Released March 17, 2022 | SUGAR LAND
en
Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The central metaphor in the new Energy Outlook 2022 prepared by BP plc (NYSE:BP) (London, England) and released March 14, is that the world has a finite carbon account, much like your checking or savings accounts. Unfortunately, we can't view a running tally of what remains in the account. We can only see individual deposits and withdrawals, shown as actual emissions for specific years. Future years' deposits and withdrawals are estimated under three scenarios. It is not clear if the global carbon account has "overdraft protection," and if so, how large it might be.
As a metaphor, it works because there are so many uncertainties--scientific, technical, political, financial--surrounding global climate change that making a solid prediction amounts to a fool's errand. When does the world's carbon account run out? To paraphrase a Biblical verse, "About that day or hour no one knows, not even the angels in heaven."
BP's purpose in its Energy Outlook 2022 is rather more secular and practical: It puts forth three possible scenarios about global energy use and carbon dioxide (CO2) emissions through 2050. The energy giant projects the order of magnitude of investments in renewable energy, oil and gas exploration and production, and carbon capture, utilization and storage (CCUS) that would need to be made to limit CO2 emissions under the three scenarios through 2050. The 109-page study also discussed low-carbon solutions like blue and green hydrogen, electric vehicles and global electrification; and the gap between rising national commitments to lower CO2 emissions and faltering actual performance.
The BP report proposed three scenarios, taking pains to emphasize that these were not predictions of what might happen, only sketches of what could happen under differing assumptions and developments in the energy transition through 2050. As such, the scenarios were not clearly defined in terms of differing rates of gross domestic product (GDP). The report focuses on key uncertainties surrounding the transition.
The report was prepared before Russia invaded Ukraine, so no possible shifts in the global energy ecosystems stemming from that conflict were included in the report.
One scenario, "New Momentum," is basically an extrapolation of "Business as Usual" in terms of global energy use and CO2 emissions. Recent changes, such as the rise of renewables, are extended forward three decades.
The other two cases, "Accelerated" and "Net Zero," fall within the range of two scenarios proposed by the Intergovernmental Panel on Climate Change (IPCC) to limit CO2 emissions gains since the start of the Industrial Revolution to 1.5 degrees Celsius and 2.0 degrees Celsius, respectively. The BP study looked only at CO2 emissions from energy use, including industrial uses of energy, but did not explore non-energy contributions to CO2 concentrations, such as from agriculture.
Click on the image at right to see a graphic of CO2 emissions under three scenarios through 2050.
For example, the report estimated a global annual average energy investment of as much as $2 trillion would be needed in renewable energy, upstream oil & gas and CCUS under the three scenarios.
The BP report noted some positive developments since its last Energy Outlook, produced in 2020: "Government ambitions globally to tackle climate change have increased markedly. And key elements of the low-carbon energy system critical for the world to transition successfully to net zero--installation of new wind and solar power capacity; sales of electric vehicles; announcements of blue and green hydrogen and CCUS projects--all have expanded rapidly. There are signs of a new momentum in tackling climate change."
"Despite that," the report continued, "other than the COVID-19-induced dip in 2020, carbon emissions have risen in every year since 2015, the year of the Paris (Agreement). The carbon budget is finite, and it is running out: further delays in reducing CO2 emissions could greatly increase the economic and social costs associated with trying to remain within the carbon budget. ... Delaying decisive action to reduce emissions sustainably could lead to significant economic and social costs."
As BP sees it, the structure of global energy demand will continue to change over the next three decades, with fossil fuels gradually declining in importance and a continuing rise in the role of renewables. Efforts to electrify economies, including electric vehicles, will accelerate. The transition to a low-carbon world requires a range of other energy sources and technologies, the company said, including low-carbon hydrogen, modern bioenergy and CCUS.
The three scenarios all contain these assumptions:
In the near-term, oil demand increases to above its pre-COVID-19 level in all three scenarios, BP said, boosted by the stronger-than-expected rebound in economic growth: "Oil consumption peaks in the mid-2020s in Accelerated and Net Zero cases, and around the turn of the decade in the New Momentum scenario," the report said. "Thereafter, oil consumption in Accelerated and Net Zero (cases) falls substantially, (while) the declines in oil demand in New Momentum are slower and less marked."
Click on the image at right to view global oil demand under three scenarios to 2050.
On the supply side, the BP report said, U.S. tight oil--including natural gas liquids (NGLs)--bounces back from the impact of COVID-19, with output peaking above pre-COVID-19 levels at around 15 million barrels per day (BBL/d) during the first decade of the outlook in all three scenarios. Brazilian output also grows over the first 10 years of the outlook. But as U.S. tight formations mature and OPEC adopts a more competitive strategy against a backdrop of accelerating declines in demand, U.S. production (and other sources of non-OPEC output) falls from the late 2020s onwards.
Through 2050, global natural gas demand falls in two scenarios but rises in the third, the New Momentum case, BP said.
Click on the image at right to see how global natural gas demand could change over the next three decades, under three scenarios.
In his introduction to the report, Spencer Dale, BP's chief economist, said: "The importance of the world making a decisive shift towards a net-zero future has never been clearer. The opportunities and risks associated with that transition are significant."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: LinkedIn.
