2017 2018 World Oil Outlook 2040
Organization of the Petroleum Exporting Countries
World Oil Outlook 2040
Organization of the Petroleum Exporting Countries
OPEC is a permanent, intergovernmental organization, established in Baghdad, Iraq, on 10–14 September 1960. The Organization comprises 15 Members: Algeria, Angola, Republic of the Congo, Ecuador, Equatorial Guinea, Gabon, 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, September 2018 Helferstorferstrasse 17 A-1010 Vienna, Austria www.opec.org
ISBN 978-3-9503936-6-8
The data, analysis and any other information (‘Content’) contained in this publication is for informational purposes only and is not intended as a substitute for advice from your business, finance, investment consultant or other professional. Whilst reasonable efforts have been made to ensure the accuracy of the Content of this publication, the OPEC Secretariat makes no warranties or representations as to its accuracy, currency or comprehensiveness and assumes no liability or responsibility for any error or omission and/or for any loss arising in connection with or attributable to any action or decision taken as a result of using or relying on the Content of this publication. This publication may contain references to material(s) from third parties whose copyright must be acknowledged by obtaining necessary authorization from the copyright owner(s). The OPEC Secretariat will not be liable or responsible for any unauthorized use of third party material(s). The views expressed in this publication are those of the OPEC Secretariat and do not necessarily reflect the views of individual OPEC Member Countries. The material contained in this publication may be used and/or reproduced for educational and other non-commercial purposes without prior written permission from the OPEC Secretariat provided that the copyright holder is fully acknowledged.
Report citation: Organization of the Petroleum Exporting Countries. 2018 OPEC World Oil Outlook. September 2018. Available from: http://www.opec.org.
Download: All the data presented in this Outlook is available at www.opec.org. Acknowledgements
Director, Research Division Ayed S. Al-Qahtani
Head, Energy Studies Department Abderrezak Benyoucef
Main contributors Jan Ban, Haris Aliefendic, Julius Walker, Tofol Al-Nasr, Eleni Kaditi, Hans-Peter Messmer, Joerg Spitzy, Mehrzad Zamani, Erfan Vafaiefard, Moufid Benmerabet, Hend Lutfi, Mohammad Alkazimi
Other contributors Adedapo Odulaja, Behrooz Baikalizadeh, Mohammad Ali Zarie Zare, Hossein Hassani, Mohamed Mekerba, Eissa Alzerma, Afshin Javan, Hassan Balfakeih, Mohammad Ali Danesh, Aziz Yahyai, Pantelis Christodoulides, Klaus Stoeger, Mohammad Sattar, Ryszard Pospiech, Mihni Mihnev, Nadir Guerer, Douglas Linton
Editor James Griffin
Editorial support Andriana Ballerin, Menhal Alamri, Marie Brearley, Angelika Hauser, Mathew Quinn
Layout and typesetting Andrea Birnbach
Design & Production Coordinator Carola Bayer
OPEC’s Economic Commission Board (as of September 2018) Achraf Benhassine, Kupessa Daniel, José Antonio Cepeda Altamirano, Florencio Oyono Eneme Obono, André-Brice Boumbendje, Mohammad Taeb, Ali Nazar Faeq Al-Shatari, Mohammad Khuder Al-Shatti, Abdelkarim M. Omar Alhaderi, Mele Kyari, Abdulla Ahmad Al-Hussaini, Nasser A. Al-Dossary, Salem Hareb Al Mehairi, Ronny Rafael Romero Rodriguez Contents FOREWORD 1
EXECUTIVE SUMMARY 5
CHAPTER 1 KEY ASSUMPTIONS 23 1.1 Population and demographics 25 1.2 Economic growth 30 1.3 Energy policies 44 1.4 Technology and innovations 49 CHAPTER 2 ENERGY DEMAND 57 2.1 Major trends in energy demand 58 2.2 Energy demand by region 63 2.3 Energy demand by fuel 68
2.4 Energy-related CO2 emissions 84 2.5 Energy intensity and consumption per capita 86 CHAPTER 3 OIL DEMAND 97 3.1 Medium-term oil demand 99 3.2 Long-term oil demand by region 115 3.3 Long-term oil demand by product 118 3.4 Long-term oil demand by sector 124 CHAPTER 4 LIQUIDS SUPPLY 161 4.1 Medium-term outlook for liquids supply 162 4.2 Long-term outlook for liquids supply 176 4.3 Global outlook for tight oil supply 182 4.4 Demand for OPEC crude 194 4.5 Upstream investment 194 CHAPTER 5 REFINING OUTLOOK 201 5.1 Existing refinery capacity 202 5.2 Distillation capacity 205 5.3 Secondary capacity 234 5.4 Investment requirements 252 5.5 Refining industry implications 256
