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Page added on February 12, 2014
Tech Talk – The BP Energy Outlook 2035
BP begins its new forecast for the energy future with the statement:
We project that by 2035 the US will be energy self-sufficient while maintaining its position as the world’s top liquids and natural gas producer.
This illustrates the optimism which BP are projecting in their image of future production. But it carries with it a lot of inherent assumptions, some of which are relatively easy to identify in the summary graphic presentation that accompanied the initial presentation of the new report. Perhaps the most illustrative of their optimism is this plot, which shows the increasingly decoupled changes in energy supply relative to projected increases in GDP.
Figure 1. The reducing dependence on Energy growth as a control on GDP. (All figures are from the new BP Energy Outlook for 2035)
Each year there are significant projections for the future of energy over the next few decades. Recent posts have reviewed this year’s projections from the IEA and ExxonMobil. These projections, were also reviewed last year and those reviews included the previous BP projection although that only projected forward to 2030 – the current review has added five years to this.
The relative contributions of the different fuel sources to the overall mix have not changed appreciably in the past year. Oil is anticipated to continue to shrink in percentage contribution, and coal will also decline in relative contribution after around 2020. Natural gas and renewables are anticipated to make up the supply needed.
Figure 2. Relative contributions of the different fuel sources to overall global energy supply to 2035.
BP have made it a little easier to see how this breaks down by plotting the ten-year increments in fuel contribution as well as the overall totals.
Figure 3. Changes in projected fuel supplies over the period to 2035.
Changing the plot to show the ten-year incremental changes illustrates how coal, now surging as an international fuel source, is anticipated to decline beyond 2020.
Figure 4. Projected ten-year incremental changes in fuel supply through 2035.
Note that in overall total BP is projecting that global consumption will rise by 41% over today’s numbers, most of which increase will come from the rapidly-developing countries of the world.
Figure 5. Regional increments of energy consumption growth over the decades to 2035.
The reliance on the improvements in energy efficiency to stall further growth in energy demand from the OECD countries is evident in this picture.
BP notes that the decade from 2002 to 2012 saw the “largest ever growth in energy consumption in volume terms,” but anticipates that this rate will never be exceeded in the decades to come. And they anticipate that as Chinese growth fades in the decades, so the growth of the Indian and adjacent economies will almost match that of China by the end of the period. As the nations of the world complete their industrialization, so the growth in the demand for fuel will see a greater emphasis on transportation demands.
Interestingly the decline in the demand for coal that BO projects is linked to the completion of industrialization in China, and this assumption is, of course, predicated on oil and natural gas remaining available to meet the demand at a reasonable cost.
Figure 6. Anticipated primary sources for generation of electric power.
The projections for changes in liquid fuel supply are also relatively simply presented. First one can see the projected changes in demand, with the OECD countries declining, as demand increase seems to focus in the Eastern nations.
Figure 7. Anticipated changes in global demand for liquid fuels
It is where this growth in supply is to come from that is of the greatest concern, and BP suggest the following:
Figure 8. The anticipated sources for growth in liquid fuel supply through 2035.
BP note the largest sources of these gains as being:
The largest increments of non-OPEC supply will come from the US (3.6 Mb/d), Canada (3.4 Mb/d), and Brazil (2.4 Mb/d), which offset declines in mature provinces such as the North Sea. OPEC supply growth will come primarily from NGLs (3.1 Mb/d) and crude oil in Iraq (2.6 Mb/d).
One of the more interesting plots in the report shows how, over last year, the changes in US production more than compensated for the declines in production from the MENA countries.
Figure 9. The ability of increased US production to balance declines in production from the nations in turmoil in MENA.
BP anticipates that continued US increases in production will more than balance the anticipated increases in global demand, so that the continued disruptions will not significantly affect global supply even though, as they have historically, they extend for more than ten years. The US gains are anticipated to continue to such an extent that OPEC will be required to rein in their supplies in order to sustain global prices.
