Energy Outlook 2020 edition 2 |

The Energy Outlook The Energy Outlook considers a number of different scenarios. These scenarios are not predictions of what is likely to happen or what bp explores the forces would like to happen. Rather they explore the possible implications of different judgements and assumptions concerning the nature of the shaping the global energy transition. The scenarios are based on existing and developing energy transition technologies which are known about today and do not consider the out to 2050 and the possibility of entirely new or unknown technologies emerging. Much of the analysis in the Outlook is focussed around three key uncertainties scenarios: Rapid, Net Zero and Business-as-usual. The multitude of surrounding that uncertainties means that the probability of any one of these scenarios materializing exactly as described is negligible. Moreover, the three transition scenarios do not provide a comprehensive description of all possible outcomes. However, the scenarios do span a wide range of possible outcomes and so might help to inform a judgement about the uncertainty surrounding energy markets out to 2050. The Energy Outlook is produced to inform bp’s analysis and strategy and is published as a contribution to the wider debate. But the Outlook is only one source among many when considering the future of global energy markets and bp considers a wide range of other analysis and information when forming its long-term strategy.

3 | bp Energy Outlook: 2020 edition 4 |

In February of this year, bp In August, we set out a new strategy announced a new purpose – to in support of this purpose and reimagine energy for people and our ambition. It will see bp transform planet. This purpose was supported from an International Oil Company by a new ambition, to be a net-zero focused on producing resources to an company by 2050 or sooner and to Integrated Energy Company focused help get the world to net zero. on delivering solutions for customers. From IOC to IEC. And while the Our new purpose and ambition are Covid-19 pandemic has had a huge underpinned by four fundamental impact on the global economy and judgements about the future. That energy markets, it has not affected the world is on an unsustainable path our belief in and commitment to our Welcome to the and its carbon budget is running out. purpose, ambition and strategy. 2020 edition of That energy markets will undergo lasting change, shifting towards That belief and commitment is in bp’s Energy Outlook renewable and other forms of zero- no small part down to the objective or low-carbon energy. That demand analysis that goes into every edition for oil and gas will be increasingly of the Energy Outlook. It does not to challenged. And that, alongside many try to predict precise future outcomes others, bp can contribute to the – any attempt to do that is doomed to energy transition that the world wants fail. Instead, it helps us to understand and needs, and create value doing so. the many uncertainties ahead – in the

near and longer term – by considering Customers will continue to Countries, cities and industries will a range of possible pathways the redefine mobility and convenience, increasing want their decarbonized energy transition may take over the underpinned by the mobility energy and mobility needs met next 30 years. This year’s Outlook revolution that is already underway with bespoke solutions, shifting the explores three main scenarios – combining electric vehicles, shared centre of gravity of energy markets Rapid, Net Zero and Business-as- mobility and autonomy. towards consumers and away from traditional upstream producers. usual – which span a wide range Oil and gas – while remaining of possible outcomes. Those three needed for decades – will be The Energy Outlook has been tracking scenarios have helped us to develop increasingly challenged as society and analysing the trajectory of the a strategy that we think is robust to shifts away from its reliance on fossil world’s energy system for the past the uncertainty around the pace and fuels 10 years. This year’s Outlook has nature of the energy transition. been instrumental in the development And those core beliefs lead us to of the new strategy we announced in three more about how the energy Three features are common across August. I hope it is useful to everyone system will change out to 2050: those scenarios and they form a set else seeking ways to accelerate the of core beliefs as to how energy energy transition and get to net zero. The energy mix will become demand is likely to change over the We welcome any feedback on the next three decades: more diverse, driven increasingly by customer choice rather than content and how we can improve. resource availability. Renewable energy will play an increasingly important role in meeting Markets will need more integration the world’s growing energy needs. to accommodate this more diverse supply and will become more localized as the world electrifies Bernard Looney and the role of hydrogen expands. chief executive officer

5 | bp Energy Outlook: 2020 edition Executive summary 6 |

Key messages

Global energy demand continues levels of integration and competition. to grow, at least for a period, driven These changes underpin core beliefs by increasing prosperity and living about how the global energy system standards in the emerging world. may restructure in a low-carbon Significant inequalities in energy transition. consumption and access to energy persist. Demand for oil falls over the next 30 years. The scale and pace of this The structure of energy demand decline is driven by the increasing is likely to change over time: efficiency and electrification of road declining role of fossil fuels, offset transportation. by an increasing share of renewable energy and a growing role for The outlook for natural gas is more electricity. These changes underpin resilient than for oil, underpinned by core beliefs about how the structure the role of natural gas in supporting of energy demand may change. fast growing developing economies as they decarbonized and reduce A transition to a lower carbon their reliance on coal, and as a energy system is likely to lead source of near-zero carbon energy to fundamental restructuring of when combined with carbon capture the global energy system, with a use and storage (CCUS). more diverse energy mix, greater consumer choice, more localized energy markets, and increasing

Renewable energy, led by wind and The use of hydrogen increases as solar power, is the fastest growing the energy system progressively source of energy over the next 30 decarbonizes, carrying energy years, supported by a significant to activities which are difficult or increase in the development of – and costly to electrify. The production of investment in – new wind and solar hydrogen is dominated by a mix of capacity. blue and green hydrogen.

The importance of electricity in The importance of bioenergy – final energy consumption increases biofuels, biomethane and biomass materially over the next 30 years. – increases as consumption shifts The carbon intensity of power away from fossil fuels. generation falls markedly, driven by renewables gaining share relative to The world is on an unsustainable coal. path. A rapid and sustained fall in carbon emissions is likely to require The intermittency associated with a series of policy measures, led the growing use of wind and solar by a significant increase in carbon power means a variety of different prices. These policies may need to technologies and solutions are be reinforced by shifts in societal needed to balance the energy behaviours and preferences. system and ensure the availability of Delaying these policies measures firm power. and societal shifts may lead to significant economic costs and disruption.

7 | bp Energy Outlook: 2020 edition Contents 8 |

Overview 10 Regions 50

Three scenarios: Rapid, Net Zero and Summary 52 Business-as-usual 12 Regional energy demand and carbon emissions 54 Changing nature of global energy system 16 Fuel mix across key countries and regions 56 Global energy trade and energy imbalances 58 Global backdrop 18 Alternative scenario: Deglobalization 60

Total greenhouse gases 20 Global GDP 22 Demand and supply of energy sources 62

Climate impacts on GDP growth 24 Summary 64 Energy demand 26 Oil and liquid fuels 66 Impact of Covid-19 28 Gas 76 Energy access and economic development 30 Renewable energy in power 84 Coal 88 Energy use by sector 32 Nuclear power 90

Summary 34 Hydroelectricity 92 Industry 36 Non-combusted 38 Buildings 40 Transport 42

Other energy carriers 94 Investment 132

Electricity and power generation 96 Summary 134 Hydrogen 102 Upstream oil and gas investment 136

Carbon emissions from energy use 106 Comparisons 138

Summary 108 Revisions to Rapid 140 Carbon pathways 110 Comparing Rapid with external Outlooks 142 Alternative scenario: Delayed and Disorderly 112 Annex 144 Global energy system at net zero 118 Key figures, definitions, Summary 120 methodology and data sources 146 Energy demand 122 Electrification and the power sector 124 Oil and natural gas 126 Bioenergy and hydrogen 128 CCUS and negative emission technologies 130

9 | bp Energy Outlook: 2020 edition 10 | Overview

Three scenarios: Rapid, Net Zero and Business-as-usual Changing nature of global energy system

11 | bp Energy Outlook: 2020 edition Overview 12 |

Three scenarios to explore the energy transition to 2050

CO2 emissions from energy use

Gt of CO2

40 Rapid Net Zero 35 Business-as-usual

30

25

20

5

0

5

0 2000 200 2020 2030 2040 2050

Key points

This year’s Energy Outlook considers with limiting the rise in global that progress, albeit relatively slow, three main scenarios which explore temperatures by 2100 to well below means carbon emissions peak in the different pathways for the global 2-degrees Celsius above pre- mid-2020s. Despite this peaking, energy system to 2050. industrial levels. little headway is made in terms of reducing carbon emissions from The scenarios are not predictions The Net Zero Scenario (Net Zero) energy use, with emissions in 2050 of what is likely to happen or what assumes that the policy measures less than 10% below 2018 levels. bp would like to happen. Rather, the embodied in Rapid are both added scenarios help to illustrate the range to and reinforced by significant Primary energy demand increases of outcomes possible over the next shifts in societal behaviour and by around 10% in Rapid and Net thirty years, although the uncertainty preferences, which further Zero over the Outlook and by around is substantial and the scenarios accelerate the reduction in carbon 25% in BAU. do not provide a comprehensive emissions. Global carbon emissions description of all possible outcomes. from energy use fall by over 95% by 2050, broadly in line with a range The Rapid Transition Scenario of scenarios which are consistent (Rapid) posts a series of policy with limiting temperature rises to measures, led by a significant 1.5-degrees Celsius. increase in carbon prices and supported by more-targeted sector The Business-as-usual Scenario specific measures, which cause (BAU) assumes that government carbon emissions from energy use policies, technologies and social to fall by around 70% by 2050. preferences continue to evolve in This fall in emissions is in line with a manner and speed seen over scenarios which are consistent the recent past*. A continuation of *BAU is comparable with the Evolving Transition Scenario in previous editions of the Energy Outlook 13 | bp Energy Outlook: 2020 edition Overview 14 |

Scenarios differ due to alternative assumptions about policies and societal preferences

Average carbon prices in developed and emerging regions Primary energy consumption by source US$ per tonne (real 2018) EJ

300 00 Business- enewables Deeloped as-usual Emerging 700 ydro 250 Rapid Net Zero Nuclear Rapid 00 Coal Net Zero 200 Natural gas 500 Oil 50 400

300 00 200 50 Business-as-usual 00

0 0 205 2020 2025 2030 2035 2040 2045 2050 20 2050

Key points

The differences between In addition to carbon prices, the As a result of these policies and the scenarios are driven by three scenarios assume a number shifts in societal preferences, a combination of different of other policies are enacted to there is a decline in the share of assumptions about economic affect both the growth of energy hydrocarbons (coal, oil and natural and energy policies and social consumption and the mix of energy gas) in the global energy system in preferences. sources across different sectors of all three scenarios. This is matched the economy: industry (pp 36-37); by a corresponding increase in the Both Rapid and Net Zero assume buildings (pp 40-41) and transport role of renewable energy as the a significant increase in carbon (pp 42-49). world increasingly electrifies. The prices, which reach $250/tonne of scale of this shift varies significantly

CO2 ($2018 prices) in the developed Net Zero is based on the view that across the three scenarios, with the world by 2050 and $175 in emerging there may be economic and political share of hydrocarbons in primary economies. This increase in carbon limits to the extent to which an energy declining from around 85% prices incentivizes significant gains accelerated energy transition can be in 2018 to between 70-20% by 2050 in both energy efficiency and the driven solely by government policies. and the share of renewable energy use of lower-carbon energy sources. It assumes that the impact of these increasing to between 20-60%. This policy impulse is much smaller policies is accentuated by the in BAU, with carbon prices reaching changing behaviour and preferences

only $65 and $35 per tonne of CO2 of companies and households, by 2050 in developed and emerging with greater adoption of circular economies respectively. and sharing economies; increased propensity to switch to low-carbon energy sources; and less resistance to the accelerated buildout of low- carbon technologies and distribution networks. 15 | bp Energy Outlook: 2020 edition Overview 16 |

Low-carbon transition leads to a fundamental shift in the global energy system

Shares of primary energy in Rapid

00% enewables Natural gas Other non-fossil fuels 0% Oil Coal

0%

40%

20%

0% 00 5 30 45 0 75 0 2005 2020 2035 2050

Key points

The transition to a lower carbon As the importance of coal declined, The increasing diversification of energy system in Rapid leads to oil became the predominant energy the fuel mix also leads to greater a fundamental restructuring and source. The energy transition in competition across different forms reshaping of the global energy Rapid means that for much of of energy as they compete for system. There are several different the next 20 years the global fuel market share against a backdrop aspects to these changes. mix is far more diversified than of plateauing energy demand in previously seen, with oil, natural the second half of the Outlook First, there is a significant shift away gas, renewables and coal (for a in Rapid. Moreover, the peaking from traditional hydrocarbons (oil, time) all providing material shares and subsequent decline in the natural gas and coal) towards non- of world energy. The greater variety consumption of coal, oil and natural fossil fuels, led by renewable energy. of fuels means that the fuel mix gas in Rapid triggers greater In Rapid, non-fossil fuels account is increasingly driven by customer competition within individual fuels, for the majority of global energy choice rather than the availability of as resource owners compete to from the early 2040s onwards, with fuels, with increasing demands for ensure their energy resources are the share of hydrocarbons in global integration across different fuels and produced and consumed. This energy more than halving over the energy services. heightened competition increases next 30 years. the bargaining power of consumers, This increased differentiation is further with economic rents shifting away Second, the energy mix becomes enhanced by the growing importance from traditional upstream producers far more diversified. For much of of electricity and hydrogen at the towards energy consumers. history, the global energy system final point of energy use in Rapid. has tended to be dominated by a These energy carriers are more Similar trends are also apparent in single energy source. For the first costly to transport than traditional Net Zero, although the pace with half of the previous century, coal hydrocarbons causing energy markets which the share of renewables provided most of the world’s energy. to become more localized. grows is even faster.

17 | bp Energy Outlook: 2020 edition 18 | Global backdrop

Total greenhouse gases Global GDP Climate impacts on GDP growth Energy demand Impact of Covid-19 Energy access and economic development

19 | bp Energy Outlook: 2020 edition Global backdrop 20 |

Carbon emissions from energy use are the largest source of greenhouse gas emissions

Global GHG emissions Carbon emissions from energy use, 2018

Gt of CO2e

0 griculture, 2% uildings Seasonal space heating and Industry 50 cooling, 5% Non-energy Other transport, 4% Medium and Transport emissions heay road, 5% arder 40 Marine, 2% Other residential and commercial to abate buildings, 2% iation, 3% Energy 2018 total: 30 emissions* 33.9 Gt of CO2 Fugitie emissions

Iron and steel, 20 and-use change ight industry, 24% forestry % Cement, Waste 4% 0 Industrial processes Other heay industry, 3% griculture 0 Energy 024200020022004200200200 202 204 20 Source: WRI estimates

*Energy Outlook definition which includes CO2 emissions from the combustion of fossil fuels. Non-CO2 emissions from energy as defined by WRI are allocated to Industrial processes and Fugitive emissions

Key points

Scientific evidence suggests that the were 32.9 Gt CO2e, similar to the WRI or processes which are relatively dominant cause of climate change estimate of 32.3 Gt CO2e. straightforward or inexpensive to is the release of greenhouse gases electrify can be reduced as the power (GHGs). The World Resources In addition to carbon emissions from sector is increasingly decarbonized. Institute (WRI) estimates that total energy use, the WRI estimates that One exception to this is seasonal the other main sources of emissions GHGs were equal to 49.4 Gt CO2e space heating and cooling demands in 2016, with carbon emissions from in 2016 were: agriculture (5.8 Gt in buildings. Although these demands

energy use being the largest source CO2e); industrial processes (2.8 can be electrified, the scale of the of GHGs, accounting for around 65% Gt CO2e); land-use and forestry seasonal fluctuations are hard to meet of all GHGs. change 3.2 Gt CO2e); and waste in a power sector based heavily on management facilities (1.6 Gt CO2e). intermittent renewable power (see pp The estimate of carbon emissions 124-125). from energy used in the Energy In terms of the carbon emissions Outlook differs slightly from the WRI from energy use, nearly half of the The majority of emissions which are definition. The Energy Outlook does emissions stem from energy used hard-to-abate stem from activities or not model fugitive methane emissions within industry. The remainder is split processes that are difficult to electrify from the production of hydrocarbons roughly evenly between the transport and so need alternative sources of and so they are excluded from the and buildings (including agriculture) low-carbon energy. This includes high estimates used. The Outlook does, sectors. temperature industrial processes, however, include emissions from such as those used in iron and bunker fuels which are excluded As the energy transition advances, steel, cement and chemicals. It also from the WRI definition. Based on some emissions can be more readily includes long-distance transportation the Energy Outlook definition, carbon prevented than others. In particular, services, including heavy duty trucks, emissions from energy use in 2016 carbon emissions from activities aviation and marine.

21 | bp Energy Outlook: 2020 edition Global backdrop 22 |

Global GDP continues to expand, but at a slower rate

Global GDP growth and Global GDP, 2018-2050 regional contributions

Trillion $US (2015) PPP % per annum

350 30% Other GDP per head frica 300 25% Deeloped Other sia 250 20% India

200 China World population 5% 50 Other Fast 0% urbanizing 00 countries

05% 50

0 0% 20 2050 20 - 2050

Key points

The world economy continues to The expansion in global activity is The growth in global activity grow over the next 30 years, driven supported by population growth, and prosperity is underpinned by increasing wealth and living with the world’s population by continuing high levels of standards in the developing world, increasing by over 2 billion people to urbanization, which is often an but at a slower rate than in the past. around 9.6 billion by 2050. integral part of the development process leading to increasing levels Global GDP annual growth But the most important factor of industrialization and productivity. averages around 2.6% (on a 2015 underpinning global growth is Countries which are projected Purchasing Power Parity basis) in increasing productivity (GDP per to have a relatively fast pace of all three scenarios. This growth is head) – and hence prosperity urbanization over the next 30 years considerably slower than its average (income per head) – which drives – that is, the level of urbanization is over the past 20-years, in part around 80% of the expansion in projected to increase by at least a reflecting the persistent impact of global GDP over the Outlook. third by 2050 – contribute well over Covid-19 on economic activity. See half of the increase in world output pp 28-29 for a discussion of the Developing economies account over the Outlook, despite making treatment of Covid-19 in this year’s for over 80% of the growth in the up less than a third of global GDP in Energy Outlook. world economy, with China and 2018. India contributing around half of that The weaker economic growth than increase. in the past also reflects the assumed increasing impact of climate change on the productive potential of the economy (see pp 24-25, 148-149 for a discussion of this impact).