CHAPTER 6 OIL MOVEMENTS 261 6.1 Logistics developments 262 6.2 Oil movements 265 6.3 Crude oil movements 269 6.4 Product movements 282 CHAPTER 7 ENERGY AND TECHNOLOGY 287 7.1 Transportation 288 7.2 Power generation 300 7.3 Carbon capture, storage and utilization 306 7.4 Tight oil 307 7.5 Residential, commercial and industrial sector 308 7.6 Refining and crude oil to chemicals 310 7.7 IT, big data and blockchain 311 CHAPTER 8 ENERGY AND CLIMATE CHANGE 313 8.1 United States 315 8.2 European Union 322 8.3 China 328 8.4 India 334 8.5 Other regional developments 340 CHAPTER 9 ENERGY AND SUSTAINABLE DEVELOPMENT 345 9.1 SDG 7 on energy 347 9.2 Energy access 350 9.3 Renewable energy sources and energy efficiency 355 9.4 Sensitivity analysis of achieving SDG 7 targets 356 9.5 International initiatives on sustainable energy 363 ENDNOTES 367 ANNEX A 371 Abbreviations ANNEX B 377 OPEC World Energy: definitions of regions ANNEX C 381 World Oil Refining Logistics Demand: definitions of regions ANNEX D 387 Data sources List of boxes
Box 1.1 Warning signs: Rising protectionism 33 Box 2.1 Focus on Africa 90 Box 3.1 Sensitivity cases: Electric vehicles penetration 140 Box 4.1 US tight oil production sensitivities 190 Box 7.1 Electric vehicles: Emissions and recycling 293
List of tables
Table 1.1 Population by region 26 Table 1.2 Working population (age 15–64) by region 28 Table 1.3 Net migration by region in the medium variant 29 Table 1.4 Medium-term annual real GDP growth rate 35 Table 1.5 Long-term annual real GDP growth rate in the Reference Case 40 Table 2.1 Total primary energy demand by region 59 Table 2.2 World primary energy demand by fuel type 61 Table 2.3 OECD primary energy demand by fuel type, 2015–2040 64 Table 2.4 Developing countries primary energy demand by fuel type, 2015–2040 64 Table 2.5 Eurasia primary energy demand by fuel type, 2015–2040 65 Table 2.6 China primary energy demand by fuel type, 2015–2040 67 Table 2.7 India primary energy demand by fuel type, 2015–2040 68 Table 2.8 Natural gas demand by region, 2015–2040 74 Table 3.1 Medium-term oil demand 99 Table 3.2 Global oil demand by sector, 2017–2023 108 Table 3.3 Long-term oil demand by region 115 Table 3.4 Long-term oil demand by product 119 Table 3.5 Sectoral oil demand, 2017–2040 125 Table 3.6 Number of passenger cars 129 Table 3.7 Number of commercial vehicles 130 Table 3.8 Oil demand in the road transportation sector by region, 2017–2040 136 Table 3.9 Oil demand in the aviation sector by region, 2017–2040 145 Table 3.10 Oil demand in the marine bunkers sector by region, 2017–2040 148 Table 3.11 Oil demand in the petrochemicals sector by region, 2017–2040 150 Table 3.12 Oil demand in rail and domestic waterways sector by region, 2017–2040 154 Table 3.13 Oil demand in ‘other industry’ sector by region, 2017–2040 156 Table 3.14 Oil demand in the residential/commercial/agriculture sector by region, 2017–2040 157 Table 3.15 Oil demand in the electricity generation sector by region, 2017–2040 159 Table 4.1 Medium-term liquids supply outlook 164 Table 4.2 Medium-term non-OPEC crude supply outlook 172 Table 4.3 Medium-term non-OPEC NGLs supply outlook 173 Table 4.4 Medium-term non-OPEC other liquids supply outlook, excluding biofuels 175 Table 4.5 Medium-term non-OPEC biofuels supply outlook 175 Table 4.6 Long-term liquids supply outlook 177 Table 4.7 Long-term non-OPEC crude supply outlook 178 Table 4.8 Long-term non-OPEC NGLs supply outlook 180 Table 4.9 Long-term non-OPEC other liquids supply outlook, excluding biofuels 181 Table 4.10 Long-term non-OPEC biofuels supply outlook 182 Table 4.11 US total liquids supply outlook 184 Table 4.12 Global medium-term tight liquids supply 192 Table 4.13 Global long-term tight liquids supply 193 Table 5.1 Global refinery base capacity per different sources 203 Table 5.2 Assessed available base capacity as of January 2018 204 Table 5.3 Secondary capacity relative to distillation capacity as of January 2018 206 Table 5.4 Distillation capacity additions from existing projects by region 208 Table 5.5 Global demand growth and refinery distillation capacity additions by period in the Reference Case 221 Table 5.6 Net refinery closures, recent and projected, by region 226 Table 5.7 Crude unit throughputs and utilizations 232 Table 5.8 Secondary capacity additions from exiting projects, 2018–2023 235 Table 5.9 Global cumulative potential for incremental product output, 2018–2023 240 Table 5.10 Global capacity requirements by process, 2018–2040 246
