International oil companies have a natural interest in following overall energy developments to see where their fortunes fit. The rising role of electricity makes the competition among energy sources more pronounced as switching from one source of energy to another becomes easier.

This is why a long-term energy outlook from BP is worthy of consideration, for oil and gas producers and consumers alike. The latest outlook is based on a number of scenarios and have different assumptions for developments from now until 2040.

The main scenario is rightly called the “evolving transition” scenario to reflect the speed of change in energy markets noticeable in recent years.

The assumptions are the usual parameters that all forecasters must be aware of. World economic growth would more than double GDP by 2040 and 2.5 billion people lifted from low incomes; the world population increases to 9.2 billion; and an additional 2 billion move to live in cities.

Energy demand would increase from over 13 billion tonnes of oil equivalent (btoe) to just about 18-btoe, or a growth of 1.3 per cent a year. In comparison, energy growth is dampened by “accelerating gains in energy efficiency”. Industrial demand growth will account for about half of the increase with “almost 70 per cent of the increase in primary energy going to the power sector”.

Regionally, China and India will account for half of the growth in global energy demand.

Liquid fuels demand is forecast to grow only 0.5 per cent a year from 96.6 million barrels a day (mbd) in 2016 to 109.4-mbd in 2040, but growth is “projected to plateau”. This 13-mbd increase has only about 3-mbd of crude oil-based fuels and the rest is taken by natural gas liquids (6-mbd) and biofuels (3-mbd).

Oil is seeing increasing competition in its main domain of transportation coming from the use of alternative fuels. Yet by 2040, oil will still account for around 85 per cent of total transportation fuel, down from the current 94 per cent.

The doubling of car fleets to 2 billion vehicles will include only 300 million electric cars by 2040. There is uncertainty here as government policies may increase the pace of electric cars sales over the forecast period.

However, even the eventual ban of internal combustion engine cars by 2040 would have a limited impact on liquid fuel in transportation due to the high number of oil-driven vehicles.

Another area of growth in oil demand is in petrochemicals, accounting for 7-mbd.

Turning to supply, growth would come essentially from low-cost producers in the US and Middle East. In the initial period, US tight oil would dominate, but Opec could increase production by 6-mbd by 2040.

But BP warns of the need for investments to maintain and increase production, saying “if there were no new investment in oil production from today, and existing production declined at 3 per cent a year, global oil supplies would be around 45-mbd in 2040.” That is, 50-mbd of current production capacity would be lost.

Natural gas demand would grow strongly, driven by low cost supplies, diversified availability and environmental policies. Therefore, demand is expected to increase from 342 billion cubic feet a day (bcfd) in 2016 to 502-bcfd in 2040.

Demand would mostly be from industry, petrochemicals, power generation and buildings. At the same time, the use of natural gas to fuel trucking operations is increasing and may account for 5 per cent of transportation fuels by 2040.

The trade in natural gas would continue to grow as LNG trade moves from 33- to 74-bcfd and the pipeline gas trade from 47- to 66-bcfd. The increase in trade, particularly that of LNG, is likely to create a more transparent market for natural gas and close to that of oil.

The basic scenario in BP’s Outlook may be altered significantly by additional policies set by governments or breakthrough in technology. As far as I can see, BP remains more optimistic than others about the future of oil and gas. Its forecast is within the range of other authoritative forecasts.

One needs to be ready for the unexpected and BP boss Bob Dudley is right when he says: “Don’t be fooled by the recent firming in oil prices: the focus on efficiency, reliability and capital discipline is here to stay.”