With the goal of gaining insight into what the future may hold, Statoil looked ahead 30 years in its new Energy Perspectives report.
The Norwegian oil and gas corporation forecast the macroeconomic and energy market outlook from 2011 to 2040 in an “integrated and consistent outlook for total energy demand and for the projections of future energy mix.”
The report, which illustrates the major uncertainties in modeling long-term developments for the global economy and energy markets, details three scenarios: the reference (already decided energy and climate policies), low carbon (green growth), and policy paralysis (low growth) scenarios.
This year’s energy report varies slightly from previous reports with respect to the additional scenarios that were created, said Statoil Chief Economist Eirik Wærness.
“When you look so far in the future, the world is so uncertain that what you think is the most likely development—the reference scenario—is probably not very likely,” he said.
The reference scenario predicts that global economic growth will develop at roughly the same rate it has for the past 30 years, with an average 3% increase per year until 2030.
“That means the world will be considerably richer than we are today,” Wærness said. “At the same time, energy demand will grow at a lower rate—at 1.3% per year. Global energy intensity will be much lower than it is today.”
The report predicts the world will use much less energy per unit of income, and slightly different growth rates for renewable energy and oil and gas than in 2013. The reference scenario also projects a demand to increase for all energy sources ranging from 0.6% growth per year (oil) to 8% (new renewables).
As a result of climate and environmental policies and cost improvements, renewables are expected to increase market share from around 1% to almost 7%. Fossil fuels supply 75% of total primary energy demand in 2040 against 81% in 2010.
In the low carbon scenario, the report assumes that increasing requirements by the global population to take action regarding the unsustainable development of energy demand and CO2 emissions will be responded to by politicians, creating much tougher energy and climate policies, emissions restrictions, elimination of fuel subsidies than in the reference scenario.
“As a consequence of that, energy intensity improves substantially, so that you get much lower use of energy quickly compared to in the reference scenario,” Wærness said. “As a consequence of that, CO2 emissions start to fall.”
Energy and climate policies will reduce the demand and production of coal and increase the share of gas and renewable energy, which will contribute to a much lower CO2 intensity.
In the low carbon scenario, the global fuel mix evolves in a less CO2-intense direction. The coal share of the world’s primary energy consumption declines significantly by 2040, the oil share drops and all other energy carriers increase their shares of the only moderately growing total primary energy demand. Global gas use increases by about 16% from 2011 to 2040.
In the policy paralysis scenario, Statoil’s report takes a look at current geopolitical developments, such as increasing geopolitical uncertainty and conflict between the large global powers, and the potential implications it could have for economic growth, international trade, security of supply issues, and protectionism.
“In such a scenario, you get less economic growth and, therefore, lower energy demand,” Wærness said, “but you also get more dependence on your own resources, and less on international trade.”
The global fuel mix evolves in a less green direction, with a growing share of coal as one of the world’s primary energy sources, lower growth for renewables and carbon capture storage, steady nuclear share, lower oil share, and big regional differences for natural gas, such as a decline in importing regions and increase in exporting regions. Because the share of coal increases, a higher CO2 intensity results, but energy demand is lower because of lower economic growth.
In all the scenarios a growth in gas demand is forecasted, with a moderate growth in oil demand until 2040.
“Given maturation of the world’s existing oil and gas fields, all three scenarios imply major investments to replace current production,” Wærness said. “Even a strong growth in renewables will not be enough to replace the natural decline from producing fields and meet the global demand for energy.”
Because of its availability, flexibility and environmentally friendly characteristics compared to coal, natural gas is projected to become an increasingly important fuel in the decades to come. In the reference scenario, natural gas demand is forecast to grow faster than total energy demand, by 1.4% per year on average until 2040. In the low carbon scenario, the gas share of total primary energy demand grows from 21% to 24%. In the policy paralysis scenario, the global market share for natural gas is relatively stable.
Although the oil demand is predicted to be slightly higher than it is today, Wærness said it will have a “slightly lower share in terms of energy in 2040 than it has today.”
“In terms of implications for the oil and gas industry, it’s not as much the absolute level of demand that is important,” he said. “It’s the difference in the demand in any given scenario, and what you can produce in the existing fields.”
The analysis confirms results presented by the IEA—that within a sustainable energy system, there is still a strong need for oil and gas in the energy mix over the coming decades.
“We cannot stop investing in oil and gas and hope that we will be able to deliver sufficient energy,” Waerness said. “If we stop investing, then that means more coal and that is not sustainable.”
Valerie Wilke is a Web Content Associate Editor for SPE.