List of figures
Figure 1.1 World population growth 1992–2016 vs. 2016–2040 26 Figure 1.2 Population trends in developing Asia and Middle East & Africa, 1990–2040 27 Figure 1.3 Urbanization rate for selected regions, 2000–2040 29 Figure 1.4 Global GDP growth rate 30 Figure 1.5 Non-OPEC investment by supply segment 31 Figure 1.6 Productivity growth, five-year moving average 35 Figure 1.7 Long-term GDP growth rates by components, 2017–2040 41 Figure 1.8 Distribution of the global economy 43 Figure 1.9 Real GDP per capita in 2017 and 2040 44 Figure 2.1 Growth in primary energy demand by region, 2015–2040 60 Figure 2.2 Growth in primary energy demand by fuel type, 2015–2040 62 Figure 2.3 Growth in energy demand by fuel type and region, 2015–2040 66 Figure 2.4 Coal demand growth by major region, 2015–2040 71 Figure 2.5 Global natural gas demand growth 73 Figure 2.6 Number of nuclear reactors by region, 2018 77 Figure 2.7 Nuclear energy demand by major region, 2015–2040 78 Figure 2.8 Hydropower demand by major region, 2015–2040 80 Figure 2.9 Biomass demand by major region, 2015–2040 81 Figure 2.10 Annual wind and solar capacity additions, globally 82 Figure 2.11 ‘Other renewables’ demand by major region, 2015–2040 83
Figure 2.12 Per capita CO2 emissions by major region, 2015 and 2040 85
Figure 2.13 Cumulative CO2 emissions since 1900, 1990–2040 86 Figure 2.14 Global and regional energy intensity, 1990–2040 87 Figure 2.15 Average annual rate of improvement in global and regional energy intensity, 2015–2040 88 Figure 2.16 Energy consumption per capita vs. GDP at PPP per capita, 2015–2040 89 Figure 3.1 Annual oil demand increments by region, 2018–2023 100 Figure 3.2 Impact of IMO regulations on global oil demand growth 102 Figure 3.3 Annual oil demand growth in the OECD, 2018–2023 103 Figure 3.4 Annual oil demand growth in Developing countries, 2018–2023 104 Figure 3.5 Oil demand in OPEC Member Countries by sector, 2018–2023 106 Figure 3.6 Annual oil demand growth in Eurasia, 2018–2023 106 Figure 3.7 Regional oil demand growth between 2017 and 2023 107 Figure 3.8 Growth in global oil demand by sector between 2017 and 2023 110 Figure 3.9 Growth in global oil demand by product between 2017 and 2023 111 Figure 3.10 Marine bunker demand by fuel type 114 Figure 3.11 Average annual oil demand growth 117 Figure 3.12 Incremental demand for crude based gasoline by region 120 Figure 3.13 Demand growth by product category in the long-term 123 Figure 3.14 Share of the different sectors in demand by product, 2017 and 2040 123 Figure 3.15 Sectoral oil demand growth 125 Figure 3.16 Sectoral oil demand in the OECD, 2017 and 2040 127 Figure 3.17 Sectoral oil demand in Developing countries, 2017 and 2040 127 Figure 3.18 Shares of new passenger car sales by powertrain, 2017 and 2040 132 Figure 3.19 Passenger car fleet composition, 2017–2040 133 Figure 3.20 Shares of new commercial vehicle sales by powertrain, 2017 and 2040 134 Figure 3.21 Commercial vehicle fleet composition, 2017–2040 135 Figure 3.22 Demand in road transportation in the OECD, 2017 and 2040 137 Figure 3.23 Demand in road transportation in Developing countries, 2017 and 2040 138 Figure 3.24 Oil demand in the road transportation sector by segment 139 Figure 3.25 Propensity to travel, 2017 143 Figure 3.26 Rise of the global middle class 144 Figure 3.27 International seaborne trade and oil demand in marine sector, 2000–2016 146 Figure 3.28 Product demand in the marine bunkers sector, 2017–2040 149 Figure 3.29 Regional demand in the petrochemicals sector by products in 2017 and 2040 