Figure 10. Changes in the demand for OPEC oil and the result on their production reserve capacity.
One anticipates, given that KSA has said that they will not increase overall supply much above current levels, that the increases in production that BP anticipate will likely come from Iraq, and Iran if the sanctions are lifted. Given the current situation in those parts the latter seems increasingly more likely than the former. Further BP note that the increasing populations in these countries and their consequent increases in demand for energy is likely to constrain the levels at which these countries can continue to export.
In conclusion, and to justify the heading at the top of this piece, BP anticipate a continued growth in US oil production such that, by 2035 imports are virtually eliminated, being more than offset by the gains in the export of natural gas products. BP anticipates that the latter will increase by 2025 to around 12 bcf/d and continue at about that level.
Figure 11. BP projections for changes in the US oil supply sources for the period to 2035.
26 Comments on "Tech Talk – The BP Energy Outlook 2035"
Dave Thompson on Wed, 12th Feb 2014 12:37 pm
BP certainly paints a rosy picture here.
rockman on Wed, 12th Feb 2014 12:52 pm
The projections in this post are meaningless IMHO. I’m not saying they are either correct or not. Perhaps in the BP report they note the assumption for the future price of oil. But, if so, they aren’t posted in this post. There may be a temptation to judge the BP projections but on what basis: Did BP base these projections on inflation adjusted prices of $60/bbl oil? $100/bbl oil? $125/bbl oil?
This draws on the recent history of increased oil production especially in the US. In 2000 few would have projected the significant increase in US oil production because few would have projected oil pricing in the range 3X -5X then current levels. Did anyone predict $100+/bbl oil today in 2000? I doubt many would have taken such a forecast seriously. But had someone done so and then predicted the surge in North American production they likely would have ridiculed by most.
So back to this post: how can anyone judge the validity of these projections without knowing the oil price platform used? At least on the demand side BP does offer its expectation of GDP growth. But doesn’t a robust increase in global GDP also imply an energy cost that allows such an increase in activity? Is that projection based on current prices holding indefinitely? Increase at 5% per year? What if oil prices climb high enough to repeat the global recession in the mid 80’s as a result of high oil prices? If this happens it would lead to their future consumption estimates to be grossly in error. And if consumption collapsed would be looking at a 60%+ decrease in oil prices as happened in the mid 80’s? IOW under that scenario we would be looking at $40/bbl oil. Would we be drilling like crazy in any of the shale plays at $40/bbl? Would Canada still be shipping 3+ million bopd to the US? Some would completely discount the possibility of $40/bbl oil. And they would be just as confident as those folk who would have discounted the possibility of $15/bbl oil in 1986.
Davy, Hermann, MO on Wed, 12th Feb 2014 2:01 pm
Rock, good price point and “what if” on earlier predictions.
Energy growth and contraction will increasingly be dictated by above ground parameter. Price is a reflection of production economics. Production economics is dependent on capex. Capex is dependent on interest rates and liquidity.
The assumptions on the kind of growth from a production economics point of view is very shaky IMHO at this juncture. You all know my position on the market and that is a significant collapse probable for multiple reasons in next few years. Let’s be more a mainstream bear which means a correction to a strong contraction. In this case then we are talking 10% to 20% percent decline in the market. This will correspond to a stream of other economic reactions including bankruptcies, interest rate hikes, capex declines, volatility, energy demand destruction, energy price volatility, sovereign debt defaults, and foreign exchange volatility.
You see the headwinds presented in these mainstream market bear assumptions. If we do an “Excel Plug”, like I often see predictions like BP’s do, we would at minimum see small growth. The pressure on capex for these future projections is immense. Consider the high cost to the big projects that would be need to be funded in a bear market. Much would depend on when a correction occurs. I will admit we are in a new normal. Normal financial fundamentals, business cycles, and interest rates are now phantom. This new normal is in effect centrally planned by central banks, TBTF banks/brokerages, and global government’s acquiescence. We are talking market manipulation, corruptions, and wealth cannibalization of lower classes. These important conditions can and may extend the positive market forces for a time. Yet, you cannot, IMHO, transcend fundamentals and business cycles! We are near a correction, contraction, and or collapse by many many well supported analysis I have seen and read.
