The world may never consume as much oil as in 2019BP Energy Outlook 2020, published on September 14.
The energy transition requires for oil & gas majors to increasingly use their prospective scenarios to justify their strategies. By forecasting a peak in oil demand between 2020 and 2030, BP expressed its willingness, like Total or Shell, to become a multi-energy major.
In its “Energy Outlook 2020”, BP announced that whatever energy policies or guidelines, the oil demand has almost reached its maximum, and the Covid-19 crisis will have an enduring influence on global oil consumption: by 2025, It will start to decrease by 3 million barrels per day due to the pandemic.
The pace and extent of the decline to come by 2050 will be linked to the speed of the “electrification” of the transportation industry and progress in energy efficiency.
A major decline in fossil fuels in the profile of low-carbon sectors
The energy outlook shows an increase in global energy consumption by 2050 (+ 0.7% per year in the BAU scenario, + 0.3% per year in the other two, against + 2% per year on average over the last two decades), linked in particular to the “catching up” of emerging economies, more urbanized and aspiring to a higher standard of living.
BP considers 3 different scenarios for the development of the global energy system by 2050. It reflects a wide range of possibilities illustrating the uncertainty surrounding energy markets:
- “Business-as-usual”, which government policies and social preferences evolve in the same way as in the recent past
- “Rapid”, aimed at limiting global warming by below 2 °C by 2100 (in line with Paris agreement on climate change)
- “Net Zero”, global warming limited to 1.5 °C
As a result of these policies and shifts in societal preferences, there is a decline in the share of hydrocarbons (coal, oil and natural gas) in the global energy system in all these scenarios. This is matched by a corresponding increase in the role of renewable energy as the world increasingly electrifies. The scale of this shift varies significantly across the three scenarios, with the share of hydrocarbons in primary energy declining from around 85% in 2018 to between 70-20% by 2050 and the share of renewable energy increasing to between 20-60%.
The transition to a lower carbon energy system in Rapid leads to a fundamental restructuring and reshaping of the global energy system.
Renewable energies, led by wind and solar power, are experiencing massive deployment in all BP scenarios by 2050, thanks to further cost reductions and energy transition policies. In its “Rapid” scenario, BP estimates that renewable sectors other than hydropower could account for 45% of global primary energy consumption in 2050, against only 5% in 2018.
Electricity and hydrogen, a rapidly increasing role
The increasing diversification of the fuel mix also leads to greater competition across different forms of energy as they compete for market share against a backdrop of plateauing energy demand in the second half of the Outlook in Rapid.
By 2050, the share of electricity in global final energy consumption could reach 34% in the BAU scenario, 45% in the Rapid scenario and more than 50% in the NetZero scenario, against nearly 20%. in 2018.
In the road transportation industry, the “electrification” will be led in particular by increasing growth of Robotaxis:
The potential for robotaxis to help decarbonize road transportation by increasing the share of passenger car VKM powered by electricity means they are supported by government policies, such as higher road pricing and congestion charges for private vehicles, particularly in Rapid and Net Zero. The importance of robotaxis is also supported in Net Zero by a shift in societal attitudes towards a sharing economy.
Hydrogen is presented by BP as “energy to activities that are difficult or expensive to electrify”. In the Rapid and Net Zero scenarios, the production of hydrogen is overwhelmingly “green” (produced by electrolysis with electricity of renewable origin) or “blue” (produced from fossil fuels but with capture and storage of CO2).
The scenarios outlined by BP are quite similar to those presented recently by DNV GL but it will have a particular attention because it’s published by the fourth biggest oil & gas company. Note that BP, now claims it wants to contribute to the global energy transition. In August 2020, the American major published its new strategy which is supposed to illustrate this ambition. Despite the big dip in demand for fossil fuels, the growth of renewable energies still expected to rise worldwide even though expansions have slowed somewhat during the pandemic.