Challenges and opportunities of a lower-carbon future

Transcription

1 Challenges and opportunities of a lower-carbon future Oil & Gas Denmark September 21 st 216

2 Agenda 1. Long-term demand overview 2. Trends to watch 3. Alternative scenarios the carbon-constrained and IEA 45 worlds 4. How do producers respond to a lower-carbon future? 2

3 Mtoe Wood Mackenzie base case long-term outlook shows fossil fuels playing a majority role in world energy demand through to 235 World primary energy demand growth ; 235 regional share by fuel (Wood Mackenzie base case) North America 13% Europe 12% 31% 25% Russia & Caspian 8. 36% 34% 1,8 Mtoe 1,3 Mtoe 4. 2,8 Mtoe Middle East 52% 44% Asia Pacific 3% World 235 (not to scale) 17, Mtoe 3% 24% 27% 28% 1, Mtoe Africa South America 13% 7 Mtoe 75 Mtoe Coal Oil Gas Nuclear Hydro Renewables* OSF** 23% 8, Mtoe 44% Source: Wood Mackenzie. *Excludes hydro. **Other Solid Fuels (biofuels, waste) 3

4 Mtoe US$ Bn Increasingly efficient use of energy will moderate long-term demand growth 2: Emerging markets feature low GDP per capita, high energy intensity GDP per capita vs. energy intensity, primary energy demand Energy demand per unit GDP (Mtoe / US$ bn) India China Median energy intensity =.33 Mtoe / US$ Bn Median GDP per capita = $6, Russia EU USA Japan World GDP Non-OECD OECD World energy demand 4 1, 3, 7, 2, 55, 15, 4 Source: Wood Mackenzie GDP per capita (US$ / person / year)

5 Mtoe US$ Bn Increasingly efficient use of energy will moderate long-term demand growth 216: Emerging markets intensity falls as demand, GDP per capita expand GDP per capita vs. energy intensity, primary energy demand Energy demand per unit GDP (Mtoe / US$ bn) India Median energy intensity =.26 Mtoe / US$ Bn Median GDP per capita = $9, Russia China EU USA Japan World GDP Non-OECD OECD World energy demand 4 1, 3, 7, 2, 55, 15, 5 Source: Wood Mackenzie GDP per capita (US$ / person / year)

6 Mtoe US$ Bn Increasingly efficient use of energy will moderate long-term demand growth 235: Energy intensity convergence while EM GDP per capita still relatively low GDP per capita vs. energy intensity, primary energy demand Energy demand per unit GDP (Mtoe / US$ bn) Convergence into lower-intensity area limits energy demand growth even as economies expand Median energy intensity =.19 Mtoe / US$ Bn India Median GDP per capita = $14, Russia China EU USA Japan World GDP Non-OECD OECD World energy demand 4 1, 3, 7, 2, 55, 15, 6 Source: Wood Mackenzie GDP per capita (US$ / person / year)

7 US$ / MWh (Real 214) Improving technology and rapid uptake driving down renewables costs meaning lower costs and even more rapid uptake Over ten years, prices for solar have fallen dramatically US Utility-scale solar PPA prices by technology, PPA date 3 Size of bubble indicates PPA contract size (MW) 55 MW 25 2 WORLD RECORD $29.99 / MWh: Dubai Electricity and Water Authority (DEWA) lowest bid level May NEW WORLD RECORD! $29.1 / MWh: Solarpack Corp. Tecnologica (Chile) August Jul-26 Aug-27 Sep-28 Oct-29 Nov-21 Dec-211 Jan-213 Mar-214 Apr-215 Photovoltaic (PV) Concentrated PV (CPV) Mix of PV/CPV Concentrated Thermal Source: Lawrence Berkeley National Labs 7

