BP on energy markets: Long-term shifts underway

BP has released its 66th annual review of world energy markets. Energy demand was low, renewables grew, coal lost a large share, and gas production grew very slowly, and oil consumption grew strongly.

 

The oil and gas company said the review of 2016 demonstrates the long-term transitions now underway in the markets, with a shift to slower growth in global energy demand, demand moving sharply towards the fast-growing developing economies of Asia, and a marked shift towards lower carbon fuels as renewable energy continues to grow strongly and coal use falls.

According to the review, global energy demand was weak, growing only by 1% in 2016 – similar to rises of 0.9% and 1% seen in 2015 and 2014 respectively and significantly lower than the 10-year average rate of growth of 1.8%.

Almost all growth came from fast-growing developing economies; China and India together accounted for around half of all growth.

Global oil consumption grew strongly, rising by 1.6%, or 1.6 million barrels a day (mmb/d), above the 10-year average rate for a second consecutive year. Strong increases in demand were seen from India (up 0.3mmb/d) and Europe (up 0.3mmb/d), and while demand from China continued to grow (up 0.4mmb/d), it was lower than in recent years.

Weak prices impacted the growth of global oil production which rose by just 0.5% – the lowest increase since 2009 – or 0.4mmb/d.

Within this total, production from OPEC increased by 1.2mmb/d, with significant increases seen from Iran (up 0.7mmb/d), Iraq (up 0.4mmb/d) and Saudi Arabia (up 0.4mmb/d).

In contrast, non-OPEC oil production fell by 0.8mmb/d, the biggest annual decline for around 25 years. The largest output falls were from the US (down 0.4mmb/d), China and Nigeria (each down 0.3mmbd).

Gas growth slowest in 34 years, but LNG on the rise

 

 

Global natural gas consumption increased by 1.5% in 2016, slower than the 10-year average rate of 2.3%. However, there were strong increases in gas consumption in Europe (up 6%), the Middle East (up 3.5%) and China (up 7.7%).

According to BP, global natural gas production rose by only 0.3% – the weakest growth in gas output for 34 years, outside the financial crisis. With lower gas prices, US gas production fell for the first time since the shale gas revolution began. Australian gas production rose significantly as new LNG facilities came on stream.

Global LNG imports/exports grew by 6.2%, driven by the new Australian output.

According to BP’s Chief Economist Spencer Dale, the year 2016 was the first year of the growth spurt expected to see in LNG, with global supplies set to increase by around a further 30% by 2020.

 

“That is equivalent to a new LNG train coming on stream every two months until the end of this decade – quite astonishing growth,” Dale said.

The rise of LNG trade reflects an ongoing continuing fundamental shift in global gas markets towards greater integration, but also towards more competitive and flexible markets – with increasing volumes of LNG under shorter or smaller contracts or uncontracted.

Renewables at almost 4%, coal down

 

Once again, BP said, renewables were the fastest growing energy source in 2016. Not including hydroelectric power, renewable energy grew by 12%. While below the 10-year average rate of growth for renewables of 15.7%, this still represented the largest annual incremental increase in output on record (an increase of 55Mtoe – more than the decline in coal consumption).

Renewables now provide a share of just under 4% of primary energy.

Global coal consumption fell for the second successive year, down by 1.7% or 53 million tons of oil equivalent (Mtoe). This decline brought coal’s share of primary energy production to 28.1%, its lowest share since 2004.

In the UK, coal consumption more than halved (-52.5%). UK coal consumption has now fallen to levels last seen at the start of the Industrial Revolution around 200 years ago. The UK power sector recorded its first ‘coal-free’ day in April 2017.

 

 

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Posted on June 13, 2017 with tags , .

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