BP PLC Energy Outlook and Statistical Review of World Energy (Q&A Session)

Feb 19, 2019 AM UTC 查看原文
BP.L - BP PLC
BP PLC Energy Outlook and Statistical Review of World Energy (Q&A Session)
Feb 19, 2019 / 08:00AM GMT 

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Corporate Participants
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   *  Spencer Dale
      BP p.l.c. - Group Chief Economist
   *  William Zimmern

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Presentation
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 William Zimmern,    [1]
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 Hello, hello. Welcome to the Eastern Hemisphere launch of BP's Energy Outlook. My name is William Zimmern, and I manage the production of the outlook. And I'm here with Spencer Dale, BP's Group Chief Economist.



 In a moment, we are going to watch a video of the live launch, which happened here in London on Thursday last week. But before that, just a few comments on the outlook. For those of you who aren't aware, BP's Energy Outlook is a document that we produce each year. It looks at long-term global energy markets, and it's something that we've been doing -- this is the ninth year of publication. We've been doing it quite a few years internally before that, but this is the ninth year that we've published it for the general public.



 So we're now going to go to a video looking at the live launch, where Spencer is going to talk you through some of the key messages from the publication. We're going to watch the video alongside you. So when -- as you're watching it, you may have some questions and comments that you would like to ask us, so please write them in. We'll be collating those questions, and then we'll come back in about 40, 45 minutes or so, and we'll try and answer as many of them as we have time for.



 So please enjoy the launch.

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 Spencer Dale,  BP p.l.c. - Group Chief Economist   [2]
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 Thank you, Bob (sic) [William], and let me add my thanks to everybody for sparing a time to come to the launch of this year's Energy Outlook here in London where there are many familiar faces. It's great to see so many people. And as Bob said, also on -- around the world via the web where we have over 8,000 people registered for today. And I know watching this via webcast is not the same as being in the room, but please do stick with us. We have lots of interesting things today, and you have one big advantage watching it online. You can post your questions whenever you want to. Everybody here has to sit on their hands for the next half an hour listening to me. So take that advantage, and you can get your questions in first.



 For those of you who are watching the video, you may have seen that we changed slightly our logo for the Energy Outlook this year. Gone is the green and yellow globe, and instead, we swapped it for this sort of urban backdrop. It's very nice. But I thought this was more appropriate for today. It's Valentine's Day. Now you know on Valentine's Day, traditionally, you give tokens of your affections to your loved ones. And although there are many familiar people in the room today, I don't wish to appear overfamiliar. And although I'm very excited by the Energy Outlook, even I know it's not quite the same as a bunch of flowers or a box of chocolates. But please know the thought is there.



 In a similar spirit, if I just continue to spread the love by just talking -- thanking a few people that have been helping us produce the Energy Outlook over the last few months, that includes, in particular, the rest of the economics team, many of whom are here today. One special note, if I can, 1 member of the economics team, Mark Finley, who's worked for the team for over 17 years, retires next month, and we're going to miss you a lot, Mark. But the work of this goes beyond the economics team. It cross -- goes right across BP as we put in expertise and insights from right across BP, upstream, downstream, trading, technology, regions and so on. The economics team holds the pen, but the content is very much a team BP effort. So many thanks to all of you for all your help over the last few months, especially right through the Christmas period.



 The basic structure of this year's outlook is similar to last year's. The outlook considers a wide range of scenarios to explore and better understand the uncertainty surrounding the energy transition. There's no central or base case. The probability that the world will unfold exactly in line with any of these scenarios is, of course, almost 0. But as with last year, the -- for ease of explanation, much of the narrative in the outlook is based around the evolving transition scenario, or ET scenario, which gives a sense of the broad path the global energy system may travel along if government policies, technologies and social preferences continue to evolve in a speed and manner consistent with the recent past. They won't, of course, and considering how and why they may differ from the past gives rise to a range of alternative scenarios shown here on the screen, and I'll take you through these scenarios and several other ones as I go through the presentation today.



 Again, as with last year, we consider the outlook from -- for energy from 3 different perspectives. First, how is that energy ultimately used in sectors? So in transport, industry or buildings? Then where in the world is that energy coming from and where in the world is that being produced and being consumed? And finally, what fuels and energies are rising to meet the growing demand? Three different windows onto the same changing energy landscape.



