Historical data about energy use tell us a lot about expected trends as well as the impact of policy changes, economic growth and projected prices. The 2018 issue of the influential BP Statistical Review of World Energy is preceded by a detailed review of energy developments in 2017.
Energy in transition is what we have been used to hearing for more than two decades due to changes in the energy mix fuelling economies. This transition is said to be progressing less rapidly than expected, or desired, by stakeholders. BP cites the increase in energy-related carbon dioxide emissions and the sudden increase in coal consumption as examples of the less expected in 2017.
“Global energy demand grew by 2.2 per cent in 2017, up from 1.2 per cent last year and above its 10- year average of 1.7 per cent”, it reads.
This higher-than-expected growth is a result of lower energy prices and as a result, the “slight slowing in the pace of improvement in energy intensity”, which is what is required to produce one unit in the economy.
The growth of 253 million tonnes of oil equivalent (mtoe) was 80 per cent due to expansion in the developing countries. But this is much less than that of a decade ago.
Crude oil development was essentially governed by the Organization of the Petroleum Exporting Countries (Opec) and others led by Russia, and by the vigorous increase in non-Opec production led by the US. But the most striking is the growth in oil demand at 1.7 million barrels a day (mbd) “similar to that seen in 2016 and significantly greater than the 10-year average of around 1.1 mbd”.
“This was despite all the talk of peak oil demand, increasing car efficiency, growth of electrical vehicles.”
In supply, Opec and others targeted a production cut of 1.8 mbd from the October 2016 level, but actually achieved more due to declines in Venezuela and more cuts by Saudi Arabia.
However, others increased their production by 1.5 mbd, led by the US tally of 0.69 mbd.
The implication is that oil stocks in Organisation for Economic Co-operation and Development (OECD) countries declined and prices improved from $44 (Dh169.51) a barrel in 2016 to $54 in 2017. “The speed and scale of Opec’s actions mean that it continues to have the ability to smooth temporary disturbances to the oil market’ especially that it was able to gather support from other producers,” says BP.
Natural gas consumption grew by 83 mtoe or 96 billion cubic meters (bcm), the highest growth among energy sources “buoyed by exceptional growth in China”, the Middle East and Europe. This was more than matched by 131-bcm increase in production, especially from Russia, Iran, Australia and China. At the same time LNG trade increased by more than 10 per cent led by volumes from the US and Australia.
Growth in renewable energy of 72 mtoe was driven by robust growth in both wind and solar power as a result of policies and falling cost of projects. This is almost half of the total growth in power generation, yet its share is still only 8 per cent of total generation.
Solar capacity alone increased by 100GW “aided by continuing falls in solar costs, with auction bids of less than 5 cents/KWH”.
But the most striking statement in BP’s analysis is “there has been almost no improvement in the power sector fuel mix over the past 20 years. The share of coal in the power sector in 1998 was 38 per cent — exactly the same as in 2017”.
How does this sync with all the hype from the Paris agreement on climate change, where it was deemed that the power sector “is the single most important source of carbon emissions from energy consumption”?
Coal consumption grew in 2017 by 25 mtoe, for the first time since 2013, driven by India and China, despite policies to reduce it.
Even coal production increased by 105 mtoe, which means the surplus went into stocks.
Finally, BP raises the question whether raw materials used to produce batteries for electric cars are sufficiently available. While “lithium production increased by almost 50 per cent between 2015 and 2017”, prices of the rose from $4,000 to $12,000 a ton. As for cobalt, prices have gone up from $33,000 in 2000 to $58,000 per ton in 2017.
So these could be a constraint to the expected growth in electric vehicles unless other metals for battery technologies are advanced and adapted.