(EnergyAsia, June 20 2014, Friday) — Driven by China, Asia’s energy demand will grow at five times the rate of North America’s by five times between 2014 and 2030, predicts UK-based consultant Wood Mackenzie.
This is equal to adding a new Brazil to global energy demand every year over that 16-year period, but global supply will keep pace thanks to the continued growth in North American oil and gas production, said Paul McConnell, Wood Mackenzie’s Principal Analyst for Global Trends Service.
“Global energy markets are reaching a new equilibrium as demand shifts East, but this era is also one of robust energy supply” that will limit the run-up in oil, gas and coal prices.
As a result, wary investors and shareholders will exert pressure on capital expenditure, forcing companies to focus on short-term cash flow.
“This shift from volume to value means a rebalancing towards a supply outlook more appropriate to a world in which demand growth, while still remarkable in the context of history, is somewhat softer than was expected only a few years ago,” said Mr McConnell.
“As the energy industry adjusts and settles into this new equilibrium, cost pressures will remain at the forefront of executive concerns.”
He said the demand growth in developing markets, the impact of new techniques and technology on the supply mix, and the increasingly interconnected character of global energy trade will open up “endless” opportunities for growth over the long term.
Asia’s energy demand and North America’s supply
“This will be an era of huge demand growth, China is already the world’s largest energy consumer; its vast size and continued development ensure its importance as a current and future driver of global energy demand,” said Mr McConnell.
“By 2030 China’s energy consumption will be unrivalled and the centre of gravity for global energy demand will have decisively shifted East. India and the other developing economies of Asia Pacific are also of huge importance. India and China will cement their positions as compelling destinations for exporters of coal, oil and gas.”
The world’s increasing energy needs will be partly met by the emergence of North America as an energy export province for oil and gas.
“The renaissance of North American gas and oil production is the critical supply-side trend affecting global energy markets in the long term,” he said.
“Energy production has undergone an abrupt reversal, which will make the region a net exporter of energy before the 2020s and will redefine global energy markets as it provides a robust and stable energy supply. It will also facilitate the global rebalancing of energy demand towards Asia, providing increased supply in a period of long-term demand growth, as well as reshaping commodity trading patterns across the world.”
By 2020, Wood Mackenzie expects the growth in North American oil production to outpace the Middle East by four barrels to one, and by 2030, North American output will have grown by 390 million tonnes of oil equivalent (Mtoe) – from 2009’s levels of 650 million toe.
This growth rivals an increase of 430 Mtoe in the Middle East where oil production will accelerate, mainly driven by growth in Iraq, while North American tight oil supply growth plateaus post-2020. Wood Mackenzie provided this analysis before the latest explosion of violence and conflict in Iraq.
The UK consulting firm also expects North American gas production to continue to grow rapidly, doubling to 1,000 mtoe in 2030 since the start of the continent’s energy boom in 2005.
Wood Mackenzie said North America will become energy independent by 2018 with energy exports exceeding imports.
“By 2018 North America will also have overtaken the gas output of Russia and the Caspian, and will grow to be the world’s largest gas producing region by 2030,” it said.
Ann-Louise Hittle, the firm’s Head of Macro Oils Research said US tight oil supply will provide a price floor for world prices.
“Increasing US tight oil supplies and Canada’s growth in oil sands production are expected to add stability to the international oil market, rather than remove it,” she said.