 The charts here offer the updated ET scenario in which energy demand increases around 1/3 by 2040. If we look through these different windows, giving us a bit more detail, starting first with that sector window about how energy window is used across different sectors, one thing I'm always struck by is that despite the considerable attention many of us pay to emerging trends in the transport sector, transport only accounts for around 20% of energy consumption today. It's important not to overweight the significance of the transport sector, and I'm going to come back to that point later.



 Indeed, although it typically attracts far less column inches and far less policy attention, the use of the energy within industry, shown here in red, accounts around half of all energy the world uses, almost 2.5x that used in transport. How industry's use of energy changes over the next 20 years, both in terms of efficiency and fuel choice, will have a major bearing on the energy transition.



 Residential and commercial buildings, the next largest source of energy demand, shown here in pink, is the fastest-growing sector in terms of energy use in the ET scenario. The vast majority of that additional use within buildings takes the form of rising power demand as increasing prosperity and living standards in a delivering -- in a developing world leads to greater use of lighting, household appliances and air conditioning, all of which are predominantly powered by electricity.



 Finally, in terms of transport, shown here in the dark blue, in last year's Energy Outlook, we spent quite a bit of time considering the potential impact of the so-called mobility revolution, the interaction of electric cars, shared mobility and autonomous driving. We have updated that analysis in this year's outlook. I'm not planning to go through that in detail today, but just to say that the prospects in the updated ET scenario are broadly unchanged from last year, with a similar number of electric cars and around 25% of all passenger car kilometers powered by electricity by 2040.



 If we go back to my 3 windows and consider next the country and regions accounting for the increase in energy demand, the story here is similar to recent outlooks. All of the growth in energy demand comes from the developing world, led by Asia. Energy demand in the OECD, these are these green bars here, is essentially flat.



 One difference from previous years is that in the updated ET scenario, India, shown here in the light-blue bars, overtakes China to be the largest growth market for energy over the outlook. The big factor driving this switch is the sustained slowing in Chinese energy demand as economic growth moderates and the pattern of that growth shifts to less energy-intensive sectors, and where the pace of that slowing in recent years has repeatedly surprised us.



 Another point we've made in previous outlooks but is important to remember is that although some of the increase in energy demand stems from population growth, the majority is due to increasing prosperity, rising income per head, shown there by this orange bar as productivity in developing economies increase. In the ET scenario, billions of people move from low to middle incomes, increasing their access to electricity and clean cooking facilities, improving the housing in which they live and the way in which they travel. This increasing prosperity, the emergence of a growing middle class in the developing world, especially in Asia, is the major factor accounting for global economic growth over the next 20 years, and likewise is the major factor accounting for the growth in global energy demand. Without plentiful supplies of energy, this increase in global living standards would be suppressed, and with it, the major factor driving global economic growth. And I will come back to the importance of the world providing more energy in a moment.



 The amount of additional energy needed to support this rising prosperity is offset by significant gains in energy efficiency, shown here by the blue bar, which is assumed to improve at an average rate of almost 2% a year, somewhat quicker than the average over the past 20 years. So although global GDP more than doubles, energy demand increases by only 1/3.



 When considering the future growth of energy demand and the related uncertainties, it's worth bearing in mind this basic chart. The 2 big determinants of future energy demand are the growth in global prosperity, the orange bar; and the extent to which that demand is offset by improving energy efficiency, the blue bar. I do worry that in many mainstream discussions of the outlook for energy demand, these 2 factors often don't quite get the attention they deserve.



 If we turn back to my windows and look through the third window now, onto the fuels which are growing to meet this demand. Renewable energy, shown here in orange, led by wind and solar power, is the fastest-growing source of energy in the ET scenario, accounting for around half of the increase in primary energy with its share here increasing to around 15% of primary energy by 2040.



 Oil demand continues to grow during the first part of the outlook before broadly plateauing in the 2030s. All of the growth in oil consumption stems from the developing world, with the combination of U.S. tight oil and OPEC meeting this increased demand.



 Natural gas, shown here in red, grows much faster than either oil or coal, and it overtakes coal to be the world's second-largest source of energy, converging on oil by the end of the outlook. The demand for natural gas in the ET scenario increases in almost every country and region considered. So broad-based demand, supported by the expansion of liquefied natural gas, LNG, increasing the accessibility of gas around the world.



