Guest Editorial: Rapid Pivot to Gas Crucial for Future Energy Mix
Authors: Sewell Andrew 
Published: April 2020

Guest editorial

The crash in the oil price during March, caused by oversupply coinciding with an expected large drop in short-term demand because of the COVID-19 pandemic, will cause severe disruption to the industry for at least the next 12–18 months. Whether the low price spurs greater demand for oil when the pandemic subsides, or whether demand for oil continues to drop for the next few years, does not really affect the longer-term trends that we examine in this article.

There are numerous views of what the future energy landscape will look like in the next decade and beyond. A common theme throughout is that energy use could switch quite rapidly, from fossil fuels to electrical energy. Many studies, to varying extents, have examined the impact of a primary energy supply that evolves away from oil and coal, and toward renewables.

Although a pivot to gas is widely talked about, none of the major oil companies have yet to significantly alter the ratio of gas vs. oil produced. However, all acknowledge that this is essential. There is no easy alternative that can provide cleaner energy at the volume required to sustain a growing world population with an increasing per capita energy demand.

Dash for Gas

Through our “Rapid Pivot to Gas” analysis, we reviewed a range of forecasts and concluded that a significant and rapid swing to natural gas will be required, in addition to a huge growth in wind and solar power. Global primary energy demand will continue to increase, from 14,300 million tonnes of oil equivalent (MTOE)/year in 2018 to 21,500 MTOE/year in 2040. This rise will be driven by economic growth in non-OECD countries, and much of that increased demand will have to be fulfilled by natural gas.

Under this scenario, approximately $20 trillion would need to be invested in natural gas E&P over the next 2 decades. This will also require significant technology advances if we are to use the gas responsibly, including the need for carbon capture and storage (CCS). Even with the phasing out of coal and oil, and a rapid increase in renewables, CO2 emissions would continue to increase until 2025 before starting to decline.

The starting point for our projection of how a rapid pivot to gas might occur starts with a decline in coal consumption for environmental reasons, and an unprecedented reduction in oil (liquid hydrocarbons) consumption as transportation rapidly converts to electricity produced from other primary sources of energy. We postulate that conventional crude oil and coal could decline to 1,500 MTOE/year and 1,200 MTOE/year, respectively, by 2040. This is 56% and 68% below 2018 levels.

Aggressive growth rates of over 1,000% from 2016 to 2040 have been assumed for new renewables, particularly for wind and solar. In addition to sustained installation of capacity, the uptime and efficiency of new capacity is projected to keep improving for the next 20 years, so that net energy delivered per unit of capacity installed increases continuously. But in relative terms, the overall energy from wind and solar will still be quite small, accounting for less than 10% of total primary energy by 2040.