153 Figure 3.30 Per capita oil consumption in the residential/commercial/agriculture sector, 1970–2040 158 Figure 4.1 Revisions to total non-OPEC supply vs. WOO 2017 162 Figure 4.2 Medium-term non-OPEC liquids supply by stream 163 Figure 4.3 Medium-term non-OPEC total liquids supply by region 165 Figure 4.4 Select contributors to non-OPEC total liquids change 2017–2023 165 Figure 4.5 US medium-term total liquids supply 166 Figure 4.6 US tight oil supply growth (y-o-y change) 167 Figure 4.7 Brazil medium-term total liquids supply 167 Figure 4.8 Canada medium-term total liquids supply 168 Figure 4.9 Russia medium-term total liquids supply 169 Figure 4.10 Kazakhstan medium-term total liquids supply 170 Figure 4.11 Norway medium-term total liquids supply 171 Figure 4.12 Mexico medium-term total liquids supply 171 Figure 4.13 Annual non-OPEC total liquids growth by source 174 Figure 4.14 Long-term non-OPEC total liquids supply growth by region 176 Figure 4.15 Long-term non-OPEC liquids supply outlook, 2017 and 2040 179 Figure 4.16 US tight oil supply outlook 183 Figure 4.17 US total liquids supply outlook 183 Figure 4.18 US tight crude supply by basin 185 Figure 4.19 US natural gas liquids production by type 186 Figure 4.20 Evolution of wellhead breakeven prices by play 187 Figure 4.21 Cost of drilling oil & gas wells in US 187 Figure 4.22 US oil rig count by major basin 188 Figure 4.23 US upstream investment by type of liquids 189 Figure 4.24 Long-term demand for OPEC crude oil 194 Figure 4.25 Annual global upstream capital expenditure, historical and future requirements 195 Figure 4.26 Annual upstream investment requirements 196 Figure 4.27 Annual upstream investment requirements by major region 197 Figure 4.28 Cumulative oil-related investment requirements by sector, 2018–2040 198 Figure 5.1 Annual distillation capacity additions and total projects investment 207 Figure 5.2 Distillation capacity additions from existing projects, 2017–2023 208 Figure 5.3 Additional cumulative refinery crude runs, required and potential 211 Figure 5.4 Additional cumulative crude runs in US & Canada, potential and required 213 Figure 5.5 Additional cumulative crude runs in Europe, potential and required 214 Figure 5.6 Additional cumulative crude runs in China, potential and required 215 Figure 5.7 Additional cumulative crude runs in the Asia-Pacific (excl. China), potential and required 215 Figure 5.8 Additional cumulative crude runs in the Middle East, potential and required 216 Figure 5.9 Additional cumulative crude runs in the Russia & Caspian, potential and required 217 Figure 5.10 Additional cumulative crude runs in Africa, potential and required 218 Figure 5.11 Additional cumulative crude runs in Latin America, potential and required 219 Figure 5.12 Net cumulative regional refining potential surplus/deficits vs. requirements 220 Figure 5.13 Crude distillation capacity additions in the Reference Case, 2018–2040 223 Figure 5.14 Net refinery closures, recent and projected, by region 227 Figure 5.15 Historical and projected global refinery utilizations, 1980–2023 229 Figure 5.16 Global oil demand, refining capacity and crude runs, 1980–2023 229 Figure 5.17 Conversion projects by region, 2018–2023 236 Figure 5.18 Expected surplus/deficit of incremental product output from existing refining projects, 2018–2023 240 Figure 5.19 Global capacity requirements by process type, 2018–2040 247 Figure 5.20 Conversion capacity requirements by region, 2018–2040 248 Figure 5.21 Desulphurization capacity requirements by region, 2018–2040 250 Figure 5.22 Desulphurization capacity requirements by product and region, 2018–2040 251 Figure 5.23 Octane capacity requirements by process and region, 2018–2040 252 Figure 5.24 Cost of refinery projects by region, 2018–2023 253 Figure 5.25 Projected refinery direct investments above assessed projects 255 Figure 5.26 Refinery investments, 2018–2040 257 Figure 6.1 Inter-regional crude oil and products exports, 2017–2040 268 Figure 6.2 Crude oil supply outlook to 2040 269 Figure 6.3 Change in crude oil supply to 2040 270 Figure 6.4 Global crude oil exports by origin, 