Oil and Gas to Supply Nearly Half of Global Primary Energy in 2050

From PERSPECTIVES, a digital publication from DNV GL – Oil & Gas

DNV GL forecasts world energy demand will plateau from 2030

• Oil and gas will supply 44% of global primary energy in 2050
• Gas will be the largest single source of energy from 2034
• Significant investment needed across the oil and gas value chain

Oil and gas will remain crucial components of the world’s energy future as global energy demand flattens over the coming decades for the first time since at least the industrial revolution. DNV GL’s inaugural Energy Transition Outlook (ETO), an independent forecast of the future energy landscape, predicts that oil and gas will still account for 44% of world primary energy supply in 2050, compared with 53% today.

The company’s model predicts energy demand and supply for 10 world regions and energy transport between them. It forecasts demand for hydrocarbons to peak over the next two decades, with gas becoming the single largest energy source from 2034. A suite of reports^1-4, available to download free-of-charge from DNV GL’s website, includes a study that considers some of the key trends identified by the ETO model across the oil and gas value chain, and explores their implications (figure I). DNV GL’s ‘Oil and gas forecast to 2050‘ report reveals that significant investment will be needed to add new oil and gas production capacity and operate existing assets safely and sustainably. It also warns the industry to maintain strict cost efficiency in order to achieve the margins necessary for future expenditure and stay relevant.

Gas set to become the largest single source of energy

 DNV GL predicts that the fossil fuel share in the world’s primary energy mix will reduce from 81% currently to 52% in 2050 (figure II), principally driven by a significant reduction in coal use. Demand for crude oil will flatten out in the period 2020–2028 then fall significantly as sales of light electric vehicles (EVs) surge. The model predicts that EVs will achieve cost parity with internal combustion vehicles in 2022. Half of new light-vehicle sales will be electric by 2033.

While demand for oil will decrease significantly by mid-century – peaking in 2022 – the stage is set for gas to become the largest single source of energy towards 2050, with demand reaching a high of 156EJ in 2035 – 14% more than today – before entering moderate decline.

Gas will be the last of the fossil fuels to experience peak demand. As the cleanest fossil fuel, it will continue to play a key role alongside renewables in helping to meet future, lower-carbon energy requirements.

The future for gas in power generation could be even brighter if its use for this purpose was further decarbonized. The only currently viable technology to achieve this is carbon capture and storage (CCS), but the model suggests its uptake will be low for the next 20 years, owing to low carbon prices. When the cost of carbon is increased by 50% in sensitivity studies with the model, CCS uptake grow tenfold.

The model has major implications for oil and gas production: some key global production forecasts are summarized in figure I, while regional trends are detailed in the report.

The industry has taken bold steps before, but now needs to take even bigger strides.

The transition has major implications

One early sign that the energy transition has begun is that major oil companies are seeking to increase the share of gas in their reserves. Shell has already started down this road through its acquisition of BG Group. DNV GL expects this industry shift to accelerate by 2022 as operators decarbonize business portfolios.

“The profound change set out in the ETO report has significant implications for both established and new energy companies,” said Remi Eriksen, group president and CEO, DNV GL. “Ultimately, it will be a willingness to innovate and a capability to move at speed that will determine who is able to remain competitive in this dramatically altered energy landscape.” Despite greater efficiency and reduced reliance on fossil fuels, DNV GL’s model indicates that the planet is set to warm by 2.5 degrees Celsius (˚C) compared with pre-industrial levels, thus failing to achieve the 2015 Paris Agreement target.

Eriksen commented: “Even with energy demand flattening and emissions halving, our model still points to a significant overshoot of the 2°C carbon budget. This should be a wake-up call to governments and decision-makers within the energy industry. The industry has taken bold steps before, but now needs to take even bigger strides.”

Keeping a focus on oil and gas industry costs

The ETO model’s results reinforce the oil and gas industry’s need to build on recent success in tackling costs to achieve the margins necessary for future capex and opex.

The global industry has already cut offshore field development and production costs by 30–40% in three years, mainly through commercial pressure on the supply chain and revising design concepts to be more flexible and leaner.

 Innovation in floating liquefied natural gas (FLNG), such as DNV GL’s Solitude design concept for an unmanned autonomous FLNG vessel, shows the industry continuing to challenge the status quo.⁵

“We have seen impressive and important innovative efforts across the energy industry, resulting in cost saving and efficiency gains,” said Elisabeth Tørstad, CEO, DNV GL – Oil & Gas. “The oil and gas industry must continue on a path of strict cost control to stay relevant. Coming from a tradition of technological achievements, and having the advantage of existing infrastructure and value chains, this industry has the potential to continue to contribute to energy security and shape our energy future.”

She added: “Increased digitalization, standardization and remote or autonomous operations will play a central role in achieving long-term cost savings and improving the oil and gas industry’s carbon footprint. We also expect the industry to turn to innovations in facility design, operating models and contracting strategies.”

Download a complimentary copy of the DNV GL Energy Transition Outlook from: eto.dnvgl.com

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