Energy demand stayed low in 2016, as the fuel mix shifted towards cleaner energy sources
China and India accounted for almost all the growth, says BP, and global emissions were flat for the second year in a row
Long-term, irreversible changes in world energy markets were evident in 2016, found BP's
66, out now. th statistical review
The British oil and gas company found that while energy consumption grew by just 1%
—compared with a 10-year average of 1.8% —this growth was almost entirely sustained by developing countries, especially India and China.
The relatively low rate of demand can be partly explained, BP said, by the weak economic growth in China last year, and especially a slowdown in its iron, steel and cement industries. Global GDP only grew by 3%, its slowest rate since 2002.
China surpassed the US as the biggest renewable producer in the world, while BP chief economist Spencer Dale said it was "the end of an era" for coal, with the UK power sector celebrating its
first coal-free day in April this year, and coal use back to levels not seen since the industrial revolution 200 years ago. Worldwide, coal was at its lowest consumption and production levels since 2004.
"There was a continued adjustment to short-term cyclical changes overlaid by gravitational pull from the long-run transition which is underway," Dale summed up.
That shift is one towards cleaner, low-carbon energy led by renewables, technological advances and environmental needs.
Bringing back balance
Oil, natural gas and coal consumption grew faster than production in 2016, with oil demand growing by 1.6m barrels a day.
Oil inventories are now at 300m barrels above the five-year average. But while oil gained market share, the Brent price averaged $44 per barrel in 2016, down from $52 in 2015, its lowest annual average since 2004.
The statistical review highlighted two main players influencing balance in the oil market: American shale and
"US tight oil responded more quickly to price signals than conventional oil," Dale said. "It's like a Weeble toy
—it wobbles, but it doesn't fall down."
He stressed, however, to beware of generalisations, since the behaviour of the
Permian is different from the Eagle Ford's, which is different from the Bakken's.
New well production per rig grew by about 40% per year in 2015 and 2016.
The emergence of US tight oil can be understood as a long-term structural shift, the report claimed. That could explain why Opec did not cut in 2014 as tight oil began to have a real impact, but chose to do so in 2016.
"This time it was about inventory levels," Dale said.
So far this year, prices have averaged at $53, thanks in part to Opec's actions, Dale said.
Although natural gas consumption rose globally by 1.5%, this was weaker than the 10-year average of 2.3%, and Henry Hub prices were 5% lower in 2016 than they were in 2015.
US gas production fell for the first time since shale production began in the mid-2000s, but demand grow strongly in some areas, particularly Europe (6%).
China was again the main source of growth for gas, but new availability of supplies meant new countries including Egypt, Poland and Pakistan are becoming bigger players in the market.
Last year was also the first year of the LNG growth spurt, with supply set to increase by 30% by 2030. Australia was
a standout performer with several new facilities coming online. Dale said to expect more flexible trading in LNG markets in the next few years, with smaller, shorter contracts and more supply in the form of the equivalent of a new LNG train every three or four months for the next four years.
strategy is more focused on gas, with six out of seven projects it has coming online this year being gas projects. Going green
More than 40% of the global increase in renewable energy within primary energy was down to China
—this was more than the entire OECD.
Led by wind and solar, renewables still made up only 3.2% of primary energy, but Dale stressed that oil, gas and nuclear each took around 40-50 years to achieve a dominant share of the market.
"It takes time to shift resources into new energy sources," he said.
Emissions were also flat for the second consecutive year, even in China, where they are estimated to have fallen in the past two years (following a 75% growth in the 10 years before then).
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