23 | bp Energy Outlook: 2020 edition Global backdrop 24 |

The impact from climate change on economic growth increases over the Outlook

Climate change impact on level of GDP in 2050

ussia Canada Europe Other CIS United States Middle East China India OECD sia Mexico

frica Other sia

South Central -% -7% -3% 0% 2% merica % change in GDP by 2050

Change in GDP per head relative to projection using average temperatures that are kept constant at the current level

Key points

The growing concentration of is based considers only increasing Importantly, if the scenarios were greenhouse gases in all three temperatures. extrapolated beyond 2050, the scenarios is assumed to have an erosion of wealth and prosperity in increasing impact on the growth and For illustrative purposes, the level of BAU would get progressively worse, productive potential of the global GDP in 2050 in all three scenarios leading to significantly lower levels economy. is projected to be around 5% of activity and well-being than in lower relative to a hypothetical Rapid or Net Zero. Increasing temperatures, combined world in which the concentration with more extreme weather of greenhouse gases was frozen The environment and economic patterns and rising sea levels, may at current levels. These effects are models and studies underpinning trigger a range of impacts that lower assumed to be greatest in regions these illustrative estimates of economic growth. Efforts to reduce which have the highest average the impact of global warming or mitigate carbon emissions may temperatures currently on economic activity are highly also divert investment from other (see pp 148-149). uncertain and almost certainly sources of growth. incomplete – for example, they do The negative impact from rising not capture many of the potential Estimating the potential size of temperature levels is largest in BAU human costs. Future editions of the these impacts is highly uncertain, where little progress is made in Energy Outlook will update these with most existing environmental reducing carbon emissions. But the estimates as the scientific and and economic models and studies upfront costs of the policy actions economic understanding of these capturing only a subset of these taken to reduce emissions are effects improves. effects, often very imperfectly. For greater in Rapid and Net Zero, such instance, the economic literature on that the overall impact on GDP over which our illustrative impact on GDP the next 30 years is projected to be broadly similar in all three scenarios.

25 | bp Energy Outlook: 2020 edition Global backdrop 26 |

Energy demand grows led by increasing prosperity, partially offset by efficiency gains

Contribution to primary energy demand growth Global primary energy demand % per annum EJ

4% 00 GDP per head Rapid 3% Business- Population 700 Net Zero Rapid Net Zero as-usual Business-as-usual Energy intensity 00 2% Primary energy 500 % 400 0% 300

-% 200

-2% 00

-3% 0 5-20 20-2050 0 2000 200 2020 2030 2040 2050

Key points

Growth in global energy demand is Energy efficiency measured in terms The faster declines in energy underpinned by increasing levels of of final energy use improves by intensity relative to history in Rapid prosperity in emerging economies. more in Net Zero than Rapid, but and Net Zero are a critical factor Primary energy increases by around these gains are offset in terms of in mitigating the growth in carbon 10% in Rapid and Net Zero and primary energy by the greater use emissions. Other things being equal, around 25% in BAU. of electricity and hydrogen which if energy intensity over the Outlook require considerable amounts of improved at the same rate as the Much of this increase in energy primary energy to produce. past 20 years, carbon emissions by consumption – the entire growth in 2050 would be more than a quarter Rapid and Net Zero and over half in Growth of primary energy in BAU higher in Rapid and Net Zero. BAU – stems from economies which (0.7% p.a.) is faster and more are urbanizing quickly. sustained than in the other two Policies and actions to promote scenarios, reflecting slower gains in improvements in energy efficiency The average rates of growth of energy efficiency. are central to achieving a low-carbon primary energy in Rapid (0.3% transition. p.a.) and Net Zero (0.3% p.a.) are significantly slower than the past 20 years (2.0% p.a.), reflecting a combination of weaker economic growth and faster improvements in energy intensity (energy used per unit of GDP). Primary energy in both scenarios broadly plateaus in the second half of the Outlook.

27 | bp Energy Outlook: 2020 edition Global backdrop 28 |

Covid-19 is assumed to have a persistent impact on economic activity and energy demand

Impact of Covid-19 in Rapid Alternative case: Greater impact from Covid-19

% change as a result of Covid-19

0% GDP Primary energy -2% Oil demand

-4% -3 Mb/d -2 Mb/d -5 Mb/d -%

-%

-0%

-5 Mb/d -2% 2025 2050 2025 2050

Key points

The Covid-19 pandemic is foremost Africa, whose economic structures which is around 3 Mb/d lower in a humanitarian crisis, but the scale are most exposed to the economic 2025 and 2 Mb/d in 2050 as a result of the economic cost and disruption ramifications of Covid-19. of the pandemic. The majority of is also likely to have a significant this reduction reflects the weaker and persistent impact on the global The pandemic may also lead to a economic environment, with around economy and energy system. At number of behavioural changes; 1 Mb/d of the reduction in 2025 a the time of writing, the number of for example, if people choose to result of the various behavioural new cases from the pandemic is travel less, switch from using public changes. The marginal impacts in still increasing and so assessing its transport to other modes of travel, BAU and Net Zero are similar. eventual impact is highly uncertain. or work from home more frequently. Many of these behavioural changes There is a risk that the economic The central view used in the main are likely to dissipate over time as losses from Covid-19 may be scenarios it that economic activity the pandemic is brought under significantly bigger, especially if partially recovers from the impact control and public confidence is there are further waves of infection. of the pandemic over the next few restored. But some changes, such This possibility is explored in a years as restrictions are eased, as increased working from home, ‘greater impact’ case, in which but that some effects persist. The may persist. Covid-19 reduces the level of global level of global GDP is assumed to GDP by 4% in 2025 and almost 10% be around 2.5% lower in 2025 and In Rapid, the impact of the pandemic by 2050. In this ‘greater impact’ 3.5% in 2050 as a result of the is assumed to reduce the level of case, the crisis causes the level of crisis. These economic impacts energy demand by around 2.5% in energy demand in Rapid in 2050 to disproportionately affect emerging 2025 and 3% in 2050. The impacts be 8% lower, with the level of oil economies, such as India, Brazil and are most pronounced on oil demand, demand around 5 Mb/d lower.

29 | bp Energy Outlook: 2020 edition Global backdrop 30 |

Economic development depends on both access to energy and the quality of that access

GDP and electricity consumption Proportion of world population with (per head), 2018 Tier 3* access to electricity or less The size of the bubbles are proportional to population

0 50% Countries by income group

Tier 3 Tier 4 Tier 5 ow income

Tier 2 40% 0 ower middle income Upper middle income 30% Business- igh income as-usual 40 Rapid Net Zero

Population (million) 20%

500 GDP per head (PPP ($000)) 20 0% 000

0 0% 0 2500 5000 7500 0000 20 2050 nnual electricity consumption per head (kWh) Source: Oxford Economics; BP Statistical Review 2019 *Tier 3 access assumes less than 16 hours of uninterrupted medium Tiers based on World Bank definitions power electricity during the day and less than 4 hours during the evening

Key points

There is a strong link between The World Bank’s multi-tiered Although the share of the world’s access to energy and economic framework provides one measure population without any access to well-being and prosperity. The of quality of access, in which Tier 1 electricity is estimated to have importance of energy access is access equates to very basic levels declined to 10% in 2018, around embodied in the UN’s Sustainable of provision (lighting with limited 45% of the world’s population lived Development Goal (SDG) 7 availability) though to Tier 5, which in countries with Tier 3 access or which seeks to “ensure access to denotes access to plentiful and below. In all three scenarios, around affordable, reliable, sustainable and reliable supplies. a quarter of the world’s population modern energy for all”. in 2050 live in countries or regions There is a strong link between in which average levels of electricity One measure monitored by SDG economic development and the consumption are still equivalent to 7 is global access to electricity, quality of the access to electricity: Tier 3 access or below. where the number of people around three-quarters of low and without access is estimated to have lower-middle income countries in Improving the quality of electricity decreased from 1.2 billion in 2010 to 2018 had relatively limited access to access – and energy access more 790 million in 2018*. electricity (Tier 3 or below); whereas generally – across the globe is over 90% of high-income countries likely to require a range of different Economic prosperity and had Tier 5 access. policy approaches and technologies, development depend not just on the including the development of ability to access electricity, but also decentralized and off-grid power on the quantity and quality of the generation. electricity provision.

* Source: Tracking SDG7 The Energy Progress Report 2020 31 | bp Energy Outlook: 2020 edition 32 | Energy use by sector

Summary Industry Non-combusted Buildings Transport

33 | bp Energy Outlook: 2020 edition Summary 34 |

Energy consumption grows across all sectors of the economy, although slower than in the past

Primary energy consumption by end-use sector Annual demand growth and sector contributions

EJ % per annum

00 20% Business- Transport as-usual 700 Industry Rapid Net Zero Non-combusted 5% 00 uildings 500 0% Business- 400 as-usual

05% 300 Rapid Net Zero 200 0% 00

0 -05% 20 2050 0-20 20-2050

Key points

The strength and composition of amounts of primary energy to The use of electricity and hydrogen energy growth over the next 30 produce. As such, increasing the use expand by even more in Net Zero, years depends importantly on how of these forms of energy carriers particularly in transport and industry. that energy is used across the main tends to boost primary energy. As a result, even though the pace sectors of the economy. of underlying efficiency gains in In Rapid, the growth in primary both sectors is faster than in Rapid, The industrial sector (excluding energy used in all three sectors the increase in primary energy is the non-combusted use of fuels) slows relative to the past 20 somewhat greater. Primary energy consumed around 45% of global years. This deceleration is most used in buildings by 2050 is largely energy in 2018, with the non- pronounced in the industrial and unchanged from its current level. combusted use of fuels accounting buildings sectors, with the use of for an additional 5% or so. The primary energy in both sectors falling In contrast, the use of primary remainder was used within in the second half of the Outlook. energy increases materially in residential and commercial buildings In contrast, primary energy used all three sectors in BAU, albeit (29%) and transport (21%). in transport increases throughout significantly slower than in the past the Outlook – accounting for nearly 20 years. This deceleration is most The outlook for primary energy 60% of the total increase in primary marked in industry and transport, also depends on the form in which energy in Rapid – boosted by with energy use in buildings that energy is used at the final greater switching to electricity and and the non-combusted sector point of consumption. In particular, hydrogen. This hydrogen can be together accounting for around half although it is possible to decarbonize used either directly or combined of the increase in primary energy the production of electricity and with carbon or nitrogen to make it consumption. hydrogen, they require considerable easier to transport.

35 | bp Energy Outlook: 2020 edition Industry 36 |

The use of energy within industry shifts towards developing economies and lower-carbon energy

Growth of final energy consumption Primary energy demand in industry in industry by energy carrier EJ % per annum

350 20% Deeloped iomass + China Business- 300 as-usual Emerging 5% ydrogen (ex China) Net Zero Net Zero Electricity Rapid 0% Business- 250 Rapid as-usual Coal 05% Gas 200 0% iuids 50 Total -05%

00 -0%

50 -5%

0 -20% 20 2050 0 - 20 20-2050

Key points

Industrial energy demand in both by the increasing use of electricity The use of coal within industry falls Rapid and Net Zero is relatively and hydrogen, especially in Net sharply in all three scenarios. In BAU, flat over the Outlook, dampened Zero, which boosts the demand for the increased demand for energy by increasing efficiency gains the primary energy used in their is more than met by the growing in industrial processes and an production. use of gas and electricity, with coal expansion of the circular economy. consumption falling by around a Industrial demand in BAU increases The growth of industrial energy third. The demise of coal use in by around 15% (0.5% p.a.) by 2050, demand in all three scenarios is industry is much more pronounced which is significantly slower growth concentrated in the emerging world in Rapid and Net Zero where it is than the past 20 years. (outside of China) – especially, India, almost entirely eliminated in both Other Asia and Africa – as energy- scenarios by 2050, replaced by The increasing role of the circular and labour-intensive industrial an increasing share of electricity, economy in Rapid and Net Zero activities are increasingly relocated biomass and hydrogen. The shift limits the growth in industrial output, from the developed world and China towards low-carbon energy sources as materials such as steel, aluminium to lower-cost economies. is most pronounced in Net Zero, and plastics are used less and are such that the use of gas (and oil) increasing reused and recycled. also falls substantially by 2050. In Combined with increasingly efficient contrast, the use of gas in industry in industrial processes, energy used Rapid is broadly unchanged over the at the final point of consumption in Outlook. the industrial sector falls by around 15% by 2050 in Rapid and by 25% in Net Zero. These falls are offset

37 | bp Energy Outlook: 2020 edition Non-combusted 38 |

The non-combusted use of fuels continues to grow, but at much reduced rates

Non-combusted demand by fuel Oil feedstock for plastics and fibres

EJ Mb/d

0 20 Rapid Net Zero Business- Coal Rapid as-usual Gas Net Zero Business-as-usual 50 Oil Extrapolation of past trends 5 40

30 0

20 5 0

0 0 20 2035 2050 20 2035 2050 20 2035 2050 20 2025 2030 2035 2040 2045 2050

Key points

The non-combusted use of fuels These actions are greatly intensified Oil accounts for almost two-thirds of – predominantly as feedstocks in Rapid and Net Zero, with the growth in non-combusted fuels for petrochemicals, bitumen and increased use of chemical recycling out to 2050 in BAU and around half fertilizers – is an important source of and a focus on reducing the demand in Rapid, driven in large part by the incremental demand for fossil fuels, for some products and increasing production of plastics and fibres. The although less than in the past 20 the reuse of others. As a result, the actions to reduce, reuse and recycle years as environmental pressures growth of non-combusted fuels plastics means that the level of oil increase. in Rapid (0.5% p.a.) is half that of used in the production of plastics by BAU, with use gradually declining in 2050 is around 3 Mb/d lower in BAU The non-combusted use of fuels the 2040s. In Net Zero, the use of and 6 Mb/d in Rapid relative to an (oil, natural gas and coal) grows at non-combusted fuels peaks around extrapolation of past trends linked to an average rate of 1.1% p.a. in BAU, 10-years earlier and by 2050 is the growth in economic activity and less than half the rate seen over around 25% below current levels. prosperity. These trends are even the past 20 years (2.7% p.a.). This more pronounced in Net Zero, with deceleration largely reflects actions oil demand by 2050 2 Mb/d below to both increase the level of recycling current levels and 10 Mb/d below an – recycling rates roughly double from extrapolation of past trends. current levels to around one third by 2050 – and encourage a shift away from the use of some manufactured products, such as single-use plastics and fertilizers.

39 | bp Energy Outlook: 2020 edition Buildings 40 |

Improving living standards in the developing world drive increasing use of electricity in buildings

Growth of final energy consumption Primary energy demand in buildings in buildings by energy carrier EJ % per annum

250 Business- 20% as-usual Emerging Other

Deeloped 5% Business- ydrogen as-usual 200 Net Zero Rapid Electricity Rapid Net Zero 0% Coal 05% 50 Natural gas

0% Oil

00 Total -05%

-0% 50 -5%

0 -20% 20 2050 5-20 20-2050

Key points

The growth of energy absorbed The efficiency gains are less The increasing use of electricity by the buildings sector emanates pronounced in BAU, with energy crowds out the demand for oil, gas entirely from the developing world, consumed in the buildings sector and coal which lose share in all three as improving wealth and living growing by almost 40% (1.0% p.a.) scenarios. The shift away from standards allow people to live and by 2050, accounting for around 40% these traditional energies is most work in greater comfort. of the overall increase in primary pronounced in Rapid and Net Zero, energy. in which the use of oil in buildings is In Rapid and Net Zero, a significant largely phased out by 2050, and the expansion of energy use in buildings Electricity consumption increases demand for gas in buildings falls by in developing Asia and Africa – materially in all three scenarios, around 50% in Rapid and over 90% which enjoy some of the most driven by the greater use of lighting in Net Zero. significant increases in prosperity – and electrical appliances (including is broadly offset by substantial falls for space cooling) as living standards in the developed world as efficiency increase. in new and existing buildings stock improves, driven by regulations, carbon prices and consumer preferences. As a result, overall energy use in buildings is relatively little changed over the Outlook in both Rapid (0.2% p.a.) and Net Zero (0.1% p.a.).

41 | bp Energy Outlook: 2020 edition Transport 42 |

The growth of energy used in transportation slows, with oil peaking in mid-to-late 2020s

Share of final energy consumption Primary energy demand in transport in transport by energy carrier EJ Business- Rapid Net Zero as-usual 0 00% Emerging ydrogen Net Zero 0 Business- Deeloped Electricity Rapid as-usual Gas 40 0% iofuels 20 Oil 0% 00

0 40% 0

40 20% 20

0 0% 20 2050 20 2050

Key points

The demand for passenger and 25% and 35% respectively by The use of oil in transport peaks in commercial transportation increases 2050. Primary energy in transport the mid-to-late 2020s in all three strongly over the Outlook, with road increases by almost 25% in scenarios: the demand for oil for and air travel doubling in all three BAU, with slower gains in energy road transport in emerging markets scenarios. The growth in final energy efficiency offset by a smaller shift continues to increase until the early required to fuel this increased away from oil. 2030s in Rapid and Net Zero, and travel is offset by significant gains the late 2030s in BAU, but this is in vehicle efficiency, especially in The growth in primary energy used increasingly offset by falls in the passenger cars, trucks and aviation. in transport in all three scenarios developed world. stems entirely from the developing The gains in energy efficiency are world, as increasing prosperity The share of oil in total final partially disguised by a shift away in developing Asia, Africa and consumption falls from over 90% of from oil towards the increasing Latin America supports greater transport demand in 2018 to around use of electricity and hydrogen demand for passenger and freight 80% by 2050 in BAU, 40% in Rapid in transport. In particular, the transportation. Energy use in and just 20% in Net Zero. The main conversion process used to produce transport in the developed world is counterpart is the increasing use of these energy carriers boosts the broadly flat. electricity, especially in passenger total amount of primary energy cars and light and medium-duty absorbed by the transport sector. trucks, along with hydrogen, biofuels The shift towards electricity and and gas. The share of electricity hydrogen is most pronounced in in end energy use in transport Rapid and Net Zero, where overall increases to between 30% and 40% primary energy increases by around by 2050 in Rapid and Net Zero.