If market difficulties happen which I believe they must then there is no way in hell you can expect the world GDP needed to produce the kind of numbers projected by BP and others I might add. Predictions that far out are always suspect anyhow like Rock has mentioned. Just to produce the gas and renewable numbers there would need to be a huge increase in capex for the pipelines, LNG terminals, and drilling infrastructure. With renewables you have huge upfront cost that will not produce profit for years and the high manufacturing cost. The cost of renewable manufacturing may drop some but it will still be too high. I might add the huge capex needed just for maintenance of existing infrastructure is a headwind.
At least in this BP projection they acknowledge oil will decline. Yet, BP puts a big responsibility on North America, Iraq, and Iran for supply to prevent oil production plunging. This oil assumption alone is pushing things in my opinion for all the typical above ground reason. When we look at what oil supply decline means from our point of view here than we will again say “NUTS”. All the PO things that will occur in the other resource markets are well known here. All of the other energies mention in the projections will be under pressure from declining oil. The BP projections are dead on arrival in my mind!
Davy, Hermann, MO on Wed, 12th Feb 2014 2:07 pm
You see the headwinds presented in these mainstream market bear assumptions. If we do an “Excel Plug”, like I often see predictions like BP’s do, we would at minimum see small growth.
Sorry meant at “Maximum” small growth or I might add plateau.
Nony on Wed, 12th Feb 2014 2:21 pm
There’s a few comments about price if you weed through it, but I agree…lacking clear prediction.
I saw a chart on the net somewhere yesterday, that plotted, for next year, the futures price. And the also plotted the 95% confidence intervals (I guess this can be imputed from puts and calls). Anyhow, the price itself was pretty flat, don’t remember exactly but like 100 trending to 90 (maybe flatter, but slight down). Anyhow…the 95% intervals and just for next year (!) were huge. They include 40/140 next year.
To me the interesting thing is what drives a price. Is it changes in the demand curve (e.g. recession, long term switching, regulations) or is it changes in the supply (OPEC discipline, Persian Gulf war, new finds, etc.)
Nony on Wed, 12th Feb 2014 2:26 pm
Rockman:
Most of the hard core TOD peakers were predicting both high prices AND continued decline in US production. Sure didn’t see any stacked area charts from them showing tight oil boom. The idea that there was still enough wiggle in the US woman to significantly respond to high price was more of a cornie meme. Although in actuality, we are sort of at this squishy POD, undulating plateau, high price, but not cliff regime…which is really intermediate of peaker and cornie.
paulo1 on Wed, 12th Feb 2014 2:26 pm
I had a hard time reading past this :
“We project that by 2035 the US will be energy self-sufficient while maintaining its position as the world’s top liquids and natural gas producer.”
Paulo
Nony on Wed, 12th Feb 2014 2:31 pm
Also, there was a TOD prediction of Bakken peak at ‘2-3 times current of 75 kbpd’ back in ~2008. Analysis was based on declines/sweet spot exhaustion (NOT a global price crash). Prediction by Heading Out (you gave him an attaboy in the comments). I’d say he was a little off on the bear call.
Nony on Wed, 12th Feb 2014 2:34 pm
Paulo:
God looks out for children, drunkards, and the United States (-quote from Bismark)
So, to simplify, this is God’s nation. USA!
