Spencer Dale, Chief Economist at BP was in Moscow in mid-February to deliver BP’s most recent Energy Outlook. The report forecasts the upcoming trends in the oil and gas industry in the coming decades. Dale’s presentation focused on global growth, the trend towards decarbonization, and the increasing demand for electricity.
Dale spoke at the Institute of World Economy and International Relations in Moscow, part of his global tour to present this year’s report.
“Do we have a crystal ball that somehow means that can we forecast perfectly for 20 years ahead? Of course not. We now know that any forecast will inevitably be wrong. But I don’t think we should think about forecasting as being right or wrong. The value of forecasting is to better understand the nature of the uncertainty we face.”
The energy demand forecasts are based on the assumption that GDP will grow by 3.4% on average over this period. While some of the growth is driven by an increase in population, a majority will come from productivity growth, led by China and India. More than 2 billion people will shift from “lower income” to middle class, creating more demand for energy.
“The world continues to electrify, with the share of energy used for power continuing to increase,” the economist said.
By 2035, the global demand for energy will increase by 30%, with virtually all growth coming from developing economies.
While oil demand will continue to rise, the real winner will be natural gas with the expansion of LNG, the report says. Coal is expected to see its peak in the mid-2020s. Overall, the three fossil fuels will only make up 77% of the energy mix in 2035, compared to the current 86%.
According to the forecast, in the decades to come, Russia will continue to be the world’s biggest exporter, and in particular, has the potential to increase gas production by 28%.
BP, which recently launched a market campaign to rebrand itself as Beyond Petroleum, is very much oriented towards the role non-carbon sources of energy will play in the future.
“Non-fossil fuels provide almost half of the increase in primary energy in the next 20 years,” Dale said.