Introduction - Bob Dudley, group chief executive

Rapid growth and improving prosperity mean growth in energy demand is increasingly coming from developing economies, particularly within Asia, rather than from traditional markets in the OECD

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.
Bob Dudley, group chief executive

Welcome to BP’s Statistical Review of World Energy. This is the 66th edition of the Statistical Review and the data and analysis it contains provide a window onto another fascinating year in the world of energy.

Global energy markets are in transition. Rapid growth and improving prosperity mean growth in energy demand is increasingly coming from developing economies, particularly within Asia, rather than from traditional markets in the OECD. The relentless drive to improve energy efficiency is causing global energy consumption overall to decelerate. And, of course, 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.

As well as the increasing pull of this long-term transition, energy markets last year also had to respond to a series of shorter-run factors, most notably in the oil market which continued to adjust to the excess supply that has weighed on prices over the past three years. To understand this mix of short and long-run factors and what they might imply for the future, we need timely and reliable data. That is where the Statistical Review comes in, providing accurate global data to inform discussion, debate and decision making.

Looking at the picture overall, energy consumption grew slowly again in 2016 - the third consecutive year in which demand has grown by 1% or less - much weaker than the rates of growth we had become used to over the previous 10 years or so. Moreover, the weak growth in energy demand, combined with a continuing shift towards lower carbon fuels, meant global carbon emissions from energy consumption were estimated to have been essentially flat in 2016 for a third consecutive year - a substantial improvement relative to past trends.

From a global level, much of this improvement can be traced back to the pronounced changes in the pace and pattern of economic growth and energy consumption within China. The extent to which these changes will persist as China moves to a more sustainable pattern of growth and how much will unwind as the marked weakness in some of China’s most energy-intensive sectors eases is uncertain. We need to keep up our focus and efforts on reducing carbon emissions. BP supports the aims set out in the COP21 meetings in Paris and is committed to playing its part in helping to achieve them.

In terms of individual fuels, 2016 was a year of adjustment for the oil market, with low prices fuelling demand growth and weighing on production, particularly US tight oil which fell back substantially. As a result, the oil market moved broadly into balance in the second half of the year, albeit with inventories remaining at elevated levels. Towards the end of last year, OPEC together with 10 non-OPEC producers announced an agreement to cut output in order to speed up the pace at which oil stocks adjust to more normal levels. The price responsiveness of US tight oil and the actions of OPEC dominated oil markets in 2016 and look set to continue to do so over the next few years.

The weak price environment in 2016 was also felt in the natural gas market, where global production was essentially flat. This is the weakest growth in gas output for 34 years, other than in the immediate aftermath of the financial crisis. Even so, exports of liquefied natural gas (LNG) increased strongly, as a number of major LNG projects in Australia came onstream. The growth spurt in LNG supplies expected over the next few years is likely to have a major influence on global gas markets, leading to greater integration of markets across the globe and a move towards more flexible, competitive markets.

The influence of the energy transition was particularly marked in the contrasting fortunes of coal and renewable energy. Coal consumption fell sharply for the second consecutive year, with its share within primary energy falling to its lowest level since 2004. Indeed, coal production and consumption in the UK completed an entire cycle, falling back to levels last seen almost 200 years ago around the time of the Industrial Revolution, with the UK power sector recording its first ever coal-free day in April of this year. In contrast, renewable energy globally led by wind and solar power grew strongly, helped by continuing technological advances. Although the share of renewable energy within total energy remains small, at around 4%, it accounted for almost a third of the increase in primary energy last year.

Our industry has faced some significant challenges in recent years. There are signs in last year’s data that markets are adjusting and some of the near-term pressures may gradually ease. But as we know from history, one set of challenges is likely to be replaced by another, as we learn to operate in ever-changing markets and to harness the opportunities afforded by the transition to a lower carbon environment. That will require understanding and judgement, both of which rely on the kind of robust data and analysis provided by the Statistical Review. I hope you find it a useful resource for your own discussions and deliberations.

Let me conclude by thanking BP’s economics team and all those who helped us prepare this Review. The Review relies on the willingness of governments around the world to contribute their official data. Thank you for your continuing co-operation and transparency.

Bob Dudley
Group chief executive

June 2016

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