Oil included in BP's first-ever energy outlook

FOR AS LONG as we can remember BP has been producing an annual survey of all-forms energy statistics. Always reliable, never late, this is a key resource for respected specialised periodicals like Oil Review Africa.

Now, for reasons unknown, the IOC has decided to make the main conclusions of its strong forecasting team publicly available. It's been all there as BP Energy Outlook 2030 on the Web since January. This makes an admirable partner for the past-year statistics series, and invites comparison with the International Energy Agency's annual long-term World Energy Outlook.

On the global energy situation, apart from further growth being inevitable, BP's “long view” is that energy consumption and the mix of fuels mirror technology and economic development. “Historical trends and patterns of development [such as the coal-fuelled age of steam] can help us understand how the future may unfold.”

Similarly the relationship between population, gross domestic product and energy continues to change, albeit slowly. Energy efficiency “continues to improve globally, and at an accelerating rate”. This is a key finding, and examples are given.

Non-OECD (i.e. non-industrialised) economies are now driving consumption growth as the fuel mix gradually shifts away from oil and coal towards gas and, especially, non-fossil fuels, including renewables.

There are two more main themes identified (and, like the above, fully explained) in this document. First, that industry and power generation in developing economies are now dominating the growth of energy consumption. And second that policies to constrain carbon emissions are already gradually tightening and will have a significant impact by 2030.

Oil Central

Despite being the slowest-growing fuel over the next 20 years oil will remain a central fuel says the BP forecasting team, and they point out some of the key trends that are certain to impact on African production plans. The figures we quote are extracted with a ruler from the bar charts presented; this is understandably not a detailed collection of forecasts.

First and most unsurprisingly, oil demand growth will continue to be driven by the non-OECD countries, more of the same we have seen over many recent years. Global demand will rise from just under 86Mb/d in 2010 to over 102Mb/d by 2030. OECD demand will drop to roughly the level last seen way back in 1990. By 2030 Asia will be the largest consuming region, with China alone both the largest single consumer and the 'fastest grower'.

Global demand for all liquid hydrocarbons – that's crude, biofuels and others lumped together – is expected to rise by 16.5Mb/d, with non-OECD Asia accounting for more than three-quarters of the increase. “OECD demand has likely peaked (in 2005)”, they say “and consumption is expected to decline by just over 4Mb/d.”

This increase in worldwide demand will be driven by consumption within the transportation and industrial sectors. Critically, usage by the power generation industry will be down by nearly one-half. As a result global consumption growth will slow to just 0.9% annually, from 1.3 points over the last 20 years. In the process non-OECD consumption will overtake that of the major industrialised countries as early as 2015, and more than double the group's 1990 level by 2030. However, excluding the former Soviet Union (FSU) states growth in this critical group will be significantly slower than that seen over the last two decades.

“Overall consumption growth will be restrained by the increase in crude oil prices seen in recent years and by the continued, gradual reduction of subsidies in non-OECD countries.” Demand from the transport sector in the industrialised countries will also fall as “technology and policy lead to improved engine efficiency”. OECD transport use including by aircraft will be on the way down within a mere five years.

Cars

The fuel economy of passenger cars, which has already made major progress since the very first 'oil shock', is set to advance much further, the BP team believe. Outside the USA passenger cars leaving factories in 2010 averaged around seven litres fuel needed per 100km. By 2020 this will be down to around five, and little over four 10 years on from that. US economy will improve at the same rate - but never approach the rest of the world, within the review period anyway.

'Vehicle saturation' in mature markets along with high prices, expected increases in taxation and reduction in subsidies in under-industrialised countries will all play a significant part in reducing the amount of energy used globally in transport, too.

So by implication this very positive factor will constrain consumption in developing countries including sub-Saharan Africa, too, but still be overtaken by increases in vehicle numbers – in those states like China that can afford them.

So oil consumption in transport is likely to reach a plateau in the mid 2020s, in major part due to the displacement of mineral oil by biofuels such as those derived from the jatropha successfully trialled in southern Africa. By 2030 9 per cent of energy demand arising from transportation will be met by biofuels, the 'Beyond Petroleum' team predict.

Global Oil consumption

And in all usage sectors it will be China that remains the key regional component of oil consumption growth, even though the rate of increase will fall in all sub-sectors other than transport, and especially after 2020. “China is the largest source of oil consumption growth in our outlook, with consumption forecast to grow by 8Mb/d to reach 17.5Mb/d by 2030, overtaking the US to become the world's largest oil consumer.” An assortment of government policies are likely to slow this growth considerably.

That's global oil consumption dealt with, a major concern of Africa's world-scale liquid energy exporters who for decades can expect only small domestic markets to rely on. What does one of the world's key IOCs say about global supply in which of course it has a major stake (in Russia and the fast-developing Arctic, for example)?

On this side of the equation it's OPEC, represented in SSA by Angola and Nigeria alone - that matters most.

Extrapolating from BP's graphic Africa's liquids supply is not actually expected to increase much, from around 10 Mb/d last year to just over 12 by 2030. Meanwhile the Middle East's contribution will soar upwards from 25 to more than 35Mb/d, by far the largest increase anywhere, and mostly in 'conventional' form too. It will likely be Iraq – described as “a major source of uncertainty” - that makes the largest single OPEC-derived increment even though top spot as world oil producer is likely to be shared between Russia and Saudi Arabia, the first of these not a cartel defender..

Over the period OPEC, including its North and sub-Saharan African members, will be accounting for more than three-quarters of global supply growth, a key part of which will be output of natural gas liquids as gas output itself expands rapidly. So OPEC's share of all-forms production will increase from 40 per cent last year to 46 per cent by 2030. This will bring it to a level last seen back in 1977. In the early years it will be existing spare capacity, mostly las now ocated in the KSA, that takes up the slack.

Outside OPEC unconventionals like biofuels and tar sands will be the subject of most of the development action. The bottom line will be that “the ability and willingness of OPEC members to expand capacity and production clearly is one of the main factors determining the path of the oil market.” This is why the regular and extraordinary production review meetings of OPEC are so important to the economic prospects of SSA in particular – and not just to the handful of members.

Just as important locally, in both Egypt and South Africa especially, will be the prospects for the downstream refining industry. Globally the BP experts say total crude runs will rise fairly steadily from around 73Mb/d in 2010 to only 82 by 2030 as refiners face competition from various other supply sources (biofuels, NGLs and the results of processing gains as well as better use of existing spare capacity), which suggest only modest growth in actual scheduled refinery throughput. Further, with around one-half of global liquids demand growth coming from China alone that country's own ambitious refining plans will affect product balances around the world. That means less for countries like Saudi Arabia basing their own expansion plans on the overseas sales of more refined products. This is a major consideration for local newcomers like Ghana, Uganda and some of the Saharan-fringe states.

All these trends were identified before unrest broke out in North Africa. Wisely describing the product as “a projection, not a proposition” the BP team emphasise that they have made no attempt whatsoever to forecast long-term energy prices.