Is the world serious about
meeting its climate targets?
Inside Out
IN APRIL 2017 INSIDE OUT LOOKED AT THE WORK OF THE IEA, HIGHLIGHTING ITS WORLD ENERGY OUTLOOK AS AN
AUTHORITATIVE PUBLICATION. RELEASED IN NOVEMBER 2018, THE LATEST REPORT COMPRISES 661 PAGES FEATURING A
WIDE RANGE OF TOPICS INCLUDING EUROPEAN LNG TERMINALS, CHINESE POWER UTILITIES AND US SHALE GAS & OIL.
The future – two principal scenarios
1. New Policies Scenario
The IEA’s main view of the future reflects announced commitments
by governments and existing technologies with oil demand growth
projected to slow, but not peak before 2040.
Big changes are expected in the geographic distribution of oil
demand and in oil products consumed. Worldwide demand for gasoline
(petrol) for cars is expected to peak within seven years, as fuel efficiency
and sales of electric vehicles rise.
However, rising incomes and living standards in emerging economies
means the use of plastics and household products made from oil and
gas is expected to grow rapidly. Those fuel-efficient and electric cars are
likely to have an increased plastic content, too. The result is that this
scenario projects strong demand growth for lighter products used as
petrochemical feedstocks, particularly naphtha, LPG and ethane.
In this scenario, total energy demand is projected to grow by more
than 25% to 2040, necessitating over $2 trillion/year of investments in
new energy supply!
2. Sustainable Development Scenario
This shows a future that would meet the 2015 Paris Climate Agreement’s
objective of holding the global temperatures increase to well below 2C.
By 2040 petrol demand is projected to plunge whilst naphtha demand
keeps increasing at a rate only slightly slower than in the first scenario.
The IEA warns that this shift in the mix of demand for oil products
‘would represent an unprecedented challenge for refiners’. It could also
lead to oil & gas shifts favouring US shale which produces more lighter
natural gas liquids.
In this scenario, global energy-related CO2 emissions would peak
around 2020 and then enter a steep and sustained decline, fully in line
with the above Paris Agreement.
The global energy sector faces major transformations from growing
electrification to the expansion of renewables, upheavals in oil production
and globalisation of natural gas markets with policy choices made by
governments determining energy’s future.
This latest Outlook finds mixed signals on the pace and direction of
change in Asia with oil markets facing renewed uncertainty, volatility and
a possible supply gap in the early 2020s. Rising demand for natural gas is
erasing possibilities of a glut as China emerges as a giant consumer. Solar
PV is forging ahead, but other low-carbon technologies still require a big
push.
What must the world do to meet climate targets?
There must be a systematic preference to invest in sustainable energy
technologies together with a much smarter use of existing energy
systems. Expanding the use of carbon capture, utilisation and storage,
hydrogen, improving energy efficiency, and in some cases, retiring
existing capital stock early may help us be successful…..but it will need an
unprecedented global political and economic effort.
New Policies Scenario – observations &
projections
OIL consumption will continue to grow due to rising petrochemicals,
commercial ground transport and aviation demand; meeting growth
in the near term will require approvals of conventional oil projects to
double their current low levels. Without such a pick-up in investment,
US shale production would need to add more than 10 million barrels
a day from today to 2025 – that’s the the equivalent of adding
another Russia in 7 years which is unprecedented!
POWER – falling costs and supportive policies will make renewables
the technology of choice, providing two-thirds of global capacity
additions to 2040. Renewable power generation will rise to over 40%
(presently 25%) with coal remaining the largest single source and
gas the second-largest. This expansion will bring major environmental
benefits but also a new set of challenges that policy makers need to
address quickly. With higher variability in supplies, power systems
will need to make flexibility the cornerstone of future electricity
availability in order to keep the lights on. The issue is of growing
urgency as countries around the world are quickly ramping up their
share of solar PV and wind, and will require market reforms, grid
investments, as well as improving demand-response technologies,
such as smart meters and battery storage technologies.
ELECTRICITY markets have seen higher demand resulting
from technological changes such as the digital economy and
electric vehicles. Examining the impact of higher electrification in
transportation, buildings and industry, the analysis finds this leading
to a peak in oil demand by 2030, and a reduction in local air pollutant
with a negligible impact on carbon emissions without stronger efforts
to increase the share of renewables and low-carbon sources of power.
ASIA will be responsible for half of global growth in natural gas, 60%
wind/solar PV, more than 80% of the oil increase and more than
100% in coal and nuclear. Fifteen years ago European companies
dominated the list of the world’s top power companies – now six of
the top 10 are Chinese utilities.
UNITED STATES will account for more than half of global oil &
gas production growth (nearly 75% oil/40% gas) and by 2025
nearly every fifth barrel of oil and every fourth cubic metre of gas
in the world will come from USA. Shale will add to to pressures on
traditional oil & gas exporters that rely heavily on export revenues to
support national development.
INTERNATIONAL energy trade flows from the Middle East, Russia,
Canada, Brazil and USA will increasingly be drawn to Asia as its
share of global oil & gas trade rises from around half to more than
two-thirds by 2040. However, new ways of sourcing energy are also
visible at local level, as digitalisation and increasingly cost-effective
renewable energy technologies enable distributed and community-
based models of energy provision to gain ground.
Cheaper renewable energy technologies, digital applications and the
rising role of electricity are central to the prospects for meeting many
of the world’s sustainable development goals.
Fuel Oil News | January 2019 15