2017–2040 272 Figure 6.5 Crude oil exports from the Middle East by major destinations, 2017–2040 273 Figure 6.6 Crude oil exports from Latin America by major destinations, 2017–2040 274 Figure 6.7 Crude oil exports from Russia & Caspian by major destinations, 2017–2040 275 Figure 6.8 Crude oil exports from Africa by major destinations, 2017–2040 276 Figure 6.9 Crude oil exports from the US & Canada by major destinations, 2017–2040 277 Figure 6.10 Crude oil imports to the US & Canada by origin, 2017–2040 278 Figure 6.11 Crude oil imports to Europe by origin, 2017–2040 279 Figure 6.12 Crude oil imports to the Asia-Pacific by origin, 2017–2040 280 Figure 6.13 Regional net crude oil imports, 2017, 2020 and 2040 281 Figure 6.14 Regional net product imports, 2020, 2030 and 2040 283 Figure 9.1 Access to electricity, % of population 350 Figure 9.2 Share of population with access to electricity in 2016, (%) 351 Figure 9.3 Access to electricity, % of population, 2016 351 Figure 9.4 Access to electricity: GDP per capita vs. % of population with access to electricity, 2000 and 2016 353 Figure 9.5 Access to clean cooking: GDP per capita vs. % of population with access to clean cooking, 2000 and 2016 353 Figure 9.6 Number of people with primary reliance on clean fuels, kerosene and solid fuels 354 Figure 9.7 Share of renewable energy in total final energy consumption, 2015 356 Figure 9.8 Renewable electricity (% of total electricity output), 2015 357 Figure 9.9 Global primary energy demand and the energy mix in 2030 359 Figure 9.10 Global primary energy demand and the energy mix in 2040 359 Figure 9.11 Energy demand reduction relative to the Reference Case in 2030 361 Figure 9.12 Energy demand reduction relative to the Reference Case in 2040 361
Figure 9.13 Impact on CO2 emissions 362 FOREWORD
Foreword
World Oil Outlook 2018 2 Organization of the Petroleum Exporting Countries FOREWORD
Cooperation is one of the cornerstones of OPEC’s activities and, in this regard, the period since the publication of the World Oil Outlook (WOO) 2017 has been a historic one for the Organiza- tion, as well as the global oil industry. F We have witnessed the ongoing commitment of 24 OPEC and non-OPEC producing countries (now 25, since the Republic of the Congo joined OPEC in June 2018) through the landmark ‘Declaration of Cooperation’ to restore sustainable stability to the industry. The cooperative efforts have helped accelerate the return of balance to the global oil market, bring greater optimism to the industry, with investments now gradually picking up, as this year’s publication highlights, and have had a positive effect on the global economy and trade worldwide.
The impact of the cooperation has exceeded even the most optimistic of projections. We have not only turned a page, but a new, exciting chapter is being authored in the history of the in- dustry by OPEC and its non-OPEC partners. It is clear that the ‘Declaration’ has now become a permanent feature of the global energy scene, establishing a novel framework for producing countries, whilst also taking into account the vital interests of consumer countries, as well as the global economy.
These endeavours were further reinforced at the 7th OPEC International Seminar in June 2018, under the central theme: ‘Petroleum – cooperation for a sustainable future’, which brought together a ‘who’s who’ of global oil and energy industry leaders. Held at the Hofburg Palace in Vienna the record-breaking Seminar showcased the importance of dialogue and sta- bility to tackle the plethora of challenges facing the industry.
This year’s WOO will be launched in Algiers, the capital of OPEC Member Country, Algeria, and a place many see as the birthplace of the ‘Declaration of Cooperation’. It was here on 28 September 2016, at the 170th (Extraordinary) Meeting of the OPEC Conference, that OPEC Member Countries set forth on the path that eventually led to the ‘Declaration of Cooperation’ on 10 December 2016. It is fitting that Algiers plays host to the unveiling of the WOO 2018, as part of the celebrations to mark the second anniversary of the seminal Algiers meeting.
