Oil and gas investment will be needed for another 30 years, says BP
INVESTMENT in oil and gas production will be needed for at least the next three decades if the world is to avoid shortages and price swings, BP has warned.
The oil giant said in its annual energy outlook published today that fossil fuels are still likely to account for about 20pc of primary energy in 2050 even under a significant tightening of climate policy.
Spencer Dale, chief economist at BP, said investment in production would be needed until 2050 to ensure supply matches demand.
“Natural declines in existing production sources mean there needs to be continuing upstream investment in oil and natural gas over the next 30 years,” he wrote in the report.
The assessment is likely to spark a backlash from climate groups and campaigners who argue that investment in new wells should be immediately stopped in order to meet net-zero carbon emission goals. Greta Thunberg told world leaders at Davos earlier this month that new extraction should be stopped immediately while António Guterres, the UN chief, has called new funding for fossil fuels “delusional”.
The International Energy Agency said in 2021 that no new oil, gas or coal projects should be approved if the world was to stay on track to meet a goal of net zero emissions by 2050. However, BP said continued supply is needed to prevent a repeat of the kind of distress seen last year when Russian oil and gas supplies were cut or disrupted after it invaded Ukraine.
Mr Dale said the scale of disruption that caused “highlighted the need for the transition away from hydrocarbons to be orderly, such that the demand for hydrocarbons falls in line with available supplies, avoiding future periods of energy shortages and higher prices”.
While demand is expected to fall sharply as a result of efforts to cut carbon emissions, the fuels will still play a major energy role, BP predicts.
The company expects oil demand to plateau over the next decade, before starting to fall, driven by the switch to electric cars. However, BP envisages fossil fuels will still account for about 20pc of primary energy in 2050 even under a significant tightening of climate policies to cut emissions 95pc by 2050.
Mr Dale said: “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 ... events of the past year have served as a reminder to us all that this transition needs to take account of the security and affordability of energy.”
The warning comes as investors increasingly turn their backs on fossil fuels, with close to $40 trillion in global capital committed to divesting.
BP looked at three possible scenarios for the evolution of the global energy system. Under its “new momentum” scenario, which best reflects the current trajectory, fossil fuels account for 55pc of primary energy in 2050, compared to about 80pc in 2019.
“The total consumption of fossil fuels declines in all three scenarios over the outlook,” it says. “This would be the first time in modern history that there has been a sustained fall in the demand for any fossil fuel.”
Opec’s share of global oil production is expected to rise sharply after 2030 to almost two-thirds by 2050, albeit in a much smaller market. The cartel of oilproducing countries, led by Saudi Arabia, is seen as cutting output over the next decade to avoid pushing prices down too far.
Under chief executive Bernard Looney, BP has pledged to shift towards renewable energy and has said it expects to cut its oil and gas output by about 40pc by 2030.