McKinsey: aggregate fossil fuel demand to peak in 2027
Aggregate fossil fuel demand is set to peak in 2027 – with oil peaking in 2029 and gas in 2037 – partially due to the impacts of COVID-19, according to new research by McKinsey & Company.
The Global Energy Perspective 2021 report finds that while coal demand peaked already, peaks in demand for oil and gas are not far behind.
The pandemic has resulted in a profound reduction in energy demand, from which McKinsey expects it will take between one to four years to recover – with electricity and gas demand expected to bounce back more quickly than oil demand.
However, demand for fossil fuels will never return to its pre-pandemic growth curve. Over the long-term, the impacts of behavioural shifts due to COVID-19 are minor compared to “known” long-term shifts such as decreasing car ownership, growing fuel efficiencies and a trend towards electric vehicles, whose impact is estimated to be three-to-nine times higher than the pandemic’s by 2050.
Christer Tryggestad, Senior Partner at McKinsey, says: “While the pandemic has certainly provided a substantial shock for the energy sector across all fuel sources, the story of the century is still a rapid and continuous shift to lower-carbon energy systems”.
“The share of electricity in the energy mix is set to grow by around 50 percent by 2050 and it’s set to capture all global energy growth as hydrocarbon consumption plateaus. However, in our Reference case, fossil fuels continue to play a significant role for the foreseeable future.”
- Power consumption to more than double by 2050 as energy demand electrifies
- Green hydrogen will become cost competitive by 2030 - a game changer for the sector
- Low-cost renewables will dominate the power market by 2030 as they become cheaper than existing fossil plants
- Almost half of global capacity will be in solar and wind by 2035
Indeed, while energy systems around the world will shift to renewables, which are able to compete with the marginal cost of fossil power already today in most places, by 2050 more than half of all global energy demand continues to be met by fossil fuels in McKinsey’s Reference Case scenario.
As a result, while the earlier peak of hydrocarbon demand means a substantial reduction in forecasted carbon emissions, the world remains significantly off of the 1.5ºC pathway and will run out of its carbon budget for 2100 in the early 2030s.
Tryggestad concludes: “There is still a long way to go to avert substantial global climate change. According to our estimates, annual emissions would need to be around 50 per cent lower in 2030 and about 85 per cent lower by 2050 than current trends predict to limit the global temperature increase to 1.5ºC”.
“The importance of policies has increased in the past year. Despite the increased momentum towards decarbonization, many governments still need to translate ambitious targets into specific actions. Additionally, given the unparalleled size of many economic recovery packages post COVID-19, the focus of the stimulus measures will play a key role in shaping energy systems in the decades to come.”
The findings are taken from four scenario outlooks, conceived by McKinsey:
- 1.5ºC Pathway McKinsey’s top-down view of how a pathway that limits global warming to 1.5ºC could look across sectors and energy products, taking economic and technical feasibility into consideration
- Accelerated transition A progressive view, driven by governmental response to COVID-19 and “next normal” behavioural changes. This scenario assesses the impact of 10 conceivable shifts happening at an accelerated pace (e.g., uptake of EVs, recycling, renewables and hydrogen)
- Reference case McKinsey’s outlook on the continuation of existing trends. This scenario reflects our expectations of how current technologies can evolve and incorporates current policies and an extrapolation of key policy trends
- Delayed transition Post-pandemic, the societal focus is on economic recovery; energy transition continues at a lower speed; lower incentives to invest in decarbonization technologies, and low fossil fuel prices delay cost parity
The report presents specific outlooks per fuel type such as natural gas, oil, coal and hydrogen. It also discusses carbon emissions and offers a detailed perspective on the McKinsey 1.5ºC pathway. This includes a look at the implications for business leaders and policy makers, comprising a view on value pools and an energy investment outlook.
Global Offshore rebrands Enelift and invests in global hubs
Global Offshore has rebranded Enelift and will invest "a seven-figure sum" in establishing new support hubs in Houston, Dubai, Singapore, Perth and the Caspian during the next six months.
The investment will cover oil, gas and renewables, mainly concentrating on manufacturing capability with associated R&D, as well as in stock held in the hubs.
The company’s flagship Hinge Lok technology provides aluminium, non-welded light weight transportation cradle for casing and tubing. Enelift now plans to enhance its offering by augmenting its existing solutions with robotics and remote operational and training technology, which will reduce manpower for handling offshore equipment that is transported and stored using the Hinge Lok system.
Enelift is partnering with "a Japanese robotics company" and the technology will be trialed with "a Norwegian operator on a Norwegian drilling rig", according to a statement.
Operating from its bases in Aberdeen, UK and Esbjerg, Enelift was founded by 35-year industry veteran and Managing Director Paul Brebner 10 years ago to offer the offshore energy industries safe, reliable and efficient storage and transportation of equipment.
The expansion plans are bolstered by the appointment of Jim Clark of the Craigendarroch Group to Chairman, and Adam Maitland to Non-Executive Director. Maitland is the Managing Director of Hutcheon Mearns IF, and brings his wealth of expertise in the field of corporate finance.
Brebner said Enelift may be a new name in the market, but the experience it brings is "industry renowned".
"Our solutions are underpinned by safety that enables inefficiencies and their associated costs to be eradicated – meaning operational personnel can focus doing what they do best, safely. We remain committed to providing the safest storage and transportation solutions for equipment in the sector as we grow our global operations," he said.
Clark said the market is changing and its solutions fully support customers’ economic and safety aspirations.
"We are very well placed to take full advantage of increasing opportunities in the Middle East, Africa, Far East and Americas. Safety is our absolute commitment to our customers and our support hubs will facilitate this. Aligning our identity to our entire offering ensures that we will drive our expansion through new products and global support sites across the rest of this year."