E D I T I O N 2016 World Oil Outlook Organization of the Petroleum Exporting Countries 2016 World Oil Outlook Organization of the Petroleum Exporting Countries OPEC is a permanent, intergovernmental organization, established in Baghdad, Iraq, on 10–14 September 1960. The Organization comprises 14 Members: Algeria, Angola, Ecuador, Gabon, Indonesia, the Islamic Republic of Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. The Organization has its headquarters in Vienna, Austria. © OPEC Secretariat, October 2016 Helferstorferstrasse 17 A-1010 Vienna, Austria www.opec.org ISBN 978-3-9503936-2-0 The data, analysis and any other information (‘Content’) contained in this publica- tion is for informational purposes only and is not intended as a substitute for advice from your business, finance, investment consultant or other professional. 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Acknowledgements Head, Energy Studies Department In Charge of Research Division Oswaldo Tapia Solis Authors Jan Ban, Jorge León Arellano, Amal Alawami, Roberto F Aguilera, Martin Tallett Contributors Moufid Benmerabet, Harvir Kalirai, Julio Arboleda Larrea, Hans-Peter Messmer, Mohammad Taeb, Eleni Kaditi, Haris Aliefendic, Erfan Vafaiefard, Mehrzad Zamani, Douglas Linton, Hend Lutfi, Thomas Witmer Editors James Griffin, Alvino-Mario Fantini Editorial Administrator Anne Rechbach Secretarial support Marie Brearley, Angelika Hauser Layout and typesetting Andrea Birnbach Design & Production Coordinator Carola Bayer Additional technical and statistical support Hojatollah Ghanimi Fard, Adedapo Odulaja, Hasan Hafidh Hamid, Hossein Hassani, Eissa Alzerma, Hassan Balfakeih, Mohammad Ali Danesh, Nadir Guerer, Aziz Yahyai, Pantelis Christodoulides, Klaus Stoeger, Mouhamad Moudassir, Mohammad Sattar, Anna Gredinger, Alanna Bock-Butler OPEC’s Economic Commission Board (as at September 2016) Achraf Benhassine, Kupessa Daniel, Alex Galárraga, Widhyawan Prawiraatmadja, Behrooz Baikalizadeh, Ali Nazar Faeq Al-Shatari, Mohammad Khuder Al-Shatti, Abdelkarim Omar Alhaderi, Olusegun Adeyemi Adekunle, Sultan Al-Binali, Nasser Al-Dossary, Salem Hareb Al Mehairi, Nélida Izarra Contents Foreword 1 Executive summary 6 SECTION ONE Oil supply and demand outlook to 2040 24 SECTION TWO Oil downstream outlook to 2040 204 SECTION THREE Uncertainties and challenges 320 Footnotes 358 Annexes 370 Oil supply and demand outlook to 2040 SECTION ONE CHAPTER 1 ASSUMPTIONS FOR THE REFERENCE CASE 27 Introduction 28 Demographic trends 30 Medium- and long-term economic growth assumptions 40 Policy assumptions 46 Technology trends for the Reference Case 54 Oil price assumption 59 CHAPTER 2 ENERGY DEMAND: THE REFERENCE CASE 63 Total primary energy demand 64 Regional primary energy demand 68 Global primary energy demand by fuel type 73 Energy intensity 89 Energy consumption per capita 91 CHAPTER 3 OIL DEMAND 97 Medium-term demand 98 Long-term demand 104 Sectoral demand 109 CHAPTER 4 LIQUIDS SUPPLY 147 Medium-term outlook for liquids supply 148 Long-term outlook for liquids supply 153 Medium-term outlook for crude and NGLs 157 Long-term outlook for crude and NGLs 178 Medium-term outlook for other liquids supply (excluding biofuels) 182 Long-term outlook for other liquids supply (excluding biofuels) 182 Medium-term outlook for biofuels supply 189 Long-term outlook for biofuels supply 190 Alternative non-OPEC supply scenarios 191 Upstream investment 198 Oil downstream outlook to 2040 SECTION TWO CHAPTER 5 DISTILLATION CAPACITY 207 Base capacity 210 Refinery projects 217 Assessed refinery closures 235 Medium-term outlook 238 Long-term outlook 248 Projected refinery closures 256 Industry implications 259 CHAPTER 6 SECONDARY CAPACITY ADDITIONS 261 Medium-term outlook 262 Implications for refined products supply/demand balances 265 Long-term secondary capacity additions 268 Product quality developments 278 Downstream investment requirements 286 CHAPTER 7 OIL MOVEMENTS 291 Factors impacting actual movements and projections 292 The impact of ending the US crude oil export ban 294 Logistics developments 298 Crude oil movements 