😉
Makati1 on Wed, 12th Feb 2014 3:30 pm
Should start with: “Once upon a time…”
No one can predict tomorrow with any certainty and certainly cannot predict 21 years down the road. Looking back for guidance does not work in today’s world. Some say history repeats, but we never attempted our total extinction before…
Northwest Resident on Wed, 12th Feb 2014 3:58 pm
Makati1 — And should end with “Lived happily ever after…”
While I’m neither informed enough or smart enough to dissect this article from the technical POV as rockman has done, or from the financial POV as Davy has done, one thing I can do is spot a PR Fluff piece form a mile away. Look, without significant investment in future oil extraction projects, those projects will never get going. Unless millions of investors around the world are convinced that their investments in oil extraction projects stand a pretty good chance of making them an extra buck or two, they are not going to invest in oil extraction, and the projects will never get going. It seems obvious to me that articles like this one from BP and hundreds of others have one primary intent — to keep the investment money coming into oil extraction projects. Most people don’t have the advantage of being able to read rockman’s analyses — or the analyses of other informed posters on this site. They take what they read from BP at face value, and base their decisions on that “information”. If it ever became common knowledge that BP and other “trusted information sources” were playing investors for fools, a severe blow to future oil production efforts would probably be the inevitable result — and that would affect us all to a very large extent.
Kenz300 on Wed, 12th Feb 2014 4:42 pm
Oil is getting more expensive to produce every year and producing a lot of dry holes……. how many oil companies are able to find enough new reserves to replace current production……….
Stilgar Wilcox on Wed, 12th Feb 2014 5:34 pm
I reject the whole BP premise based on the very first graph, which shows oil production falling precipitously while renewables increases to make up the shortfall. How is the economy suppose to avoid recession on reduced amounts of oil, while magically supporting increasing investment in renewables?
Presumptions like renewables will make up the shortfall are ignoring negative economic feedbacks. It’s like saying, “Well, my Ferrari is not running right, so I’ll keep up my speed in the race with my Tercell.”
rollin on Wed, 12th Feb 2014 6:16 pm
Oil production is peaked out. If a 500% price rise can’t produce much more, then adding more money will not produce much more. We are paying to continue production and slow the inevitable fall.
rockman on Wed, 12th Feb 2014 7:37 pm
Stilgar – That’s similar to the problem I have with folks who want to immediately turn away from fossil fuels for the sake of climate change. A worthy goal for sure. But they often have no answer regarding the economic and personal ramifications of such a move. Yes: if all the monies going to fossil fuel development we’re redirected we could build out the alts greatly. But two basic problems. First, the folks with the capex are deciding where to invest. If they wanted to and could they would be shoving at the alts…but they aren’t to any great degree.
Second, how would the economies function if there were a significant drop in fossil fuel development? They usual say societies would just adjust. I consider that a very Pollyannaish attitude similar to folks that think technology will automatically come up with solutions to energy problems as they develop. In just the last 25 years we’ve seen $trillions spent and hundreds of thousands of deaths over oil resource related issues. So if the world suddenly and significantly decreased the availability of fossil fuels then everyone will suddenly start playing nice? Just MHO but history would seem to strongly argue otherwise.
clifman on Wed, 12th Feb 2014 8:11 pm
Looks to me like Davy, Herman & Stilgar Wilcox fell for the same disinfo that I did at first. That first thumbnail graph – shown in full later – shows primary energy used to generate electricity. It does not show oil falling overall. BP does not show this at all. They show oil increasing to nearly 110 mbd by 2035, and if one discounts the OPEC NGLs, still to nearly 105 mbd by 2035. Pure cornucopia, no recognition or acknowledgement of decline. And SW is right about what Tom Murphy would call ‘The Energy Trap’.
GregT on Wed, 12th Feb 2014 9:19 pm
Rockman,
It would seem to me that you have already found the answers to your 2 basic problems above. We are not dealing with a problem per se, but a dilemma. Dilemmas do not have solutions, only choices.
Our financial, economic, and social systems are all dependant upon not only a growing quantity of excess energy, but of specific qualities, in a specific range of prices.