8 $/kwh Million Cars Electric vehicles and energy storage the biggest risk to hydrocarbon demand? Electric Vehicles still only a tiny fraction of vehicles sold but what does the future hold? Global sales of EVs (PHEV/BEV*): WM base case Battery costs: EIA 212 projections vs latest quotes 12 1% 1 8% 8 6% 6 4% 4 2 2% % US Europe China Other Asia Rest of world % of global sales Potential uptake in EV automakers Tesla Model 3: Announced 6 March 216 Planned release end What does a $1 / kwh battery mean for accelerated uptake of renewables? 2 $1 / kwh EIA Reference case Tesla Nissan High Technology Battery case GM Source: Wood Mackenzie / EIA / Manufacturers. *PHEV = plug-in hybrid electric vehicles; *BEV = battery all electric vehicles 8

9 Mt CO2 Paris Agreement First multilateral emissions-limiting agreement since the Kyoto Protocol Parties to the Paris text agreed: To hold increase in global average temperatures to well below 2 C above preindustrial levels, and pursue efforts to limit increase to 1.5 C To follow emission-limiting plans (Nationally Determined Contributions, or NDCs), which will become increasingly stringent over time To aim to reach a global peaking of emissions as soon as possible. World CO 2 emissions, WM base case vs. Paris Agreement vs. IEA 45 scenario Paris Agreement emissions trajectory implies lower-co 2 world than WM base case, but significantly above IEA 45 scenario Emissions - base case (Mar 216) Emissions - NDC Emissions - 45 scenario Source: Wood Mackenzie 9

10 Share of world emissions countries & the EU signed the Paris Agreement on April 22 nd Treaty enters into force after ratification by 55 countries covering 55% of global emissions Map of Paris Agreement signatories; key emitters share of global GHG output, 215 7% 6% 5% 55% emissions threshold 4% 3% 2% 1% % EU28 Canada India USA China September 216: China & USA ratify Paris Agreement India & Canada have stated their intention to ratify before the end of 216 Source: Wood Mackenzie 1

11 Power generation (GWh) Denmark is moving quickly in the direction of new energies, with renewables a global standout Denmark an outlier, or sign of an alternative global future? Denmark power generation by fuel type, Fuel share of total primary energy demand, WORLD RECORD 215 wind generation 14, GWh (approx. 4%) 32% 35% Denmark 1% 22% 58% fossil fuels % 24% 8% 27% 28% WORLD WM base case 8% fossil fuels % 7% 7% 29% 18% 27% WORLD WM carbonconstrained scenario 74% fossil fuels Other Solar Wind Hydro Thermal generation Coal Oil Gas Nuclear Hydro Renewables* OSF** Source: Wood Mackenzie / Energinet.dk. *Excludes hydro. **Other Solid Fuels (biofuels, waste) 11

12 Average %YoY Growth As carbon policy and technological advances accelerate growth in renewables / EVs, coal and oil demand could peak before 235 Global energy demand growth: vs Historic data WM business-as-usual case WM carbon-constrained scenario IEA 2C scenario 5,% Wood Mac base case fossil fuel demand growth will slow but remains positive Wood Mac carbon-constrained scenario negative growth for coal, oil; positive growth for gas, zero carbon 2,5%,% Coal Oil Gas Zero-carbon fuels * -2,5% IEA 45 scenario (consistent with 2 degree global warming target) slowing growth for gas; strong negative growth for coal, oil; strong positive growth for zero carbon Source: Wood Mackenzie / IEA. *Includes renewables, hydroelectricity, nuclear 12

13 Adda Boje Cecilie Dagmar Dan Gorm Halfdan Area Harald Hejre Kraka Lulita Nini Area Ravn Regnar Roar Rolf Siri Area Skjold South Arne Svend Tyra Area Valdemar Adda Boje Cecilie Dagmar Dan Gorm Halfdan Area Harald Hejre Kraka Lulita Nini Area Ravn Regnar Roar Rolf Siri Area Skjold South Arne Svend Tyra Area Valdemar Oil reserves (mmbbl) Gas reserves (bcf) If the world is shifting towards low-carbon, where does Denmark fit as a producer? An active oil and gas sector, but continued investment required to maximise resources Initial vs. remaining commercial oil reserves Initial vs. remaining commercial gas reserves Initial Liquids Remaining Liquids Initial Gas Remaining Gas Source: Wood Mackenzie. Commercial Reserves at 1/1/216 (p+p) 13