304 Product movements 315 Uncertainties and challenges SECTION THREE CHAPTER 8 THE PARIS AGREEMENT: GUIDANCE ON FUTURE POLICIES 323 Setting the context 324 Intended Nationally Determined Contributions 325 Scenario-based analysis of policies guided by the INDCs 327 Implications for oil 333 Potential implications on CO2 emissions 335 CHAPTER 9 UNCERTAINTIES, HURDLES AND OPPORTUNITIES 341 Low oil price challenges 342 Economy: a source of uncertainty 345 Uncertainties and implications of policy measures 347 Uncertainties associated with technological progress 349 Downstream challenges 350 Dialogue and cooperation 354 Footnotes & Annexes FOOTNOTES 358 ANNEX A 370 Abbreviations ANNEX B 378 OPEC World Energy Model (OWEM): definitions of regions ANNEX C 382 World Oil Refining Logistics Demand (WORLD) Model: definitions of regions ANNEX D 386 Major data sources List of boxes Box 1.1 The end of China’s one-child policy 32 Box 1.2 Megacities: the transportation challenge 37 Box 2.1 Energy access for productive use supports poverty alleviation 94 Box 3.1 Autonomous vehicles: where next? 127 Box 4.1 Mexico’s evolving energy reform: what lies ahead? 169 Box 5.1 Specific processes need additional capacity research 216 Box 6.1 IMO regulations: new rules slowly being clarified? 271 Box 7.1 Tanker markets: tough times continue 296 Box 7.2 Pipelines & policies: getting Canada’s oil out 301 Box 8.1 CCS deployment supports Paris Agreement implementation 338 Box 9.1 Evolving Asian oil benchmarks 343 Focus articles Chapter 1 China’s 13th Five-Year Plan for Economic and Social Development, 2016–2020 52 Chapter 3 Penetration of non-conventional powertrains 119 Chapter 4 Opportunities and constraints for oil sands development 183 List of tables Table 1.1 Population by region 30 Table 1.2 Net migration by region as a share of total population in the medium variant 37 Table 1.3 Medium-term annual real GDP growth rates in the Reference Case 41 Table 1.4 Long-term real GDP growth rates in the Reference Case 42 Table 2.1 Total primary energy demand by region 64 Table 2.2 World primary energy demand by fuel type 66 Table 2.3 OECD primary energy demand by fuel type 68 Table 2.4 Developing countries primary energy demand by fuel type 68 Table 2.5 Eurasia primary energy demand by fuel type 69 Table 2.6 China primary energy demand by fuel type 72 Table 2.7 India primary energy demand by fuel type 72 Table 3.1 Medium-term oil demand in the Reference Case 99 Table 3.2 Long-term oil demand in the Reference Case 104 Table 3.3 Long-term oil demand by product category in the Reference Case 105 Table 3.4 Projection of number of passenger cars 113 Table 3.5 Projection of number of commercial vehicles 114 Table 3.6 Oil demand in road transportation in the Reference Case 130 Table 3.7 Oil demand in aviation in the Reference Case 132 Table 3.8 Oil demand in rail and domestic waterways in the Reference Case 134 Table 3.9 Oil demand in marine bunkers in the Reference Case 136 Table 3.10 Oil demand in the petrochemical sector in the Reference Case 138 Table 3.11 Oil demand in ‘other industry’ in the Reference Case 140 Table 3.12 Oil demand in residential/commercial/agriculture in the Reference Case 142 Table 3.13 Oil demand in electricity generation in the Reference Case 144 Table 4.1 Medium-term liquids supply outlook in the Reference Case 149 Table 4.2 Long-term liquids supply outlook in the Reference Case 154 Table 4.3 Medium-term non-OPEC crude and NGLs supply outlook in the Reference Case 158 Table 4.4 Global tight crude supply outlook in the Reference Case 163 Table 4.5 Global unconventional NGLs supply outlook in the Reference Case 164 Table 4.6 Non-OPEC crude and NGLs supply outlook in the Reference Case 179 Table 4.7 Medium-term other liquids supply outlook in the Reference Case 182 Table 4.8 Long-term other liquids supply outlook in the Reference Case 183 Table 4.9 Medium-term non-OPEC biofuels supply outlook in the Reference Case 189 Table 4.10 Long-term non-OPEC biofuels supply outlook in the Reference Case 190 Table 5.1 Global refinery base capacity per different sources 211 Table 5.2 Assessed