BP’s latest projections for oil and gas demand up to 2050 indicate that, regardless of whether the energy transition occurs rapidly or gradually, consumption levels by mid-century will be higher than previously anticipated.
In particular, this year’s Energy Outlook is focused on two main scenarios: Current Trajectory and Net Zero. These scenarios are not predictions of what is likely to happen or what BP would like to happen.
Rather they explore the possible implications of different judgements and assumptions concerning the nature of the energy transition. The scenarios are based on existing technologies and do not consider the possible impact of entirely new or unknown technologies.
According to the report, the recent developments and emerging trends are the following:
#1 Carbon emissions have continued to increase, growing at an average rate of 0.8% per year over the past four years (2019-23). If CO2 emissions were maintained at close to recent levels, the carbon budget estimated by the Intergovernmental Panel on Climate Change (IPCC) to be consistent with a high probability of limiting average global temperature increases to 2°C would be exhausted by the early 2040s.
#2 The war in Ukraine increased the attention on ensuring energy security and affordability as well as achieving the Paris climate goals. The recent disruptions in the Middle East have reinforced the importance of energy security. The increased focus on energy security could support greater emphasis on improving energy efficiency and growing domestic energy production. It may also prompt greater government involvement in the design and operation of energy markets, as illustrated by the growing role of green industrial policies, increasing attention on the security of energy supply chains and, where relevant, on the utilization of local fossil fuel resources.
#3 Global energy demand has continued to grow, averaging around 1% per year between 2019 and 2023, weaker than its average rate of a little below 2% over the 10 years to 2019, driven by increasing prosperity and growth in emerging economies.
#4 Progress on improving energy efficiency has been disappointing. The amount of energy used per unit of economic activity has fallen by a little over 1% per year over the past four years on average. That is slower than the previous 10 years and much weaker than the 4% annual rate targeted in the energy efficiency pledge at COP28.
#5 Investment in low carbon energy is estimated to have grown very rapidly in recent years, up around 50% since 2019 at approximately $1.9 trillion in 2023. This investment is heavily concentrated in developed economies and China, with far lower investment levels in emerging economies where costs of capital are typically higher.
#6 Much of this investment has been deployed in renewable power, with wind and solar power generation almost doubling between 2019 and 2023. This growth has been driven in particular by solar, supported by continuing falls in cost – the costs of solar modules have fallen by around 60% over the past four years.
#7 The energy additions from low carbon sources have not, however, been sufficient to meet the growth in total global energy demand, meaning the use of fossil fuels has continued to increase. Fossil fuel consumption reached a new high in 2023, driven primarily by rising oil consumption.
#8 Oil and gas upstream investment totalled $550 billion in 2023. Although upstream investment remains below its peak in the early 2010s, production has continued to grow steadily, supported by improving productivity of investment.
#9 Growth in oil demand since 2019 – which has averaged around 0.5 Mb/d per year – has been largely driven by increasing consumption in emerging economies and increased demand for petrochemical feedstocks. Oil consumption in developed economies continued to fall over much of the past two decades.
In 2022 oil demand in developed economies was around 2 Mb/d lower than it was before the Covid-19 pandemic, and 5.5 Mb/d (around 10%) below its historic
peak in 2005.
#10 Strong growth in natural gas demand in emerging Asian economies, combined with disruptions to Russian pipeline exports to Europe, has increased the importance of liquified natural gas (LNG) within global gas markets. LNG demand has grown around eight times the rate of overall natural gas consumption
over the past five years.
#11 Growth in electricity has continued to outpace total energy demand growth in recent years as the energy system has increasingly electrified. This has been driven by continued rapid growth in electricity use in emerging economies, spurred by improved accessibility and affordability. Nascent but growing demand from data centres to support the increasing adoption of generative AI applications looks set to increase electricity demand materially in some markets in the coming years. The rapid growth in low carbon generation is putting increased pressure on the infrastructure and governance process supporting
power markets, including planning and permitting and grids. For example, in the US the average time between a request for grid connection and commercial
operation increased from less than two years for projects built in 2000-07 to nearly five years for projects built in 2023.
