A more “mature” conversation is required on the energy transition and the role of fossil fuels going forward as leading industry bodies debate over when the world will reach peak consumption for oil and gas, according to the head of the World Energy Council.
The International Energy Agency, whose member countries represent more than 80 per cent of the world’s energy consumption, expects fossil fuel demand to peak before 2030.
However, Opec, whose member countries are responsible for 27 per cent of the global crude supply, has contested the energy agency’s data, calling it ideologically driven, and raised concerns about the IEA’s statements affecting oil and gas investments.
The oil producers’ group expects crude demand to grow to 116 million barrels per day by 2045, compared with its forecast of 104.4 million bpd for this year.
Angela Wilkinson, secretary general of the London-based World Energy Council, is sceptical about relying solely on projections of the future.
“There’s a difference between being able to project where the past is taking us and being able to create a different future that we would prefer to see,” Ms Wilkinson told The National in an interview.
She also said that fossil fuels will continue to play a big role in certain sectors and emerging economies even as renewable energy gathers momentum.
“Gas has a role to play in getting renewables to scale … [and] oil is a story of plateauing rather than peaking at the moment,” Ms Wilkinson said.
“Even if we stop burning fossil fuels, we’re still going to need a lot of oil for the production of chemicals and other items that are essential for humanity, so I think I’d like to see a much more mature conversation,” she added.
The short-term forecasts for oil demand from both the IEA and Opec have been diverging more noticeably over time.
The IEA expects crude demand to grow by 1.22 million bpd this year, while Opec has forecast a growth of 2.2 million bpd.
Neil Atkinson, former head of oil industry and markets division at the IEA, said the real demand growth may be “somewhere in between” those two estimates.
“I don’t think it will be as low as whatever the IEA has got, but I certainly do see no justification for a real gangbuster increase the Opec Secretariat are talking about,” Mr Atkinson said in a Gulf Intelligence podcast on Thursday.
“A lot of the post-Covid rebound in demand has sort of happened. We still have a lag in aviation.”
China’s crude imports reached a record high last year as the country’s economy bounced back from three years of the pandemic.
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Coal to ‘plateau’
At the Cop28 climate summit, China and India refrained from signing the pledge calling for a threefold increase in renewable energy by the end of the decade.
The countries did not agree with initial drafts of the final agreement that included curbs on investments in coal-fired power plants.
The delegates ultimately settled on a milder agreement to “accelerate efforts towards the phase-down of unabated coal power”.
“Coal and gas, and oil, all have very different regional stories,” Ms Wilkinson said.
“India is not going to stop using coal. They’re going to hopefully use coal in very modern stations with carbon capture and direct removal because they’re just not going to write those assets off.”
Although India and China – two of the most populous countries in the world – have set ambitious clean energy targets, they intend to rely on the highly polluting fuel for the longer-term to meet growing power demand.
Coal accounts for around three-quarters of India’s power generation and nearly 61 per cent of China’s.
As per the IEA, global coal demand is already set to drop this year and plateau through 2026, driven by a major expansion in renewable energy.
Transition efforts grow
Last month, the US announced a temporary pause on pending approvals of liquefied natural gas exports citing climate risks, which, some experts say, is intended to appease environmental activists ahead of elections this year.
The move has raised concerns about future supply to Europe, which has increased its reliance on American imports as it aims to phase out Russian gas.
“I am sure their decision is [partly] motivated by the climate situation, but I also think it’s partly motivated by security of supply and the ability for the US to make use of that gas in its industrialisation,” Ms Wilkinson said.
“It’s never a one-dimensional decision around that.”
In 2023, the US became the world’s largest LNG exporter, overtaking Qatar and Australia.
Meanwhile, Saudi Aramco, the world’s largest oil exporting company, has scrapped plans to boost its maximum production capacity to 13 million bpd by 2027, from 12 million bpd currently.
At a recent event, Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman said the kingdom’s decision was driven by the energy transition.
“[It] shows that they are also looking at investments in renewables, so I am in no doubt that the renewables revolution is under way,” Ms Wilkinson said.
Updated: February 17, 2024, 5:32 AM
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