The importance of these recent developments, specifically in terms of helping achieve sustain- able market stability, is clearly vital across all timeframes. While the focus for many is obvi- ously on the short-term, we need to recall that the short- , medium- and long-terms are all interlinked. We cannot view any of them in isolation. Stability today begets stability tomorrow, which is vital given that our industry remains a growth business, with oil continuing to be a fuel of choice for the foreseeable future.
The WOO 2018 analyzes the industry’s various linkages, its shifting dynamics and considers developments in areas such as the global economy, energy demand, oil supply and demand, both in the upstream and downstream, policy and technology developments, and environ- ment and sustainable development concerns. This all helps provide the framework for the WOO’s Reference Case, including breakdowns by region, sector and timeframe.
With regard to the global economy, on the back of strong growth in emerging and develop- ing economies the size of the global economy in 2040 is estimated to be more than double
World Oil Outlook 2018 Organization of the Petroleum Exporting Countries 1 FOREWORD
that of 2017, with China and India seeing their overall weight in the global economy increase significantly.
With an expanding global population and the crucial need to reduce energy poverty, with al- most one billion people still without access to electricity and three billion lacking access to clean fuels and efficient technologies for cooking, energy demand is anticipated to increase by around 33% between 2015 and 2040. There will be a variety of abundant energy resources to meet this demand growth.
Renewables are expected to see the largest annual average growth rate, although they start from a low initial base. It should be noted that many OPEC Member Countries are making sig- nificant investments in renewables, given their vast solar and wind resources.
Oil is presumed to remain the fuel with the largest share in the energy mix over the forecast period, led by demand from transportation and petrochemicals. Combined, oil and gas are still expected to make up more than 50% of the global energy mix by 2040.
Long-term oil demand is expected to increase by 14.5 mb/d to reach 111.7 mb/d by 2040. This is slightly higher than last year’s number, in spite of overall demand growth generally slowing over the projection period.
For supply, total non-OPEC liquid supply is projected to expand significantly, with the ma- jority of the growth over the next decade coming from US tight oil. Global tight oil supply is projected to expand to 16 mb/d by the late 2020s, making up almost 25% of non-OPEC supply by then.
The upshot is that the long-term focus for additional liquids remains on OPEC. In terms of crude, it is estimated that demand for OPEC crude rises by 7.3 mb/d over the forecast period, and for all liquids the figure is 10.5 mb/d. The share of OPEC crude in the global oil supply is expected to increase from 34% in 2017 to 36% by 2040.
From the downstream perspective, around 18 mb/d of capacity additions are estimated for the period 2018–2040. Following trends in regional oil demand, the majority of the new additions are set to be located in the developing regions, predominantly in the Asia-Pacific and Middle East. Regions such as Africa and Latin America are also expected to see significant long-term downstream capacity additions.
At the same time, fast evolving trade patterns for crude oil and refined products will continue to change. Global crude exports are forecast to increase by around 5.5 mb/d in the long-term, with the major contribution from the Middle East to the Asia-Pacific.
Given the demand and supply outlook, there is evidently the need for significant investments across the entire industry. Overall, the outlook sees oil investment requirements of almost $11 trillion over the period to 2040. While investments picked up slightly in 2017 compared to the previous two years, and the expectations are for higher levels again in 2018, it is vital that
World Oil Outlook 2018 2 Organization of the Petroleum Exporting Countries FOREWORD
as an industry we ensure there is timely and adequate investment so as not to lead to a supply shortage in the future.
Let me reiterate that OPEC Member Countries remain fully committed to investments across F the whole value industry chain, and the issue of returning global investments is a core focus of the ‘Declaration of Cooperation’.
The WOO 2018 also explores a number of sensitivity cases that could potentially impact the long-term energy mix, and the oil supply and demand outlook. These include the potential for higher energy demand in Africa, the possibility of faster and slower penetration of electric ve- hicles, the prospects for higher and lower tight oil growth, and the possibility for faster energy efficiency improvements and a quicker expansion in renewables.