43 | bp Energy Outlook: 2020 edition Transport 44 |

Energy use in road transport is dominated by electrification and vehicle efficiency

Share of car and truck vehicle Factors impacting passenger car liquid kilometres electrified* fuels demand over the outlook Mb/d

00% 40 Electrification Rapid and switch to Net Zero 30 other non-liquid fuels Business-as-usual ICE car 20 75% fuel efficiency Increase in 0 passenger car VKM 0 Change in 50% liuid fuels -0 demand

-20 25% -30

-40

0% -50 2020 2025 2030 2035 2040 2045 2050 Rapid Net Zero Business- as-usual *includes buses

Key points

The outlook for energy use in road By 2050, electric vehicles account Despite the accelerated transport is dominated by two major for between 80-85% of the stock electrification of passenger cars, trends: increasing electrification and of passenger cars in Rapid and the continuing importance of ICE improving vehicle efficiency. Net Zero and 35% in BAU. The passenger cars for much of the corresponding numbers for light and Outlook means that improvements The electrification of the vehicle medium-duty trucks are 70-80% in their efficiency is the main factor parc is most pronounced in Rapid and 20%. limiting the growth of oil used in and Net Zero, concentrated in two passenger cars out to 2050. and three wheelers, passenger cars The other dominant trend affecting and light and medium-duty trucks. the use of energy in road transport Vehicle efficiency improvements in Electric vehicles in Rapid and Net is the increasing levels of vehicle Rapid reduce oil use in passenger Zero account for around 30% of efficiency, especially passenger cars (and hence emissions) four-wheeled vehicle kilometres cars, driven by tightening vehicle by roughly twice as much as (VKM) travelled on roads in 2035 emission standards and rising electrification out to 2050 and between 70-80% in 2050, carbon prices which are largely compared with less than 1% in borne by consumers in the form of 2018. The corresponding shares in higher gasoline and diesel prices. In BAU are a little over 10% in 2035 Rapid, the efficiency of a typical new and around 30% in 2050. internal combustion engine (ICE) passenger car increases by around 45% over the next 15 years.

45 | bp Energy Outlook: 2020 edition Transport 46 |

The pattern of road transportation changes led by increasing prosperity and growth of robotaxis

Change in share of road passenger VKM, Robotaxi share of passenger car VKM 2020-2050 powered by electricity

25% 0% obotaxi 20% uman taxi Rapid 50% Net Zero 5% Own car Business-as-usual us 0% ight duty truck 40% 5% 2/3 wheelers 0% 30%

-5% 20% -0%

-5% 0% -20%

-25% 0% Rapid Net Zero Business- 2020 2025 2030 2035 2040 2045 2050 as-usual

Key points

The composition of road factors, including continuing advances use – up to 9-times greater than transportation across different in digital technologies such as private cars by 2050. The growing modes of transport, e.g. private cars, improving connectivity and geospatial penetration of robotaxis, combined taxis, buses etc, is affected by two technologies. In addition, digital with their intensity of use, means significant trends over the Outlook: advances enable automated driving that by 2035 they account for around increasing levels of prosperity and systems and the emergence of fully 40% of passenger VKM powered the falling cost of shared-mobility autonomous vehicles (AVs) from the by electricity in Rapid and Net Zero transport services. Both trends have early 2030s in Rapid and Net Zero, and around 20% in BAU. This share important implications for the pace significantly reducing the cost of declines in the final 10-years or so and extent to which the transport shared-mobility services, especially in of the Outlook in Rapid and Net Zero sector is decarbonized. developed economies where average as the share of private ownership of income levels are higher. The falling electric cars increases. The increasing levels of prosperity relative cost of autonomous shared- and living standards in emerging mobility services (robotaxis) leads The potential for robotaxis to help economies leads to a shift away to a shift away from private-owned decarbonize road transportation by from high-occupancy forms of vehicles as well as buses. increasing the share of passenger car transport (e.g. buses) into passenger VKM powered by electricity means cars. This leads to a reduction in The vast majority of robotaxis are they are supported by government average load factors (i.e. average electric in all three scenarios. This policies, such as higher road pricing number of passengers per vehicle), reflects the local air quality benefits and congestion charges for private putting upward pressure on carbon and lower running costs of electric vehicles, particularly in Rapid and Net emissions. cars relative to traditional (internal Zero. The importance of robotaxis is combustion engine). Electric also supported in Net Zero by a shift The relative cost of shared mobility robotaxis provide a significant cost in societal attitudes towards a sharing services falls as a result of a range of advantage given the intensity of economy.

47 | bp Energy Outlook: 2020 edition Transport 48 |

Biofuels and hydrogen play a key role in decarbonizing aviation and marine

Total final energy demand in transport by mode Aviation and marine demand by source

EJ EJ iation BAU 40 Business- 20 as-usual Trucks iofuels Rapid 5 Net Zero Oil 20 Passenger ehicle Marine 0 Rapid 00 ail Net Zero 5 iation 0 0 20 2050 0 Marine 5 BAU ydrogen 40 Rapid 0 Net Zero Gas 20 5 iofuels Oil 0 0 20 2050 20 2050

Key points

Aviation and marine transport In Rapid, liquids demand from and to nearly 60% in Net Zero. In accounted for around 7 Mb/d and aviation remains relatively stable at contrast, there is minimal growth in 5 Mb/d of oil consumption in 2018 around 7 Mb/d over the course of the share of biofuels in BAU. respectively. Demand for these the Outlook, as efficiency improves services increases over the Outlook by around 35%, largely offsetting Unlike aviation, the fuel mix in the in both Rapid and BAU: growth additional demand for air travel. In shipping sector is able to diversify in shipping is driven by increased Net Zero, these efficiency savings into hydrogen (either as ammonia levels of trade; whilst expansion in plus reduced appetite for flying or in liquid form) and LNG, as well air-travel is underpinned by growing in some markets means liquids as biofuels. In Rapid and Net Zero, prosperity, especially in emerging demand from aviation peaks in non-fossil fuels account for 40% economies. In Net Zero, the growth the early 2030s and declines to a and 85% of marine transport fuel by in air travel by 2050 is around 10% little below 2018 levels by 2050. In 2050 respectively, with more than lower than in BAU, reflecting in part contrast, liquids demand continues half of that coming from hydrogen. a shift in societal preferences to to grow throughout the Outlook in Conversely, under BAU, marine use high-speed rail as an alternative BAU, reaching 10 Mb/d by 2050. demand for oil increases slightly by to air travel in China and much of 2050, with natural gas increasing the OECD. Similarly, increasing Biofuels play a critical role in its share of the sector fuel mix to preference for the consumption decarbonizing the aviation sector, just under 15% and non-fossil fuels of locally-produced goods and since neither batteries nor hydrogen accounting for just 1%. reduction in oil trade in Net Zero are able to deliver the necessary contributes to reduced shipping energy density required for aviation. demand by around a third by 2050 The share of biofuels in jet-fuel relative to BAU. increases from less than 1% in 2018 to around 30% by 2050 in Rapid

49 | bp Energy Outlook: 2020 edition 50 | Regions

Summary Regional energy demand and carbon emissions Fuel mix across key countries and regions Global energy trade and energy imbalances Alternative scenario: Deglobalization

51 | bp Energy Outlook: 2020 edition Regions 52 |

Growth in global energy demand comes entirely from emerging economies

Primary energy growth Primary energy consumption by region and regional contributions EJ % per annum

00 Business- Other 25% as-usual 700 frica Rapid Net Zero Other sia 20% 00 India China 5% 500 Deeloped

400 Total 0% Business- as-usual

300 Rapid Net Zero 05% 200 0% 00

0 -05% 20 2050 2000-20 20-2050

Key points

Growth in global energy demand Growth of energy consumption in for energy in all three scenarios, in all three scenarios is driven the emerging economies is led by accounting for over 20% of the entirely by emerging economies, India and Other Asia, which together world’s energy demand in 2050, underpinned by increasing account for more than the entire almost twice that of India. prosperity and improving access increase in primary energy in Rapid to energy. Energy consumption and Net Zero and almost 60% in Africa’s contribution to demand in the developed world falls as BAU. India is the largest source of growth increases in the second improvements in energy efficiency demand growth out to 2050 in all half of the Outlook, supported by outweigh demands from higher three scenarios. a growing population and rising levels of activity. prosperity. Even so, Africa’s energy Growth in China’s energy demand consumption remains small relative The contrasting energy trends slows sharply relative to past trends, to its size: although around a quarter in developed and emerging reaching a peak in the early 2030s in of the world’s population are economies lead to a continuing shift all three scenarios. Indeed, China’s projected to live in Africa in 2050, in the centre of gravity of energy energy demand in Rapid and Net it accounts for less than 10% of consumption, with the emerging Zero by 2050 is back close to 2018 total energy demand in all three world accounting for around 70% of levels, helped by accelerating scenarios. energy demand by 2050 in all three gains in energy efficiency and a scenarios, up from around 50% as continuing shift in the structure of recently as 2008. the economy away from energy- intensive industries. Despite that, China remains the largest market

53 | bp Energy Outlook: 2020 edition Regions 54 |

Global differences in energy consumption and carbon emissions narrow over the Outlook

Energy consumption per head in Rapid Carbon emissions per head in Rapid

GJ per head Tonnes of CO2 per head

300 Deeloped Rapid Rapid Emerging 4 250 EU 2 US 200 0 China

50 India

00 4 50 2

0 0 20 2050 20 2050

Key points

A key factor underlying the The degree of this inequality These differences in the current contrasting trends in energy narrows over the Outlook, reflecting levels of energy consumption demand in developed and emerging both the sustained increases in between developed and emerging economies are the significant economic activity and prosperity in economies are also reflected in differences in the level of energy the emerging world and the marked average carbon emissions per consumption per capita. falls in energy consumption per capita, offset only partially by the capita in developed economies: lower average carbon intensity of In 2018, average energy US energy consumption per capita the fuel mix in the developed world consumption per capita in the falls by 40% over the Outlook in relative to emerging economies. developed world was more than Rapid. Even so, by 2050, average three times that in emerging energy consumption per capita in The differential in carbon emissions economies, with an average person the developed world in Rapid is still per capita narrows markedly by in the US consuming 12 times more more than twice that in emerging the end of the Outlook in Rapid. energy than an average person in economies. Similar convergence in This is almost entirely driven by the India. energy consumption per head is also narrowing in energy consumption apparent in Net Zero and BAU. per capita, with the degree of These differences in energy improvement in the average carbon consumption largely reflect intensity of the fuel mix broadly differences in economic similar in developed and emerging development and prosperity, as well economies. as a range of other factors, including economic structure, local climatic conditions and differences in natural resource endowments.

55 | bp Energy Outlook: 2020 edition Regions 56 |

The low-carbon transition leads to a gradual convergence in the fuel mix across countries

Shares of energy sources

2018 Rapid, 2050 Oil Oil US 0% US EU EU China 40% China India India

20%

enewables 0% 40% 20% 0% Natural enewables 0% Natural gas gas

Coal Coal

Key points

As well as differences in the significantly smaller shares. This supported by higher carbon prices pattern of energy demand growth contrasts with China and India, and other policies. This shift is also across developing and emerging where coal currently accounts for reflected in a move away from the economies, the nature of the energy between 55-60% of primary energy. use of coal, which is substantially transition also depends on variations reduced in China and India in Rapid in the fuel mix in different parts of The transition to a lower-carbon by 2050, and entirely phased-out in the world. energy system in Rapid is driven by the US and EU. several common trends which lead There are marked differences in to a gradual convergence in the fuel These trends also help drive a the current mix of energy used mix across all four countries. convergence in the role of natural across countries and regions, as gas, with its share declining in US illustrated, for example, by the Most significant is the growing and EU, and increasing in China and varying importance of different competitiveness of renewable India, such that by 2050 it accounts energy sources in US, EU, China energy, which combined with its for between 15-25% of energy in all and India. These differences reflect widespread availability and the four countries. numerous factors including the increasing electrification of the level of economic development and energy system, leads renewable A similar degree of convergence is the cost and availability of different energy to be the single largest also apparent in Net Zero. Although energy sources. energy source in all four countries in the same qualitative trends are Rapid by 2050, providing between apparent in BAU, the more limited The current fuel mix in the US 45-55% of energy supplies. progress made in phasing out and EU have some similarities, coal use in China and India means with oil and gas accounting for the The growth in renewables (including the degree of convergence is majority of energy supplies, and bioenergy) is part of a broader trend considerably less. coal and renewable energy having towards a lower carbon fuel mix,

57 | bp Energy Outlook: 2020 edition Regions 58 |

Significant energy imbalances persist over the Outlook

Net import and exports of oil and gas by region in Rapid

EJ

25 22

50 ussia 4 20 2050

20 2050 4

US 2050 Middle China -20 East -23 - 20 2050 India 20 20 2050

- -

Natural gas

Oil

Key points

The global energy system is These oil and gas deficits in China domestic consumption, means the highly interconnected, with huge and India persist in Rapid, although US becomes a sizeable net exporter international flows of traded energy. to varying degrees. China’s of oil and especially gas in Rapid. In 2018, almost three-quarters of combined net imports of oil and gas US exports of oil and gas peak in global oil production was traded decline slightly by 2050, helped by the 2030s before gradually declining internationally and around a quarter a 50% fall in Chinese oil demand as production of US tight oil and of natural gas. (see pp 66-67). In contrast, India’s unconventional NGLs falls back (see combined oil and gas imports more pp 70-71). These trade flows are associated than double by 2050, driven in part with large energy imbalances by increased coal-to-gas switching The disruptions associated with (surpluses and deficits) as countries which leads to a marked deepening Covid-19, together with the increase with large resource endowments in India’s dependence on imported in trade disputes and sanctions in export energy to countries with less LNG. recent years, may lead to rising natural energy resources. concerns about energy security, On the other side of the trade particularly in countries which are For example, in 2018, China balance, exports of oil and gas highly dependent on energy imports. imported around 70% of the oil it over the Outlook continue to be consumed and a little over 40% of dominated by the Middle East and The potential impact of a shift its natural gas. The corresponding Russia. towards deglobalization and numbers for India were a little above increased concerns about energy 80% and 50%. The expansion in US oil and gas security on the global energy system production associated with the shale is explored on the next page. revolution, together with falling

59 | bp Energy Outlook: 2020 edition Regions 60 |

Alternative scenario: Deglobalization Covid-19 may lead to deglobalization and increased concerns about energy security

Deglobalization versus Rapid : Global GDP and energy in 2050 Net exports of oil and gas in 2050 EJ

0% 25 Natural gas Deglobalization Coal 20 Rapid -% Oil 5 enewables -2% 0

5 -3% 0 -4% -5

-5% -0 -5 -% -20

-7% -25 GDP Primary US ussia China India energy

Key points

The disruptions associated with increased concerns about energy The risk premia on imported energy Covid-19 may lead to a process of security lead countries to attach means that the fall in energy is deglobalization, as countries seek to a small risk premium (10%) on concentrated in traded fuels, increase their resilience by becoming imported sources of energy. especially in oil and natural gas less dependent on imported goods given the relatively low level of coal and services, and companies The slower trend GDP growth consumption remaining towards the reshore certain activities and move results in the level of world GDP end of the Outlook in Rapid. These supply chains closer to home. One by 2050 being 6% lower in falls lead to a pronounced narrowing manifestation of these trends is that Deglobalization than in Rapid and in energy deficits and surpluses concerns about energy security may energy demand around 5% lower, around the world. For example, increase, particularly in countries with those falls concentrated in China’s net imports of oil and gas in which are highly dependent on countries and regions most exposed Deglobalization are 30% lower than energy imports. to reduced foreign trade. in Rapid by 2050. Likewise, US net exports of oil and gas are around The impact of these possible 50% lower by 2050. changes on Rapid is explored in an alternative Deglobalization case in The fall in traded fossil fuels relative which: to domestically produced energy, especially renewable energy, the reduced openness of the means that the carbon-intensity global economy is assumed to of the global fuel mix by 2050 is lead to a slight reduction (0.2 slightly lower in Deglobalization percentage points) in trend global than in Rapid. GDP growth; and

61 | bp Energy Outlook: 2020 edition 62 | Demand and supply of energy sources

Summary Oil and liquid fuels Gas Renewable energy in power Coal Nuclear power Hydroelectricity

63 | bp Energy Outlook: 2020 edition Summary 64 |

Renewables lead the transition to a lower-carbon energy mix

Shares of primary energy Primary energy consumption by source EJ Renewables Hydrocarbons 00% 00 Business- enewables Rapid as-usual Net Zero 700 ydro Business-as-usual Net 0% Rapid Zero Nuclear 00 Coal Natural gas 500 0% Oil 400

40% 300

200 20% 00

0% 0 20 2025 2030 2035 2040 2045 2050 20 2025 2030 2035 2040 2045 2050 20 2050

Key points

The growth in primary energy The increasing importance of The level of oil demand in both over the Outlook is dominated by renewable energy comes at the Rapid and Net Zero does not fully renewable energy, as the world expense of hydrocarbons whose recover from the sharp drop caused shifts towards lower-carbon energy share of primary energy declines by Covid-19, with demand falling by sources. from close to 85% in 2018 to around around 50% by 2050 in Rapid and 40% by 2050 in Rapid and 20% in almost 80% in Net Zero. The outlook Renewable energy – including wind, Net Zero. for oil is more resilient in BAU, with solar, geothermal and bioenergy but demand in 2050 declining slightly excluding hydroelectricity (see pp Within hydrocarbons, natural gas from its current level (pp 66-67). 84-87) – increases more than 10-fold has the most durable outlook, with in both Rapid and Net Zero, with its its level in Rapid in 2050 broadly Coal consumption declines share in primary energy rising from unchanged from its current level significantly in all three scenarios, 5% in 2018 to over 40% by 2050 in and around 35% higher in BAU. particularly in Rapid and Net Zero in Rapid and almost 60% in Net Zero. Consumption of natural gas falls by which it falls by well over 80% by Although the growth of renewables around 40% by 2050 in Net Zero 2050 (pp 88-89). is less pronounced in BAU, they (pp 76-77). still account for around 90% of the The way in which the pronounced overall increase in primary energy falls in the demand for oil, natural over the next 30 years (pp 84-85). gas and coal in Net Zero are matched on the supply side by the countries and regions which produce these forms of energy is very uncertain and not explored in detail in this section.