Lesser or equal quantities, of lower quality, higher priced energy sources, equates to a decrease in economic output, and ‘quality’ of life. These are the ramifications to our economic and personal lifestyles. This is what our future has in store for us.
Climate change adds another facet to our dilemma. We have a choice between modern industrial society, or a planet supportive of life. We can’t have both, the former is destroying the latter.
Again, only choices, one or the other.
We had the opportunity to make the wise choices decades ago, but we didn’t. We have an opportunity to maker a much harder choice now, but we aren’t. The longer we hold off the inevitable the more destruction we will reek on the environment, and the more serious the consequences will be to all of mankind.
Again, no solutions, only ever increasingly difficult choices. We are in quite the dire predicament.
rockman on Wed, 12th Feb 2014 9:33 pm
Greg – I agree. How badly the future may unfold will not depend upon solutions but how we collectively respond to those various dilemma IMHO.
Kenz300 on Wed, 12th Feb 2014 9:44 pm
How much of the growth in oil output is due to non conventional oils………… biofuels are expanding in production and use around the world.
The non conventional vs conventional line is very blurry in most projections.
GregT on Wed, 12th Feb 2014 10:15 pm
rockman,
IMHO, the first thing that needs to go down is fiat based fractional reserve banking. If we (the people) could take control of our financial systems, we could end the need for exponential growth. I don’t see TPTB allowing that to happen anytime soon though, so maybe collapse is the only way. Then perhaps we could reboot into a steady state economy.
Probably too optimistic of a scenario, so I’m sticking with realism. Hoping for the best, but preparing for the worst.
Northwest Resident on Wed, 12th Feb 2014 10:17 pm
GregT — You nailed it buddy. No solutions. Just door one, door two and door three — those being: 1) Do nothing, hold on to BAU as long as possible, doom humanity to oblivion, 2) Induce a controlled step-down to a sustainable plateau knowing that with each step down there will be chaos, turmoil and massive suffering, knowing that at any point it might (and probably will) spiral out of control and lead to 3) Total collapse. Turn out the lights. Hit the “off” switch on oil flows — put a plug in those wells and wait for the smoke and the stench of death to clear, gather up whatever remains and try to put together a “new world order” where we live within the natural limits that are imposed upon us, meaning, in a status of sustainability. Damned if we do. Damned if we don’t. Just plain ol’ damned.
shortonoil on Wed, 12th Feb 2014 10:36 pm
Apparently someone at BP has slipped through the reality barrier. The reason I say this is that if you go to the the study:
http://www.thehillsgroup.org/
and go to “Study Graphs” then graph# 25 you will find the relationship between “World GDP and Cumulative Production”. The data that produced the graph is taken from the World Bank and the EIA. World GDP has been driven by conventional crude production for as far back as the data goes back. BP has no model to predict “why” a hundred year trend will be broken. We have one that shows why it won’t, and ours is based on good old engineering principles that have been established for more than a century.
This whole presentation is an artifact of their PR department, and they have $10,000 software to put up all those pretty graphs. High class BS!
Davy, Hermann, MO on Thu, 13th Feb 2014 2:15 am
Guys, again, this is all about the economic system at this point! Many projects will be dead on arrival if interest rates go up. Rates have nowhere to go but up so which way do you think interest rates will go. We see a tremendous cost inflation in the oil exploration capex with significant decreases in associated production compared to previous years. Now, add to this a likely sizable increase in interest expense. This will further pressure the ratio of capex to production. We will begin to see marginally profitable projects cancelled especially if we have price volatility to the down side. A problem scenario is easy to see and would be a loss of confidence leading to liquidity issues. Rates go up from a bond market route. Oil prices drop from a slowing economy. What happens is the whammies of financing tightening, interest cost rising, oil prices falling, and production cost rising. The product is there we know this. The economy to get the product may not be. The market is close to a correction at precisely the point that major maintenance, production and exploration investment is needed. This is true of all the other energy types but oil is the critical element to all the other energy types. I see a government involvement in the energy market at some point if the market can’t produce. It is not the oil boys it is the Wall Street boys that will fail us!