Evidently one of the greatest challenges facing the industry, and humankind, going forward is climate change. OPEC remains fully engaged and supportive of the Paris Agreement. We firmly believe that a global consensus from the multilateral process remains the best and most inclu- sive way for all nations to collectively mitigate or adapt to the impacts of climate change based on the core principle of ‘common but differentiated responsibilities’ in a fair and equitable manner.
In this regard, OPEC is cognizant of the dual challenge of meeting growing demand for oil while constantly improving its environmental footprint. It is vital that we collectively develop and adopt technologies, as well as all-inclusive energy policies, that transform the environmental credentials of all energies. As this Outlook underlines, all forms of energy will be required in the future. It is not about choosing one form of energy over another.
As with all previous editions, the WOO is the product of cooperation between the various depart- ments of the OPEC Secretariat and our Member Countries. The commitment and dedication of everyone involved in terms of the data, research, comprehensive analysis and design and editing of the publication should be highly commended. Their work is also an expression of the broader, ongoing commitment of the Organization to further discussions on energy outlooks, such as with the International Energy Agency (IEA) the International Energy Forum (IEF) and the Gas Exporting Countries Forum (GECF), and to widen our engagement with other energy stakeholders.
It was the legendary astronaut, Neil Armstrong, who once said: “Research is creating new knowledge”. This is the objective of the WOO; we see it as a valuable and informative reference tool that enables the Organization to share its views and analysis of the global oil and energy markets. This can then be leveraged to stimulate debate and foster knowledge-sharing, to drive further research in the years to come.
Mohammad Sanusi Barkindo Secretary General
World Oil Outlook 2018 Organization of the Petroleum Exporting Countries 3 Executive Summary EXECUTIVE SUMMARY
Decelerating growth and ageing population mark future demographic change Population growth, the size of the working-age population, urbanization levels and immigra- tion play an important role in shaping the future energy and oil market. Global population is expected to increase from around 7.6 billion in 2017 to 9.2 billion in 2040. The majority of this growth will come from Developing countries, particularly from Africa, India and the Middle East. In the Organization for Economic Co-operation and Development (OECD) region, popula- tion is estimated to grow by 105 million in the period to 2040. It is important to note, however, ES that overall population growth will decelerate over the forecast period.
While the working-age population (age 15–64) is estimated to grow by around one billion peo- ple over the long-term, its relative share of the global population is expected to decline from 66% in 2016 to 63% in 2040.
Population by region millions
Change 2017 2020 2030 2040 2017–2040 OECD 1,297 1,317 1,368 1,402 105 Developing countries 5,911 6,134 6,839 7,467 1,556 Eurasia 343 344 345 341 –2 World 7,550 7,795 8,551 9,210 1,660
Global GDP growth between 2017 and 2040 is expected to average 3.4% p.a., driven primarily by Developing countries Global economic growth will mainly be driven by Developing countries while the OECD region is expected to see weaker growth on the back of a marginally declining working age population and a slow rise in labour productivity.
Global gross domestic product (GDP) between 2017 and 2040 is expected to increase at an average annual rate of 3.4%. This is slightly lower than the WOO 2017 assumption, mainly due to the expectation of less dynamic long-term labour market developments. Most of the growth until the end of the forecast period will be determined by labour productivity. Developing coun- tries are expected to grow, on average, by 4.5% per annum (p.a.) over the forecast period, while growth in the OECD region averages 1.8% p.a.
Long-term annual GDP growth rates % p.a.
2017–2023 2023–2030 2030–2040 2017–2040
OECD 2.0 1.8 1.7 1.8 Developing countries 5.0 4.6 4.0 4.5 Eurasia 2.3 2.4 2.3 2.3 World 3.6 3.4 3.2 3.4
World Oil Outlook 2018 Organization of the Petroleum Exporting Countries 5 EXECUTIVE SUMMARY
Major regional shifts in the future economic picture are expected The size of the global economy in 2040 is estimated to be more than double that of 2017. There will be major regional shifts in the economic picture over the forecast period. In 2017, OECD America accounted for 20% of global GDP, followed by OECD Europe and China both at 18%. Other Asia accounted for a further 10% while India had a share of 8%. During the forecast pe- riod, China’s weight in the global economy is projected to increase by around six percentage points to reach 24%, while the weight of OECD America is estimated to drop to 15% and that of OECD Europe to 12%.
