The resurgence in oil and gas production from the United States, declines in the cost of renewables, and growing electrification are changing the face of the global energy system and upending traditional ways of meeting energy demand, according to the World Energy Outlook 2017 from the International Energy Agency (IEA).
A cleaner and more diversified energy mix in China is another major driver of this transformation.
Over the next 25 years, the world’s growing energy needs are expected to be met first by renewable energy resources and natural gas. At the same time, fast-declining costs are expected to turn solar power into the least expensive source of new electricity generation.
Global energy demand is forecast by IEA to be 30 percent higher by 2040. That level is around half as much as it would have been without efficiency improvements. In the absence of large-scale carbon capture, utilization and storage systems, coal use declines. At the same time, IEA says that rising oil demand slows but is not reversed before 2040, even as electric-car sales rise.
WEO-2017 finds that over the next two decades the global energy system will be reshaped by four major forces:
• The United States is set to become the undisputed global oil and gas leader
• Renewables are being deployed rapidly thanks to falling costs
• The share of electricity in the energy mix is growing
• China’s new economic strategy takes it on a cleaner growth mode, with implications for global energy markets.
“Solar is forging ahead in global power markets as it becomes the cheapest source of electricity generation in many places, including China and India,” said Dr. Fatih Birol, the IEA’s executive director. “Electric vehicles (EVs) are in the fast lane as a result of government support and declining battery costs but it is far too early to write the obituary of oil, as growth for trucks, petrochemicals, shipping and aviation keep pushing demand higher. The U.S. becomes the undisputed leader for oil and gas production for decades, which represents a major upheaval for international market dynamics.”
China's Energy Emergence
The report includes a special focus on China, where an emphasis on cleaner energy technologies, in large part to address poor air quality, is moving the country to a position as a world leader in wind, solar, nuclear and electric vehicles, and as the source of more than a quarter of projected growth in natural gas consumption.
As early evidence, in November agreements were signed in Beijing between Alaska and Chinese officials to jointly promote a $43 billion liquefied natural gas project. Alaska Gasline Development Corp., the State of Alaska, China Petrochemical Corp. (Sinopec), CIC Capital Corp., and Bank of China, signed a joint development agreement to advance Alaska LNG, a 20 million tonnes per annum integrated LNG system.
Also in November, China Energy Investment Corp. agreed to invest $83.7 billion over the next 20 years in shale gas development and chemical manufacturing projects in West Virginia.
The shale oil and gas revolution in the United States is expected to continue thanks to the ability of producers to unlock new resources in cost-effective ways, IEA says. By the mid-2020s, the United States is projected to become the world’s largest LNG exporter and a net oil exporter by the end of that decade.
Consumers in Asia are expected to account for more than 70 percent of global oil and gas imports by 2040. LNG from the United States is also accelerating a major structural shift towards a more flexible and globalized gas market.
Oil Demand Growth Continues
WEO-2017 finds that global oil demand will continue to grow to 2040, although at a steadily decreasing pace. Fuel efficiency and rising electrification are expected to bring a peak in oil used for passenger cars, even with a doubling of the car fleet to two billion units. But other sectors -- petrochemicals, trucks, aviation and shipping -- are likely to drive up oil demand to 105 million barrels a day by 2040.
The report finds that global energy-related CO2 emissions increase slightly by 2040, but at a slower pace than in the 2016 projections. Still, this is “far from enough” to avoid impacts of climate change, the report says.