65 | bp Energy Outlook: 2020 edition Oil 66 |

Global market for liquid fuels adjusts to changing patterns of demand and production

Liquid fuels consumption Liquid fuels supply growth

Mb/d Mb/d, average annual growth

20 0 OPEC Rapid Business-as-usual Other 05 00 non-OPEC US tight oil 0 Total 0

-05 0 -0

40 -5 Rapid 20 Net Zero -20 Business- as-usual 0 -25 2000 2005 200 205 2020 2025 2030 2035 2040 2045 2050 20- 2030- 20- 2030- 2030 2050 2030 2050

Key points

The global market for liquid fuels (oil, In contrast, after recovering from the US tight oil also grows over the biofuels and other liquids) transitions impact of Covid-19, the consumption next 10 years or so in BAU offset by as oil demand peaks and supplies of liquid fuels in BAU is broadly flat declining OPEC production. Declines shift. at around 100 Mb/d for the next in US tight oil and other non-OPEC 20 years, before edging lower to output from the mid-2030s onwards The demand for liquid fuels in Rapid around 95 Mb/d by 2050. Demand provides scope for OPEC to increase and Net Zero never fully recovers for liquid fuels continues to grow in its production despite the backdrop from the fall caused by Covid-19, India, Other Asia and Africa, offset of gradually declining demand. By implying that oil demand peaked in by the trend decline in consumption 2050, the level of OPEC production 2019 in both scenarios. in developed economies. in BAU is broadly unchanged from its level in 2018. The consumption of liquid fuels falls Despite the weakness in oil demand, significantly over the Outlook in both US tight oil* in Rapid recovers scenarios, declining to less than 55 from the impact of Covid-19 and Mb/d and around 30 Mb/d in Rapid expands until the early 2030s, with and Net Zero respectively by 2050. this increase in output more than The falling demand is concentrated offset by falls in OPEC production. in the developed world and China, Thereafter, OPEC production broadly with consumption in India, Other stabilizes as declines in global Asia and Africa broadly flat over the demand are broadly matched by Outlook as a whole in Rapid, but falls in US tight oil and other non- falling below 2018 levels from the OPEC supplies. By 2050, non-OPEC mid-2030s onwards in Net Zero. supplies account for around two- thirds of the total decline in liquids supply in Rapid. *US tight oil include crude, condensate and natural gas liquids from onshore tight formations 67 | bp Energy Outlook: 2020 edition Oil 68 |

The outlook for liquid fuels demand is dominated by changes in the transport sector

Liquid fuels demand by sector Consumption of liquid fuels in transport

Mb/d Mb/d

20 70 Power

uildings 00 Business- 0 as-usual Industry

Non- 50 0 combusted

Transport 40 0 Rapid Non-road 30 Trucks 40 Net Zero Cars 20 Rapid 20 0 Net Zero Business- as-usual 0 0 20 2050 2000 2005 200 205 2020 2025 2030 2035 2040 2045 2050

Key points

The outlook for liquid fuels demand The scale and pace of these falls are Liquids fuel demand in BAU is more is dominated by the impact of driven primarily by the changing use resilient, with broadly stable use in Covid-19 in the near-term and by of liquid fuels in the transport sector, transport helping to support global their declining use in the transport which declines sharply in the second demand at around 100 Mb/d for sector further out. half of the Outlook in both Rapid and much of the next 20 years, before it Net Zero, driven by the increasing edges lower in the final 10 years of Global liquids demand in all three efficiency and electrification of road the Outlook as the use of liquid fuels scenarios is significantly affected transportation (see pp 44-47). The within transport begins to decline. by the impact of Covid-19, which transport sector accounts for around disproportionately impacts economic two-thirds of the decline in the use The non-combusted use of liquid activity and prosperity in emerging of liquid fuels by 2050 in Rapid and fuels, largely as a feedstock in the economies which are the main almost 60% in Net Zero. petrochemicals sector, provides growth markets for liquid fuels. some degree of support to overall The experience of coronavirus also The pace of decline in liquids liquids demand, increasing in both triggers some lasting changes in demand in the second half of the Rapid and BAU, and declining below behaviour, especially increased Outlook – during which it falls by an 2018 levels only in the final 10 years working from home (see pp 28-29). average of over 2 Mb/d per annum of the Outlook in Net Zero. in Rapid and 3 Mb/d in Net Zero – is Liquids demand in Rapid and Net unprecedented and has significant Zero does not fully rebound from implications for other parts of the oil this near-term hit to demand and industry, including refining (see pp subsequently falls substantially over 74-75). the Outlook to around 55 Mb/d and 30 Mb/d by 2050 respectively.

69 | bp Energy Outlook: 2020 edition Oil 70 |

The supply of liquid fuels is initially driven by US tight oil, with OPEC’s share recovering later

US tight oil production Liquid fuels supply by region

Mb/d Mb/d

0 50% Rapid Business- NGs Rapid Business- OPEC as-usual as-usual Crude 70 45% Other condensates non-OPEC 4 ussia 0 40% razil 2 50 35% US 0 OPEC 40 30% share (S) 30 25% 20 20% 4

2 0 5%

0 0 0% 20 20302050 20302050 20 2030 2050 2030 2050

Key points

The composition of global liquids early 2030s to around 45% by 2050. As well the overall demand for liquid supply is initially dominated by a The higher cost structure of non- fuels falling, the transition to a lower- rebound in US tight oil, with OPEC’s OPEC production means around carbon energy mix also prompts share of production recovering in the two-thirds of the total fall in liquids a shift in the composition of liquid second half of the Outlook. production in Rapid by 2050 is borne fuels. In Rapid, the overall decline by non-OPEC supplies. in liquids supply over the Outlook is In Rapid, US tight oil recovers from more than accounted for by a sharp the falls caused by the impact of Non-OPEC supplies follow a similar fall in crude and condensates, while Covid-19, increasing to close to 15 pattern in BAU, expanding in the first the production of biofuels increases Mb/d in the early 2030s. Brazilian half of the Outlook, led by increases by over 2 Mb/d. Similarly, although production also grows over the in US tight oil and Brazil, before total liquids supply by 2050 in BAU is same period. But as US tight declining in the second half as US only slightly lower than 2018 levels, formations mature and OPEC adopts tight oil peaks in the early 2030s. this is more than accounted for by a a more competitive strategy against This reduction provides scope for larger fall in crude and condensates, a backdrop of accelerating declines OPEC to increase its production partially offset by growing supplies in demand, US production and non- from the mid-2030s onwards, with of natural gas liquids (NGLs) and OPEC output more generally fall its level of output by 2050 back biofuels. from the early 2030s onwards. close to 2018 levels and its market share rising to over 40%. OPEC production declines over the next 10 years or so before broadly stabilizing thereafter, with its share of total liquids production recovering from a low of close to 25% in the

71 | bp Energy Outlook: 2020 edition Oil 72 |

Differences in operational carbon intensity of crudes have an increasing impact as carbon prices increase

Average carbon intensity of crude production by country, 2015 Carbon intensity: impact on volumes* g of CO2e/MJ Mb/d

3 lgeria owest uartile Venezuela of carbon intensity Canada 2 Middle two uartiles Iran of carbon intensity Ira ighest uartile Nigeria of carbon intensity US razil Mexico 0 ussia Kazakhstan UK - ngola UE China -2 atar Norway Saudi rabia -3 0 5 0 5 20 25 30 35 Rapid Business- as-usual Source: Masnadi et al. (2018), Global carbon intensity of crude oil production graph includes countries *Difference in crude and condensate supplies relative to a with crude and condensates above 1 Mb/d in 2018. Error bars include 5-95th percentile of fields counterfactual in which supplies have the same carbon intensity

Key points

The carbon emissions associated which carbon prices remain relatively The precise extent of this shift with the production and low over the entire Outlook, the shift between high and low carbon transportation of crude oil and in the pattern of supplies between intensity supplies depends on condensates accounted for around those in the highest and lowest the extent the carbon intensity of 5% of total carbon emissions from quartiles of carbon intensity is less different crudes and condensates energy use in 2015. than 0.5 Mb/d by 2050 compared can be reduced and at what cost. with a counterfactual case in which For example, it might be possible There is a significant variation in all supplies are assumed to have the to reduce operational emissions these operational emissions – same carbon intensity. of some onshore production via measured by the carbon intensity electrification at relatively little cost. of crude supplies – across (and In contrast, the higher level of But it seems likely that some of the within) different countries, reflecting carbon prices in Rapid increases the differences in intensity is likely to differences in the nature and additional cost levied on supplies persist and so have a bearing on the location of the operations. These with higher levels of carbon intensity future pattern of supplies if carbon differences in carbon intensity affect and so has a more material impact prices increase materially. the exposure of different types of on their competitiveness. In production to carbon prices. particular, in Rapid, the increasing A similar set of issues applies to carbon price causes highest quartile differences in the carbon intensity At low levels of carbon prices, these intensity supplies by 2050 to be of natural gas supplies, which in differences in carbon intensity have around 2 Mb/d lower than in the addition to differences in the carbon relatively little impact on overall counterfactual case (a decline of intensity of production, also depend costs and competitiveness and almost 25%), with correspondingly on whether the gas is transported hence on the pattern of aggregate greater volumes of lower quartile via pipelines or as LNG, which adds supplies. For example, in BAU in intensity supplies. to its carbon intensity.

73 | bp Energy Outlook: 2020 edition Oil 74 |

The outlook for refining is challenging, with declining demand and capacity shutdowns Refining capacity changes, Refinery throughput 2018-2050

Mb/d Mb/d

0 20 Rapid

0 Business- 0 Product as-usual importers with growing 70 0 demand Deeloped 0 -0 Other 50 -20 World 40 -30 30 -40 20

0 -50

0 -0 200 20 2030 2040 2050 Rapid Business- as-usual

Key points

The outlook for refining is downbeat, levels until the early 2030s, before particularly Europe, OECD Asia and reflecting the impact of Covid-19 gradually declining to around 10 parts of North America – where in the near term and a combination Mb/d below 2018 levels by 2050. falling domestic demand increases of declining liquid fuels demand refineries’ exposure to the highly and increasing competition from This outlook for falls in refining competitive product export market. alternative feedstocks further out. throughput contrasts with previously announced plans to build roughly 9 The degree of market rationalization Refinery throughputs in both Rapid Mb/d of new refining capacity over required in Rapid is more and BAU are significantly lower in the next 5 years or so. The scale of pronounced and widespread, the near term as a result of Covid-19 excess refining capacity could be with around 50 Mb/d of current reducing the demand for refined even greater if emerging economies (or planned) capacity surplus to products, especially in the transport in which product demand continues requirements by 2050. The refining sector (see pp 68-69). to increase – such as India and Africa capacity that is most resilient to – build additional capacity to limit any these pressures in Rapid is aided As with the overall demand for increase in import dependency for by: resilient domestic demand, liquids fuels, refinery runs in Rapid refined products. access to advantaged feedstock, never fully recover to pre-Covid high levels of upgrading, integration levels and fall by more than 45 Mb/d The excess refining capacity that with petrochemicals and, in some to less than half of their 2018 levels emerges in both BAU and Rapid regions, government support. by 2050. The outlook for refining is leads to increasing competition a little less challenged in BAU, with and the eventual shutdown of the refining runs recovering close to pre- least competitive refineries. The Covid-19 levels over the next few shutdowns in BAU are concentrated years and remaining around these in the developed economies –

75 | bp Energy Outlook: 2020 edition Gas 76 |

Outlook for gas is more resilient than for either coal or oil

Gas consumption Gas production growth by region

Bcm Bcm

000 200 Rapid Business-as-usual Other 000 ussia 5000 00 China Middle 00 East 4000 frica 400 US 3000 200 Total 0 2000 -200 Rapid -400 000 Net Zero Business- -00 as-usual 0 -00 2000 200 2020 2030 2040 2050 20- 2035- 20- 2035- 2035 2050 2035 2050

Key points

The outlook for gas is more durable The growth of global gas demand The main areas of increasing gas than for coal or oil, helped by broad- in Net Zero is shorter lived, peaking production in Rapid are China and based demand and the increasing in the mid-2020s, followed by a far Africa, supported by rising domestic availability of global supplies. faster decline, such that demand consumption. US and Middle by 2050 is around 35% below 2018 Eastern gas production by 2050 are In Rapid, the global demand for levels. largely unchanged from their 2018 gas – natural gas plus biomethane levels, with marked falls in domestic - recovers from the near-term In contrast, gas demand increases demand offset by increased exports. dip associated with Covid-19 and throughout the next 30 years in Much of the exports are in the grows relatively robustly over the BAU, increasing by a third to around form of liquefied natural gas (LNG), next 15 years or so, driven primarily 5300 Bcm by 2050. This growth which roughly doubles over the by economies in developing Asia in gas consumption is relatively Outlook in Rapid, increasing the (China, India, Other Asia) as they widespread, with particularly strong competitiveness and accessibility of switch away from coal towards increases across developing Asia, natural gas around the globe (see pp lower-carbon fuels, including gas Africa and the Middle East. 82-83). (this potential supporting role for natural gas is explored on pp 80-81). Biomethane increases in all three The much stronger demand growth Global gas consumption declines scenarios, reaching around 250 in BAU is largely met by increases in the subsequent 15 years as the Bcm in Rapid and Net Zero, and 100 in output in the US, Middle East and impetus from developing Asia fades, Bcm in BAU, which is around 6-10% Africa, which together account for compounded by increasing falls and 2% respectively of total gas around two-thirds of the increase in in the developed world, such that demand. global supplies in BAU. global gas demand by the end of the Outlook falls back close to its 2018 levels at around 4000 Bcm.

77 | bp Energy Outlook: 2020 edition Gas 78 |

The pattern of gas demand differs significantly across the scenarios

Change in gas demand by sector, 2018-2050

Bcm

000 Rapid Net Zero Business-as-usual Power 00 Industry

00 uildings Transport 400 Non-combusted 200 ydrogen 0

-200

-400

-00

-00

-000

Key points

The pattern of changes in global In Rapid, the shift to lower carbon These shifts in the pattern of gas gas consumption varies markedly energy sources, combined with demand are even more pronounced across the three scenarios reflecting significant gains in energy efficiency, in Net Zero, with the use of gas differences in the pace and extent of means gas used in the industrial in the power sector and buildings the low-carbon transition. and power sectors – the two falling by around 65% and 90% main sources of growth in gas respectively, partially offset by a consumption over the past 20 substantial increase in the use of gas years – is largely unchanged over to produce blue hydrogen. the Outlook, and falls materially in buildings. Instead, the main source In contrast, growth in global gas of strength over the Outlook is demand in BAU is broadly based the growing use of natural gas to across all sectors of the economy, produce blue hydrogen, which led by the industrial and power accounts for almost 10% of global sectors, which together account for gas demand by 2050 in Rapid (see around two-thirds of the increase. pp 102-105 for a discussion of the The growth in industrial demand outlook for hydrogen). stems entirely from emerging economies as they continue to industrialize, supported by significant coal-to-gas switching within China’s industrial sector.

79 | bp Energy Outlook: 2020 edition Gas 80 |

The role of natural gas in a low-carbon energy transition

Rapid vs. Business-as-usual: India and Other Asia* Natural gas with CCUS as a share of primary energy Differences in shares of primary energy

40% 0% Non-fossil lue hydrogen Natural gas 30% Rapid Oil Direct % energy use Coal 20%

% 0%

0% 4%

-0% 2% -20% Business- as-usual

-30% 0% 20 2025 2030 2035 2040 2045 2050 2050

*Other Asia excludes China and OECD Asia

Key points

Natural gas can potentially play two These two roles can be highlighted There is less need for this supporting important roles in an accelerated by contrasting the role of natural role in developed countries, where transition to a low-carbon energy gas in the slow transition envisaged the slower growth in energy demand system: in BAU with the more accelerated makes it easier for the reduction decarbonization in Rapid. in coal consumption to be largely supporting a shift away from matched by the increasing use of coal in fast growing, developing The role of natural gas supporting non-fossil fuels. economies in which electricity a shift away from coal can be seen demand and other uses of coal are most clearly in India and Other Asia. The role of natural gas as a greater growing quickly, and renewables The greater fall in the share of coal in source of (near) zero-carbon energy and other non-fossil fuels may not Rapid compared with BAU is mainly in Rapid relative to BAU is clear, be able to grow sufficiently quickly offset by fast growth in non-fossil with gas combined with CCUS to replace coal on their own; and fuels, led by renewable energy and accounting for around 8% of primary supported by a larger increase in energy by 2050 in Rapid, compared as a source of (near) zero-carbon the share of gas. This supporting with just 1% in BAU. The majority power when combined with role fades towards the end of the of natural gas with CCUS in Rapid CCUS, either as a direct source of Outlook as the growth of non-fossil is used as a direct energy source in energy to the power and industrial energy sources gather pace. industry and power, with the residual sectors or to produce blue used to produce blue hydrogen. hydrogen.

