Register

Peak Oil is You


Donate Bitcoins ;-) or Paypal :-)


Page added on December 23, 2017

Bookmark and Share

How Will Fossil Fuels Fare In 2040?

Consumption

Fossil fuels have been the dominant source of energy for global economic prosperity for over 150 years.

In 2016, fossil fuels overwhelmingly account for over 85 percent in global total primary energy consumption (TPEC)—but what role will they play in 2040 and beyond? There’s an ongoing debate among various agencies, researchers and academia whether the role of fossil fuels will significantly diminish.

The innovation in fuel cells, electric vehicles and the significant decline in cost of solar and wind power are fossil fuels’ greatest challenges. How much of fossil fuels’ share will be taken by renewable sources by 2040, and is it substantial enough to undermine the role of oil and gas industry, or is there no need to worry?

The oil industry is transforming due to the auto industry’s structural shift from internal combustion engine (ICEs) to electric vehicles (EVs), reducing global demand. But this will create additional electricity demand. In 2016, out of the global total population of 7.3 billion, more than 1.5 billion (20 percent) people are without electricity, and over billions only for a few hours. In order to meet the power demand of global population, the industry will need trillions of dollars in power generation, transmission and distribution system. Naturally, trillion-dollar investment is required here.

History shows us that countries with higher per-capita energy consumption experience stronger economic growth. This relationship is even stronger with electricity consumption. So for global economic prosperity, power is the prerequisite for takeoff. Coal still remains the dominant source of electricity generation. However, under the umbrella of the Paris Accord, all countries—particularly the major coal-consuming countries for power generation, like China and India—plan to shift toward clean energy.

As such, general perception is that natural gas gets a free ride since it’s replacing coal. However, the speedy developments of renewables, particularly wind and solar, seems to dash this perception. During this learning-curve journey, global wind and solar energy capacities respectively increased from 59 GW and 5.6 GW in 2005 to 486 GW and 306 GW in 2016, backed by a substantial decline in prices (Figure-1 & 2).

(Click to enlarge)

Natural gas resources are located far from the major consumption centers—43 percent alone in the Middle East, and Africa at 7.6 percent. In contrast, consuming countries are located in developed areas, and now the thrust is shifting to Asia. The Asian region, where 60 percent of world population resides, has the capacity to consume the bulk of natural gas; however, it’s constrained by its availability, infrastructure and transport expense. In 2016, out of 3543 bcm total global natural gas consumption, 69 percent was locally consumed, 31 percent traded as pipeline (737 bcm) gas and LNG (347 bcm). Furthermore, the natural gas spot market is in its infancy, therefore the bulk of gas is sold under long-term contracts.

In contrast to natural gas reserves, almost all the countries are endowed with enormous sun and wind resources. Renewables nurtured on the laps of government subsidies have matured, and prices have significantly declined (Figure-3). For example, take the recent announcement of record-low auction prices as low as three cents per kilowatt-hour, including India, the United Arab Emirates, Mexico and Chile. Global average generation costs are estimated to further decline for 2017-2022. We also recently learned that auction prices indicate much steeper possible cost reductions, ranging from $30-45/MWh for solar PV (India, Mexico, United Arab Emirates, Argentina) to $35-50/MWh for onshore wind (India, Morocco, Egypt, Turkey, Chile). Therefore, natural gas should no longer expect to get a free ride as it gears up to substitute coal. Instead, it should brace for stiff challenges from renewables.

(Click to enlarge)

Despite challenges and constraints, the role of natural gas in TPEC is up from 24 percent (2016) to 30 percent (2040), but the biggest gainer will likely be a renewable that’s likely to go up from 3 percent in 2016 to around 12 percent to 15 percent in 2040.

One can argue the 12 percent or 15 percent numbers, but it’s certain that the penetration of renewables in power generation undermines other sources of energies.

An advantage of renewables is that there’s not necessarily a huge upfront capital investment in the transmission system. Solar panels and wind farms can provide electricity to the community without big investments in their transmission systems, especially when populations are scattered in developing countries, thus overcoming the hurdle of transmission cost/constraint.

Oil’s share will be hit hard, and could shrink from 33 percent in 2016 to around 25 percent in 2040 due to EVs and increasing ICE efficiency. Coal, once the dominant source in power generation, could decline from 28 percent in 2016 to 20 percent in 2040. Regardless, many countries with abundant coal resources and limited alternative sources will carry on as usual.