Energy policies, combined with the cost competitiveness of natural gas, put the coal industry under increasing pressure Many countries, including ten1 OPEC Member Countries, have ratified the Paris Agreement. In efforts to achieve climate objectives, the coal industry is under the most regulatory scrutiny. Consequently, the power industry is undergoing a paradigm shift; shutting inefficient plants and replacing them with modern technologies – or shifting toward other power sources alto- gether. The cost competitiveness of natural gas and renewables (particularly wind and solar), combined with supportive policies, have captured commercial interest across the globe. This shift is particularly evident in China, which has set a path toward achieving a future of ‘blue skies’.
Road transportation sector under increasing regulatory scrutiny, with the estab- lishment of more stringent emissions targets across various regions In the road transportation sector, fuel quality and vehicle emissions standards continue to evolve in major consuming regions. Although the US is relaxing Corporate Average Fuel Econ- omy (CAFE) standards, the European Union (EU), China, and India are continuing to increase fuel economy and vehicle emissions standards. Meanwhile, reflecting the fiscal realities of incentives programs, policies regarding electric vehicle across major consuming regions are undergoing a re-evaluation, as policymakers attempt to strike a balance between government support and the competitiveness of electric vehicles.
Energy policies support technology advancement, leading to efficiency improve- ments and emission reductions Policymakers in energy consuming and producing countries employ various policy measures in order to simultaneously meet and balance their individual national priorities. These priori- ties include enhancing energy security, energy efficiency, economic development, alleviating energy poverty, and adhering to environmental objectives as embodied within global pacts such as the ‘Paris Agreement’.
Evolutionary path of technology advancement broadens future energy panorama Technological advancements will continue to evolve, in general, and provide a broader future energy panorama. The concerns around global warming have accelerated the development of energy paths toward lower emissions. The ongoing, and at least already partially successful, introduction of electric vehicles as a complement to the internal combustion engine (ICE) is an important development for the energy market, although in many aspects ICEs still have sub- stantial potential for further developments. Tight oil plays are also an area of intense technol- ogy developments. Impressive advances have also been achieved in wind and solar for power
World Oil Outlook 2018 6 Organization of the Petroleum Exporting Countries EXECUTIVE SUMMARY
generation. The ongoing revolution in information technologies (IT) will impact both supply and demand, towards higher efficiency, lower emissions and lower costs.
Total primary energy demand is expected to increase by 91 mboe/d between 2015 and 2040 to reach 365 mboe/d in 2040 The Reference Case sees energy demand increasing from 274 million barrels of oil equivalent a day (mboe/d) in 2015 to around 365 mboe/d in 2040, with an average annual growth of 1.2% ES p.a. Almost 95% of the increase is accounted for by Developing countries (including China and India), with an average annual growth of 1.9% p.a.
Total primary energy demand by region
Levels Growth (mboe/d) (% p.a.) 2015 2020 2030 2040 2015–2040 OECD 108.8 113.1 112.1 109.6 0.0 Developing countries 142.6 160.3 197.3 228.2 1.9 Eurasia 22.3 23.7 25.4 26.9 0.7 World 273.7 297.1 334.9 364.7 1.2
A modest increase of around 4.5 mboe/d is projected for Eurasia between 2015 and 2040, an av- erage annual growth of 0.7% p.a. The OECD is estimated to witness only a small increase of less than 1 mboe/d, which points to stagnating energy demand in this country group as the market increasingly saturates. The imbalance between the world regions is the result of stronger popu- lation and economic growth, as well as accelerating urbanization rates in Developing countries, where an increasing number of people are expected to gain access to modern energy services.
Primary energy demand in China and India is the most significant contributor to overall energy demand growth Energy demand in Developing countries is projected to increase by almost 86 mboe/d between 2015 and 2040, with India and China the most important contributors to this growth. Energy demand in India and China in this period is forecast to increase by 22 mboe/d and 21 mboe/d, respectively, which is more than 50% of the energy demand growth in Developing countries during this period.
At the same time, the group of Other Developing countries (excluding India, China and OPEC) is projected to grow by around 2% p.a., increasing by around 29 mboe/d over the forecast pe- riod. This includes countries at different stages of development, predominantly in Asia, Africa and Latin America. Significant growth is also expected in OPEC countries, increasing from 20 mboe/d in 2015 to almost 33 mboe/d in 2040. This comprises an annual average growth rate of around 2%.
World Oil Outlook 2018 Organization of the Petroleum Exporting Countries 7 mboe/d EXECUTIVE SUMMARY
Growth in primary energy demand by region, 2015–2040
mboe/d % p.a. ro th in le el Per ent gro th p a