81 | bp Energy Outlook: 2020 edition Gas 82 |

LNG grows substantially, increasing the accessibility of gas around the globe

LNG imports and exports

Bcm Imports Exports

Other India Other frica Europe China 20 ustralia ME Other sia OECD sia ussia US

Rapid 2035

2050

Business-as-usual 2035

2050

-500 -000 -500 0 500 000 500

Key points

LNG expands significantly in both Global LNG imports fall back in LNG trade in BAU grows more Rapid and BAU, leading to a more the second half of Rapid as import slowly than in Rapid, reaching a little competitive, globally integrated gas demand in developing Asia starts over 1000 Bcm by 2050. However, market. to decline. These falls are most even in BAU, around 60% of that pronounced in China, as overall growth occurs over the next 10 LNG trade in Rapid bounces back demand declines and domestic years or so. As in Rapid, US, Africa strongly from the near-term fall production (including biomethane) and the Middle East are the main associated with Covid-19, more than increases. LNG trade by 2050 falls source of incremental supply, with doubling over the first half of the to around 970 Bcm. The pace of this developing Asia the dominant Outlook, increasing from 425 Bcm decline in LNG exports after the mid- destination for these increasing in 2018 to around 1100 Bcm by the 2030s is greater than the speed of exports, along with the EU which mid-2030s. depreciation of liquification facilities, remains an important balancing implying that towards the end of the market for LNG in both scenarios. This fast growth is driven by Outlook some facilities need to be increasing gas demand in developing operated at less than full capacity or Asia (China, India and Other Asia) as shutdown prematurely. gas is used to aid the switch away from coal and LNG imports are the main source of incremental supply. This surge in LNG demand is met by increasing supplies from the US, Africa and the Middle East, which emerge as the three main hubs for LNG exports.

83 | bp Energy Outlook: 2020 edition Renewables 84 |

Renewable energy in power grows quickly, driven by wind and solar power

Renewable energy used in power sector Cost of wind and solar energy by scenario

EJ 100% = 2018 price

400 Geothermal 00% Rapid biomass Net Zero 350 Net Zero Solar Business- as-usual Wind 0% 300 Wind Rapid 250 0%

200 Business- as-usual 40% 50 Solar

00 20% 50

0 0% 20 2050 20 2025 2030 2035 2040 2045 2050

Key points

Renewable energy used in the The fast pace of growth eases In both Rapid and Net Zero, wind power sector – wind, solar, biomass slightly from the late 2030s onwards and solar power account for broadly and geothermal – grows quickly in as the costs of balancing the similar absolute increases in power all three scenarios, aided by falling intermittency associated with adding generation. This equates to a costs of production and policies increasing amounts of wind and significantly faster rate of expansion encouraging a shift to lower-carbon solar power rise. Even so, the share in solar power, supported by (and energy sources. of renewables in primary energy driving) the greater cost declines. grows from around 5% in 2018 to The expansion of renewable energy 45% by 2050 in Rapid and 60% in The growth of renewables in power in power in Rapid and Net Zero far Net Zero. is less fast in BAU, although they outpaces the growth of primary still grow seven-fold and contribute energy, increasing by around 250 The growth in renewable energy is around 90% of the growth in EJ and 350 EJ respectively over dominated by wind and solar power, primary energy over the Outlook. the Outlook – around five and underpinned by continuing falls in seven times greater than the overall development costs as they move In all three scenarios, emerging increase in primary energy. down their ‘learning curves’. Over economies account for the majority the next 30 years, wind and solar of the growth in renewable energy, costs fall by around 30% and 65% in driven by stronger growth in power Rapid respectively and by 35% and generation and by the increasing 70% in Net Zero. share of renewables in power, especially at the expense of coal.

85 | bp Energy Outlook: 2020 edition Renewables 86 |

The build out of wind and solar power capacity accelerates sharply

Annual average increase in wind and solar capacity Installed capacity of wind and solar energy

GW GW

000 25000 Green Rapid hydrogen Net Zero Electricity Net Zero generation 00 Business- 20000 as-usual

Rapid 00 5000

400 0000

200 5000

0 0 2000- 2005- 200- 205- 20- 2025- 2030- 2035- 2040- 2045- 2050 2005 200 205 20 2025 2030 2035 2040 2045 2050

Key points

The growth of wind and solar power The fast growth in wind and solar In Rapid and Net Zero, developed generation in all three scenarios power generation in Rapid and Net countries represent around 25% of requires a significant acceleration in Zero followed by a subsequent total deployment of wind and solar, the build out of renewable capacity. slowing as the costs of intermittency China accounts for broadly another build is reflected in the pattern of 25%, with the rest accounted for by The average annual increase in wind capacity additions, which peak other emerging economies. In BAU, and solar capacity in Rapid and Net around 2035 in Rapid and Net Zero developed economies have a larger Zero over the first half of the Outlook before slowing sharply. This hump in role - accounting for around a third of is around 350 GW and 550 GW the pattern of new additions raises total deployment. respectively, between 6 and 9 times the risk of excess capacity within the faster than the annual average of renewables supply chain towards A significant share of wind and solar around 60 GW since 2000. the end of the Outlook. energy is used to produce green hydrogen in Rapid and Net Zero, with Although such an acceleration in The acceleration in the build out of this share increasing to around 20% wind and solar capacity requires a wind and solar capacity in BAU is of total installed capacity by 2050 significant increase in investment more gradual and steadier, although in Rapid and to around a third in spending, the extent of that increase the average annual rate of capacity Net Zero. is partially offset by the falling construction (235 GW) over the development costs of wind and Outlook is still considerably faster solar energy. The implications for than past rates of expansion investment in wind and solar energy are considered on pp 132-133.

87 | bp Energy Outlook: 2020 edition Coal 88 |

The role of coal in the global energy system declines, driven by China

Coal consumption Change in coal demand by sector and region, 2018-2050

EJ EJ

0 40 Other Rapid Business-as-usual 0 20 Other sia

40 India 0 20 China Deeloped 00 -20

0 -40

0 -0 40 Rapid Net Zero -0 20 Business- as-usual 0 -00 2000 200 2020 2030 2040 2050 Power Industry Other Power Industry Other sectors sectors

Key points

Global coal consumption declines The contraction in coal consumption around two-thirds of the remaining consistently over the next 30 is less pronounced in BAU, falling use of coal in BAU (see pp 100-101 years in all three scenarios, never by around 25% by 2050, with the for a discussion of the prospects for recovering back to its peak level of speed of that decline accelerating coal-fired power generation in India). 2013. through the Outlook. China accounts for the vast majority of the fall, In both Rapid and Net Zero, most The scale of the decline is followed by the US and the EU. The of the coal consumption remaining particularly pronounced in Rapid and overall fall in global coal consumption in 2050 is used in conjunction with Net Zero, in which coal is almost is partially mitigated by continuing CCUS, concentrated in the power entirely eliminated from the global increases in India and Other Asia. By sector and the production of blue energy system over the next 30 2050, developing Asia (China, India hydrogen. years, falling between 85-90%, with and Other Asia) accounts for over the share of coal in primary energy 80% of total coal consumption in The falls in global coal demand dropping to less than 5% by 2050 in BAU. are matched on the supply side both scenarios. by significant falls in Chinese coal The falls in coal consumption are production, which accounts for The fall in coal demand in Rapid and concentrated in the power and the vast majority of the production Net Zero is dominated by China as it industrial sectors. In Rapid and Net declines in both Rapid and BAU. shifts to a more sustainable pattern of Zero, the power sector accounts growth and a lower-carbon fuel mix. for around two-thirds of the decline Declines in Chinese coal consumption as power generation is largely account for around half of the overall decarbonized; whereas in BAU, the fall in global demand in these two falls are distributed roughly evenly scenarios, supported by declines in between the two sectors. By 2050, OECD, India and Other Asia. the power sector accounts for

89 | bp Energy Outlook: 2020 edition Nuclear 90 |

Growth in nuclear power is dominated by China

Nuclear generation Change in nuclear generation by region, 2018-2050

TWh TWh

000 5000 Net Zero Other EU 7000 Rapid 4000 Net Zero US Rapid 000 Business- Middle East as-usual 3000 Business- as-usual India 5000 2000 China 4000 Total 000 3000

0 2000

000 -000

0 -2000 2000 2005 200 205 2020 2025 2030 2035 2040 2045 2050 20 - 2050

Key points

Nuclear energy grows throughout Nuclear power in the developed The growth of nuclear generation the Outlook in all three scenarios, as economies falls slightly in Rapid is slower in BAU, increasing by strong growth in China offsets weak and edges higher in Net Zero. In around 40% by 2050, with its share or falling nuclear power generation in both scenarios, the pressure to in primary energy edging lower. the developed world. decarbonize the power sector more The pattern of growth in BAU is quickly than other zero-carbon even more lopsided, with China Nuclear generation grows robustly energy sources and balancing accounting for more than the entire in Rapid and Net Zero, increasing by technologies can be deployed growth of nuclear power generation, around 100% and 160% respectively is partially met by extending the partially offset by declines in the by 2050. China accounts for around operating lifetimes of nuclear power US and Europe as aging nuclear 60% of this growth in Rapid – plants in the US and Europe, many plants are retired and a combination and 40% in Net Zero – as China to 60 years or more. of economic and political factors continues to diversify away from means they are not replaced by coal towards a lower-carbon fuel The pace of build out of new new capacity. The level of nuclear mix in the power sector. The share capacity additions in Rapid is generation in China by 2050 in BAU of nuclear power in China’s power comparable to that seen in the is around twice that of the entire generation increases from around heyday of nuclear power in the developed world. 4% in 2018 to more than 15% by 1980s – and even quicker in Net Zero 2050 in both scenarios. Nuclear – with the pace of construction in power generation also increases in Rapid increasing more than two-fold India, Other Asia and Africa. relative to recent rates of expansion.

91 | bp Energy Outlook: 2020 edition Hydro 92 |

Hydroelectricity grows over the next 30 years but at a slower pace than in the past

Hydroelectricity generation by region Hydroelectricity growth by region

TWh % per annum

000 Net Zero 30% Other Rapid 7000 Business- frica as-usual 25% SC merica 000 Other sia 20% Net Zero 5000 China Rapid

4000 Deeloped 5% Business- as-usual

3000 0% 2000 05% 000

0 0% 20 2050 2000 - 20 20 - 2050

Key points

Hydroelectricity expands throughout The slowing in hydroelectricity Some of this slowing in the growth the Outlook, but the pace of growth relative to past trends is dominated of Chinese hydro power generation slows in the second half of all three by China, where the robust build is offset by an acceleration in scenarios as the availability of the out of hydro facilities over the past Other Asia, Latin America, and most advantaged sites gradually 20 years accounted for around Africa, where growing economic wanes. three-quarters of global growth in prosperity and accelerating power hydroelectricity. But as the most demand increase the economic The greater pressure to decarbonize productive and advantaged sites viability of developing the abundant the energy system in Rapid and in China are exploited, the growth geographical sites available in these Net Zero helps to support stronger of Chinese hydro power slows, regions. growth of hydro energy than in averaging between 1.3-1.7% p.a. in BAU, even so the growth of hydro the three scenarios, down from an power in all three scenarios over average annual rate of almost 10% the Outlook – ranging from 1.3% to over the past 20 years. 1.6% p.a. – is slower than the past 20 years (2.6 p.a.). The share of hydro in global power generation is broadly stable in all three scenarios at around 15%.

93 | bp Energy Outlook: 2020 edition 94 | Other energy carriers

Electricity and power generation Hydrogen

95 | bp Energy Outlook: 2020 edition Power 96 |

Electricity demand grows robustly as the world continues to electrify Change in electricity demand Share of electricity in total final consumption by sector, 2018-2050

TWh

0% 25000 Transport Rapid Industry 50% Net Zero 20000 uildings Business- as-usual 40% 5000

30%

0000 20%

5000 0%

0% 0 2000 200 2020 2030 2040 2050 Rapid Net Zero Business- as-usual

Key points

The world continues to electrify, stronger overall growth in energy The increase in electricity use in leading the power sector to play an consumption than in the other two Rapid and Net Zero is broadly based increasingly central role in the global scenarios. across all three sectors (industry, energy system. transport and buildings) of the The energy required to meet the economy, with electricity used in the The growth in final electricity growing use of electricity for final transport sector rising most strongly demand is similar in all three consumption is the dominant source as increasing amounts of road scenarios, growing by just under 2% of incremental demand for primary transportation are electrified p.a., such that demand expands by energy in all three scenarios. As a (see pp 42-45). around 80% by 2050. result, the share of primary energy that is absorbed by the power sector In contrast, the slower gains in The extent to which the energy increases from 43% in 2018 to energy efficiency in buildings and system electrifies is greatest around 60% by 2050 in Rapid and industry in BAU means these in Rapid and Net Zero as the Net Zero and to a little over 50% in sectors account for around 80% of progressive decarbonization of the BAU. the growth in power demand, with a energy system leads to increasing more subdued increase in transport. amounts of final energy use being The vast majority of the growth electrified. The share of electricity in electricity demand in all three in total final consumption increases scenarios is driven by emerging from a little over 20% in 2018 to markets, led by developing Asia 45% in Rapid by 2050 and over 50% (China, India, and Other Asia) and in Net Zero, compared with just 34% Africa, as increasing prosperity and in BAU. The growth of electricity living standards underpin higher demand in BAU is supported by electricity consumption.

97 | bp Energy Outlook: 2020 edition Power 98 |

Growth in power generation is led by wind and solar power as coal loses share

Share of global power generation by energy source

Rapid Net Zero Business-as-usual

70% Wind solar 0% Natural gas Coal 50%

40%

30%

20%

0%

0% 2000 200 2020 2030 2040 2050 2000 200 2020 2030 2040 2050 2000 200 2020 2030 2040 2050

Key points

The growth of global power The main fuel to lose ground is coal, The changes in the fuel mix, generation is dominated by with the share of coal-fired power combined with the increasing use of renewable energy. generation in global power falling CCUS, means the carbon intensity from 38% in 2018 to less than 3% in of power generation falls by over Renewable energy, led by wind 2050 in Rapid and Net Zero, and to 90% in Rapid, compared with just and solar power (and including around 20% in BAU. 50% in BAU. As a result, despite biomass and geothermal), more the substantial increase in power than accounts for the entire growth The use of gas in the power sector generation, carbon emissions from in global power generation in Rapid increases during the first half of the the power sector decrease by and Net Zero and for around three- Outlook in Rapid as it gains share over 80% in Rapid, compared with quarters of the growth in BAU. from coal but falls back close to its just 10% in BAU. In Net Zero, the 2018 level by 2050 as the use of use of bioenergy combined with The increasing cost of balancing the renewables accelerate. The initial CCUS (BECCS) means that net CO2 intermittency associated with the growth of gas in Net Zero is shorter emissions from the power sector are use of wind and solar power as their lived and the subsequent decline negative by 2050. share rises causes the pace at which sharper. In contrast, the use of gas they penetrate the power sector to in BAU increases broadly in line slow in the 2040s in Rapid as their with overall power demand, with share of global power rises above its share in global power generation 50%. Similarly, the share of wind edging down only slightly. By 2050, and solar power in Net Zero begins roughly half of the natural gas used to flatten out in the 2040s as it rises to generate power in Rapid and above 60%. around 90% in Net Zero is used in conjunction with CCUS.

99 | bp Energy Outlook: 2020 edition Power 100 |

The challenge of decarbonizing the Indian power sector

Share of Indian power generation Annual average net capacity by energy source in Rapid additions in wind and solar in India Generation from gas in India

GW TWh

0% 20 000 Wind solar Rapid Gas Business-as-usual 00 Coal Alternative case 1 00 0% Rapid 0 Net Zero 00 Business- as-usual 40% 0 Alternative case 2 400 40 20% 200 20

0% 0 0 205 2020 2025 2030 2035 2040 2045 2050 200- 205- 20- 2025- 2030- 2035- 2040- 2045- 205 2020 2025 2030 2035 2040 2045 2050 205 20 2025 2030 2035 2040 2045 2050

Key points

The challenge of decarbonizing the The pace and extent of the One option to avoid any increase in power sector in economies and decarbonization of power is greater Indian coal-fired power generation regions in which there is strong in Rapid, with coal power generation would be for wind and solar power growth in electricity demand is falling by around 40% by 2050. to accelerate even more quickly over illustrated by the outlook for the Wind and solar power generation the next 10 years, averaging around Indian power sector. grow by around 30-fold and 60-fold 45 GW per year, compared with 30 respectively, and gas over 13-fold. GW in Rapid and an average of 3 Electricity consumption in India GW since 2000. This is illustrated by increases robustly in all three However, even in Rapid, Indian coal- ‘Alternate case 1’ above. scenarios, growing between 4.0- fired power generation increases 4.6% p.a. over the Outlook, as by around a third over the next 10 Another alternative (as shown by improving prosperity and living years or so before subsequently Alternate case 2) would be to bring standards boost industrial and declining. This requires around 50 forward some of the growth of residential demand. new coal-fired power stations to be gas-fired power generation that built in the 2020s, with the likelihood happens later in the Outlook. If In BAU, wind and solar power that some of these power stations gas power generation is increased generation increase more than 20- become uneconomic as coal sufficiently to prevent any increase fold by 2050, growing at an average generation subsequently declines. in coal generation, this would reduce rate of 10% p.a.. Despite that, Indian A similar near-term increase in coal carbon emissions by around coal-fired power generation doubles generation, albeit less pronounced, 2 Gt CO2 over the next decade over the Outlook in BAU, requiring is apparent in Net Zero. relative to Rapid. more than 100 new coal-fired power plants to be built over the next 15 years.