Availability and competitive prices are important. For example, in the United States, due to the shale gas boom’s big difference, power generation from coal down dropped from 53 percent in 2007 to around 30 percent in 2016. As such, the role of fossil fuels is expected to drop from 85.6 percent in 2016 to around 75 percent in 2040. The role of hydro and nuclear should remain at their current level of about 7 percent and 6 percent in 2040.

For natural gas to gain strong footing and capture market share of 30 percent in TPEC requires a lot of innovation and outside-the-box strategy. Rather than selling big LNG quantities, they should consider smaller quantities (like selling to grocery stores rather than wholesale markets). In order to achieve this strategy, they need to look back at history—rather than looking for big trains like 7.8 MTPA and larger, companies should look for smaller size trains, LNG carriers, and even FSRUs to meet the demand of a large number of smaller customers.

Along with power and industrial sectors, the natural gas industry should focus on marine fuel (particularly the shipping industry) and look for markets in Africa, Central America, and South America rather than focusing only on traditional Asian markets.

It’s time to create demand for natural gas where resources are located rather than only looking at the capital-intensive export options. A sizable natural gas reserve (7.6 percent) is located in Africa. Over 16 percent of the global population resides there, with most generally deprived of power—still struggling to take off. The regional per capita energy consumption is around 15 million btu, compared to Asia’s 50, with developed regions close to 200.

There’s much potential in Africa, Central America, and South America. It will require a strategy to create opportunities via investments in integrated projects in these areas with rich resources and poor economies, which could then generate increased regional economic activity. At last, these countries could finally utilize their indigenous energy resources.

By Dr. Salman Ghouri

OilPrice.com



14 Comments on "How Will Fossil Fuels Fare In 2040?"

  1. Duncan Idaho on Sat, 23rd Dec 2017 6:16 pm 

    2040?
    2020 is still a big issue, with lots of possibility.

  2. peakyeast on Sat, 23rd Dec 2017 8:01 pm 

    15% in 2040?. Then there will be no transition.

  3. deadly on Sun, 24th Dec 2017 1:48 am 

    You gotta get it while you can, it won’t be long and it’ll all be gone, so you gotta get it while you can – Steve Goodman

    Natural gas is an inexhaustible resource, there will always be natural gas, you will never burn it all. It is called natural gas for a reason.

    In any event, the natural gas belongs to those who can extract it, store it, then ship it to a market, those who buy natural gas.

    Have a giant natural gas gas station and fill vessels all day long. Deliver the natural gas filled vessels to the street food vendors in Shanghai. You’ll have a lot of deliveries to handle. You’ll be busy.

    The Chinese have been using natural gas for some 4,000 years, they know how it’s done, they are not about to stop. They’ve been firing clay and all that stuff for a long time. They are not knuckleheads, they have a lot of living to do and they’ll do it the best they can. What would life be without some Kung Pao chicken? Something would be missing.

    Doesn’t matter where the natural gas is, pay a royalty, 1/5, then begin consuming the natural gas, selling it is easy, lots of demand for natural gas.

    More than likely, it will be consumed by North Americans, so it really does belong to the population that resides on the North American continent. If natural gas is in Africa, that is where to go to get it.

    The guano on the islands off the coast of Peru was mined until it was gone, it belonged to the farmers who bought it, nobody else. Buyers get the product, they have the means to obtain it, it belongs to them. It was just located on an island off the South American coast in the Pacific, the guano was shipped to the appropriate locations.

    If you want an analogy, that’s the one, guano mining then is analogous to extracting natural gas now, here in the 21st century.

    Natural gas has replaced the guano. Natural gas to produce anhydrous ammonia to fertilize the gmo seed is the bomb for starting your field crops. Along with Roundup, it is the way to go. The gmo canola, corn and soybeans Roundup ready seed will be fully matured for harvest and there will be no weeds, just the crop you planted in the field.

    Apply the anhydrous, seed the field, wait for germination, two, three leaves, apply Roundup, all of the noxious plants die off, the gmo seed survives, voila, crop is in the bin or at the elevator. It’ll be shipped and processed into value added products or some other way to consume it, soybean meal and such. Expended corn mash can be fed to livestock.

    The ag industry meets the consumers’ demand the best they can and they do.

    Stop! You’re sounding like an advertisement for Roundup ready gmo seeds and Roundup, you idiot. Go pound some sand, good Lord.

    It’s a vicious circle. You plant, you harvest, keep it until it is gone, then you start all over again. There is no rest for the stupid. The spirit is willing, but the flesh is weak, eventually, it will all change again then start all over again.

    That’s the way it goes moving west.

