The energy major has today (30 January) published its annual Energy Outlook for 2023, scaling back its forecasts for oil and gas through to 2035.
Compared with last year’s edition, the Outlook scales back oil demand predictions for 2035 by 5%. The reduction for natural gas is 6%. This is under a scenario which BP describes as ‘New Momentum’ and has designed to “reflect the current broad trajectory” of the energy transition at present.
On oil, BP states that the continued improvements in efficiency in transport, plus the growing uptake of electric transport, means that oil demand will certainly decline in the next 10-12 years. The Outlook notes how the US’s multi-billion-dollar Inflation Reduction Act (IRA) could dramatically accelerate transport electrification in this major market.
BP states that the trajectory for gas demand is less set in stone. The Outlook highlights how some nations are looking to increase their own gas extraction and storage to maintain energy security while weaning off Russian gas, in the near-term. There is also a longer-term question of whether emerging and developing economies may use gas as a ‘bridge’ rather than going from coal to clean energy. Additionally, how rapidly energy efficiency efforts will be accelerated is yet to be seen.
The Outlook states that, under the ‘New Momentum’ scenario, global emissions would likely peak in the late 2020s. BP has scaled back its annual global emissions prediction for 2030 by 4%, to 37.8 gigatonnes. This would be around a 30% reduction on 2019 levels.
This scenario is not quite as ambitious as that detailed by the International Energy Agency (IEA) in the last quarter of 2022. The IEA’s World Energy Outlook, released in October, forecast a peak in power sector emissions by 2025 at the latest.
Neither the IEA’s ‘Stated Policies’ scenario nor BP’s ‘New Momentum’ scenario are aligned with global net-zero by 2050 – as recommended by climate scientists to give the best possible chance of limiting the global temperature increase in line with the Paris Agreement’s 1.5C pathway.
Global emissions would need to at least halve by 2030 to remain on this trajectory, scientists have stated. In contrast, the ‘New Momentum’ scenario entails a 30% reduction.
“The carbon budget is running out,” BP’s report states. “Despite the marked increase in government ambitions, CO2 emissions have increased in every year since the Paris COP in 2015 (bar 2020). The longer the delay in taking decisive action to reduce greenhouse gas emissions on a sustained basis, the greater are the likely resulting economic and social costs.”
The report also calls for “greater support” than simply subsidies from Governments. It states that an accelerated energy transition will also depend on national and regional governments addressing bottlenecks with planning and development for renewables, nuclear and energy storage. They will also need to better prepare electricity grids for increased demand and for additional renewable generation and storage capacity.
Self-fulfilling prophecy?
Readers may wonder how accurate an energy major’s outlook on these topics would be, given the desire of players in this sector to continue selling fossil fuels in the decades to come despite their stated commitments to net-zero.
BP’s ‘New Momentum’ scenario would see oil demand in 2035 sitting at 93 Mb/d, falling to 73 Mb/d in 2050. In contrast, oil demand in the ‘Net-Zero’ scenario is 70 Mb/d in 2035 and 21 Mb/d in 2050. In both scenarios, the decline is steeper post-2035.
On gas, the ‘New Momentum’ scenario actually entails an increase in demand from 3900 Bcm in 2020 to 4616 Bcm in 2050. In contrast, the ‘Net-Zero’ scenario entail a decrease to 1658 Bcm in this timeframe. The difference is stark.