is similar to the emergence of nuclear power in the 1970s and 1980s. -- D.R.] 

Natural gas is projected to be the fastest growing fossil fuel, and coal and oil are likely to lose market share as all fossil fuels experience lower growth rates. Fossil fuels’ contribution to primary energy growth is projected to fall from 83% to 64%. [...] 

BP’s ‘base case’ projections are that world primary energy demand growth averages 1.7% per year from 2010 to 2030 although growth decelerates slightly beyond 2020. Non-OECD energy consumption will be 68% higher by 2030 averaging 2.6% per year growth, and accounts for 93% of global energy growth. In contrast, OECD growth averages 0.3% per year to 2030; and from 2020 OECD energy consumption per capita is on a declining trend of -0.2% per year.

Transport growth is seen to slow because of a decline in the OECD. The region’s total demand for oil and other liquids peaked in 2005 and will be back at roughly the level of 1990 by 2030. Toward the end of the period, coal demand in China will no longer be rising and China is projected to become the world’s largest oil consumer. [According to the BP Outlook, China is the largest source of oil consumption growth, with consumption forecast to grow by 8 million barrels a day to reach 17.5 million barrels a day by 2030, overtaking the United States to become the world's largest oil consumer -- D.R.] 

OPEC’s share of global oil production is set to increase to 46%, a position not seen since 1977. At the same time, oil - and gas - import dependency in the US is likely to fall to levels not seen since the 1990s, because of improved fuel efficiency and the increased share of biofuels. Global consumption growth is also impacted by higher oil prices in recent years and a gradual reduction of subsidies in oil-importing countries.

The fuel mix changes over time, reflecting long asset lifetimes. Oil, excluding bio-fuels, will grow relatively slowly at 0.6% per year; natural gas is the fastest growing fossil fuel with more than three times the projected growth rate of oil at 2.1% per year. Coal will increase by 1.2% per year and by 2030 it is likely to provide virtually as much energy as oil excluding biofuels. The strong carbon policy drive in OECD countries risks being more than offset by growth in emerging economies. [Among non-fossil fuels, renewables are expected to grow at 8.2% per year from 2010 to 2030.] 

Wind, solar, bio-fuels and other renewables continue to grow strongly, increasing their share in primary energy from less than 2% now to more than 6% projected by 2030. Biofuels will provide 9% of transport fuels and nuclear and hydropower will grow steadily and gain market share in total energy consumption.

“The slowing of growth in total energy in transport is related to higher oil prices and improving fuel economy, vehicle saturation in mature economies, and expected increases in taxation and subsidy reduction in developing economies,” said Rühl. “In percentage terms, oil demand is reduced the most in the power sector (-30%) because this is the easiest oil to displace with gas or renewables and is the sector most likely to employ carbon pricing.” [...]

Global liquids demand is forecast to reach 102.4 million barrels per day (mmbpd) in 2030. The net growth of 16.5 mmbpd over the next 20 years comes exclusively from the emerging economies of the non-OECD. “Non-OECD Asia will account for nearly two-thirds of non-OECD consumption growth over the next 20 years and more than three-quarters of the net global increase, rising by nearly 13 million barrels a day,” said Rühl.

The largest increments of new supply will come from OPEC – conventional crude in Saudi Arabia and Iraq, as well as OPEC natural gas liquids (NGLs) which are not subject to OPEC quotas.”

Non-OPEC liquids are likely to rise modestly, driven by a large increase in biofuels, along with smaller increments from Canadian oil sands, deepwater Brazil, and the FSU which offset continued declines in mature provinces. [...]

According to the Energy Outlook’s projections, oil continues to suffer a long run decline in market share, while gas steadily gains share. Coal’s recent gains in market share, on the back of rapid industrialisation in China and India in particular, are reversed by 2030, with all three fossil fuels converging on market shares around 27%. [...]

Biofuels production is expected to reach 6.7 mmbpd by 2030 from 1.8 mmbpd in 2010 and will contribute 125% of net non-OPEC supply growth over the next 20 years. Continued policy support, high oil prices, and continued technological innovations all contribute to the rapid expansion.

The US and Brazil will continue to dominate biofuel production with 76% of total output in 2010 but falling to 68% in 2030 as output from Asia-Pacific begins to rise. [Read More]

(The BP Energy Outlook 2030 is the first of BP’s forward-looking analyses to be published, after 60 years of producing definitive historical data in the BP Statistical Review of World Energy. The Energy Outlook has been used only internally so far. Prof. Christof Rühl is Chief Economist of BP plc. The BP Energy Outlook 2030 is available in pdf format here  -- D.R.)