Norwegian oil and gas company Equinor says global oil demand could peak in the early 2020s if countries hit their climate goals or continue to grow into the 2050s in a “conflict-ridden world”. Equinor photo by Olaf Nagelhus .
Global oil demand estimates for 2050 vary between 59 million-122 million b/d
Norway’s energy company Equinor, formerly known as Statoil, says global oil demand could peak by the early 2020s, should countries meet their climate goals, or it could continue to grow into the 2050s in a conflict-ridden world.
“The future of energy is uncertain”, wrote Eldar Sætre, CEO of Equinor in the company’s Energy Perspectives 2018 report. He added “it depends on developments in the global economy, technology, policy, resource availability and consumer preferences”.
Energy companies considering this fuzzy forecast for global crude demand are mulling their options. Should they invest in long-term projects or cut their risk by putting money into projects with rapid returns like shale oil?
In its new energy outlook, Equinor said “An oil market in potential decline increases the uncertainty the producers face, reduces their investment horizon, and increases the focus on short payback periods for investments”.
In the report, Sætre wrote “The challenge for energy companies and society at large is to satisfy growing demand while contributing to increased sustainability” He added “For that to happen, we will need an energy transition of enormous proportions”.
Equinor plans to boost investments in renewable energy to 15-20 per cent of its total capital expenditure by 2030.
But Equinor’s roots are in the oil industry and even with a hazy estimate of demand for crude in 2050 somewhere between 50 to 122 million barrels per day (b/d), the company is keeping an eye on oil demand today and into future.
The Energy Perspectives 2018 report highlights three energy-related scenarios; Renewal, Reform and Rivalry.
In the Renewal scenario, countries adhere to their goals agreed to in the Paris climate agreement to limit the increase in the world’s average surface temperatures to below 2 degrees Celsius above the pre-industrial era.
The Reform framework sees a continuation of existing policy and technology trends. Under Reform, the global oil demand peaks at 111 million b/d somewhere around 2030 and drops to 105 million b/d in 2050.
In the Rivalry scenario, the geopolitical backdrop is “a fluid, volatile and conflict-ridden”. Equinor says in the Rivalry setting, there is a lack of trust that prevents countries from tackling climate change effectively.
“The value proposition of democracy declines, with many parts of the world now ruled by dictators and autocrats, some of whom are intent on exporting their authoritarian political models. Other issues than climate dominate the energy policy agendas,” Equinor said of the Rivalry scenario.
Equinor added that unexpected, or “black swan” events including a commercial breakthrough in safe and green energy like nuclear fusion technology, or a quicker pace of transport electrification and energy efficiency could affect oil demand.
The report added that natural decline in current crude production will likely outpace the decline in oil demand, and as such, new investments in oil production will be needed.
Even under the Renewal scenario, about 480 billion barrels of crude from new sources will be needed by 2050. This is more than the total supply from OPEC countries in the past 35 years, according to Equinor.
On May 15, Statoil changed its name to Equinor to reflect its new mission to be a “broad energy” company.