BP Energy Outlook 2019 Edition the Energy Outlook the Outlook Considers a Number of Different Scenarios

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BP Energy Outlook 2019 edition The Energy Outlook The 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 by considering a series of shaping the global “what if” experiments. The scenarios consider only a tiny sub-set of energy transition the uncertainty surrounding energy markets out to 2040; they do not out to 2040 and the provide a comprehensive description of all possible future outcomes. For ease of explanation, much of the Outlook is described with key uncertainties reference to the ‘Evolving transition’ scenario. But that does not imply surrounding that that the probability of this scenario is higher than the others. Indeed, the multitude of uncertainties means the probability of any one of transition these scenarios materializing exactly as described is negligible. The Energy Outlook is produced to aid BP’s analysis and decision- making, 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. BP considers the scenarios in the Outlook, together with a range of other analysis and information, when forming its long-term strategy.

3 | BP Energy Outlook: 2019 edition | © BP p.l.c. 2019 The outlook facing major energy need for much more energy to meet providers, like BP, is both challenging demand as prosperity rises. and exciting. There are many other challenges One of the biggest challenges of our facing our industry as the global energy time is a dual one: the need to meet system evolves. The centre of gravity rising energy demand while at the of energy demand is shifting, with same time reducing carbon emissions. the expanding middle classes in Asia The emissions-reduction side of this accounting for much of the growth in dual challenge will mean shifting to a global GDP and energy consumption lower-carbon energy system, as the over the next 20 years. The pattern Welcome to the world seeks to move to a pathway of energy supply is also changing, consistent with meeting the climate with the shale revolution catapulting 2019 edition of goals outlined in the Paris Agreement. the US to pole position as the world’s Much more progress and change largest producer of oil and gas, and the BP’s Energy Outlook is needed on a range of fronts if rapid growth of liquefied natural gas the world is to have any chance of (LNG) transforming how natural gas moving on to such a pathway. is transported and traded around the globe. Meanwhile, the way in which Meeting the other side of the dual energy is consumed is changing in challenge will require many forms real time, as the world electrifies and of energy to play a role. There’s a energy increasingly becomes part of strong correlation between human broader services that are bought and development and energy consumption sold in ever more competitive and – and our analysis of this relationship efficient digital markets. in this year’s Outlook highlights the

The challenge is to understand, adapt to our thinking and decision-making. and ultimately thrive in this changing It helps us gauge the range of energy landscape. Along with these uncertainties, judge how the risks challenges, come opportunities – and can be managed, and determine how that’s what makes this a really exciting best to encourage change that puts time for our industry. Billions of people the world on a more positive and are being lifted out of low incomes, sustainable path. Ultimately, we are helping to drive economic growth all part of the energy transition and and the demand for energy. New the decisions all of us make today technologies are revolutionizing the can shape the future for many years way in which that energy is produced, to come. transported and consumed. And the The Energy Outlook plays an transition to a lower-carbon energy important role in helping to inform and system is opening up a wide range of shape our strategic decision-making in business possibilities. BP. I hope you find this year’s Outlook This year’s Energy Outlook provides a useful contribution to your own fresh insight into these trends and discussions and thinking. many more. The value of the Outlook is not in trying to predict the future. Any such attempt is doomed to fail – the uncertainty surrounding the energy transition is here to stay. Rather the value of the Energy Outlook is in Bob Dudley providing a structure and discipline Group chief executive

5 | BP Energy Outlook: 2019 edition | © BP p.l.c. 2019 Executive summary

The demand for Key points energy is set to The Energy Outlook considers Despite this increase in energy increase significantly different aspects of the energy demand, around two-thirds of the transition and the key issues and world’s population in 2040 still live driven by increases uncertainties these raise. in countries where average energy consumption per head is relatively in prosperity in the In all the scenarios considered, world low, highlighting the need for developing world GDP more than doubles by 2040 ‘more energy’. driven by increasing prosperity in fast-growing developing economies. Energy consumed within industry and buildings accounts for around In the Evolving transition (ET) three-quarters of the increase in scenario this improvement in living energy demand. standards causes energy demand to increase by around a third over the Growth in transport demand slows Outlook, driven by India, China and sharply relative to the past, as gains Other Asia which together account in vehicle efficiency accelerate. for two-thirds of the increase. The share of passenger vehicle kilometres powered by electricity increases to around 25% by 2040, supported by the growing importance of fully-autonomous cars and shared-mobility services.

