IC today31 Oct 2022 18:01
COMPANIES
Gas age coming to an end despite crisis, says IEA
Demand for gas remains flat following peak in 2030, according to a new IEA report, while oil needs fall after mid-2030s
October 31, 2022
By Alex Hamer
International Energy Agency says there's around a decade until peak fossil fuel demand
A clean energy ramp up could quicken peak oil and gas, as the world is currently on track to hit 2.5 degrees of warming by 2100
Just as oil and gas companies remain on track for the most profitable year in their existence, the International Energy Agency (IEA) has reaffirmed its estimate of peak demand for fossil fuels: 2030 for gas and 2035 for oil. In the meantime, gas demand growth will slow to 0.4 per cent a year, the report said, compared with 2.3 per cent between 2010 and 2019.
Previous peak oil estimates by consultancy Rystad Energy had seen oil top out at over 106mn barrels per day (bopd), while the IEA has put it at 103mn bopd, driven by advanced economies shifting to electric vehicles. A quicker shift to EVs could bring that peak to as early as the mid-2020s, however.
The agency's latest energy outlook comes after two years of rising oil and gas demand and disrupted supplies, first from the Opec cartel and private companies barely ramping up supply during the Covid-19 rebound, and then as Russian oil and gas was largely removed from Western markets because of the war. The 2030s IEA forecasts are reached from a ‘stated policies scenario' that uses current policies and government strategies.
Despite the closeness of 2030 in capital allocation and project life terms, if the current rates of growth for solar and wind power and electric vehicle take-up are maintained, peak demand for oil, gas and coal, could come sooner. This would also bring down the forecast temperature increase – the current trajectory is for warming to reach 2.5 degrees by the end of the century, well beyond the Paris goal of 1.5 degrees.
Rystad said high gas prices would likely spur more renewables investment given wind and solar were far cheaper than fossil fuel options. "For Europe’s utilities and member states, at prices over €100 (£86) per megawatt hour (MWh) it is unsustainable to continue generating electricity using gas, especially when solar PV and onshore wind offer far cheaper alternatives," the consultancy said, although highlighting that gas would continue to "play an important role in the European power mix". Rystad's gas price forecast for 2030 is €30/MWh, below the average 2021 price of €46.
The short term has countries looking for new sources of gas, however. Prices are currently far below the highs of recent months, but forecasts for next winter are dire as storage will be depleted after a summer without Russian gas imports into Europe.
The IEA said investing in fossil fuels was not the route out of the current energy crisis.
“In the most affected regions, higher shares of renewables were correlated with lower electricity p
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