101 | bp Energy Outlook: 2020 edition Hydrogen 102 |

Hydrogen plays an increasing role as the world transitions to a low-carbon energy system

Hydrogen use by sector Hydrogen use by region

EJ EJ

70 70 Power Other Rapid Net Zero Rapid Net Zero Transport India and 0 0 Other sia uildings OECD sia Industry 50 50 Europe North merica 40 40 China

30 30

20 20

0 0

0 0 2035 2050 2035 2050 2035 2050 2035 2050

Key points

The use of hydrogen as an energy Hydrogen complements the growing The use of hydrogen in Rapid is carrier* increases significantly in role of electricity in Rapid and Net most pronounced in China and Rapid and Net Zero as the world Zero because it can be used for the developed economies which transitions to a lower-carbon energy some activities which are difficult lead the world in its adoption, system. The hydrogen can be used or costly to electrify, especially in supported by rising carbon prices either directly or combined with (bio) industry and transport, and because and increasing deployment of carbon or nitrogen to make it easier it can be more easily stored than infrastructure and other policies to transport. electricity. supporting its use. This adoption is more broadly-based in Net Zero, with The growth of hydrogen is Hydrogen has a particular advantage significant increases also in India and concentrated in the second half of in industry as a source of energy for other parts of developing Asia. the Outlook as falling technology and high-temperature processes, such input costs, combined with rising as those used in steel, cement, In contrast, the role of hydrogen carbon prices, allow it to compete refining and petrochemicals sectors. within BAU is far more limited, increasingly against incumbent fuels. By 2050, hydrogen accounts for mirroring the minimal progress made By 2050, hydrogen accounts for around 10% of total final energy in decarbonizing the energy system. around 7% of (non-combusted) total consumption in industry in Rapid and final energy consumption (excluding 18% in Net Zero. the non-combusted use of fuels) in Rapid and around 16% in Net Zero. The use of hydrogen in transport is concentrated in long-distance transportation, particularly heavy- duty trucks in which 7% of VKM in Rapid by 2050 are powered by hydrogen and 10% in Net Zero. *The Outlook does not include the role of hydrogen as a feedstock in industry 103 | bp Energy Outlook: 2020 edition Hydrogen 104 |

Most hydrogen production by 2050 is a combination of green and blue hydrogen

Hydrogen production by type Annual average increase in wind and solar capacity

EJ GW

70 400 Grey Rapid Rapid Net Zero hydrogen Business-as-usual 0 200 lue Net Zero hydrogen Net Zero with 00% 50 Green 000 green hydrogen hydrogen

40 00

30 00

20 400

0 200

0 0 20 2035 2050 2035 2050 2000- 2005- 200- 205- 20- 2025- 2030- 2035- 2040- 2045- 2005 200 205 20 2025 2030 2035 2040 2045 2050

Key points

The production of hydrogen in Rapid facilities which produce hydrogen Second, production of green and Net Zero is dominated by green using natural gas or coal without hydrogen diverts renewable energy and blue hydrogen. CCUS (so-called grey hydrogen). that could potentially be used to decarbonize further the power Green hydrogen is made by The production of blue hydrogen sector. Given that the vast majority electrolysis using renewable helps supplies of hydrogen to of domestic power sectors over the power; blue hydrogen is extracted grow relatively quickly in Rapid and Outlook are not fully decarbonized from natural gas (or coal) and the Net Zero without relying only on in either scenario, only renewable displaced carbon is captured and renewable energy. This is important energy which cannot be used within stored (CCUS). for two reasons. the domestic power sector can strictly be used to produce green The ability of many countries First, relying exclusively on green hydrogen. This would be the case if to produce either green or blue hydrogen would require an even the renewable energy is curtailed at hydrogen, combined with relatively faster expansion in wind and solar certain points in time or because its high transport costs, means that the capacity. To achieve the same level location means it is not economic for majority of hydrogen is produced of hydrogen production as in Net it to be connected to the central grid. relatively locally, with a mix of blue Zero using only green hydrogen, and green hydrogen depending would require an average build out of local conditions. By 2050, over of wind and solar capacity of around 95% of hydrogen in Rapid and Net 800 GW per year over the Outlook, Zero comes from green and blue compared with less 600 GW in Net hydrogen in broadly equal amounts. Zero and around 60 GW over the The remainder comes from legacy past 20 years.

105 | bp Energy Outlook: 2020 edition 106 | Carbon emissions from energy use

Summary Carbon pathways Alternative scenario: Delayed and Disorderly

107 | bp Energy Outlook: 2020 edition Summary 108 |

Carbon emissions fall significantly inRapid and Net Zero ; little progress in Business-as-usual

Global carbon emissions from energy use Carbon emissions by sector

Gt of CO2 Gt of CO2

40 40 ydrogen 35 35 uildings Business- as-usual Transport 30 30 Industry 25 25 Power Net 20 20 Well 5 below 2˚C 5 IPCC 2˚C median Rapid 0 IPCC 1.5˚C median 1.5˚C 0 Rapid 5 Net Zero 5 Net Zero Business-as-usual 0 0

-5 0 0 2000 200 2020 2030 2040 2050 20 2050

Ranges show 10th and 90th percentiles of IPCC scenarios, see pp 150-151 for more details

Key points

The impact of Covid-19 causes by the second half the Outlook the The composition of the carbon carbon emissions from energy to fall emissions pathway in Net Zero is emissions remaining in 2050 sharply in the near-term. Although close to the middle of the IPCC in Rapid provide a sense of the emissions subsequently pick up as range. hardest-to-abate emissions. The the global economy recovers, the largest source of emissions is the level of carbon emissions in Rapid The carbon emissions remaining transport sector which accounts and Net Zero do not return to their in 2050 in Net Zero could be for around third of the remaining pre-pandemic levels. reduced further by either additional emissions, with the industrial and changes in the energy system power sectors each accounting for Carbon emissions from energy use or using negative emissions around a quarter. in Rapid fall by around 70% by 2050 technologies (NETs). Alternatively,

to a little over 9 Gt CO2. This fall in the emissions could be offset by The transport and industrial sectors emissions is broadly in the middle of increased deployment of natural account for the majority of the the range of ‘well below 2-degree’ climate solutions (NCS) (see pp remaining emissions in Net Zero in scenarios contained in the 2019 130-131). This will partly depend on 2050. These emissions are partially IPCC Report. See pages 150-151 the costs of NETs and of abating offset by net negative emissions for details on the construction of the GHGs emitted from outside the from the power sector, stemming IPCC scenario ranges. energy system, neither of which are from the use of biomass combined explicitly considered in this Outlook. with CCUS (BECCS), which reduce In Net Zero, carbon emissions net carbon emissions by around 1.5 fall by over 95% from their 2018 The extent of the decline in carbon Gt CO2 by 2050. levels to around 1.5 Gt CO2 by emissions from energy use in BAU 2050. The initial pace of decline is far more limited. Emissions peak is slower than the range of IPCC around the mid-2020s and decline ‘below 1.5-degree’ scenarios, but only gradually, falling to around 10% below 2018 levels by 2050. 109 | bp Energy Outlook: 2020 edition Carbon emissions 110 |

The fall in emissions in Rapid and Net Zero driven by switch to low-carbon energy

Carbon capture utilization Carbon emissions from energy use and storage in 2050

Gt of CO2 Gt of CO2

40 Efficiency ydrogen

35 Energy mix Industry CCUS 5 Power 30 Rapid Net Zero 4 25 Business-as-usual

20 3

5 2 0 5

0 0 20 2025 2030 2035 2040 2045 2050 Rapid Net Zero

Key points

The reduction in carbon emissions The rest of the difference between patterns towards lower-energy in Rapid and Net Zero reflect a the carbon pathways in Rapid and activities. These changing societal combination of increased switching BAU reflects stronger gains in preferences accentuate the impact of to low-carbon fuels, greater gains in energy efficiency and greater use government low-carbon policies. energy efficiency, and growing use of of CCUS. By 2050, CCUS is used carbon capture technologies (CCUS). to capture and store around 4 Gt The largest factor contributing to the greater declines in carbon emissions CO2 of potential emissions in Rapid, The most important factor with around three quarters of the in Net Zero relative to Rapid is accounting for the reduction in captured emissions emanating from the further switching away from carbon emissions in Rapid, relative the industrial and power sectors and fossil fuels into zero-carbon energy to the BAU emissions pathway, is the remainder from the production of sources, especially renewable the additional degree of switching blue hydrogen. energy. to low-carbon fuels which accounts for around 45% of the difference by The additional reductions in carbon There are also contributions from 2050. This is driven by significant emissions in Net Zero relative to faster gains in energy efficiency reductions in the use of coal, Rapid are partly enabled by changes and greater use of CCUS. By 2050, especially in developing Asia, with in the behaviour and preferences the amount of carbon captured and much of this replace by faster of companies and households, stored in Net Zero is around 5.5 Gt

penetration of renewable energy with increased focus on using CO2, with the majority employed in and, to a lesser extent, gas. energy more efficiently, greater the production of blue hydrogen and switching to zero or low-carbon fuels the power sector. and adjusting their consumption

111 | bp Energy Outlook: 2020 edition Carbon emissions 112 |

Alternative scenario: Delayed and Disorderly A delayed transition may lead to a disorderly adjustment path

Energy intensity Carbon intensity of energy

MJ per $US of GDP Mt of CO2 per EJ

55 70 Rapid 50 Business-as-usual 0 Delayed and Disorderly 45 50

40 40

35 30

30 20 Rapid 25 0 Business-as-usual Delayed and Disorderly 20 0 200 2020 2030 2040 2050 2000 200 2020 2030 2040 2050

Key points

Rapid and Net Zero assume that Delayed and Disorderly is highly Given these constraints on the government and society begin stylized - the nature of any delayed speed and extent to which energy to change policy and behaviour transition path will depend on the efficiency and fuel switching relatively quickly, such that carbon factors triggering the eventual can improve, any further actions emissions from energy use start to change and the response of necessary to achieve the cumulative fall over the next few years. But it is government and society. The emissions target are assumed to possible that there is an extended scenario is predicated on the take the form of energy ‘rationing’, delay before these types of changes assumption that there are costs that is, policies that stop or restrict take place, with an increasing to delaying action. In particular, it various energy-using outputs or likelihood of a sharp tightening in assumes that it is not possible to activities. climate policies the longer the world make greater progress in energy remains on an unsustainable path. efficiency or fuel switching by 2050 For simplicity, Delayed and than is achieved in Rapid. As such, Disorderly assumes that the This possibility is explored in an for illustrative purposes, it assumes required energy rationing is imposed alternative Delayed and Disorderly that from 2030 onwards the: proportionality across the main scenario in which the global energy sectors of the economy, with the system is assumed to move in line degree of energy efficiency degree of rationing increasing at a with BAU until 2030, after which (including recycling, reuse and constant rate over the Outlook. sufficient policies and actions are reduce) improves linearly and undertaken to limit cumulative reaches the same level as Rapid carbon emissions over the Outlook by 2050; (2018-50) to be the same as in Rapid. carbon intensity of the fuel mix improves linearly and reaches the same level (including CCUS) as Rapid by 2050; 113 | bp Energy Outlook: 2020 edition Carbon emissions 114 |

Alternative scenario: Delayed and Disorderly A delayed and disorderly transition leads to significant economic costs

Cumulative carbon emissions Primary energy consumption

Gt of CO2 EJ

000 00 Rapid Delayed and Disorderly (before rationing) 700 Delayed and Disorderly 00 00

500 00

400

400 300

200 200 Rapid 00 Delayed and Disorderly (before rationing) Delayed and Disorderly 0 0 20 2025 2030 2035 2040 2045 2050 200 205 2020 2025 2030 2035 2040 2045 2050

Key points

Delaying the start of the decisive More significantly, the implied scale in buildings – a reduction in energy shift to a low-carbon energy system of energy rationing necessary to use relative to the 2050 level in until 2030 significantly increases achieve the reduction in carbon is Rapid roughly equivalent to the the scale of the challenge relative to equivalent to around a quarter of the energy used to fuel the entire Rapid: carbon emissions start from a energy consumption between 2030 buildings sector in the EU today. higher level and there is less time to and 2050 in Rapid. make the adjustments. Although not modelled explicitly, this Assuming this rationing is imposed rationing is likely to have a significant This delay leads to significant proportionately across the main impact on economic activity and economic cost and disorder in sectors of the economy, it is roughly levels of well-being. Delayed and Disorderly. equivalent to:

Achieving the same improvements in industry – offsetting around in energy efficiency and the fuel 20 years of growth in industrial mix as in Rapid in two-thirds of the output; time is likely to require a significant diversion of investment from other in transport – reducing car travel by productive activities and lead to the up to two-thirds and air travel by premature scrapping of productive half relative to their 2050 levels in assets. Rapid, together with similar scale reductions in commercial and marine transportation;

115 | bp Energy Outlook: 2020 edition Carbon emissions 116 |

Low carbon transition leads to fundamental changes in the global energy system

Share of electricity and hydrogen Hydrocarbon use by scenario in total final consumption* Total final consumption by carrier* 100% = 2018 level EJ

20% 70% 500 Rapid ioenergy Net Zero 0% Electricity 00% Electricity 400 ydrogen 50% Rapid Natural gas 0% Net Zero 300 Oil 40% 0% Coal 30% 200 40% 20% Rapid 00 20% Net Zero ydrogen 0% Business-as-usual

0% 0% 0 20 2025 2030 2035 2040 2045 2050 200 2020 2030 2040 2050 20 2050

*Excluding non-combusted

Key points

The transition to low-carbon energy These traditional forms of energy are The shift away from traditional system in Rapid and Net Zero leads replaced to a large extent by low- hydrocarbons also leads to an to a fundamental restructuring of the carbon energy carriers in the form increasing role for bioenergy. global energy system. of electricity and, to a lesser extent, Bioenergy takes various forms hydrogen. By 2050, electricity including liquid biofuels used largely These changes are led by the accounts for around 50% of final in transport; biomethane which declining importance of fossil fuels: consumption (excluding the non- can be used as a direct substitute oil, natural gas and coal. The use combusted use of fuels) in Rapid for natural gas across all sectors of of hydrocarbons in both Rapid and around 60% in Net Zero. This the economy; and biomass used and Net Zero peak in the next few greater recourse to electricity is predominantly in the power sector. years, falling by around 50% and complemented by the increasing By 2050, bioenergy accounts for 70% respectively by 2050. Within use of hydrogen which is used around 7% of primary energy in that, the combined use of oil and for activities which are harder or Rapid and almost 10% in Net Zero. natural gas falls by around a third more costly to electrify. By 2050, and two-thirds in Rapid and Net Zero hydrogen accounts for around 7% of The uncertainties surrounding the respectively. final energy consumption in Rapid eventual nature of the global energy and 16% in Net Zero. system in a net-zero world are considered in the next section.

117 | bp Energy Outlook: 2020 edition 118 | Global energy system at net zero

Summary Energy demand Electrification and the power sector Oil and natural gas Bioenergy and hydrogen CCUS and negative emission technologies

119 | bp Energy Outlook: 2020 edition Net zero 120 |

Key uncertainties surrounding the global energy system in a net-zero world

Total final consumption by energy source in 2050*

EJ

ioenergy CCUS Electricity from bioenergy Net Zero Electricity

ydrogen

Oil

Natural gas CCUS Coal

Rapid

0 50 00 50 200 250 300 350 400

*Excluding non-combusted

Key points

There is significant uncertainty Energy demand: to what extent Carbon capture and negative surrounding the structure of the global could efficiency improvements and emission technologies: how energy system in a net-zero world. changing consumption patterns cause significant could CCUS be in energy demand to decouple from reducing carbon emissions, and The composition of energy in Net economic activity; what is the potential for negative Zero in 2050 may provide some emission technologies and actions? insight: total final energy consumption Electrification and the power sector: (excluding non-combusted energy) what proportion of final energy These uncertainties are discussed in is close to 10% lower than in Rapid; consumption might be electrified, and the rest of this section. The analysis electricity, hydrogen and bioenergy what different energy sources and is aided by considering the scenarios together account for around 85% of technologies may be needed in a fully included in the IPCC Report which end energy use; and CCUS plays a decarbonized power sector; reach a net-zero energy system and significant role. considering the variation in outcomes Other zero-carbon energy sources across those scenarios (see pp But there are myriad transition paths and carriers: what are the scope and 150-151 for more detail). to a net-zero world which will affect limitations on the share of global the eventual structure of the energy energy use that could be provided by system and that structure is likely to bioenergy and hydrogen; continue to evolve even once it has reached net zero. Oil and natural gas: what role will oil and natural gas play as the energy There are (at least) five sources of system is decarbonized; uncertainty surrounding the size and structure of a net-zero energy system:

121 | bp Energy Outlook: 2020 edition Net zero 122 |

Net-zero energy system: how much energy will the world need?

Global energy demand in IPCC scenarios and Net Zero Total final consumption in 2050

EJ EJ

400 IPCC range at net zero* Demand if energy 200 IPCC median per head at least at net zero at EU leel Net Zero 000 in 2050

00 Demand if energy per head at EU leel in all regions 00

400

200 Net Zero

0 Primary Total final 0 00 200 300 400 500 00 energy consumption *Ranges show 10th and 90th percentiles of IPCC scenarios

Key points

The nature of a net-zero energy Global energy demand will also The size of the energy system will system will depend importantly on depend on the equality of energy also be affected by the relative its overall size: how much energy is access and use globally. In Net Zero, importance of different energy required for the global economy to average energy consumption per sources and carriers. In particular, continue to grow and prosper? capita in the developed world by the conversion process used to 2050 is still more than twice that in produce energy carriers such as This depends partly on the extent emerging economies, with billions electricity and hydrogen boosts to which it is possible to decouple of people living in energy deficient primary energy. The range of energy consumption from economic countries and regions. To reduce primary energy in the IPCC net- activity, through either improving that inequality, either overall energy zero scenarios is 550-1210 EJ – energy efficiency – producing the provision would need to increase or considerably more than total final same goods and services with energy consumption in developed consumption of energy. less energy – or reduced energy economies fall further. use – changing production and Even if the vast majority of this consumption patterns to make less If regions with energy consumption primary energy is zero carbon, demands on the energy system, e.g. per capita below EU levels increased the overall footprint of the energy through the expansion of circular and to at least EU levels, global energy system is still likely to have wider sharing economies. demand would be over 55% higher. implications due to the competing This required increase falls to demands for (and environment The IPCC scenarios suggest a wide around 45% if regions with energy impacts of) the materials, land and range for final end use of energy consumption per capital above water it requires. between 340-620 EJ in net zero. EU levels reduced their average That compares with 425 EJ in 2018 consumption levels to EU levels. and with 340 EJ in Net Zero in 2050 which is at the bottom of this range.