14 How are the Majors responding? Some companies are investing to mitigate the risk of more stringent carbon policy / weaker demand others plan to build a profitable renewables business, integrated with gas and power Solar Star Project 1 (579 MW) Quinto 2 (11 MW) Henrietta 3 (12 MW) (CA, USA) Questa, NM (1 MW) San Joaquin Valley, CA (29 MW) 5 PV projects in CA, AZ, TX (73 MW), joint ventures Casper Wind Farm, WY (16.5 MW) Interests in 8 operational wind projects (898.5 MW) Interests in 16 wind farms (1,556 MW), 6 wholly owned PV Salvador, Chile (68 MW), 2% interest Sheringham Shoal, UK (317 MW), 4% interest BP refinery, NL (32 MW) Dunkirk, France (1 MW) Egmond ann Zee, NL (18 MW), 5% interest 3 sugar cane mills, Brazil (795 mil. litres ethanol 215) 24 sugar cane mills, Brazil (2bn litres ethanol 215) 5% interest Amyris Inc. sugar cane biofuel plant, Brazil 31.52% interest Hywind demo, Norway (2.3 MW) Porto Marghera refinery, Italy Biofuel conversion (42, tons biodiesel p.a.) Prieska 4, South Africa (74 MW) Sharm 1, Abu Dhabi, UAE (1 MW), 2% interest Petroleum Development Oman (solar-steam EOR), 34% interest Key Solar Wind Biomass CCS* Hydrogen Power Abu Dhabi, start 218 (4MW, capture up 1.7 mil. t CO2 p.a.) CCS demonstration projects: Gorgon gas fields, Australia; Quest oil sands, Canada; Technology Centre Mongstad, Norway; Boundary Dam, Canada Sleipner field, Norway; Snøhvit LNG, Norway; In Salah, Algeria; Technology Centre Mongstad, Norway (capture only) Source: Wood Mackenzie. *Carbon capture & storage 14

15 Breakeven discount (US$/bbl) Oil production (' b/d) Gas production (bcm) An alternative to diversification is to focus on costs Meanwhile, gas looks to have a promising future including in a carbon-constrained world Oil production breakeven cost stack, 22 Denmark forecast oil vs. gas production, Global Denmark Gorm Siri Tyra South Arne Dan Brent 52 week range ($27 - $54 US$/bbl) Halfdan Source: Wood Mackenzie Cumulative production (' b/d) Total oil production Total gas production 15

16 TPED (Mtoe) Fossil fuel demand growth is slowing, but even in a 2 o C scenario hydrocarbons will still meet 65% of global energy needs in 235 The market is changing, but there is a robust future for producers who are able to adapt Global energy demand, fossil fuel ratio, WM business-as-usual WM carbon-constrained scenario IEA 2C scenario 8% 74% 65% Ratio of fossil fuels in total global energy mix by The world is going to have to continue using fossil fuels, whether they like it or not. Rex Tillerson, ExxonMobil CEO, May 216 the average global temperature across land and ocean surface areas for 215 was.9 C above the 2th century average of 13.9 C, beating the previous record warmth of 214 by.16 C. NOAA National Centers for Environmental Information, January 216 Source: Wood Mackenzie / IEA / NOAA 16

17 Conclusion Emerging trends are reshaping energy markets» Maturing technologies and the return of carbon policies are the critical factors Fossil fuels will persist, but growth trends are uncertain» Move to lower-carbon growth a question of when & how, not if New oil and gas production will be needed» But lower demand growth future means a permanent focus on cost Oil and gas producers will need to adapt» Diversify, reduce costs, decarbonise legacy operations, focus on core business all are potential strategies in a changing marketplace Source: Wood Mackenzie 17

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