LONDON (Alliance News) - BP PLC Tuesday said global demand for energy is set to grow by 37% from 2013 to 2035, driven by the ongoing economic expansion in Asia which will increase energy demand over the next 20 years and said gas is set to gain ground over oil in the period.
The oil major released its estimates ahead of its Energy Outlook 2035, which is BP's "best effort to describe a most likely trajectory of the global energy system", set to be released in full later on Wednesday.
BP said the economic expansion in Asia, particularly in China and India will spur the 37% growth in demand by 2035, or by 1.4% per year, despite the "dramatic recent weakening in global energy markets."
BP said China will be the world's largest economy by 2035, whilst India will be the world's third largest. Together, the two countries will account for one third of the global population, said BP.
The key drivers for increased energy demand will be population growth and a rise in income per person. By 2035, BP said the world's population will reach 8.7 billion, which is an additional 1.6 billion people from 2014.
"After three years of high and deceptively steady oil prices, the fall of recent months is a stark reminder that the norm in energy markets is one of continuous change," said Spencer Dale, BP's chief economist.
"It is important that we look through short term volatility to identify those longer term trends in supply and demand that are likely to shape the energy sector over the next 20 years and so help inform the strategic choices facing the industry and policy makers alike," he added.
BP's Energy Outlook forecasts that demand for oil will increase by around 0.8% each year to 2035, with 96% of the rising demand coming from countries outside of the Organisation for Economic Co-operation and Development.
The OECD was set up in 1960 and has 14 member states, most notably including Australia, Japan, the UK, the US, and Germany.
BP said "oil consumption within the OECD peaked in 2005 and by 2035 is expected to have fallen to levels not seen since 1986," adding that China is likely to have overtaken the US as the largest oil consumer in the world by 2035.
BP said oil production in the US reached its highest ever level in 2014, at 1.5 million barrels of oil per day, but said in the longer term, US oil production will slow and production in the Middle East will gain ground. However, BP also said that the US is likely to become self sufficient in oil by the 2030s.
Demand for natural gas is set to grow at an even higher rate up to 2035, with BP predicting demand growth of 1.9% per year, also driven by demand in Asia. Half the increased demand will be met by rising conventional gas production, primarily in Russia and the Middle East, and about a half from shale gas, said BP.
"By 2035, North America, which currently accounts for almost all global shale gas supply, will still produce around three quarters of the total," said the company.
BP said coal is being "squeezed out from power generation" following on from tighter regulations on the use of coal in the US and China and the plentiful supply of gas. The company said coal demand had grown by 3.8% between 2000 to 2013, but has now become the slowest growing fuel.
"Roughly one-third of the [37%] increase in energy demand is provided by gas, another third by oil and coal together, and the final third by non-fossil fuels," said BP.
By 2035, coal will still be a dominant fuel, providing around one third of power generation, but BP said this is significantly down from the 44% share coal has today, narrowing the gap between coal and other fuels.
"As demand for gas grows, there will be increasing trade across regions and by the early 2020s Asia Pacific will overtake Europe as the largest net gas importing region. The continuing growth of shale gas will also mean that in the next few years North America will switch from being a net importer to net exporter of gas," said BP.
"Increased oil and gas supplies in the US and lower demand in the US and Europe due to improving energy efficiency and lower growth will combine with continuing strong economic growth in Asia to shift the energy flows increasingly from west to east," said BP.
The increase in traded gas that BP is expecting will be met through increasing supply of liquefied natural gas, with supplies of LNG set to rise by 8% year on year until 2020. By 2035, LNG is set to have replaced pipelines as the dominant form of traded gas, BP predicts.
"Increasing LNG trade will also have other effects on markets. Over time it can be expected to lead to more connected and integrated gas markets and prices across the world. And it is also likely to provide significantly greater diversity in gas supplies to consuming regions such as Europe and China," said the company.
BP shares were down 0.4% to 450.30 pence per share on Wednesday afternoon.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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