123 | bp Energy Outlook: 2020 edition Net zero 124 |

Net-zero energy system: significant increase in electrification and decarbonized power sector

Shares of electricity, wind and solar in IPCC scenarios and Net Zero Technologies to help balance power system at different durations

0% IPCC range Seconds Minutes ours Days Weeks Seasons Not at net zero applicable/ atteries expensie 0% IPCC median at net zero Most Pumped adantaged Net Zero hydro 70% in 2050 ess Demand adantaged response and rescheduling 0% ydro with high-capacity reseroirs

50% ydrogen

Gas (or coal) 40% with CCUS

ioenergy with or without CCUS 30% Share of Share of wind electricity in solar final energy in electricity

Key points

A net-zero energy system is likely and other supporting technologies to seconds to a few hours, this is likely to be characterized by a substantial ensure reliability. The intermittency to be met largely from a combination increase in the electrification of of wind and solar power means the of batteries, pumped hydroelectricity energy-consuming activities, with cost of balancing the power sector and demand-side responses. the electricity generated from a is likely to increase as the share fully decarbonized (or net negative) of wind and solar power grows, But some of these technologies power sector. slowing the extent to which they and actions are unlikely to be penetrate the power sector. technically or economically feasible But not all energy processes for longer-duration balancing across and uses can be technically or In the IPCC net-zero scenarios, wind multiple days, weeks and seasons. economically electrified, such and solar power provides between This longer-term balancing is likely as high-temperature industrial 40-85% of global power generation. to be met by a combination of processes or long-distance In Net Zero, the share of wind and bioenergy; natural gas (or coal) transportation. In the IPCC net-zero solar reaches a little above 60% in combined with CCUS; hydrogen; scenarios, between 40-70% of end the early 2040s after which it begins and hydroelectricity combined with energy use is electrified; in Net Zero, to plateau. high-capacity reservoirs. In Net Zero, a little over 50% of end energy use bioenergy, natural gas with CCUS, is electrified by 2050. A power system dominated by hydro and hydrogen collectively wind and solar power generation is account for 30% of power A fully decarbonized power sector is likely to require a range of different generation in 2050. likely to be dominated by zero- and energies and technologies to help near-zero carbon energy sources, led balance their intermittency. For by wind and solar power, together short-duration, high-frequency with nuclear, hydro and bioenergy balancing, lasting from a few

125 | bp Energy Outlook: 2020 edition Net zero 126 |

Net-zero energy system: use of oil and natural gas falls substantially

Oil consumption in IPCC Natural gas consumption in IPCC scenarios and Net Zero scenarios and Net Zero Mb/d Bcm

0 4000 IPCC range IPCC range

70 IPCC median 3500 IPCC median Transport 0 3000 Non-combusted Non-combusted Combusted gas 50 2500 Other without CCUS Natural gas 40 2000 with CCUS lue hydrogen 30 500 from gas

20 000

0 500

0 0 IPPC at net zero Net Zero in 2050 IPPC at net zero Net Zero in 2050

Key points

The use of both oil and natural gas Outside of transport, most of the Natural gas consumption in the IPCC in a net-zero energy system is likely remaining oil in Net Zero in 2050 is net-zero scenarios in 2050 varies to decline substantially from current used in the non-combusted sector between 3800 Bcm – similar to levels. for petrochemical feedstock and 2018 – and 1000 Bcm, a decline of other industrial uses. Although this 75% from current levels. In Net Zero, Oil consumption in the IPCC net- use of oil does not lead to carbon natural gas is around 2300 Bcm in zero scenarios declines to between emissions at the point of use – since 2050 providing energy across all 70-10 Mb/d, around 30-90% below the oil is not combusted – the use the main sectors of the economy – current levels. Oil consumption falls and ultimate end of life consumption either directly or via blue hydrogen. to around 25 Mb/d in Net Zero by or disposal of the products which 2050, of which 10 Mb/d is used the oil is used to produce, such as By 2050, around three-quarters of in the transport sector, mainly for plastics, may well generate carbon the natural gas which is combusted long-distance transportation in emissions over their life cycle. And, in Net Zero is used in conjunction trucking, aviation and marine. It is depending on how those activities with CCUS. This share is likely to likely that this use in transport will are conducted, may also lead to grow further over time, either as decline further over time, as legacy other environmental issues. This the build out of CCUS expands vehicles and infrastructure are may put further pressure on oil use or alternative low or zero-carbon increasingly replaced with alternative over time. energy sources become increasingly technologies and energy sources. available and replace unabated natural gas.

127 | bp Energy Outlook: 2020 edition Net zero 128 |

Net-zero energy system: share of bioenergy and hydrogen increases

Bioenergy in IPCC scenarios and Net Zero Hydrogen in IPCC scenarios and Net Zero

EJ EJ

0 70 IPCC range IPCC range 0 IPCC median 0 y sector y type IPCC median 40 ydrogen Power Power 50 uildings 20 uildings Industry 00 40 Industry Transport 0 Transport 30 Green hydrogen 0 y sector y type iomethane 20 lue hydrogen 40 iomass iofuels 0 20

0 0 IPCC at net zero Net Zero IPCC at net zero Net Zero in 2050 in 2050

Key points

Bioenergy and hydrogen – alongside The use of bioenergy in a net-zero The versatility of hydrogen means it electricity – are likely to play an energy system will depend on the is used in all sectors of the economy increasing role in a net-zero energy cost and feasibility of producing in Net Zero by 2050, especially system. bioenergy at scale, together with in high-temperature industrial other environmental and social processes; long-distance road and The use of bioenergy in the IPCC factors, such as the extent of marine transportation; and as a form net-zero scenarios ranges from 40- competition with other land uses of storage and flexible energy source 155 EJ; this compares with around and its impact on biodiversity. in the power and buildings sectors. 55 EJ in Net Zero by 2050, where it accounts for close to 10% of primary Hydrogen as an energy carrier The production of hydrogen in Net energy. reaches around 60 EJ in Net Zero by Zero by 2050 is roughly even split 2050, providing around 15% of total between green and blue hydrogen A little over half of the bioenergy final consumption (excluding the (see pp 104-105). used in Net Zero is in the form of non-combusted use of fuels). This biomass, which is mainly used as is at the top of the range of IPCC a flexible feedstock in the power net-zero scenarios (15-60 EJ), which sector and to fuel high-temperature may reflect that many of the IPCC industrial processes. Biofuels scenarios were compiled before the account for almost another 30%, increase in policy and private-sector used largely in long-distance interest in hydrogen over the past transportation, helped by their few years. portability and high energy density. The remainder is biomethane which is consumed across all sectors as a replacement for natural gas.

129 | bp Energy Outlook: 2020 edition Net zero 130 |

Net-zero energy system: CCUS and negative emission technologies play a significant role

Carbon captured in IPCC scenarios and Net Zero CCUS by sector and fuel type in Net Zero in 2050

Gt of CO2 Gt of CO2

20 IPCC range at net zero 7 7 ECCs IPCC median 5 at net zero 5 Net Zero 4 in 2050 iomass 3 5 0 2 Coal 4 Natural 0 gas CCUS 5 3 by fuel

2 0 Industry ydrogen

Power -5 0 Carbon capture ioenergy with Natural Emissions from CCUS Unabated use and storage carbon capture climate combustion of fossil by sector emissions use and storage solutions fuels before CCUS

Key points

Technologies which capture CCUS can be combined with hard-to-abate sources in the energy carbon emissions or extract them bioenergy (BECCS) in the power system and the wider economy, from the atmosphere are likely to and industrial sectors to create a such as agriculture, as well as any play a material role in a net-zero negative-emissions energy source. overshoots in the carbon budget. environment. In the IPCC net-zero scenarios, the negative emissions produced using In particular, natural climate solutions In the IPCC net-zero scenarios, the (NCS), which includes forest and BECCS range from 5-10 Gt CO2. use of CCUS ranges between 8-18 Again, this is higher than in Net Zero, peat restoration and various forms

Gt CO2, which is roughly equivalent where the negative emissions from of enhanced land management, to capturing and sequestering generate emissions savings in the BECCS reach around 1.5 Gt CO2 by between a quarter and a half of 2050. IPCC net-zero scenarios ranging

all current carbon emissions from from -3 to +7 Gt CO2e (where the energy use. This range is higher than There are a variety of other negative ‘negative saving’ reflect the risk in Net Zero, where CCUS reaches a emission technologies (NETs). These that land use deteriorates over time

little over 5 Gt CO2 by 2050. technologies are not modelled adding to emissions). explicitly in Net Zero which explores Although CCUS facilities capture a a possible pathway in which There are other NETs, such as vast majority of carbon emissions, the energy system almost fully direct air capture and biochar which, current technologies don’t have a decarbonizes without significant use although not explicitly included in 100% capture rate. The average of NETs. Even so, these NETs may Net Zero, may also play a material efficiency rate assumed in Net Zero play an increasingly important role as role in balancing total GHGs as the is around 90%, implying residual the world seeks to reduce all GHG world moves to net zero. carbon emissions from CCUS emissions to net zero, offsetting

operations of around 0.5 Gt CO2. any continuing emissions from

131 | bp Energy Outlook: 2020 edition 132 | Investment

Summary Upstream oil and gas investment

133 | bp Energy Outlook: 2020 edition Investment 134 |

The energy transition requires significant shifts in the pattern of investment

Average annual investment, history and 2020-2050 Average annual investment in wind and solar

2018 US$ Billion Five-year rolling average, 2018 US$ Billion

200 203-20 Business- Rapid ind as-usual 000 Net Zero solar Rapid Business- Net Zero as-usual 00

203-20 Business- Oil as-usual 00 gas Rapid

Net Zero 400

Business- as-usual CCUS 200 Rapid facilities Net Zero 0 0 00 200 300 400 500 00 700 00 00 205 20 2025 2030 2035 2040 2045 2050

Key points

The energy transition requires Zero is between $500-750bn. This The marked decline in oil and natural significant levels of investment, with is two or three times greater than gas demand in Rapid and Net Zero material shifts in the pattern of that recent levels of investment, although is reflected in a sharp slowing in the investment across different energy is roughly equivalent to around only pace of upstream investment relative sources. 3% of total business investment in to the past and is significantly lower 2018. BAU also implies an increase than the investment in wind and Estimates of the investment paths in investment in wind and solar solar capacity implied by these implied by different scenarios are capacity to around $300-400bn per scenarios. The pattern of investment highly uncertain since they depend year. in oil and natural gas production in on assumptions concerning a range the different scenarios is discussed of factors that could affect the cost The hump-shaped pattern of wind in more detail on pages 136-137. of energy investments over the and solar investment in Net Zero next 30 years. The assumptions – reflecting the quick build-out of The level of investment required underlying the estimated investment new capacity in the 2020s and 30s to support the build-out of CCUS requirements are discussed in more before slowing markedly – may lead facilities is relatively small compared detail on pp 152-153. Investment to issues of excess capacity in the to that required for wind and solar estimates are in real $2018 prices. supply chain supporting this build- capacity and upstream oil and gas out. production. This is the case even in Rapid and Net Zero scenarios imply Rapid and Net Zero in which CCUS a significant increase in investment capacity is increased substantially. in wind and solar power capacity relative to the past. The average annual investment in wind and solar capacity implied by Rapid and Net

135 | bp Energy Outlook: 2020 edition Investment 136 |

Significant investment in new oil and natural gas production is still required

Consumption and production of oil Consumption and production of natural gas

Mb/d Bcm

20 000

00 5000

0 4000

0 3000

40 2000 Rapid Rapid Net Zero Net Zero 20 Business-as-usual 000 Business-as-usual Supply with no new Supply with no new greenfield investment greenfield investment 0 0 0 2000 200 2020 2030 2040 2050 0 2000 200 2020 2030 2040 2050

Key points

Even though the demand for oil Closing the gap between these ‘no falls in the second half of Net Zero and natural gas peaks and falls in new greenfield investment’ supply is faster than the natural decline rate nearly all the scenarios, the faster profiles for oil and natural gas and of production, implying that some of rate of decline in existing production the level of supply needed to meet these investments by 2050 may not means that significant amounts of the demand profiles in the three be fully utilized and so may become new upstream investment in oil and scenarios requires significant levels uneconomic. natural gas production is required in of new investment in upstream all three scenarios. oil and gas production, totalling This risk may be able to be mitigated between $9 trillion and over $20 by investing in less capital intensive, The scenarios are based on the trillion over the next 30 years. shorter-cycle, scalable projects, such assumption that, if oil producers as unconventional tight oil and gas, over the next 30 years invested only The profile of oil demand in Net Zero brownfield redevelopments and in maintaining existing (brownfield) highlights the increasingly difficult subsea tiebacks. sites, as well as completing projects judgements concerning future that have already been sanctioned, investments in oil and gas as the The uncertainty about the speed and this would imply an average decline world transition to a lower carbon nature of the energy transition, as rate of oil production of a little above energy system. highlighted for example by Delayed 4% p.a., with global oil supplies and Disorderly, means the option falling to around 25 Mb/d in 2050. The relative resilience of oil demand value associated with these types The corresponding decline rate for during the first half of the Outlook in of projects could increase in natural gas is assumed to be slightly Net Zero implies that several trillions coming years. higher (4.5%), reflecting the greater of US dollars of new oil investment proportion of natural gas production is needed over the next 15 years that comes from short-cycle or so to ensure adequate supplies. unconventional plays. But the pace at which oil demand

137 | bp Energy Outlook: 2020 edition 138 | Comparisons

Revisions to Rapid Comparing Rapid with external Outlooks

139 | bp Energy Outlook: 2020 edition Comparisons 140 |

Main revisions to Rapid: lower energy demand and carbon emissions; higher share of renewable energy

GDP, energy and carbon emissions Shares of primary energy % change in 2040 vs previous Outlook Percentage point change in 2040 vs previous Outlook

0% 5%

4% -2% 3% -4% 2% -% %

-% 0%

-% -0% -2% -2% -3% -4% -4%

-% -5%

GDP Primary CO2 Oil Gas Coal Nuclear ydro Wind ioenergy energy solar other

Key points

Analysing how previous Outlooks Global GDP in Rapid is 8% lower in assumptions regarding the use of have been revised over time helps 2040 than in last year’s RTS. This plastics (see pp 28-29, 44-45, identify key developments that may largely reflects the impact from 38-39). affect the future path of the energy Covid-19 and new assumptions system. concerning the impact of climate The share of natural gas in primary change on economic activity (see energy is also lower than in last The modelling assumptions used pp 28-29, 148-149). The level of year’s RTS, squeezed by a more in Rapid differ from those used in energy demand in 2040 in Rapid pronounced shift to renewable last year’s Rapid Transition scenario is around 4% lower, reflecting the energy in power generation and a (RTS) in two main respects. weaker profile for economic growth greater substitution by electricity and First, Rapid includes a more partially offset by the increasing use hydrogen in industry. comprehensive modelling of the role of secondary energy carriers such that hydrogen and bioenergy may as electricity and hydrogen, whose The main counterpart is renewable play in the energy transition. Second, production tends to boost primary energy, whose share of primary Rapid embodies a faster pace of energy. energy in 2040 is 7 percentage decarbonization, such that the level points higher than in last year’s of carbon emissions from energy The largest downward revision is to RTS. This upwards revision is split use in Rapid in 2040 are around oil, whose share of primary energy roughly equally between bioenergy 15% lower than in 2019’s RTS. in 2040 is 4 percentage points lower – reflecting this year’s more The differences in Rapid relative to than in 2019’s RTS. This diminished comprehensive analysis of bioenergy 2019’s RTS reflect a combination of role for oil reflects the proportionally (see pp 128-129) – and wind & solar these modelling changes as well as higher impact of Covid-19 on the power, supported by green hydrogen the impact of recent developments. transport sector, faster penetration production as well as continuing falls of electricity and hydrogen in in development costs. transport, and more stringent policy

141 | bp Energy Outlook: 2020 edition Comparisons 142 |

Rapid is broadly in line with external outlooks, although weaker oil and stronger natural gas

Growth in primary energy by source, 2018-2050 CO2 emissions and CCUS in 2050

% per annum Gt of CO2

0% 20 ange energy forecasters* % ange IPCC 2˚C Scenarios (0-0th percentile) % Median IPCC 2˚C Scenarios 4% Rapid 4

2% 2

0% 0

-2%

-4%

-% 4

-% 2

-0% 0

Primary Oil Gas Coal Nuclear enewables CO2 emissons CCUS energy hydro *See pp 155 for more detail

Key points

It is also helpful to compare the many of the scenarios have not been The outlook for natural gas in Rapid scenarios in the Energy Outlook updated since the pandemic, as well is towards the top end of both with projections published by other as the assumed impact of climate scenario ranges, which may partly organizations to highlight differences change on GDP growth in Rapid. reflectRapid having a brighter of view and areas of uncertainty. outlook for blue hydrogen than many Rapid can be compared with a The comparative weakness of of the other scenarios. sample of external outlooks which energy demand in Rapid is manifest are broadly consistent with limiting in the profiles for oil and coal In terms of carbon emissions in global temperature rises to ‘well consumption, where Rapid is at or 2050, Rapid is towards the low end below 2oC’ as well as a range of towards the bottom of the range of of the range of external scenarios corresponding IPCC scenarios (see both the external projections and the and in line with the median IPCC pp 155 for details of the sample of IPCC scenarios. scenario. Within that, the use of external outlooks and pp 150-151 for CCUS in Rapid is broadly in the more details on the IPCC scenarios). As with Rapid, both sets of middle of the spread of external comparator scenarios point to outlooks, although below the bottom The average growth of primary renewable energy being the fastest of the range of IPCC scenarios energy over the next 30 years in growing source of energy over the which embody a stronger view of Rapid is towards the bottom end next 30 years, with the average the potential role of CCUS. of the range of both the sample annual rate of growth of renewable of external outlooks and the IPCC energy in Rapid broadly in line with scenarios. This may partly reflect the median IPCC scenario. the impact of Covid-19 on economic activity and energy demand since

