LNG News Editor:
UK major BP says that natural declines in existing hydrocarbon production imply continuing investment in new upstream oil and natural gas is required over the next 30 years and the LNG sector is expected to see substantial growth.
These assertions are contained in the “Energy Outlook 2022” report, which adds helpfully that it “was largely prepared before the military action by Russia in Ukraine” and does not include any analysis of the possible implications of those developments on economic growth or global energy markets.
Valuable guide
If anything, the events make BP's Outlook a more valuable guide to the future importance of LNG supplies to Europe and Asia as well as the need for substantial upstream spending rather than a stone-age-style rush to net zero with no adequate energy replacements nor technologies in place.
Analysts say that one point that can be taken is that the investment in upstream oil and gas is even more crucial as Russian supplies will increasingly point to Asia in the future.
“Growth in liquefied natural gas plays a central role in increasing emerging markets’ access to natural gas,” said BP.
The BP Outlook is focussed on three main scenarios: Accelerated, Net Zero and New Momentum.
“These scenarios are not predictions of what is likely to happen or what BP would like to happen. Rather they explore the possible implications of different judgements and assumptions concerning the nature of the energy transition,” the company explained.
LNG trade grows strongly over the first 10 years of the 30-year outlook, increasing by around two-thirds in the best-case scenario and by one-third if demand is completely regulated by net-zero aims.
BP states that the vast majority of this LNG growth is driven by increasing gas demand in emerging Asia (China, India and other emerging Asia) as they switch away from coal and, outside of China, continue to industrialize.
“LNG imports are the main incremental source of this increased use of gas, accounting for 70-75 percent of the increased gas consumption in emerging Asia out to 2030,” said the report.
“LNG imports continue to expand in the ‘New Momentum’ scenario, rising to over 1,000 billion cubic metres by the end of the outlook, supported by increasing imports into India and other emerging Asia, and continuing strong imports into Europe,” said the report.
BP added that the growth in LNG exports over the first part of the outlook is driven by the US, which accounts for over 40 percent of the increase in LNG exports to 2030 in all three scenarios.
It states that growth in LNG exports is also supported by sizeable increases in supply from the Middle East, Russia and Africa.
BP’s scenarios are based on existing and developing technologies and do not consider the possibility of entirely new or unknown technologies emerging.
“The Outlook can be used to identify aspects of the energy transition which are common across the main scenarios and so may provide a guide as to how the energy system may evolve over the next 30 years,” said the report.
Oil market
BP also forecasts that oil demand increases to above its pre-COVID-19 level before falling further out.
The company said the shifting pattern of global oil supplies over the outlook is driven by contrasting trends in US tight oil and output from the Organization of Petroleum Exporting Countries.
“US tight oil recovers over the first part of the outlook, after which it begins to fall and OPEC’s market share gradually increases,” said BP.
The report sees US tight oil, including natural gas liquids (NGLs), rebounding back from the impact of Covid-19, with output peaking above pre-Covid levels at around 15M barrels per day during the first decade of the outlook in all three scenarios.