The world continues to electrify, Natural gas grows robustly, with around three-quarters of supported by broad-based demand the increase in primary energy and the increasing availability of gas, absorbed by the power sector. aided by the continuing expansion of liquefied natural gas (LNG). Renewable energy is the fastest growing source of energy, Global coal consumption is broadly contributing half of the growth flat, with falls in Chinese and OECD in global energy supplies and consumption offset by increases in becoming the largest source of India and Other Asia. power by 2040. In the Evolving transition scenario, Demand for oil and other liquid carbon emissions continue to fuels grows for the first part of the rise, signalling the need for a Outlook before gradually plateauing. comprehensive set of policy measures to achieve ‘less carbon’. The increase in liquids production is initially dominated by US tight oil, The Outlook considers a range of but OPEC production subsequently alternative scenarios, including the increases as US tight oil declines. need for ‘more energy’, ‘less carbon’ and the possible impact of an escalation in trade disputes.

7 | BP Energy Outlook: 2019 edition | © BP p.l.c. 2019 Contents

Overview 10

Global backdrop 16 GDP, prosperity and energy intensity 18 Alternative scenario: More energy 22 Dual challenge: More energy, less carbon 24

Sectors 26 Summary 28 Industry 30 Non-combusted 32 Alternative scenario: Single-use plastics ban 34 Buildings 36 Alternative scenario: Lower-carbon industry and buildings 38 Transport 42 Alternative scenario: Lower-carbon transport 48 Power 52 Alternative scenario: Lower-carbon power 58

Regions 62 Regional consumption 64 Fuel mix across key countries and regions 66 Regional production 68 Global energy trade 70 Alternative scenario: Less globalization 72

Demand and supply of fuels 76 Overview 78 Oil 80 Alternative scenario: Greater reform 88 Natural gas 94 Coal 102 Renewables 104 Nuclear and hydro 108

Carbon emissions 110 Summary 112 Alternative scenario: Rapid transition 114 Beyond 2040 118

Comparisons 122 Comparisons to previous Outlooks 124 Comparisons to external Outlooks 128

Annex 132 Key figures, definitions and sources 134

9 | BP Energy Outlook: 2019 edition | © BP p.l.c. 2019 Overview

11 | BP Energy Outlook: 2019 edition | © BP p.l.c. 2019 Overview

The Energy Outlook considers a range of scenarios to explore different aspects of the energy transition

Primary energy consumption by fuel CO2 emissions

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Key points

The Energy Outlook considers Some scenarios focus on specific a range of scenarios to explore fuels or policies, e.g. a possible different aspects of the energy ban on single-use plastics transition. The scenarios have (pp 34-35). Others focus on impact some common features, such of possible changes in behaviour, as ongoing economic growth e.g. an escalation in trade disputes and a shift towards a lower- (pp 72-75) or major oil producers carbon fuel mix, but differ in reforming their economies terms of policy, technology faster-than-expected (pp 88-89). or behavioural assumptions. The Outlook also considers the In what follows, the beginning dual challenge facing the energy of each text page (unless stated system: the need for ‘more energy’ otherwise) highlights features of the (pp 22-23) and ‘less carbon’ energy transition common across all (pp 24-25), including the contribution scenarios considered. For ease of reducing carbon emissions in exposition, much of the subsequent different sectors of the energy description and text boxes are system – transport (pp 48-51), based on the Evolving transition power (pp 58-61) and industry and (ET) scenario, which assumes that buildings (pp 38-41) – can make to government policies, technology and achieving the Paris climate goals. social preferences continue to evolve in a manner and speed seen over the recent past.