143 | bp Energy Outlook: 2020 edition 144 | Annex

Key figures, definitions, methodology and data sources

145 | bp Energy Outlook: 2020 edition Annex 146 | Key figures Level in 2050 Shares of primary energy in 2018 and 2050 Change 2018 - 2050 (% p.a.) 2018 Rapid Net Zero BAU 2018 Rapid Net Zero BAU Rapid Net Zero BAU Primary energy by fuel (EJ) Total 576 625 625 725 100% 100% 100% 100% 0.3% 0.3% 0.7% Oil 190 89 42 172 33% 14% 6.8% 24% -2.3% -4.6% -0.3% Natural gas 138 134 81 187 24% 21% 13% 26% - 0.1% -1.6% 0.9% Coal 158 24 12 123 27% 3.9% 1.9% 17% -5.7% -7.8% -0.8% Nuclear 24 44 57 31 4.2% 7.0% 9.1% 4.2% 1.9% 2.7% 0.7% Hydro 38 57 62 51 6.5% 9.1% 9.9% 7.1% 1.3% 1.6% 1.0% Renewables (incl. biofuels) 27 277 370 161 4.7% 44% 59% 22% 7.5% 8.5% 5.7%

Primary energy by sector Transport^ 119 147 159 147 21% 24% 26% 20% 0.7% 0.9% 0.7% Non-combusted^ 38 44 28 53 6.5% 7.1% 4.4% 7.3% 0.5% -1.0% 1.1% Buildings^ 169 179 177 234 29% 29% 28% 32% 0.2% 0.1% 1.0% Industry^ 250 254 261 291 43% 41% 42% 40% 0.1% 0.1% 0.5% Of which: Inputs to power 245 423 483 388 43% 68% 77% 54% 1.7% 2.2% 1.5%

Primary energy by region Developed 240 179 186 218 42% 29% 30% 30% -0.9% -0.8% -0.3% US 95 67 69 92 17% 11% 11% 13% -1.1% -1.0% - 0.1% EU 70 49 49 53 12% 7.8% 7.8% 7.3% -1.1% -1.1% -0.8% Other 75 64 68 73 13% 10% 11% 10% -0.5% -0.3% - 0.1% Emerging 335 445 438 507 58% 71% 70% 70% 0.9% 0.8% 1.3% China 136 141 139 155 24% 23% 22% 21% 0.1% 0.1% 0.4% India 34 75 77 86 5.9% 12% 12% 12% 2.5% 2.6% 3.0% Other Asia 41 66 68 76 7.1% 11% 11% 11% 1.5% 1.6% 2.0% Middle East 38 40 31 53 6.6% 6.5% 5.0% 7.3% 0.2% -0.6% 1.1% Russia 30 27 28 30 5.2% 4.2% 4.5% 4.1% -0.4% -0.2% 0.0% Brazil 12 20 20 20 2.1% 3.2% 3.1% 2.8% 1.5% 1.5% 1.6% Other 45 76 75 87 7.8% 12% 12% 12% 1.7% 1.6% 2.1%

Level in 2050 Change 2018 - 2050 (% p.a.) 2018 Rapid Net Zero BAU Rapid Net Zero BAU Primary energy by fuel (native units) Oil (Mb/d) 97 47 24 89 -2.2% -4.2% -0.3% Natural gas (Bcm) 3845 3708 2263 5199 - 0.1% -1.6% 0.9%

Production Oil (Mb/d) 98 47 89 -2.2% -0.3% Natural gas (Bcm) 3865 3717 5200 - 0.1% 0.9% Coal (EJ) 165 30 120 -5.2% -1.0%

Macro GDP (trillion US$ PPP) 129 297 297 297 2.6% 2.6% 2.6% Population (billions) 7.6 9.7 9.7 9.7 0.8% 0.8% 0.8% GDP per capita (thousand US$) 17 31 31 31 1.9% 1.9% 1.9% Energy intensity (MJ per US$ of GDP) 4.5 2.1 2.1 2.4 -2.3% -2.3% -1.9%

Net CO2 emissions (Gt) 33.8 9.4 1.4 30.5 -3.9% -9.4% -0.3%

EJ = exajoules ^Includes electricity and hydrogen; and their associated conversion losses.

147 | bp Energy Outlook: 2020 edition Annex 148 |

Estimates of climate change on GDP growth

This year’s Energy Outlook attempts analyses the economic impact of carbon emissions from energy use in to account explicitly for the impact climate change based on estimates each of the scenarios. For Rapid this is of climate change on economic of how past changes in temperature RCP 2.6; Net Zero – RCP 1.9; and BAU activity as well as the mitigation costs in different parts of the world have – RCP 4.5. The economic impacts associated with decarbonizing the affected GDP. One of the benchmark from these implied temperature energy system. There is considerable studies of this literature, Burke et al. increases are computed relative to uncertainty in the economic and (2015) uses the IPCC Representative a counterfactual scenario, in which scientific literature as to how to Concentration Pathways (RCP) future temperatures are assumed to model these impacts and so any scenarios to assess the non-linear be held constant at recent (1980-2010) estimates of these effects, including impact of temperature changes on average levels. those contained in the Outlook, GDP across 166 countries. They find are imperfect and almost certainly that GDP per capita is a concave The median climatic change impacts incomplete. That said, we have judged function of temperature, peaking at an derived using Burke’s methodology that it is better to use the research that annual average temperature of 13°C suggest that, for BAU, the implied is available than to make no attempt to and declining strongly at higher levels. increase in global temperatures would include it in our analysis. decrease global GDP by close to 5% The illustrative estimates of the by 2050. The estimated impacts for The economic literature on climate impact from climate change on GDP Rapid and Net Zero are somewhat change has traditionally quantified contained in the Outlook are based smaller, reflecting the lower path the relationship between climate on the models from Burke et al. The of carbon emissions. The regional change effects and economic activity assumed temperature profiles implied impacts are distributed according to using climate-economy integrated by the three main scenarios are based the evolution of their temperatures assessment models (IAMs). A more on the RCP scenario which most relative to the concave function recent strand of empirical literature closely approximate the trajectories for estimated by Burke et al. Regions that

are already relatively warm are likely to IPCC (AR5 – Chapter 6) suggest that References experience negative impacts on GDP, for scenarios consistent with keeping Burke, M., Hsiang, S. & Miguel, E. while colder regions could potentially global temperatures increases to Global non-linear effect of temperature benefit from relatively warmer well below 2°C, median estimates of on economic production. Nature 527, weather. mitigation costs range between 2-6% 235–239 (2015) of global consumption by 2050. These climate change impacts are The global aggregate mitigation cost hugely uncertain and incomplete as Given the huge range of uncertainty estimates in terms of GDP losses the Burke et al framework focuses surrounding estimates of the are taken from IPCC AR5 – Chapter only on temperature changes on GDP, economic impact of both climate 6: https://www.ipcc.ch/site/assets/ and does not incorporate other climate changes and mitigation, and the fact uploads/2018/02/ipcc_wg3_ar5_ change effects (such as rising sea that all three of the main scenarios chapter6.pdf levels, more frequent and stronger include both types of costs to a storms, floods, droughts or loss greater or lesser extent, the Outlook of biodiversity) or other sources of is based on the illustrative assumption economic disruption, such as large- that these effects reduce GDP in 2050 scale human migration. by around 5% in all three scenarios, relative to the counterfactual in which The mitigation costs of actions to temperatures are held constant at decarbonize the energy system are recent average levels. also very uncertain, with significant variations across different external Importantly, if the scenarios were estimates. Most estimates, however, extrapolated beyond 2050, the Burke suggests that these costs increase methodology would imply GDP with the stringency of the mitigation growth and prosperity in BAU would effort, suggesting that they are likely to get progressively worse, leading to be bigger in Rapid and Net Zero, than significantly lower levels of well-being in BAU. Estimates published by the than in Rapid and Net Zero.

149 | bp Energy Outlook: 2020 edition Annex 150 |

Construction of IPCC scenario sample ranges

The world’s scientific community has frameworks were compiled and made For each of these two subsets of developed a number of “integrated available via an online portal (https:// scenarios, the ranges of outcomes for assessment models” (IAMs) that data.ene.iiasa.ac.at/iamc-1.5c-explorer). key variables are described in terms of attempt to represent interactions medians and percentile distributions. between human systems (the Some of the scenarios are now quite economy, energy, agriculture) and dated and, in some cases, scenario It is important to note that the scenario climate. They are “simplified, stylized, results are already significantly out dataset represents “an ensemble of numerical approaches to represent of line with recent historical data and opportunity” – a collection of scenarios enormously complex physical and so were excluded from our analysis. that were available at the time of the social systems” (Clarke 2014). These From the remaining model runs, we IPCC survey and which were produced models have been used to generate a extracted 112 scenarios that were for a variety of purposes. “It is not a large number of scenarios, exploring judged to be consistent with the Paris random sampling of future possibilities possible long-run trajectories for GHG Agreement Long Term Temperature of how the world economy should emissions and climatic changes under Goal. They were further divided into decarbonise” (Gambhir et al, 2019). a wide range of assumptions. two subsets: “well below 2°C” (69 That means that the distributions of scenarios); and “1.5°C with no or low IPCC scenarios cannot be interpreted The Intergovernmental Panel on overshoot” (43 scenarios). A more as reliable indicators of likelihood of Climate Change (IPCC) carries out detailed note on the scenario selection what might actually happen. Rather, regular surveys of this scenario methodology is available at www. the distributions simply describe modelling as part of its assessment bp.com/energyoutlook. For each of the characteristics of the scenarios work. The most recent survey was these two subsets of scenarios, the contained in the IPCC Report. carried out in support of the 2019 IPCC ranges of outcomes for key variables Special Report on Global Warming are described in terms of medians and of 1.5°C (SR15). A total of 414 percentile distributions. scenarios from 13 different modelling

The sample ranges included in the References section ‘Global energy system at net Clarke L. et al (2014). Assessing zero’ (see pp 119-131), are based on Transformation Pathways. In: Climate those IPCC scenarios in our sample Change 2014: Mitigation of Climate which embody net carbon emissions Change. Contribution of Working from energy and industrial use falling Group III to the Fifth Assessment below 1 Gt before 2100. This was the Report of the Intergovernmental Panel case for 84 of the scenarios from the on Climate Change sample of 112 scenarios. For each of these scenarios, the size and structure Gambhir A. et al (2019). Energy of the energy system is considered at system changes in 1.5 °C, well below the point at which carbon emissions 2 °C and 2 °C scenarios Energy fall below the 1 Gt threshold. The Strategy Reviews 23 earliest point at which this ‘net zero’ state is reached in the sample of scenarios is around 2045 and the median scenario in 2070.

151 | bp Energy Outlook: 2020 edition Annex 152 |

Estimate of investment profiles

This year’s Energy Outlook includes estimated at 4.3% p.a. and 4.8% p.a., A set of non-producing, unsanctioned, estimates of the investment respectively. When including fields dispatchable assets needed to meet requirements implied for each of the that have already been sanctioned, the the oil and gas shortfalls in our three three main scenarios for upstream decline rate is mitigated to 4.1% p.a. main demand scenarios is defined. oil and natural gas, renewables and and 4.5% p.a., respectively. Based on Rystad data, the asset-level carbon capture use and storage investments required to bring those (CCUS). The hypothetical supply baselines assets online are estimated. Finally, for oil and natural gas assume that the capital spending on new assets is Oil and gas investment no new investment is undertaken in added to the capex of the producing Upstream oil and natural gas capital new fields beginning with the 2020 and under development assets. expenditure (excluding operating costs) supply baseline. It assumes that Investment in producing and under profiles in each of the three main continuous investment at producing development assets are assumed to scenarios are calculated based on the and sanctioned fields takes place be equal in all scenarios. investment required at an individual including infill wells and costs related asset level to meet the shortfall to maintaining the facility. Additionally, between estimates of the demand for projects that have already been oil and natural gas and a hypothetical sanctioned (up to almost 7 Mb/d by supply of oil and natural gas where no 2025 and 400 Bcm by 2027 for oil and new investment is undertaken in new natural gas, respectively) are assumed fields. Both the asset-level database to be completed in the next few years. and decline rates are derived from Rystad. The average base decline rate up to 2050 for oil and natural gas is

Investment in wind and solar The total investment in CCUS is based energy, and CCUS on deployment and costs. These also include variables costs and, in For wind and solar energy, the particular, the cost of transportation deployment rate of each technology and storage of carbon emissions in each scenario is estimated. which vary between regions and over Investment costs are assigned to each time. based on their historical costs and learning curves. The investment costs References of solar and wind energy are broadly Rystad Energy’s UCube global aligned with their historical learning upstream database, August 2020 curves, around 8% for wind and 20% for solar. For carbon capture and storage, the cost of investment in 2018 for different technologies – iron & steel, cement, hydrogen, power sector, chemical sector, fertilizers – is taken from a range of sources. It is assumed that the investment costs decline over time as a reflection of technology progress. The annual investment cost reduction varies from a minimum of 1.3% to a maximum of 1.9%, depending on the technology.

153 | bp Energy Outlook: 2020 edition Annex 154 |

Definitions and data sources

Data assumption that efficiency will Non-combusted includes fuel that increase linearly to 45% by 2050. is used as a feedstock to create Unless noted otherwise, data For more information see https:// materials such as petrochemicals, definitions are based on the BP www.bp.com/content/dam/bp/ lubricant and bitumen Statistical Review of World Energy business-sites/en/global/corporate/ pdfs/energy-economics/statistical- Buildings includes energy used in All comparison data, including residential and commercial building, scenarios from IPCC and other review/methodology-for-converting- non-fossil-fuel-primary-energy.pdf plus agriculture, fishing and IEA’s energy forecasters, have been non-specified sector “Other” rebased to be consistent with the bp Gross Domestic Product (GDP) Power includes inputs into power Statistical Review is expressed in terms of real generation (including combined heat Purchasing Power Parity (PPP) at Primary energy comprises and power plants) commercially-traded fuels, and 2015 prices excludes traditional biomass Regions Sectors The primary energy values of OECD is approximated as North Transport includes energy used in nuclear, hydro and electricity from America plus Europe plus OECD road, marine, rail and aviation renewable sources have been Asia derived by calculating the equivalent Industry includes energy combusted China refers to the Chinese Mainland amount of fossil fuel required to in manufacturing; construction; the generate the same volume of energy industry including pipeline Other Asia includes all countries and electricity in a thermal power station, transport; and for transformation regions in non-OECD Asia excluding the thermal efficiency assumption processes outside of power mainland China and India is time varying, with the simplified generation

Fuels, energy carriers, biomethane Other key data sources carbon and materials References to carbon emissions BP p.l.c., bp Statistical Review of consider only CO emissions from Oil unless noted otherwise includes: 2 World Energy, London, United crude (including shale oil and oil fuel combustion Kingdom, June 2019 sands); natural gas liquids (NGLs); Plastics includes synthetic fibres International Energy Agency, Energy gas-to-liquids (GTLs); coal-to-liquids Balances of Non-OECD Countries, (CTLs); condensates; and refinery Data sources used to Paris, France, 2019 gains compare with Rapid International Energy Agency, Energy Liquids includes all of oil plus Equinor: Renewal Scenario, Energy Balances of OECD Countries, Paris, biofuels Perspectives 2019, June 2019 France, 2019 Renewables unless otherwise noted IEA: Sustainable Development United Nations, Department of includes wind, solar, geothermal, Scenario, International Energy Economic and Social Affairs, biomass, biomethane and biofuels Agency, World Energy Outlook 2019, Population Division (2019). World and excludes large-scale hydro Paris, France, November 2019 Population Prospects 2019, Online Non-fossils includes renewables, IHS Markit: Accelerated Carbon Edition. Rev. 1 nuclear and hydro Capture and Storage and Multitech Hydrogen demand includes its Mitigation: IHS Markit 2020 low consumption in transport, industry, emission cases, January 2020 buildings and power, but does Shell: Sky Scenario, February 2018 not include the demand as a non- combusted feedstock (such as use for fertilizer or methanol production) Gas includes natural gas and

155 | bp Energy Outlook: 2020 edition Annex 156 |

Disclaimer

This publication contains forward-looking including the impact of climate change and acts of terrorism or sabotage; public statements – that is, statements related to on this, population growth, demand for health situations including the impacts future, not past events and circumstances. passenger and commercial transportation, of an epidemic or pandemic and other These statements may generally, but energy markets, energy efficiency, policy factors discussed in this publication. bp not always, be identified by the use of measures and support for renewable disclaims any obligation to update this words such as ‘will’, ‘expects, ‘is expected energies and other lower-carbon publication or to correct any inaccuracies to’, ‘aims’, ‘should’, ‘may’, ‘objective’, ‘is alternatives, sources of energy supply and which may become apparent. Neither BP likely to’, ‘intends’, ‘believes’, anticipates, production, technological developments, p.l.c. nor any of its subsidiaries (nor any of ‘plans’, ‘we see’ or similar expressions. trade disputes, sanctions and other their respective officers, employees and In particular, the following, among other matters that may impact energy security, agents) accept liability for any inaccuracies statements, are all forward looking in and the growth of carbon emissions. or omissions or for any direct, indirect, nature: statements regarding the global Forward-looking statements involve risks special, consequential or other losses energy transition, increasing prosperity and and uncertainties because they relate to or damages of whatsoever kind in or in living standards in the developing world events, and depend on circumstances, connection with this publication or any and emerging economies, expansion that will or may occur in the future. Actual information contained in it. of the circular economy, urbanization outcomes may differ materially from and increasing industrialization and those expressed in such statements Acknowledgements productivity, energy demand, consumption depending on a variety of factors, Data compilation: Centre for Energy and access, impacts of the Coronavirus including: the specific factors identified Economics Research and Policy pandemic, the global fuel mix including in the discussions expressed in such its composition and how that may change statements; product supply, demand and Heriot-Watt University over time and in different pathways or pricing; political stability; general economic scenarios, the global energy system conditions; demographic changes; legal ceerp.hw.ac.uk including different pathways and scenarios and regulatory developments; availability and how it may be restructured, societal of new technologies; natural disasters preferences, global economic growth and adverse weather conditions; wars

157 | bp Energy Outlook: 2020 edition

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