    A full eighty percent of the natural gas belongs to those who can find and get it. Like the Chinese, they can do it, the natural gas belongs to them too. They’ll go to Africa to get some more if necessary. A few truckloads of Yuan will help even more! The Chinese bring cash, not bombs. The grease palms. All your natural gas to us belong. Thanks!

    It’s Sunday, so it is a free day and Christmas Eve to boot.

    Feel free to drink your favorite alcoholic beverage and make the best of a good day.

  4. deadly on Sun, 24th Dec 2017 1:58 am 

    Correction: ‘They grease palms’.

    Shortened the name, I guess.

  5. Cloggie on Sun, 24th Dec 2017 4:35 am 

    For all the energy skeptics/doomers here:

    blueprint/roadmap of how to setup a hydrogen economy, based on renewable energy (pdf 31p)

    http://profadvanwijk.com/wp-content/uploads/2017/04/NIB-BP-EN-DEF-webversie.pdf

    https://deepresource.wordpress.com/2017/12/24/groene-waterstofeconomie-in-noord-nederland/

  6. Cloggie on Sun, 24th Dec 2017 5:06 am 

    “Shell here we come, timber!”

    https://deepresource.wordpress.com/2017/12/24/building-a-hydrogen-refueling-station-in-48-hours-time-lapse/

    Now that North-Sea countries like Denmark, Germany, Holland and Britain are building offshore windparks one after the other with ever increasing pace, the question of storage can no longer be avoided.

    The answer for said flatlanders is: hydrogen, more so than pumped hydro in Scotland and/or Norway.

    The Danish video shows how a hydrogen fueling station can be build within 48 hours. Fueling 500 km+ worth of hydrogen within 3 minutes.

    After 2025 in Norway you are either obliged to recharge your car battery or fill your fuel cell tank with hydrogen.

    Tertium non datur.

    https://www.greenoptimistic.com/norway-introduce-new-hydrogen-refueling-stations-20160517/#.Wj-JR9_iaiM

    Killing oil companies via the force of law, that’s the green way forward. Stinking rich Norway first (stinking rich from oil.lol), other NW-European countries are to follow.

  7. Davy on Sun, 24th Dec 2017 6:31 am 

    I am hopeful about the prospects for renewables along with storage strategies like hydrogen. This is especially true for transport. The issue is affordability and scale with the prospects of running a total economy on renewables and storage options like hydrogen and batteries. This effort is vital for no other reason than an extender even if a total transition is not possible. It is unclear if man can transition off of fossil fuels. This is not proven yet because the issues are greater than technology. A total transition off fossil fuels does not appear possible at the moment and the status quo be maintained. It is unclear we can modify globalism. Systematically globalism with JIT, economies of scale, mono cultures of food, and heavy transport will be difficult to adapt to what is needed. What is needed is localism, seasonality, intermittency and demand management combined with far lower populations. These type of changes are huge on a macro scale. Behaviors will have to change and populations will have to decline significantly. These behavioral costs of the other side of the transition equations are huge. There are those who think we can do a green transition and have the status quo. This sounds like a have the cake and eat it trap to me. It sounds like too good to be true nonsense.

    Behaviors appear to me to be the biggest issue with humans. We are hardwired for comfort and enjoyments. Can we get all humans to cooperate with sacrifice and burden sharing? It is always the case we want to market are way out of problems or we want others to do the suffering. We don’t want to be told what to do. We resist education because we are suspicious of polices that do not conform to our way of thinking. Can we cooperate in sacrifice? Can we even agree what the problem is? We still have economic growth albeit declining rate of growth and quality of growth. Debt and bad debt are indications of macro mal-investment that is getting worse not better. Unfunded liabilities are increasing just as demands on those liabilities are increasing. People have high expectations just as support systems are compressing. It is unclear if society can survive with degrowth. Indications are that the global economy will collapse with extended periods of degrowth. We need degrowth of fossil fuels and population absolutely not preferably.

    We need to be lowering the pressure of other issues threatening civilization that are just as important as energy. The whole energy transition can be derailed with other systematic issues. Remember the economy and the social cohesion of nations is essential to maintaining our modern civilization at its level of economic activity. Can we avoid global war? We are undergoing planetary ecological decline and climate destabilization. Is there anything we can do for this? I sincerely doubt a renewable economy will matter much for the problems of planetary health. It is clear thresholds are already breached with converging feedback loops initiated. In my opinion it is now about adaptation and mitigation of planetary decline instead we are doubling down on unstable growth. We are still building by the ocean and in fire prone areas as an example. We are destroying water resources not husbanding them.

