BP: WORLD ENERGY - 2015
The most significant development on the supply side in 2014 was undoubtedly the continuing revolution in US shale. The US recorded the largest increase in oil production in the world, becoming the first country ever to increase average annual production by at least 1 million barrels per day for three consecutive years.
The US replaced Saudi Arabia as the world's largest oil producer – a prospect unthinkable a decade ago.
The growth in US shale gas in recent years has been just as startling, with the US overtaking Russia as the world's largest producer of oil and gas. The developments on the demand side were no less striking as the growth in energy demand slowed sharply. Global primary energy consumption increased by just 0.9% in 2014, its slowest rate of growth since the late 1990s, other than immediately after the financial crisis.
This slowing was driven in part by the rebalancing of the Chinese economy away from energy intensive sectors causing the growth of energy consumption in China to slow to its lowest rate since 1998. Even so, China remained the world's largest growth market for energy.
As we have seen, these shifts in supply and demand had major effects on energy prices, particularly oil prices. The fall in oil prices looks to have been largely driven by the strength of supply as non-OPEC production grew by a record amount and OPEC maintained its production levels in order to protect its market share.
These developments also had important implications for the fuel mix. The slowing pace of Chinese industrialization caused the growth in Chinese coal consumption to stall and the growth in global consumption of coal to be unusually weak. Global growth in natural gas was also weak, held back by the mild European winter triggering a sharp fall in European gas consumption. Renewables were again the fastest growing form of energy and, in a year when global consumption growth slowed sharply, they accounted for one-third of the increase in total primary energy use. Renewables provided around 3% of the world's energy needs.
Global primary energy consumption increased by just 0.9% in 2014, a marked deceleration over 2013 (+2.0%) and well below the 10-year average of 2.1%. Growth in 2014 slowed for every fuel other than nuclear power, which was also the only fuel to grow at an above-average rate. Growth was significantly below the 10-year average for Asia Pacific, Europe & Eurasia, and South & Central America. Oil remained the world's leading fuel, with 32.6% of global energy consumption, but lost market share for the fifteenth consecutive year.
Although emerging economies continued to dominate the growth in global energy consumption, growth in these countries (+2.4%) was well below its 10-year average of 4.2%. China (+2.6%) and India (+7.1%) recorded the largest national increments to global energy consumption. OECD consumption fell by 0.9%, which was a larger fall than the recent historical average. A second consecutive year of robust US growth (+1.2%) was more than offset by declines in energy consumption in the EU (-3.9%) and Japan (-3.0%). The fall in EU energy consumption was the second-largest percentage decline on record (exceeded only in the aftermath of the financial crisis in 2009).
Dated Brent averaged $98.95 per barrel in 2014, a decline of $9.71 per barrel from the 2013 level and the first annual average below $100 since 2010. Crude oil prices remained firm in early 2014 in the face of continued large supply disruptions, but fell sharply later in the year due to strong non-OPEC production growth combined with weaker consumption growth (relative to 2013) and OPEC's November decision to defend market share. The WTI – Brent differential narrowed to $5.66 per barrel despite continued robust US production growth.
Consumption and production
Global oil consumption grew by 0.8 million barrels per day (b/d), or 0.8% – a little below its recent historical average and significantly weaker than the increase of 1.4 million b/d seen in 2013. Countries outside the OECD once again accounted for all of the net growth in global consumption. OECD consumption declined by 1.2%, the eighth decrease in the past nine years. Chinese consumption growth was below average but still recorded the largest increment to global oil consumption (+390,000 b/d); Japan recorded the largest decline (-220,000 b/d), with Japanese oil consumption falling to its lowest level since 1971. Light distillates were the fastestgrowing refined product category for a second consecutive year. Global oil production growth was more than double that of global consumption, rising by 2.1 million b/d or 2.3%. Production outside OPEC grew by 2.1 million b/d, the largest increase in our dataset. The US (+1.6 million b/d) recorded the largest growth in the world, becoming the first country ever to increase production by at least 1 million b/d for three consecutive years, and taking over from Saudi Arabia as the world's largest oil producer. Along with the US, production in Canada (+310,000 b/d) and Brazil (+230,000 b/d) also reached record levels in 2014. OPEC output was flat, and the group's share of global production fell to 41%, its lowest since 2003. Declines in Libya (-490,000 b/d) and Angola (-90,000 b/d) were offset by gains in Iraq (+140,000 b/d), Saudi Arabia (+110,000 b/d) and Iran (+90,000 b/d).
Refining and trade
Global crude runs rose by 1.1 million b/d (+1.4%) in 2014 – the highest growth since 2010 and more than double the 10-year average. Strong growth in the US, China and the Middle East outweighed declines in Europe and OECD Asia Pacific. Refinery runs in the US rose by 530,000 b/d, the largest increase since 1986. Global refining capacity expanded by an above average 1.3 million b/d, led by additions in China and the Middle East, with Middle Eastern capacity expanding by a record 740,000 b/d. Global refinery utilization remained at 79.6%, its lowest rate since 1987.
Global trade of crude oil and refined products in 2014 grew by a below average 0.9%, or 490,000 b/d. Import growth was driven by China and other emerging economies, while US net imports declined. China replaced the US as the world's largest net oil importer in 2013. Gross exports from North Africa declined by 17.1%, or 360,000 b/d, primarily due to lower Libyan crude production, however this was outweighed by a 530,000 b/d increase in US (gross) exports as rising refinery runs lifted product exports.
Consumption and production
World natural gas consumption grew by just 0.4%, well below the 10-year average of 2.4%. Growth was below average in both the OECD and emerging economies, with consumption in the EU (-11.6%) experiencing its largest volumetric and percentage declines on record. The Europe & Eurasia region (-4.8%) had the five largest volumetric declines in the world in Germany, Italy, the Ukraine, France and the UK. The US (+2.9%), China (+8.6%) and Iran (+6.8%) recorded the largest growth increments. Globally, natural gas accounted for 23.7% of primary energy consumption. Global natural gas production grew by 1.6%, below its 10-year average of 2.5%. Growth was below average in all regions except North America. EU production fell sharply (-9.8%) to its lowest level since 1971. The US (+6.1%) recorded the world's largest increase, accounting for 77% of net global growth. The largest volumetric declines were seen in Russia (-4.3%) and the Netherlands (-18.7%). Trade Global natural gas trade registered a rare contraction in 2014, falling by 3.4%. Pipeline shipments declined by 6.2%, the largest decline on record, driven by falls in net pipeline exports from Russia (-11.8%) and the Netherlands (-29.9%). The UK (-28.2%), Germany (-10.1%) and the Ukraine (-29.9%) all reduced their net pipeline imports markedly. Global LNG trade increased by 2.4%. Higher imports by China (+10.8%) and the UK (+20.1%) were partly offset by declines in South Korea (-6.0%) and Spain (-15.7%). International natural gas trade accounted for 29.4% of global consumption; LNG's share of global gas trade rose to 33.4%.
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