OIL PRICES 2020: $80
Pledges made in advance of COP21 promise to give new impetus to the move towards a lower-carbon and more effi cient energy system, but do not alter the picture of rising global needs for energy.Energy use worldwide is set to grow by one-third to 2040 in our central scenario, driven primarily by India, China, Africa, the Middle East and Southeast Asia. Non-OECD countries account together for all the increase in global energy use, as demographic and structural economic trends, allied with greater effi ciency, reduce collecti ve consumpti on in OECD countries from the peak reached in 2007. Declines are led by the European Union (-15% over the period to 2040), Japan (-12%) and the United States (-3%).
China's transiti on to a less energy-intensive model for growth has major implicati ons for global trends. China carries huge weight in the world of energy: it remains by a distance the world's largest producer and consumer of coal throughout our Outlookperiod; it deploys more renewable power generati on capacity than any other country; and by the 2030s it overtakes the United States as the biggest consumer of oil and has a larger gas market than the European Union. China's total energy demand in 2040 is almost double that of the United States. But structural shifts in the economy, favouring expansion of the services sector rather than heavy industry (both steel and cement production are likely to have peaked in 2014), mean that 85% less energy is required to generate each unit of future economic growth than was the case in the past 25 years.
India – the subject of an in-depth country focus in WEO-2015– contributes the single largest share of growth, around one-quarter, in global energy demand.India today is home to one-sixth of the world's population and its third-largest economy, but accounts for only 6% of global energy use and one in five of the population – 240 million people – still lacks access to electricity. With policies in place to accelerate the country's modernisation and develop its manufacturing base (via the "Make in India" programme), population and incomes on the rise and an additional 315 million people anticipated to live in India's cities by 2040, India is entering a sustained period of rapid growth in energy consumption. Demand for coal in power generation and industry surges, increasing the share of coal to almost half of the energy mix and making India by a distance the largest source of growth in global coal use. Oil demand increases by more than in any other country, approaching 10 mb/d by the end of the period. India also steps up its deployment of low-carbon technologies, although uncertainty over the pace at which new large dams or nuclear plants can be built means strong reliance on solar and wind power (areas where India has high potential and equally high ambition) to deliver on its pledge to have a 40% share of non-fossil fuel capacity in the power sector by 2030.
The process of adjustment in the oil market is rarely a smooth one, but, in our central scenario, the market rebalances at $80/bbl in 2020, with further increases in price thereafter.Demand picks up to 2020, adding an average of 900 kb/d per year, but the subsequent rise to 103.5 mb/d in 2040 is moderated by higher prices, efforts to phase out subsidies (provided that momentum behind reform is maintained, even as oil prices pick up), efficiency policies and switching to alternative fuels. Collectively, the United States, EU and Japan see their oil demand drop by around 10 mb/d by 2040. On the supply side, the decline in current upstream spending, estimated at more than 20% in 2015, results in the combined production of non-OPEC producers peaking before 2020 at just above 55 mb/d. Output growth among OPEC countries is led by Iraq and Iran, but both countries face major challenges: the risk of instability in Iraq, alongside weaknesses in infrastructure and institutions; and the need in Iran (assuming the path to sanctions relief is followed successfully) to secure the technology and large-scale investment required. An annual $630 billion in worldwide upstream oil and gas investment – the total amount the industry spent on average each year for the past five years – is required just to compensate for declining production at existing fields and to keep future output flat at today's levels. The current overhang in supply should give no cause for complacency about oil market security.
The short investment cycle of tight oil and its ability to respond quickly to price signals is changing the way that the oil market operates, but the intensity with which the tight oil resource is developed in the United States eventually pushes up costs.US tight oil production stumbles in the short term but resumes its upward march as prices recover, helped by continued improvements in technology and efficiency improvements. But tight oil's rise is ultimately constrained by the rising costs of production, as operators deplete the "sweet spots" and move to less productive acreage. US tight oil output reaches a plateau in the early-2020s, just above 5 mb/d, before starting a gradual decline.
Where it replaces more carbon-intensive fuels or backs up the integration of renewables, natural gas is a good fit for a gradually decarbonising energy system: a consumption increase of almost 50% makes it the fastest-growing of the fossil fuels.China and the Middle East are the main centres of gas demand growth, both becoming larger consumers than the European Union, where gas use does not return to the peak reached in 2010. With gas prices already low in North America, and dragged lower elsewhere by ample supply and contractual linkages to oil prices, there is plenty of competitively priced gas seeking buyers in the early part of the Outlook. But the extent of the longer term expansion is constrained by efficiency policies, notably in the buildings sector, and competition from renewables and (in some countries) from coal in power generation; and could be limited further if deferred investment in the current low-price environment brings tighter markets in the 2020s. One-fifth of the projected rise in global demand consists of gas transported over long distances via very capital-intensive pipeline or LNG projects. Keeping these project costs under control (contrary to numerous recent examples of overruns) will be vital to the future competitive positioning of gas. Emissions of methane, a powerful greenhouse gas, along the supply chain will dent the environmental credentials of gas if there is no concerted policy action to tackle these leaks.
Unconventional gas accounts for some 60% of the growth in global gas supply, but the spread of its development beyond North America, the home of the shale gas revolution, is more gradual and uneven. The pace of China's unconventional gas growth is a major uncertainty: policies encouraging this development are in place – with production projected to exceed 250 bcm by 2040 – but aspects of the geology, limited water availability and population density in some key resource-rich areas, alongside regulatory issues related to pricing, access to resources and to domestic pipelines, militate against a very rapid rise in output.
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WNA - Apart from adding capacity, utilisation of existing plants has improved markedly since 2000. In the 1990s capacity factors averaged around 60%, but they have steadily improved since and in 2010, 2011 and 2014 were above 81%. Balakovo was the best plant in 2011 with 92.5%, and again in 2014 with 85.1%.
WNA - India has a flourishing and largely indigenous nuclear power programme and expects to have 14.6 GWe nuclear capacity on line by 2024 and 63 GWe by 2032. It aims to supply 25% of electricity from nuclear power by 2050.
WNA - Mainland China has 38 nuclear power reactors in operation, about 20 under construction, and more about to start construction. The reactors under construction include some of the world's most advanced, to give a 70% increase of nuclear capacity to 58 GWe by 2020-21. Plans are for up to 150 GWe by 2030, and much more by 2050.
PLATTS - "The domestic uranium mining industry needs US government assistance to survive the foreign onslaught -- particularly from Russia and Kazakhstan -- that has undermined the US uranium industry while new players -- particularly China -- will soon make the situation worse," Energy Fuels and Ur-Energy said in a petition they jointly filed with the department.