    The biggest variable for these issues is human population. There is no indication we can lower population by choice. If we have a die off to get populations down it is likely this will be with a ruined economy. Remember liquidity today is global and confidence driven. How much confidence are we going to have with a die down of population? Economically dropping population is deflationary and deflation with debt is very dangerous. Do we need a debt jubilee? Calling it a jubilee is wishful thinking.

    Alternatives with storage systems like hydrogen as an extender to buy us some more time is a welcome addition to the efforts at survival. Fracking and natural gas have come on strong also. The question is how much can all this extend what may be unextendable? Can we maintain something so overextended? Should we even try? Should we instead be making hospices for the coming die down and lifeboats to save those who can be save? How far will these other energy sources go to supporting civilization as conventional oil declines even further? How much will gas and fracking efforts extend the status quo? Do we have time to scale up alternatives? Can batteries progress in efficiency? Can the economies of scale be reached in an affordability sense? Much of this transition is systematic as well as technical.

    There are some who want a die off and an extreme economic degrowth to save the planet as the other alternative. It is unclear if we can save the planet from massive changes even if this occurs. The process of human decline will still be dirty. Think of all the dangerous technological processes that will go critical without human management. Think about all those NUK storage ponds going critical. Think about the chemical pollution from industries abandoned. Think about all the controls on pollution and the side effects of civilization we manage because of affluence. If nothing else I personally think we need to pursue a renewable economy with any and every storage option to at least buy us time. It is unclear if it will work or not but the alternative are nasty.

  8. Cloggie on Sun, 24th Dec 2017 11:48 am 

    VW Volkswagen e-Crafter Premiere 200 km range new electric light truck

    https://www.youtube.com/watch?v=X3W1J__rY00

    https://cleantechnica.com/2017/12/23/volkswagen-delivers-first-e-crafter-vans-customers-europe/

    For all your Amazon boxes to be delivered.

  9. Boat on Sun, 24th Dec 2017 2:31 pm 

    Clog,

    If the Mexicans will buy that van it will change the face of our roads. Needs to be able to pull a trailer though.

  10. Apneaman on Sun, 24th Dec 2017 3:35 pm 

    By 2040 the population will be halved or less due to massive crop failure due to AGW.

    3-4 days of 50C+ temps will cause the plant proteins to denature.

    It’ll start happening long before 2040.

  11. Apneaman on Sun, 24th Dec 2017 3:39 pm 

    Can humanity make peace with its death?

    One of these days, our species will cease to exist. How we prepare for that can help us live better in the meantime

    “There are many compelling reasons for us to ask this question right now. Global warming is reaching a crisis point, and while it’s impossible to predict how exactly that will end, humanity’s extinction is certainly within the realm of plausibility”

    https://www.salon.com/2017/12/23/can-humanity-make-peace-with-its-death/

  12. Apneaman on Sun, 24th Dec 2017 10:10 pm 

    California Wild Fire Becomes Largest Ever Recorded

    As 2017 marks a new benchmark for climate-change related U.S. disasters, FEMA director tells Americans they “will have to take care of themselves” when disasters strike.

    http://therealnews.com/t2/index.php?option=com_content&task=view&id=31&Itemid=74&jumival=20789#pop1

    A by the numbers look at B.C.’s record setting 2017 wildfire season

    http://cfjctoday.com/article/602762/numbers-look-bcs-record-setting-2017-wildfire-season

  13. Apneaman on Sun, 24th Dec 2017 10:12 pm 

    Christmas wildfires: How climate change puts California at risk all year round

    What was once a condensed fire season has expanded as weather patterns change

    “In October, a series of blazes raged across the rolling hills of California wine country and into populated areas, killing more than 40 people, incinerating thousands of structures and likely breaking a record for fire insurance claims.

    In December, a time when cooler weather and rains usually mitigate the risk, hundreds of thousands of southern Californians have been pushed from their homes by powerful conflagrations – one of which, the Thomas Fire that had rained ash on Mr Tito’s yard, was still burning weeks after it ignited.”

    http://www.independent.co.uk/news/world/americas/california-fires-christmas-climate-change-risk-threat-a8118951.html

  14. Jh wyoming on Tue, 26th Dec 2017 3:13 am 

    You’re right about agw apneaman. I think there are two primary perspectives these days. Those that follow information on agw and how quickly it is ramping up, and those that avoid being informed for whatever convenient reason they’ve conjured up. But unfortunately the luxury of waiting many decades to make a concerted effort to avoid the worst of it, no longer exists. It’s a dire emergency, period, and the elephant in the room.

Leave a Reply

Your email address will not be published. Required fields are marked *