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OPEC buoyant despite challenges from renewables
November 18, 2017, 3:42 pm
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Oil will continue to remain the world’s largest source of energy over the next two decades, despite the increasing importance of renewable energy, notes the latest edition of the World Oil Outlook, the flagship publication of OPEC.

With global economy expected to grow by an average of 3.5 percent per year and global population set to increase to 9 billion by 2040, OPEC projects that demand for oil will increase by 16.5 percent, from 95.4 million barrels per day in 2016 to reach 111.1 million barrels per day by 2040. Meeting this projected demand would require an overall investment of around US $10.5 trillion across upstream, midstream and downstream operations, the report noted.

Released in an exclusive briefing to senior industry executives at the annual Abu Dhabi International Petroleum Exhibition and Conference (ADIPEC), which took place from 13-16 November in Abu Dhabi, the report forecasts that oil will supply just over 27 percent of worldwide energy needs in 2040, while natural gas will see its share at slightly more than 25 percent.

Since its launch in 2007, the annual World Oil Outlook has forecast on the health of the global oil industry and offered in-depth review and analysis, as well as assessments on various trends and challenges in the medium- and long-term development of the industry.

In his introduction to the report, OPEC Secretary General, H.E. Mohammad Barkindo, noted, “The past year has been an historic one for OPEC and the global oil industry. Since publication of the World Oil Outlook, in early November last year, the oil market has undergone significant change and transition. It has been a period where the rebalancing of the global oil market has gathered vital momentum, buoyed by a number of important factors.”

However, while prospects for the industry are strong, the World Oil Outlook predicts demand for oil will grow more slowly than the overall demand for energy. Renewables will see the fastest rate of annual growth, at 6.8 percent per annum, although their overall share of the energy mix is only expected to reach 5.4 percent by 2040 due to their lower starting base.

Meanwhile, the International Energy Agency (IEA), in its annual energy assessment, the ‘World Energy Outlook 2017’ noted that international energy market dynamics are set for a “major upheaval” as the United States cements its status as the world’s largest oil and gas producer.

The IEA, which tracks the energy for 29 countries, said the US, which was once dependent on energy imports, is rapidly becoming the “undisputed global oil and gas leader". The agency expects the US to account for 80 percent of the increase in global oil supply to 2025, driven by increases in shale. That will not only make the US a net exporter of oil and gas by the late 2020s, but also realign international trade flows and challenge incumbent oil and gas suppliers, helping keep prices down.

Other highlights from the IEA report include that global energy demand will rise 30 percent by 2040, driven by higher consumption in India; renewable energy sources will become more important to the global energy mix; and, China will soon overtake the United States and European Union to become the largest consumer of energy by 2040.

While oil demand will continues to grow to 2040, it will be at a steadily decreasing pace. However, natural gas is expected to rise by 45 percent to 2040, mainly from industrial demand. At the same time, renewable sources, such as solar and wind, are expected to meet 40 percent of the new global demand for energy and their explosive growth in the power sector will mark the end of the boom years for coal. In the EU, renewable energy will represent 80 percent of new capacity. Renewables are forecast to capture two-thirds of global investment in power plants to 2040 as they become, for many countries, the least-cost source of new generation.

The IEA also pointed out improvements in energy efficiency have played a huge role in curbing growth in energy demand; without them, the projected rise in final energy use would have been more than double. In China, for instance, government focus on renewable energy has led energy demand to increase by only an average of 2 percent annually since 2012, down from 8 percent between 2000 and 2012.

 

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