Oil demand growth is driven by transport. In the long term, mobility will be increasingly powered by electricity.
No country today is an energy island. What happens in the energy world affects everybody, said Fatih Birol at SET Plan – Central European Energy Conference X.
The Executive Director of the International Energy Agency presented on 1 December the World Energy Outlook (WEO) 2016. A panel of European experts gave their views.
WEO: A plethora of subjects
According to Birol, Gas markets are undergoing a second revolution. First was the shale gas revolution, the second is driven by liquefied natural gas (LNG).
As for the renewables, last year the new capacity was higher than all sources’ capacities together. Renewables are not a romantic story anymore, but a real business.
The implementation of the Paris Agreement will mostly impact the energy sector, said Birol.
Concerning energy poverty, a billion people still do not have access to electricity, it is a political and social issue. China, however, is by far the leader in wind, solar and hydropower capacity.
Achieving the two-degree target
The Paris pledges imply a 2,7-degree increase. In order to achieve the promised the two-degree increase, we need renewables. The success of renewables was until now mostly in power sector.
They are not present enough in heat and transport. Policies to support renewables are very weak in these sectors, the growth is much lower than their potential.
There are two conditions for achieving the two-degree goal. First, in 2020, emissions have to peak and start declining. Second, by end of century, emissions have to decline to zero.
Novel notion of energy security
Regarding energy security, Birol noted that oil security is important, but there are different ways to achieve it.
The US will soon be almost independent in importing oil. The main driver is not domestic production, but efficiency measures for cars and trucks.
Birol believes we are entering a period of greater oil price volatility.
In the last two years global oil investments declined. Concerning the demand side of oil, we will see oil demand continuing to grow, although cars are becoming much more efficient. The growth is coming from trucks, aviation and petrochemical industry. One third of the growth comes from trucks in Asia.
The second gas revolution
Concerning the second gas revolution, in LNG, in next five years we will see a huge wave of LNG exports from Australia, Mozambique and Canada. LNG will become number one way of gas trade overtaking pipeline.
These are very good news for gas importers.
They have more options on hand, if they have LNG terminals or interconnections. The mere LNG option, regardless of actual imports, suffices to increase energy security. Also, a lot of LNG coming to markets means LNG prices and contracts will change in favour of importers.
Power firms: Struggling for decarbonization
Vera Silva explained her company, Electricité de France, relies on a decarbonized generation mix based on nuclear energy, but also hydro, wind and photovoltaic energies.
Electricity is one of the vectors to decarbonize heat and transport.
Branislav Strýček from Slovenské elektrárne pointed out that low electricity prices are a good message for consumers, but the question is if we can sustain electricity supply.
Renewables are an unavoidable future, because they alone are supported. As for the prices signals, they alone provide them, there are no other.
Transport: Buying a service, not product
Slovnaft’s Marek Senkovič said the future for the old fossil fuels is bleak. There is a strong rise in disruptive products and services like electric vehicles.
In the future, Slovnaft will sell kilometres of transport, not litres.
There will be a strong penetration of biofuels, CNG and LNG. Cities want to be cleaner, people are encouraged to use public transportation instead of their own cars. Countries like Norway imposed very high fuel taxes.
The new, digital generation brings new trends – it is interested in buying a service (transportation), not a product (car). Sooner or later, all refineries will have to change their business models or accept closure.
In reaction, Slovnaft will decrease production of motor fuels and increase production of chemicals and petrochemicals. Oil processing will not be decreased. Slovnaft will also use its retail infrastructure for providing new services.