EIA: Natural Gas and Oil Will Continue to Dominate Energy Mix Through 2040
The U.S. Energy Information Administration (EIA) released its International Energy Outlook 2017 last week, finding that energy consumption is set to increase 28 percent from 2015 levels by 2040. To meet this significant rise, EIA predicts fossil fuels – led by natural gas and oil – will continue to account for about 77 percent of energy consumption through 2040, as the following graphic illustrates.
According to EIA, the lion’s share of energy consumption growth will stem from non-Organization for Economic Co-operation and Development (OECD) countries in Asia, such as China and India, which are expected to represent more than 60 percent of the global increase by 2040. These countries are increasingly meeting their energy demands with natural gas, as developments such as hydraulic fracturing have greatly expanded global production. As EIA points out:
“Abundant natural gas resources and rising production contribute to the strong competitive position of natural gas among other resources.”
In addition to its abundance, the prevalence of natural gas use has grown thanks to its role as a more environmentally friendly alternative to other fossil fuels. As the executive summary continues:
“Natural gas also burns more cleanly than coal or petroleum products, and as more governments begin implementing national or regional plans to reduce carbon dioxide (CO2) emissions, they may encourage the use of natural gas to displace more carbon-intensive coal and liquid fuels.”
All told, EIA estimates that natural gas consumption will increase by 53 trillion cubic feet (Tcf) worldwide over the next several decades – a 43 percent increase from 2015 to 2040 – reaching 177 Tcf by 2040.
To meet these needs, EIA projects that global natural gas producers will increase their production by 42 percent between 2015 and 2040. Further, while it is currently the world’s largest producer of natural gas, the United States is estimated to grow its natural gas production by nearly 11 Tcf over by 2040 – with the majority of this growth derived through hydraulic fracturing. As EIA states:
“The largest increases in natural gas production from 2015 to 2040 occur in the Middle East (11.8 Tcf), China (9.5 Tcf), the United States (10.7 Tcf), and Russia (4.8 Tcf). In Russia, production growth is supported primarily by increasing development of resources in the country’s Arctic and eastern regions. U.S. production growth comes mainly from shale resources.”
In order to meet demand across the globe, the world natural gas trade too, is expected to grow substantially. According to EIA, the trade of liquefied natural gas (LNG) worldwide is poised to nearly triple, reaching 31Tcf by 2040. The U.S. specifically is expected to be a driver of global LNG growth, along with Australia, as EIA estimates that LNG will account for over 60 percent of total U.S. natural gas exports by 2040.
Oil and Petroleum Products
Along with natural gas, consumption of petroleum and other liquid fuels is expected to grow by nearly 20 million barrels per day (b/d) between 2015 and 2040, reaching 113 million b/d in 2040.
The transportation sector will continue to account for the majority of this use, with non-OECD countries demand for the fuel growing by an astounding 39 percent by 2040. Further, more than 80 percent of the total increase in oil and petroleum fuel consumption is estimated to come from non-OECD Asia, with China and India dominating demand for the region. As the report mentions:
“China’s use of liquid fuels for transportation is projected to increase by 36% from 2015 to 2040 and India’s use over that period increases by 142%.”
With consumption of liquid fuels projected to grow by 18 percent worldwide, EIA estimates that much of the crude oil production to meet this demand will stem from Middle Eastern OPEC countries. As the report notes, Middle Eastern OPEC countries are forecast to supply nearly 33 million b/d of crude oil and condensate.
That said, United States is still projected to be a dominant force in global liquid fuel production because while U.S. supply growth was not calculated in this report, a report from EIA released earlier this year projects U.S. crude oil production to be more than 10 million b/d over the next several decades. So even with supply growth from Middle Eastern OPEC countries – including Iran, Iraq, Kuwait, Qatar, Saudi Arabia and the United Arab Emirates – production in the U.S. alone will be equivalent to about a third of their total production, thanks in large part to shale oil development.
It’s obvious that fossil fuels will continue to play a significant role in global energy consumption over the next 20-plus years. But while the use of crude and liquids fuels will still be ubiquitous, this report shows that natural gas is poised to be the leading source of energy in the future, as countries are increasingly choosing the clean-burning fuel to meet their energy needs. For this reason, shale development will be pivotal, as the United States is expected to maintain its position as a global leader in oil and gas production thanks to the wealth of resources now available through hydraulic fracturing.