The global energy landscape is changing. Traditional centres of demand are being overtaken by fast-growing emerging markets. The energy mix is shifting, driven by technological improvements and environmental concerns. More than ever, this sector needs to forecast and adapt to meet these changing needs.
The world GDP is expected to double over the next 20 years, with increasing prosperity in fast-growing emerging economies lifting billions of people from low income groups. To fuel this growth, the overall demand for energy is expected to grow 30% from c. 13 btoe to 17 btoe as indicated in the recently published BP Energy Outlook 2017 – after factoring in improvements in energy efficiency, as increasing attention around the world is devoted to using energy more sustainably.
A key indicator of rising prosperity, especially in emerging markets, is a boost in car sales increasing the demand for liquid fuel. The pace of this demand growth is likely to slow as vehicles become more efficient and technological improvements, such as electric vehicles, autonomous driving and carpooling, potentially herald a mobility revolution.Although oil, gas and coal remain the dominant source of energy, the BP Energy Outlook 2017 maps the continued gradual de-carbonization of the fuel mix. Natural gas is expected to grow faster than oil or coal, helped by the rapid growth of liquefied natural gas (LNG) increasing the accessibility of gas across the globe. With rapid improvements in the competitiveness of renewable energy, renewables, together with nuclear and hydro energy, are forecast to provide half of the additional energy required upto 2035. While the growth in carbon emissions slows down relative to the past twenty years, the most likely path sees carbon emissions continuing, and calling for urgent further policy action which will have an important bearing on the nature of the energy transition. BP has created the Oil & Gas Climate Initiative ($1 billion fund) along with several industry players to transition to a lower carbon fuel mix.
India’s energy consumption is forecast to grow the fastest among all major economies (4.2% p.a. over 2017- 2035) to fuel India’s growth aspirations. India is forecast to overtake China as the largest growth market for energy in volume terms by 2030, with its consumption growth of fossil fuel being the largest in the world.
However, the energy mix for India evolves more slowly than rest of the world – fossil fuels continue to dominate and are forecast to account for 86% of demand in 2035, compared to the global average of 77%. While coal remains the dominant fuel produced in India, renewables overtake oil as the second largest domestic energy source with the share of renewables in the energy mix expected to quadruple. The country remains import dependent despite rapid increases in non-fossil fuel with rising oil and gas imports.
Along with the increase in renewables, natural gas can help India transition to affordable clean energy. A concerted push is required towards the adoption of gas as a green fuel and using it as co-generation for solar and wind power, fast-track development of stranded gas and fully exploit exploration options. Gas-based power would overcome the intermittent nature of renewables (at least till energy storage costs get competitive). It has 50% of the CO2 emissions of coal per unit of power. Even at market prices, gas is cheaper than oil and oil products. Global LNG supplies are expected to be more than double over the next 20 years and cause regional gas prices and markets to become increasingly integrated over time.
There is greater potential in India for discovering gas than oil (Source: World Energy Outlook Special Report, IEA), besides having significant undeveloped discovered gas resources which could double India’s gas production by 2022. The Government has encouraged domestic gas production through the recent gas pricing policy and other reforms. To achieve the target set by the Indian Government to reduce energy import dependence by 10%, investments are needed to develop a pan-India pipeline network, build a large and diversified consumer base and accelerate development of existing and new resources. To support the gas road-map gather momentum across the gas value chain and to make India an attractive investment destination, India needs to:
The oil & gas sector has very high “input-multiplier“- with strong forward linkages to other sectors and the economy benefitting all stakeholders – producers, consumers and the government. There is a need to continue to make bold decisions to further the country’s growth aspirations thus making 2017 a pivotal year for India.