Yes, Cliff I got careless with the graphs and you caught it. That is what happens when you get in a rush in our competition to get our message out here on this discussion board. Sorry. I will say this, the rate of increase in oil relative to implied future GDP does not compute! So even though they do not acknowledge a drop in oil their oil figure does not correspond to what we know about oil and the economy. The other energies will not substitute for oil. I don’t think they ever will because it is too late and expensive to build out the necessary infrastructure to allow substitution. Renewables, batteries, gas transport, coal to liquids, and next gen nuke are all nowhere able to scale in time!
DC on Thu, 13th Feb 2014 8:00 am
I may not be able to predict the future either, but I can say one for certain, with qualifiers of course. If we manage to hold oil consumption at the present level and avoid further(serious) demand destruction, in 21 years time, the world will have ~ 693 billion barrels of oil LESS than it does right now now. Now of course, some would say, that expecting demand to remain is static at todays level is not assured-you would be correct. I dont really know what it will do-but I can make an educated guess based on what info I have at hand. If its go higher, we have even less. If it drops,then it just means the great contraction is more or less schedule(ie the economy is tanking). But my point is, if held at even at todays rates, the world would burn though nearly ~700 billion barrels more*. Incidentally, it takes oil to make windmills and solar panels too. Every gallon burned in some fat North American slobs SUV or ATV means less solar panels and windmills built. We would be ….foolish to assume our Petro-overlords intend to use even a small fraction on my hypothetical 700 billion barrels left to build ‘clean’ power on a serious scale. Some will be built of course, but I fully expect to see the vast bulk of that 700 billion go into the tanks, ships and jets, of the Terrorist Us military, the SUVS and jet-skis of the worlds shrinking middle and upper classes, and Wall-marts salad-shooter hauling rigs. You get the idea I hope…
So thats my(abbreviated) take on this piece of hopium-warts and all.
* I am of course aware-many petro-propagandists keep insisting the Alberta Tar-sands alone contain something like 1.5 Trillion barrels. There is zero proof anything like that amount exists-IoW, its hope-based, a fantasy figure. Burning through at least 700 Billion(more) barrels in 2 decades is hardly trivial no matter how much the petro-pushers insist is left.
shortonoil on Thu, 13th Feb 2014 1:58 pm
“I am of course aware-many petro-propagandists keep insisting the Alberta Tar-sands alone contain something like 1.5 Trillion barrels.”
Of course if anyone bothered to educate themselves a little, like reading J.David Hughes’ ” Drill Baby Drill”, they would realizes that such claims are ridiculous. There may be 1.5 trillion barrels buried somewhere in Canada, but most of it is buried so deep it might as well be buried on the Moon. Shale oil is another example, YEA, there is a lot of shale oil, but the energy delivery capabilities of it are about one stage above burning buffalo chips.
Oil depletion is not a volumetric event, there is gigantic quantity of petroleum buried on planet earth. Oil depletion is a thermodynamic event. The quality of petroleum is falling, and it is getting closer and closer to the day when it will become nothing more than some black goo that nature has created to get rid of her deceased flora. Petroleum was not created so Soccer Moms could tool around in their SUVs. Only a small fraction of the world’s petroleum is usable to that creature—– man!
http://www.thehillsgroup.org/
GregT on Thu, 13th Feb 2014 4:06 pm
” it is getting closer and closer to the day when it will become nothing more than some black goo that nature has created to get rid of her deceased flora.”
And if I might add; Nature ‘created’ a planet capable of sustaining ‘life as we know it’ by sequestering CO2 in the form of that same said ‘black goo’. Releasing all of that CO2 back into the environment is not only suicidal, it is downright stupid.