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World Energy Outlook 2016

The International Energy Agency released its World Energy Outlook for 2016 recently and its findings suggest that the period up to 2040 will be one of great change in the way the world powers itself. Thanks to the Paris Agreement, it predicts a rise in the use of renewable energy sources and natural gas with a significant decline in the use of coal.

Demand for fossil fuels is likely to remain high but a lack of investment could mean there is a shortfall in supply in the near future. Although the report points out that there is no single energy story from now until 2040, as it will largely depend on individual government policies, it does highlight some interesting patterns.

Coal in decline

China, India and Southeast Asian countries are still the biggest consumers of coal, but the report believes that China’s usage may have peaked in 2013 and is now in decline. Globally, the pledges made in the Paris Agreement look set to see the use of coal decline further, with the report predicting that investment in low carbon energy sources will increase. It states that up to $44 trillion will be invested in energy between now and 2040, with 40% (up from 30%) going on types of energy not based on fossil fuels, with a larger proportion of the fossil fuel chunk being invested in natural gas.

Oil still in demand

Despite the decline in investment in fossil fuels forecast for the period up to 2040, the demand for oil is not likely to fall dramatically. The road freight, aviation and petrochemical industries have few alternatives to oil, so demand from these areas is unlikely to fall. Cars, on the other hand, are expected to require less and less oil as fuel efficiency improves and the number of electric cars on the road increases. If the current lack of investment in upstream oil operations continues into 2017, there is likely to be a production shortfall and an inability to keep up with demand.

LNG and Renewables on the rise

As the least polluting of the fossil fuels, gas may be set to take coal’s place in the global market. Emerging suppliers and markets, along with the flexibility offered by LNG as opposed to pipelines, means its use is wider spread than ever. Natural gas and renewable energy sources are expected to meet 80% of the increased demand for energy between now and 2040.

The impetus to use these types of energy are growing financially, as well as in response to global warming, as the price of oil continues to stay low. Equally, subsidies for fossil fuels fell from $500 billion in 2014 to $323 billion in 2015 and continue to fall. Overall, the report predicts that nearly 60% of all new power generation to 2040 will come from renewables.

Ex~i Flow Measurement supplies flow measurement equipment to the oil and gas industry. To find out how we can help you, call +44 (0)1243 554920.