BP revised its 2035 energy demand outlook downwards by 1 per cent compared to its outlook last year to reflect weaker economic prospects, according to its 2017 Statistical Review.
“The energy mix is shifting towards cleaner, lower carbon fuels, driven by environmental needs and technological advances. BP will play its part in meeting this dual challenge of supplying the energy the world needs to grow and prosper, while also reducing carbon emissions,” said Bob Dudley, group chief executive.
The 1 per cent decline represents 150 million tons of oil equivalent (Mtoe), which while similar to the downward revision last year, are large relative to historical revisions, BP said in its report, while GDP in 2035 expected to be 2 per cent lower compared to its outlook last year.
It is however, expected to double over the outlook period driven by fast-growing emerging economies, as more than 2 billion people are lifted from low incomes.
This rising prosperity drives an increase in global energy demand, although the extent of this growth is substantially offset by rapid gains in energy efficiency: energy demand increases by only around 30 per cent, BP said.
The largest downward revision is to coal ( down 6 per cent, by 240 Mtoe), where there is increasing evidence that a rebalancing of economic growth within China together with tightening climate and environmental policies are likely to lead to a plateauing in China’s coal consumption over the outlook period until 2035.
“Traditional centres of demand are being overtaken by fast- growing emerging markets. The energy mix is shifting, driven by technological improvements and environmental concerns,” Dudley said.
Renewables have been revised up 15 per cent (220 Mtoe) - the largest revision in percentage terms - as the prospective path for costs continues to surprise on the downside. As a result, the use of both coal and gas in the power sector has been revised down, with gas consumption in total down 2.5 per cent (-110 Mtoe) by 2035.
The upward revision in the share of non-fossil fuels relative to fossil fuels has led to an improvement in the expected carbon intensity of the fuel mix, contributing to a sizeable downward revision in the level of carbon emissions by 2035 (-3.7 per cent, -1.4 billion tonnes of CO2 on a like-for-like basis).
BP said the the outlook for Chinese energy demand was revised down significantly over the past three years: the current outlook for China’s energy consumption in 2035 is 8 per cent (400 Mtoe) below the 2014 outlook.
“Around half of that difference reflects lower-than-expected out-turns for energy consumption in recent years, as economic growth has slowed more quickly than expected and energy intensity has fallen more sharply,” the report said, while adding that the remainder reflects weaker prospects for economic growth, particularly in the second half of the outlook.
Despite its large downgrade to Chinese consumption, the expected level of energy demand in emerging Asia as a whole in 2035 is broadly unchanged: upward revisions to energy consumption in India and other emerging Asia economies offset the reductions to Chinese demand.
“These upward revisions to Asian energy demand outside of China reflect a more upbeat view of economic growth, partly reflecting the expectation that as China’s economy matures and rebalances, some industries will migrate to cheaper, lower- income Asian economies, such as India, Indonesia or Vietnam,” BP said.