Oil and gas will remain dominant commodities in the world's energy supply mix for at least the next 25 years. The Middle East will continue to be the major supplier, and there will be increasing interdependence between oil producing and consuming countries.
These confident predictions were delivered Sept. 7 to the World Energy Congress in Sydney by Majid Al-Moneef, advisor to the Minister of Petroleum and Minerals in Saudi Arabia.
Al-Moneef said four factors would impact the oil demand pattern for the next 2-3 decades:
First, there is declining oil intensity. Consumption has been falling for the last 30 years. Today, in relative terms, it is half the level it was in the 1970s. That trend will continue.
Second, vehicle use intensity is increasing. Vehicle numbers are expected to almost double in developing countries, as well as continue to increase within the Organization for Economic Cooperation and Development nations over the next 25-30 years.
Third, there is, and will continue to be, an increase in the combined share of oil and gas in the energy mix. Oil has retained its share over the last few decades, but gas has increased and will continue to do so.
And fourth, developing countries will markedly increase their share of world demand. That has almost doubled in recent years and will continue to rise.
Supply side
On the supply side, the Organization of Petroleum Exporting Countries is predicted to increase its percentage share of world oil output to 60% from 50% in the next 20 years, the Saudi official said. The Middle East will increase its share of output to 40% from the current 30%.
Al-Moneef said the Middle East's share in the global trade for oil is 44% today and is expected to rise to 54% in 2020.
The region's share of natural gas reserves and production will move to 15% in 2020 from 9% currently.
He added that oil import dependency ratios would increase around the world. Oil import dependency in the OECD countries, for instance, will increase to 63% in 2020 from 55% today. Demand patterns for transportation and industry will be a critical factor in driving the growing import dependence of developing countries such as China and India.
Al-Moneef said that known reserves of oil and gas were more than adequate to meet the demand increases and there would be timely investments made to maintain and increase production capacities.
Two scenarios
Tim Warren, chairman of Shell Australia Ltd., agreed with the prediction that both oil and gas would be retained in the world's energy mix for several decades. In a wide-ranging address to the congress, he put forward two 50-year scenarios.
Shell's "dynamics as usual" scenario, driven by social considerations such as the need for clean fuels, would see a diverse mix of energy types from coal, oil, and gas through renewables and hydrogen, retained for the next 50 years with no clear dominance of one over the other.
In the company's customer-driven "Spirit of the Coming Age" scenario, where there would be a push for clean, easily portable energy and technical change, the use of hydrogen will ultimately be the major energy source in 50 years' time.
Warren pointed out, however, that oil and gas would be needed to produce the hydrogen.
In both scenarios oil will decline as a proportion of the energy mix in 50 years, but it still will be in use. He said that the oil age would not end because the world runs out of oil. Rather, oil will be phased down as environmental considerations, like concerns about global warming and related greenhouse gases, take hold and alternative fuels are phased in.
However, Shell's scenarios do not see a significant rise in renewable energy and hydrogen fuels in the next 30 years. The gap between declining oil proportions and the rise of hydrogen, Warren suggests, will be bridged by natural gas.
He believes that by 2025 there will be more gas consumed than oil. There will be more cross-border gas, including five times as much trade in LNG than at present and twice the trade in pipeline gas.
Other technologies
In addition there will be other bridging technologies such as coal gasification, coal-to-liquids, and gas-to-liquids.
These technologies will have to address environmental issues, and much will depend on how serious public opinion towards the need to reduce greenhouse gas emissions.
Warren says that carbon dioxide geosequestration, for instance, is at best a transitory measure.
Studies in Australia, for instance, suggest that only 12% of the potential storage capacity for CO2 identified in the country can be used, due to various geological, social, and logistical constraints.
He adds that the only nongreenhouse-producing fuel technology that can be readily scaled up to meet world energy needs in the short term is nuclear, and that comes with potential environmental considerations of its own, particularly with regard to waste disposal.
The likely outcome, Warren said, is the continuing use of petroleum to underpin world energy needs for the next 20-30 years.
This includes an ongoing use of oil plus a gas bridge to span the gap before hydrogen takes over.