Peak oil demand to happen 2-3 years earlier than assumed
BAKU, Azerbaijan, Nov.18
By Leman Zeynalova – Trend:
Peak oil demand is to happen 2-3 years earlier than assumed, Trend reports with reference to Norwegian Equinor’s outlook.
“Natural decline from existing fields is seen at around 45 mbd per year. Even with current OPEC+ production cuts ending, that would consume global spare production capacity in 2-3 years, including the return of Iranian production.
“Shale oil resources are huge, but require a substantially higher oil price to attract the necessary investments. Earlier assumptions for peak oil demand to happen around 2030 may be challenged. A decline in oil supply due to low investments could force that date 2-3 years earlier. After that, renewable energy must then cover for both the decline in oil supply, and the continuous growth in global energy demand. This means we need all the renewable energy that we can provide, but at a cost that debt-laden countries can afford.
“Among the direct effects of Covid-19 are changes in new ways of working and interacting. In the industrialised world, working from home possibilities entails less need for commuting, although a higher share of it will be in private cars to ensure social distancing. Business meetings on screen are more frequent, reducing the need for air travel. Global supply chains may move from just-in-time to just-in-case, opening up for more goods produced domestically, with less demand for long-haul freight. That in turn could reduce demand growth in emerging economies, but it could also increase costs and reduce efficiency.
“The ambition to "build back greener" might mean that future investments are directed more to renewable energy projects, driven by public sentiment and government policies. One driver is that electrification only has a positive climate effect if the electricity is renewable. And 1 kWh of electricity from solar or wind will replace 3 kWh worth of coal to a coal-fired power plant.
“COVID-19 is likely to lead to slower demand growth for oil products, at least for a period. But it is also expected to influence oil supply. Oil production is an extractive industry and mature oil fields face declining output. Continuous investments are required just to keep output steady. As investments in fossil energy lose popularity, necessary funds might not be allocated. Low prices in 2020 have led to a 30% reduction in global oil and gas investments. Several producing countries have seen their oil revenues dwindle. The consequence may be that billions of barrels of oil that were earlier assumed to be recoverable will not be developed,” reads the report.
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