As a metaphor, it works because there are so many uncertainties--scientific, technical, political, financial--surrounding global climate change that making a solid prediction amounts to a fool's errand. When does the world's carbon account run out? To paraphrase a Biblical verse, "About that day or hour no one knows, not even the angels in heaven."
BP's purpose in its Energy Outlook 2022 is rather more secular and practical: It puts forth three possible scenarios about global energy use and carbon dioxide (CO2) emissions through 2050. The energy giant projects the order of magnitude of investments in renewable energy, oil and gas exploration and production, and carbon capture, utilization and storage (CCUS) that would need to be made to limit CO2 emissions under the three scenarios through 2050. The 109-page study also discussed low-carbon solutions like blue and green hydrogen, electric vehicles and global electrification; and the gap between rising national commitments to lower CO2 emissions and faltering actual performance.
The BP report proposed three scenarios, taking pains to emphasize that these were not predictions of what might happen, only sketches of what could happen under differing assumptions and developments in the energy transition through 2050. As such, the scenarios were not clearly defined in terms of differing rates of gross domestic product (GDP). The report focuses on key uncertainties surrounding the transition.
The report was prepared before Russia invaded Ukraine, so no possible shifts in the global energy ecosystems stemming from that conflict were included in the report.
One scenario, "New Momentum," is basically an extrapolation of "Business as Usual" in terms of global energy use and CO2 emissions. Recent changes, such as the rise of renewables, are extended forward three decades.
The other two cases, "Accelerated" and "Net Zero," fall within the range of two scenarios proposed by the Intergovernmental Panel on Climate Change (IPCC) to limit CO2 emissions gains since the start of the Industrial Revolution to 1.5 degrees Celsius and 2.0 degrees Celsius, respectively. The BP study looked only at CO2 emissions from energy use, including industrial uses of energy, but did not explore non-energy contributions to CO2 concentrations, such as from agriculture.
Click on the image at right to see a graphic of CO2 emissions under three scenarios through 2050.For example, the report estimated a global annual average energy investment of as much as $2 trillion would be needed in renewable energy, upstream oil & gas and CCUS under the three scenarios.
The BP report noted some positive developments since its last Energy Outlook, produced in 2020: "Government ambitions globally to tackle climate change have increased markedly. And key elements of the low-carbon energy system critical for the world to transition successfully to net zero--installation of new wind and solar power capacity; sales of electric vehicles; announcements of blue and green hydrogen and CCUS projects--all have expanded rapidly. There are signs of a new momentum in tackling climate change."
"Despite that," the report continued, "other than the COVID-19-induced dip in 2020, carbon emissions have risen in every year since 2015, the year of the Paris (Agreement). The carbon budget is finite, and it is running out: further delays in reducing CO2 emissions could greatly increase the economic and social costs associated with trying to remain within the carbon budget. ... Delaying decisive action to reduce emissions sustainably could lead to significant economic and social costs."
As BP sees it, the structure of global energy demand will continue to change over the next three decades, with fossil fuels gradually declining in importance and a continuing rise in the role of renewables. Efforts to electrify economies, including electric vehicles, will accelerate. The transition to a low-carbon world requires a range of other energy sources and technologies, the company said, including low-carbon hydrogen, modern bioenergy and CCUS.
The three scenarios all contain these assumptions:
- Wind and solar power expand rapidly, supported by increasing electrification globally.
- Oil and natural gas continue to play a critical role for decades, but in lower volumes as society reduces its reliance on fossil fuels. Increased investment in upstream activities will be needed to offset naturally occurring declines in field production.
- The energy mix becomes more diverse, with increasing customer choice.
In the near-term, oil demand increases to above its pre-COVID-19 level in all three scenarios, BP said, boosted by the stronger-than-expected rebound in economic growth: "Oil consumption peaks in the mid-2020s in Accelerated and Net Zero cases, and around the turn of the decade in the New Momentum scenario," the report said. "Thereafter, oil consumption in Accelerated and Net Zero (cases) falls substantially, (while) the declines in oil demand in New Momentum are slower and less marked."
Click on the image at right to view global oil demand under three scenarios to 2050.On the supply side, the BP report said, U.S. tight oil--including natural gas liquids (NGLs)--bounces back from the impact of COVID-19, with output peaking above pre-COVID-19 levels at around 15 million barrels per day (BBL/d) during the first decade of the outlook in all three scenarios. Brazilian output also grows over the first 10 years of the outlook. But as U.S. tight formations mature and OPEC adopts a more competitive strategy against a backdrop of accelerating declines in demand, U.S. production (and other sources of non-OPEC output) falls from the late 2020s onwards.
Through 2050, global natural gas demand falls in two scenarios but rises in the third, the New Momentum case, BP said.
Click on the image at right to see how global natural gas demand could change over the next three decades, under three scenarios.In his introduction to the report, Spencer Dale, BP's chief economist, said: "The importance of the world making a decisive shift towards a net-zero future has never been clearer. The opportunities and risks associated with that transition are significant."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: LinkedIn.
