BP 2010 Annual Report Download - page 20

Business review
Non-OECD economies drive consumption growth
(billion tonnes of oil equivalent)
1990 2000 2010 20202030
18
Renewables*
Hydro
Nuclear
Coal
Gas
Oil
16
14
12
10
8
6
4
2
Source: BP Energy Outlook 2030 *Includes biofuels.
1990 2000 2010 2020 2030
18Non-OECD
OECD
16
14
12
10
8
6
4
2
Long-term outlook
Over the long term, global demand for primary energy is expected to
continue to grow, but less rapidly than the global economy. Growing energy
demand is underpinned by continuing population growth and by generally
rising living standards in the developing world, including the expansion of
urban populations. These drivers of energy demand growth are to some
extent offset by efforts to improve efficiency in both the conversion and
use of energy.
Global energy demand is projected to increase by around 40%
between 2010 and 2030a. Fossil fuels are expected still to be satisfying as
much as 80% of the world’s energy needs in 2030. At current rates of
consumption, the world has enough proved reserves of fossil fuels to meet
these requirementsb if investment is permitted to turn those reserves into
production capacity. For example, in oil alone, there are reserves in place to
satisfy approximately 45 years’ demand at current rates of consumptionb.
However, to meet the potential growth in demand, continued investment in
new technology will be required to boost recovery from declining fields and
commercialize currently inaccessible resources. To play their part in
achieving this, energy companies such as BP will need secure and reliable
access to as-yet undeveloped resources. It is estimated that more than
80% of the world’s oil reserves are held by Russia, Mexico and members
of OPECb – areas where international oil companies are frequently limited
or prohibited from applying their technology and expertise to produce
additional supply. New partnerships will be required to transform potential
resources into proved reserves and eventually into production.
A more diverse mix of energy will also be required to meet this
increased demand. Such a mix is likely to include both unconventional fossil
fuel resources – such as oil sands, coalbed methane and natural gas
produced from shale formations – and renewable energy sources such as
biofuels, wind and solar power. Beyond simply meeting growth in overall
demand, a diverse mix would also help to provide enhanced national and
global energy security while supporting the transition to a lower-carbon
economy. Improving the efficiency of energy use will also play a key role in
maintaining energy market balance in the future.
Along with increasing supply, we believe the energy industry will be
required to make hydrocarbons cleaner and more efficient to use –
particularly in the critical area of power generation, for which the key
hydrocarbons are currently coal and gas. The world has reserves of coal for
around 120 years at current consumption ratesb, but coal produces more
carbon than any other fossil fuel. Carbon capture and storage (CCS) may
help to provide a path to cleaner coal, and BP is investing in this area, but
CCS technologies still face significant technical and economic issues and
are unlikely to be in operation at scale for at least a decade.
In contrast, we believe that in many countries natural gas has the
potential to provide the most significant reductions in carbon emissions
from power generation in the shortest time and at the lowest cost. These
reductions can be achieved using technology available today. Combined-
cycle turbines, fuelled by natural gas, produce around half the CO2
emissions of coal-fired power, and are cheaper and quicker to build. It is
estimated that there are reserves of natural gas in place equivalent to 63
years’ consumption at current ratesb and they are rising as new skills and
technology unlock new unconventional gas resources. For these reasons,
gas is looking to be an increasingly attractive resource in meeting the
growing demand for energy, playing a greater role as a key part of the
energy future.
At the same time, alternative energies also have the potential to
make a substantial contribution to the transition to a lower-carbon economy,
but this will require investment, innovation and time. Currently, biofuels,
wind, solar, and other modern forms of renewable energy account for less
than 2% of total global consumptiona. Assuming continuing policy support
and favourable technology trends, these forms of energy are likely to meet
around 6% of total energy demand in 2030a.
If industry and the market are to meet the world’s growing demand
for energy in a sustainable way, governments will be required to set a
stable and enduring framework. As part of this, governments will need to
provide secure access for exploration and development of fossil fuel
resources, define mutual benefits for resource owners and development
partners, and establish and maintain an appropriate legal and regulatory
environment, including a mechanism for recognizing the cost of carbon.
a BP Energy Outlook 2030.
b BP Statistical Review of World Energy June 2010. These reserve estimates are compiled from
official sources and other third-party data, which may not be based on proved reserves as defined
by SEC rules.
18 BP Annual Report and Form 20-F 2010