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Peak oil in less than a decade: Rystad

CEO makes bullish prediction on the energy transition and suggests investment in oil and gas will never again hit 2014 record

Peak oil consumption will happen much sooner than the industry expects—by the end of the 2020s—according to the CEO of Rystad Energy.

Rystad Energy’s sector-by-sector analysis predicts peak oil consumption before the end of the decade and “then a steady decline after that”, Jarand Rystad told the Oil & Gas Council’s World Energy Capital Assembly (Weca) conference in London. He added that peak gas will follow “maybe” 10 years later.

The transition would happen even in the absence of climate change, he says, due to local pollution legislation and technological development on the supply side, particularly in solar power generation, as well as the demand side, including from EVs. Those two technologies are so competitive that they will be able to outcompete [incumbent technologies],” he says.

While this is far sooner than many predictions, such as those by Opec, ExxonMobil and DNV GL, “these are actually more conservative assumptions than current car manufacturers’ plans in terms of the deployment of EVs and factories to build them… This technology is going to change it [the automotive sector] regardless of climate issues.”

Investor retreat

A report published by 350.org found that 1,100 investors have committed to not invest in oil and gas, equating to $11.5tn being taken out or not reinvested in the sector. Rystad notes that the S&P500 market capitalisation is only 4pc oil and gas whereas it had been 10-15pc, adding that and share prices disconnected from the oil price two years ago.

“We will never get back to the investment levels of 2014. I think that was peak investment in the oil and gas sector ever" Rystad, Rystad Energy

"Clearly, investors are either seeing that there will be a limit to growth, and we have to discount that into the value, or for the pure reason that they want to be compliant with the climate movement," he says.

While he predicts investment increasing in the next few years, we will never get back to the investment levels of 2014. I think that was peak investment in the oil and gas sector ever," he says. "Investment in the whole sector collapsed completely since 2014, 40pc down on average, while shale was 70pc down, but it has since more than doubled."

Financial transition

Rystad predicts the transition will lead the industry to shift its financing from equity to debt—an area where the US shale revolution has led the way. “That is easing the transition a little bit,” he says.

10-15GW of wind power is being added per month—equivalent to 1,500-2,000 windmills—and that will increase 70-80GW by the end of the 2020s as the price per GW falls to $2-3mn, according to Rystad Energy analysis.

$11.5tn Investor capital committed to not investing in oil and gas

He says the biggest projects in the energy sector are increasingly renewables projects such as Dogger Bank in the UK, which is the sixth biggest project in the world. “The wind market will be as big as the offshore [oil] market is today”, he says.

“Of course, we see the transition is a threat to the current oil and gas sector—but it also represents a lot of new opportunities.”

One area that will be the focus of investors is the emissions generated by the extraction of resources. The oil and gas sector “has a huge job to do to reduce the emissions as a part of this production process”, he says.

He notes that the emissions of Equinor’s Johan Sverdrup field in Norway is below 1 kg/bl, the average level is 18kg/bl and oil sands emit more than 100 kg/bl. “There is big potential and the improvements here can actually be faster at influencing emissions than the penetration of EVs,” he adds.

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