Shaping the Age of Gas

By
Bureau
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The world wants energy security and gas can help with that too, argued BP’s Group Chief Executive Bob Dudley in the recently held World Gas Conference in Paris. Excerpts from his presentation:
I think it is no exaggeration to say that we are approaching the age of gas. Broadly speaking, in the 18th century, wood remained the dominant fuel in much of the world. The 19th century saw the age of coal. The 20th century was, of course, the age of oil. And I believe the 21st century will be seen in many ways as the age of gas. Gas is the fastest growing fossil fuel and over the next 20 years we expect it to catch up with oil and coal and emerge as the main hydrocarbon component of a more sustainable mix to power the world’s economy in the second half of this century.That of course is the big, long-term, picture. Today, very understandably, a lot of people are more focused on the current volatile conditions. Our judgement in BP is that these conditions are not simply cyclical ones. To a degree, they are connected to longer term trends – the role of shale being a case in point. And we’ll be looking to understand what’s happening better when we publish our annual Statistical Review of World Energy with data for 2014.
It will help us to better quantify the extraordinary growth of shale in the US – both shale gas and shale oil. We’ll have more insight into what’s happening in China, where reports suggest that the growth in coal consumption has stalled as the economy becomes less centred on labour intensive industry. We’ll also see what progress renewables have made. It’s important to understand developments such as these and what they may bode for the future.

And in my remarks today, I want to focus mainly on the long term trends – because in an industry with cycle times measured in decades, our decisions need to be guided by these trends as much as day by day events. And despite the current turbulence, I see three reasons why it is credible to talk of a coming age of gas. First, the abundance of gas resources will help to ensure that there is sufficient energy to meet the world’s needs. Second, the world wants energy security, and gas can help with that too. And third, the world needs its energy to be sustainable, and gas has a unique role to play in that regard.Three ‘S’s – sufficiency, security and sustainability. Three reasons why I believe gas will become the world’s number one fuel during this century. I’d like to expand a little on each of those three points.

SUFFICIENCY

Starting with sufficiency, the challenge is that the world’s energy demand is projected to grow by around 35 per cent by 2035. Almost all the growth – about 95 per cent – comes from non-OECD countries, led by China and India, as they continue to industrialize. Our Outlook indicates that they will use around an extra four billion tonnes of oil equivalent compared to today – or perhaps I should say 180 trillion cubic feet of gas equivalent – given where we are.

Either way, those numbers are hard to visualise. But I always think about what they mean for individuals and communities. Electricity coming to a village. People riding scooters to work. Power and light for clinics and schools. Irrigation for farmers. Access to computers, to hot water, to refrigeration. New opportunities. New possibilities.

A lot of that comes courtesy of gas. Amid all the debate, let’s not forget the good that our product does. And it has the potential to go on doing so – because there is more than enough gas to meet demand.

Over the past decade the world has consumed around 30 trillion cubic meters of gas – but reserves today are around 30 trillion cubic meters more than they were in 2004. In other words, the industry has replaced what was used and then added the same amount again. Recent history tells a story of new frontiers and new sources of supply opening up all around the world – shale gas, tight gas, deepwater gas.

We expect the shares of gas, oil and coal to converge around 2035, with each contributing around 27 per cent of demand.  It’s what I like to call the rule of 27s. The other fifth of the demand is met by non-fossil fuels. There we see renewables growing strongly from its low base.

Gas is on a clear upward trajectory. It’s the fastest growing of the fossil fuels. This shows where we expect the additional gas to come from. Around half the increase comes from non-OECD conventional supplies, mainly from the Middle East and Russia. The other half largely comes from shale production in North America. And on a very long timeframe, this may only be the start.

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