BP warns that investment in oil and gas production is essential if the world wants to avoid more price swings and shortages.
In its annual energy outlook, published Monday by the oil giant, the company stated that fossil fuels will still account for around 20pc of primary energy in 2050, even with significant climate policy tightening.
Spencer Dale, the chief economist of BP, stated that new wells will be required until 2050 in order to ensure the supply of fossil fuels meets demand.
He wrote that natural declines in current production sources mean there must be continued upstream investment for oil and natural gas in the next 30 years.
This assessment will likely provoke a backlash from climate activists and campaigners, who argue that investment should immediately be stopped to reach net zero goals.
Greta Thunberg, the head of Davos, told world leaders earlier this month that no new extraction should continue. UN chief Antonio Guterres stated last June that “new funding for fossil fuels” should not be approved if we are to achieve our goal to zero net emissions by 2050.
BP stated that the oil and gas supply must be maintained to avoid a repeat of last year’s disruptions caused by Russian oil and natural gas shortages.
Dale stated: “The magnitude of the economic and socio-economic disruptions caused by the loss of just fractions of the world’s fossil fuels has also highlighted how important it is for the transition away hydrocarbons be ordered so that the demand for hydrocarbons remains in line with what is available, which will avoid future energy shortages and higher prices.”
BP predicts that while oil and gas demand will drop sharply due to efforts to reduce carbon emissions, fuels will still play a significant role in the energy system.
According to the company, oil demand will plateau in the next decade before falling due to the transition to electric cars.
However, BP believes that fossil fuels will still make up about 20% of primary energy by 2050 even with a significant tightening in climate policies to reduce carbon emissions 95pc or less by 2050.
Dale stated that “Global energy policies and recent discussions have been focused on decarbonizing the energy system, and the transition towards net zero.”
“The past year has served as a reminder that we all need to consider the affordability and security of energy when transitioning.”
Investors are turning their backs on fossil fuels as close to $40 trillion of global capital is committed to divesting fossil fuel companies.
In its report, BP examined three scenarios that could lead to the evolution of the global oil system. According to the “new momentum” scenario, which is most representative of current trends, fossil fuels will account for 55pc primary energy by 2050, as opposed to 80pc in 2019.
It states that “The total consumption for fossil fuels decreases in all three scenarios.” “This would mark the first time in modern times that any fossil fuel demand has fallen in a sustained manner.”
The Opec’s share in global oil production will rise dramatically after 2030, to nearly two-thirds by 2050. This is a significant geopolitical shift.
Saudi Arabia is leading the cartel of oil-producing nations. It is believed that it will reduce its production over the next decade in order to keep prices from falling too much.
BP is the largest global oil and gas producer, with more than a million barrels per day of oil equivalent in 2021. The industry’s most important resource is the annual energy outlook.
Its chief executive Bernard Looney has pledged to shift to renewable energy. He also stated that it plans to reduce its oil and gas production by around 40pc by 2030.
According to Mr Dale, the increase in extreme weather events and emissions “highlights more than ever the importance for a decisive shift toward a net zero future.”
