UK-headquartered energy giant BP has unveiled its new energy outlook, highlighting the main trends and uncertainties surrounding the energy sector and the transition to low-carbon and green energy sources over the next three decades.
With the current energy and climate crises at the forefront, BP’s new Energy Outlook explores the key trends and uncertainties surrounding the energy transition to 2050. The three main scenarios considered in this year’s outlook – Net Zero, Accelerated, and New Momentum – have been updated to take into account two major developments over the past year, which were the Russia-Ukraine war and the passing of the Inflation Reduction Act in the United States (U.S.).
Spencer Dale, BP’s chief economist, remarked: “Global energy policies and discussions in recent years have been focused on the importance of decarbonising the energy system and the transition to net-zero. The events of the past year have served as a reminder to us all that the transition also needs to take account of the security and affordability of energy. Any successful and enduring energy transition needs to address all three elements of the so-called energy trilemma: secure, affordable and lower carbon.”
The oil major pointed out that the three main scenarios in its outlook are designed to explore the range of possible outcomes for the global energy system over the next 30 years. BP claims that understanding this range of uncertainty helps it shape a strategy resilient to the different speeds and ways the energy system may transition.
“The events of the past year have highlighted the complexity and interconnectedness of the global energy system. The increased focus on energy security as a result of the Russia-Ukraine war has the potential to accelerate the energy transition as countries seek to increase access to domestically produced energy, much of which is likely to come from renewables and other non-fossil fuels,” added Dale.
In addition, Dale further underscored that “the events also show how relatively small disruptions to energy supplies can lead to severe economic and social costs, highlighting the importance that the transition away from hydrocarbons is orderly, such that the demand for hydrocarbons falls in line with available supplies.”
Furthermore, BP elaborated that Accelerated and Net Zero explore how different elements of the energy system might change in pathways that achieve substantial reductions in carbon emissions by 2050 – by around 75 per cent in Accelerated and over 95 per cent in Net Zero. While both scenarios assume a significant tightening in climate policies globally, Net Zero also includes a shift in societal behaviour and preferences to further support gains in energy efficiency and the adoption of low-carbon energy.
On the other hand, New Momentum is designed to reflect the current broad trajectory of the world’s energy system, placing weight on the marked increase in government ambitions and pledges for decarbonisation that have been seen in recent years. In this scenario, global carbon emissions peak in the 2020s and by around 2050 are around 30 per cent below 2019 levels, emphasised the oil major.
What are the key themes in BP’s energy outlook?
The UK-headquartered energy giant claims that the carbon budget is running out. While there is a marked increase in government ambitions, CO2 emissions have increased every year since the Paris COP in 2015, bar 2020. Therefore, BP underlined that the longer the delay in taking decisive action to reduce GHG emissions on a sustained basis lasts, the greater the likely resulting economic and social costs will be.
Even though government support for the energy transition has increased further in a number of countries – including the passing of the Inflation Reduction Act in the U.S. – the scale of the decarbonisation challenge suggests greater support is required, including policies to facilitate quicker permitting and approval of low-carbon energy and infrastructure, highlighted BP.
The company says that the disruption to global energy supplies and associated energy shortages caused by the Russia-Ukraine war increase the importance attached to addressing all three elements of the energy trilemma: secure, affordable, and lower carbon.
BP believes that this war has long-lasting effects on the global energy system, as the heightened focus on energy security increases demand for domestically produced renewables and other non-fossil fuels helping to accelerate the energy transition.
The oil major outlined that the structure of energy demand changes in all three scenarios, with the importance of fossil fuels declining, replaced by a growing share of renewable energy and increased electrification. BP pointed out that the transition to a low-carbon world requires a range of other energy sources and technologies, including low-carbon hydrogen, modern bioenergy, and carbon capture utilisation and storage (CCUS).
Although oil demand declines over the outlook, driven by falling use in road transport as the efficiency of the vehicle fleet improves and the electrification of road vehicles accelerates, BP underlined that oil continues to play “a major role in the global energy system for the next 15-20 years across all three scenarios.”
Additionally, the prospects for natural gas depend on the speed of the energy transition, with increasing demand in emerging economies as they grow and industrialise offset by the transition to lower-carbon energy sources led by the developed world.
According to BP, the recent energy shortages and higher prices highlight the importance of the transition away from hydrocarbons being orderly, such that the demand for hydrocarbons falls in line with available supplies. The UK firm underscored that the natural declines in existing production sources mean “there needs to be continuing upstream investment in oil and natural gas over the next 30 years, including in Net Zero.”
As the global power system decarbonises, led by the increasing dominance of wind and solar power, these two renewable sources of energy are expected to account for all or most of the growth in power generation, aided by continuing cost competitiveness and an increasing ability to integrate high concentrations of these variable power sources into power systems. The growth in wind and solar requires a significant acceleration in the financing and building of new capacity, stated the oil major.
Meanwhile, the use of modern biofuels – modern solid biomass, biofuels and biomethane – grows rapidly, helping to decarbonise hard-to-abate sectors and processes, based on BP’s energy outlook.
BP further emphasised that low-carbon hydrogen plays a critical role in decarbonising the energy system, especially in hard-to-abate processes and activities in industry and transport. The company’s outlook shows that low-carbon hydrogen is dominated by green and blue hydrogen, with green hydrogen growing in importance over time. “Hydrogen trade is a mix of regional pipelines transporting pure hydrogen and global seaborne trade in hydrogen derivatives,” added the UK firm.
Moreover, carbon capture utilisation and storage plays “a central role in enabling rapid decarbonisation trajectories: capturing industrial process emissions, acting as a source of carbon dioxide removal, and abating emissions from the use of fossil fuels,” reported BP.
The energy giant concluded that a range of techniques for carbon dioxide removal – including bioenergy combined with carbon capture and storage, natural climate solutions, and direct air carbon capture with storage – are needed for the world to achieve ”a deep and rapid decarbonisation.”
Regarding BP’s recent activities, it is worth noting that the oil major tucked another achievement under its belt for the Azeri Central East (ACE) project in Azerbaijan last month by completing the jacket for the ACE platform.