On 1 February, Mark Finley, General Manager of Global Energy Markets and US Economics at BP, honoured the British Chamber of Commerce in Mexico by sharing a detailed twenty-year outlook on global energy supply and demand over a breakfast-networking event. The outlook established a base case detailing the most likely path for global energy markets over the next two decades, based on assumptions regarding energy policy, technological advances, and overall economic indicators. BP’s analysis serves as a platform with which one can attempt to answer key questions and issues revolving around the global energy market.Mark Finley began by reviewing global population- and GDP-growth forecasts, with data showing that China and India were to grow the most, accounting for almost half of projected growth.
On the other hand, the OECD countries’ growth rate, was expected to slowly but steadily decrease. He also mentioned that global GDP over the next twenty years is projected to grow 3.5%. In parallel, global population is estimated to reach 8.8 billion people by 2035. The combined growth of wealth and population, which will require a substantial increase in energy supply, will come primarily from emerging economies. An interesting assumption Mark noted was that towards the end of the 20-year outlook, India was expected to overtake China as the largest growth market for energy.
Mark went on to speak in depth about the fuel mix. Comprised of oil, gas, coal, nuclear, hydro, and renewables, the fuel mix is forecasted to transition to a greater dependency on renewables However oil, gas, and coal, will remain the primary sources of energy; though renewable energies are estimated to be the fastest growing source of energy, at 7% annually.
Over the 20-year outlook, renewable energies’ share of the total energy market is expected to increase from 3% to 10%. The base case also examined the breakdown of energy consumption by industries, with industry and “buildings” (think infrastructure) sectors considered to be the largest markets for final energy consumption, forecasted to account for most of the growth of energy demand over the outlook, followed by transport and non-combusted industries. A salient point Mark touched upon was the projected carbon emissions, mentioning a 13% increase over the next 20 years, far from the 30% reduction needed to achieve the objectives set forth in the Paris Agreement. However, projected growth in carbon emissions were estimated to be one third of the rate seen in the past 20 years, a significant achievement.Mark explained that there will be an increase in oil resources, surprisingly stating that known global oil resources were likely to dwarf global oil demand, not just to 2035, but also likely to 2050. He talked about the impact liquid natural gas (LNG) is having on the global gas market, pointing out Asia as the largest consumer of LNG, both now and over the 20-year projection, with the USA, Australia, and Qatar, accounting for nearly 50% of LNG output.
This will lead to greater integration of the global LNG market, with US gas prices likely to play a major role in anchoring global LNG prices, Mark asserted.Mark wrapped up his presentation by stating that despite BP’s energy outlook being considered as the “most likely” path the global energy industry might follow, many risks and uncertainties surround the base case. Mark underlined three key possible uncertainties:
1. A faster mobility revolution, leading to a disruption in oil demand;2. The speed of transition to a lower carbon energy economy; and 3. The sense of urgency (or lack of) in shifting away from coal-based energy production.
Following the presentation, the floor was opened to a Q&A session, followed by the opportunity for members to network and speak to Mark. The British Chamber of Commerce would like to thank Mark Finley and BP for their generous support in helping create this opportunity to learn and dialogue regarding the global energy market from highly qualified subject matter experts!
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