13 | BP Energy Outlook: 2019 edition | © BP p.l.c. 2019 Overview

The Outlook considers the energy transition through three different lenses: sectors, regions and fuels

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Key points

The Energy Outlook considers the Growth in energy consumption Renewable energy is the fastest energy transition from three different is broad-based across all the growing source of energy, perspectives each of which helps main sectors of the economy, accounting for around half of the to illuminate different aspects of with industry and buildings increase in energy. Natural gas the transition: the sectors in which accounting for three-quarters grows much faster than either oil energy is used; the regions in of the increase in energy demand or coal. The growing abundance of which it is consumed and produced; (Sectors pp 28-61). energy supplies plays an increasing and the consumption and production role in shaping global energy of different fuels. By region, all of the growth in energy markets (Fuels pp 78-109). demand comes from fast-growing In the ET scenario, global energy developing economies, led by demand grows by around a third India and China. Differing regional by 2040 – a significantly slower trends in energy production lead to rate of growth than in the previous noticeable shifts in global energy 20 years or so. trade flows (Regions pp 64-75).

15 | BP Energy Outlook: 2019 edition | © BP p.l.c. 2019 Global backdrop

GDP, prosperity and energy intensity Alternative scenario: More energy Dual challenge: More energy, less carbon

17 | BP Energy Outlook: 2019 edition | © BP p.l.c. 2019 Global backdrop

Global economic growth is driven by increasing prosperity in developing economies, led by China and India

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The world economy continues to But the vast majority of world grow, driven by increasing prosperity growth is driven by increasing Billions of people in the developing world. productivity (i.e. GDP per head), move from low- which accounts for almost 80% incomes driving global In the ET scenario, global GDP of the global expansion and lifts grows around 3¼% p.a. (on a more than 2½ billion people from economic growth and Purchasing Power Parity basis) – low incomes. The emergence energy demand a little weaker than average growth of a large and growing middle over the past 20 years or so. class in the developing world is an increasingly important force Global output is partly supported by shaping global economic and population growth, with the world energy trends. population increasing by around Developing economies account 1.7 billion to reach nearly 9.2 billion for over 80% of the expansion in people in 2040. world output, with China and India accounting for around half of that growth. Africa continues to be weighed down by weak productivity, accounting for almost half of the increase in global population, but less than 10% of world GDP growth.

Higher living standards drive increases in energy demand, partly offset by substantial gains in energy intensity

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Expansion in global output and The overall growth in energy Despite significant growth in prosperity drives growth in global demand is materially offset by prosperity and energy consumption energy demand. declines in energy intensity over the next 20 years, a substantial (energy used per unit of GDP) proportion of the world’s population Energy consumption in the ET as the world increasingly learns in the ET scenario still consumes scenario increases by around a to produce more with less: relatively low levels of energy third over the Outlook. As with global GDP more than doubles in 2040. The need for the world GDP growth, the vast majority over the Outlook, but energy to produce ‘more energy’ as of this increase stems from consumption increases by well as ‘less carbon’ is discussed increasing prosperity, as billions only a third. in pp 22-25. of people move from low to middle incomes, allowing them to Global energy grows at an increase substantially their energy average rate of 1.2% p.a. in the consumption per head. ET scenario, down from over 2% p.a. in the previous 20 years or so. This weaker growth reflects both slower population growth and faster improvements in energy intensity.

Alternative scenario: More energy Alternative scenario: the world needs ‘more energy’ to allow global living standards to continue to improve

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Key points

There is a strong link between This requires around 25% more human progress and energy energy by 2040 – roughly equivalent consumption. to China’s energy consumption 80% of the world’s in 2017. population live in The United Nation’s Human countries where Development Index (HDI) This assumes that countries suggests that increases in in which energy consumption average energy energy consumption up to is much greater than 100 GJ/per consumption is less head do not economize on their around 100 Gigajoules (GJ) than 100 GJ per head per head are associated with energy use. If all those countries substantial increases in human reduced average consumption development and well-being, levels to the EU average in after which the relationship 2040 (around 120 GJ/per head), flattens out. this would provide almost the entire energy required. Around 80% of the world’s population today live in countries Improving energy efficiency in where average energy consumption countries which use disproportionate is less than 100 GJ per head. amounts of energy is likely to be In the ET scenario, this proportion is key to solving the dual challenge still around two-thirds even by 2040. of providing ‘more energy and less In the alternative ‘More energy’ carbon’ (pp 22-25). scenario this share is reduced to one-third by 2040.