#12 The number of electric vehicles has risen rapidly, with sales increasing from two million vehicles in 2019 to around 14 million in 2023. This growth has
been underpinned by vehicle emissions regulations, especially in China, the EU and the US.
#13 Sales of heat pumps also grew steadily, particularly in the EU and North America. Annual sales increased by around 75% in the EU between 2019 and 2023 to reach 2.6 million units per year. Growth in less mature, higher cost, low carbon energy vectors and technologies – including low carbon hydrogen, synthetic biofuels, and carbon capture and storage – remains at a very early stage. As an example, at the beginning of 2024 less than 5 Mtpa low carbon hydrogen projects were operational or under construction – a small fraction of the existing use of unabated fossilfuel-based hydrogen.
#14 Investment in critical minerals mining and exploration has increased in recent years in response to prospective increases in demand as the energy system
transitions, but would need to accelerate further to meet the needs of a rapid energy transition.
Low-carbon hydrogen
Credit: BP
Low carbon hydrogen complements the growing electrification of the energy system through its use in processes and activities in industry and transport that are hard to electrify and as a source of long-duration energy storage in power markets. The higher cost of low carbon hydrogen relative to fossil fuel alternatives means its significance in the global energy system depends on the pace of the energy transition.
- The role of low carbon hydrogen is most pronounced in Net Zero, where it is supported by policies spurring a faster decarbonization pathway. Even then, much of the growth occurs in the second half of the outlook after easierto-abate processes have been decarbonized and the cost of producing low carbon hydrogen has declined sufficiently from scaling up processes and manufacturing. The use of low carbon hydrogen grows to around 90 Mtpa by 2035 in Net Zero before accelerating to reach around 390 Mtpa by 2050.
- The role of low carbon hydrogen in Current Trajectory is more limited,increasing to a little less than 20 Mtpa by 2035 and to around 85 Mtpa by 2050.
- The initial growth of low carbon hydrogen is concentrated in its use as a feedstock in refining and in the production of ammonia and methanol for fertiliser and petrochemicals, displacing the current hydrogen feedstock produced from unabated natural gas (grey hydrogen) and coal (black or brown hydrogen). Use also grows in transport, especially in the form of hydrogen-derived fuels (ammonia and methanol) for long-distance marine transportation.
- Demand accelerates in the second half of the outlook, especially in Net Zero, as the importance of low carbon hydrogen as an energy source in industry and transport increases and overtakes its role as an industrial feedstock.
- In industry, hydrogen is used in iron and steelmaking as both a reducing agent and an energy source, as well as to fuel hightemperature processes in other parts of heavy industry.
- In transport, low carbon hydrogen plays an important role, alongside bioenergy feedstocks, in producing synthetic jet fuel to help decarbonize aviation, as well as hydrogen-derived marine fuels (ammonia and methanol). The production of these hydrogenderived fuels requires carbon neutral CO2 sources. These can be derived from either biogenic sources or from direct air capture.
- Low carbon hydrogen, together with the buildout of hydrogen storage capacity, also plays a small but important role in helping to balance power systems
in some regions, accounting for around 15% of low carbon hydrogen use in Net Zero by 2050. - Low carbon hydrogen is produced primarily from a combination of green hydrogen – made via electrolysis using renewable power – and blue hydrogen –made from natural gas (and coal) with the associated carbon emissions captured and stored.
- Blue hydrogen starts with a cost advantage relative to green hydrogen and this persists in many regions over the outlook, although it diminishes over time. But the relative costs of production vary significantly across different regions depending on access to natural gas (and coal) and suitable CO2 storage sites for blue hydrogen, and to sufficiently advantaged renewable resources for green hydrogen. Because hydrogen is costly to transport, particularly over longer distances, these relative cost and resource differences, along with policy variations, result in green hydrogen dominating in some regions while blue dominates in others.
- By 2050 around 60% of low carbon hydrogen in Net Zero takes the form of green hydrogen, which dominates production in both China and India. Much of the remainder is provided by blue hydrogen derived largely from natural gas, especially in the Middle East and the US, which has a significant global footprint in the production of both blue and green hydrogen.
EXPLORE MORE AT BP’S ENERGY OUTLOOK 2024
