Oil demand will increase “several years” without political impetus: IEA Birol
Global oil demand is expected to return to pre-pandemic levels towards the end of 2022, supported by demand growth in Asia, and increase for “several years to come” without major changes in government policy, the chief said. of the International Energy Agency. told S&P Global Platts.
“Global demand for oil is expected to return to pre-COVID levels by the end of 2022, but the recovery will be uneven. Asia is clearly the engine of growth,” said IEA Executive Director Fatih Birol , in an interview written with Platts during “Beyond Zero” week in Tokyo hosted by Japan.
“By the end of 2022, it is expected to be 1.5 million bpd higher by the end of 2019, offsetting declines in Europe, North America and elsewhere,” Birol said.
The crisis caused by the coronavirus pandemic has been a catalyst in many ways for the energy transition, with many countries and energy companies pledging to meet more ambitious climate targets, including mid-century net zero emissions targets. , said Birol.
“However, our analysis shows that although the COVID-19 crisis has caused a historic decline in global demand for oil, it is not necessarily sustainable,” Birol said. “If we don’t see other major policy shifts on the part of governments and faster changes in behavior, then global demand for oil is expected to increase for several years to come.”
Amid the intensification of the shift from fossil fuels to clean energy sources, “oil and gas markets may experience increased market volatility and concentration,” he said. “This can happen if reductions in demand for oil and gas are outweighed by reductions in supply due to lack of investment in existing fields, or if available supply is concentrated in fewer countries. “
In all scenarios, “an orderly transition requires investment to keep supplies at the appropriate level,” he said.
The IEA is currently monitoring the global gas and LNG markets closely as it considers the current high prices to be due in part to extreme weather conditions, unplanned outages and a resumption in demand after the pandemic.
“The security of energy supply is one of the main missions of the IEA, and we are closely monitoring the situation in the global gas and LNG markets and the current high prices, which have reached historic highs in Europe. and in Asia, ”Birol said.
Global gas prices have reached record highs in recent weeks, with the Asian Platts JKM LNG spot price hitting $ 39.671 / MMBtu for November and the TTF price for the coming month reaching $ 39.914 / MMBtu on October 5.
Contrary to its mandate for its member countries to have emergency oil stocks equivalent to a minimum of 90 days of net oil imports for possible coordinated release in the event of a serious supply disruption, the IEA has currently no mandate for emergency gas reserves.
Asked about the role of LNG for decarbonisation in Asia, Birol said: “Natural gas occupies a difficult place in energy transitions. Its role varies depending on the period, geography and sector. However, in the immediate term, the switch to natural gas may make sense for some countries in Asia that are heavily dependent on coal or use oil in industry: it can avoid emissions while helping to improve the quality of the gas. ‘air,’ he said.
Several Southeast Asian countries such as Thailand, the Philippines and Vietnam are already taking steps to reduce the role of coal in their energy mix in favor of LNG and renewables, Birol said.
“But LNG alone cannot be a sustainable option to achieve net zero emissions. It must be associated with the production of clean energy from renewable energies and take into account its own transition to a supply of low-carbon gas, ”he added.
More than 60 hydrogen and hydrogen-based fuel projects have been announced, 20 of which are already under development, Birol noted. Hydrogen projects could lead to a supply of a few million tonnes per year by 2030, he added.
To facilitate these hydrogen supply chains, Birol said a continued decline in the cost of low-carbon hydrogen and derived fuels is needed.
In addition, the development of a set of internationally agreed standards, including a methodology to calculate the carbon footprint of hydrogen production and the implementation of certification programs that can provide importers with certainty on the product. that they buy, is necessary, he said.
“The creation of demand is a key lever for unlocking the potential of hydrogen as a clean fuel. However, it lags behind what is needed to put the world on track to achieve net zero emissions, ”Birol said. “To date, however, the use of low carbon hydrogen is more expensive than its fossil competitors. “
Carbon pricing, which is already in place in some countries, is helping to close this cost gap, he said.
“Wider adoption of carbon pricing combined with other policy instruments such as auctions, mandates, quotas and specific hydrogen requirements in public procurement can help industry reduce investment risks. and improve the economic feasibility of low carbon hydrogen. Said Birol. “This will ultimately unlock investments in the development of low-carbon hydrogen production capacities as well.”