 Renewables and natural gas together account for almost 85% of the growth in primary energy. So nearly 85% of new energy is either clean or cleaner energy. The corresponding contribution of renewables and natural gas over the past 20 years was less than half that, with coal the largest source of energy growth in that period.



 In contrast, global coal demand in the ET scenario is essentially flat, with falls in China and the OECD barely matched by increasing demand in India and other parts of Asia. The world of energy is changing.



 That's a very quick overview of some of the key features of this year's updated ET scenario. But the real value of the outlook is going deeper. What are the main factors underpinning these trends? And more importantly, what are the key sources of uncertainty?



 To make this manageable and also ensure that you all finish in time to get home to spend your Valentine's evenings with your loved ones rather than with us talking about energy, rather -- I'm not going through the whole book, rather I'm going to focus on 5 key questions and uncertainties highlighted by this year's outlook. How much more energy does the world need? How important are plastics for the future of oil demand? What might happen if the trade wars escalate? Just how quickly could renewable energies -- renewable energy grow? And in low-carbon energy system, what more needs to be done?



 The good news is you will get home. The bad news is this only covers a small part of the analysis and thinking in this year's outlook. There are all sorts of issues and insights that I don't have time to mention today. So if by the end of this presentation your curiosity has been piqued, please do look at the whole of the outlook online at bp.com. We've updated quite significantly the way we show the outlook on the web this year, and the site now is far more interactive and user-friendly. So -- but please do check it out.



 So I'm going to start with this first question: How much more energy does the world need? There's a strong link between human progress and energy consumption. This chart shows the relationship between human development, as measured by the UN's Human Development Index, and energy consumption across a large number of countries. It suggests that increases in consumption are correlated with increases in human development, with that correlation particularly pronounced for increases in energy consumption up to around 100 gigajoules. What I found really striking is that around 80% of the world's population today live in countries where average energy consumption is less than 100 gigajoules per head, in that steeply sloping part of the relationship where increases in energy consumption and human development are particularly pronounced. 80% of the world's population.



 In the ET scenario, despite the substantial growth in energy demand, this proportion is still around 2/3, even by 2040. The world will need substantial amounts of more energy as it grows and prospers. In this year's outlook, we consider alternative more energy scenario in which the share of the world's population living in this low-energy region is reduced to 1/3 by 2040. Other things equal, that requires around 25% more energy by 2040 than in the ET scenario, so roughly equivalent to China's entire energy consumption today.



 To repeat, the world will need substantial amounts of more energy if it's to continue to grow and prosper.



 In his opening remarks, Bob stressed the importance of the dual challenge, the need to provide both more energy and less carbon. This next chart tries to illustrate the dual challenge in the context of the scenarios in this year's Energy Outlook. So the green lines here show the outlook for energy demand and carbon emissions in the ET scenario. The solid line shows energy demand where, as I mentioned, it grows by a little over -- by around 1/3 by 2040. And the dotted line shows CO2 emissions, which I'll show you later, increased -- continue to edge up and increase by around 7% by 2040 in the ET scenario.



 In the more energy scenario, reducing that share of the world's population living in the low-energy region to 1/3, energy demand is around 65% higher than it is today. But neither the more energy scenario or the ET scenario are consistent with meeting the Paris climate goals. In this year's outlook, we developed another alternative scenario, the rapid transition scenario in which CO2 emissions fall by around 45% by 2040, broadly consistent with meeting the Paris goals. And this is the essence of the dual challenge facing the global energy system. The world needs increasing levels of energy as the global economy grows and living standards improve, but at the same time, there needs to be a sharp reduction in carbon emissions for there to be a good chance of meeting the Paris climate goals. There's no simple solution to this challenge, but any viable, sustainable path for the energy system needs to take account of both elements: more energy, less carbon.



 If we turn to the next question, to the importance of plastics for oil demand. To set the scene, this chart summarizes the outlook for oil and other liquid fuels in the ET scenario. Consumption of liquid fuels increases around 10 million barrels a day over the outlook, rising from around 98 million barrels a day to 108 million, with the majority of that growth occurring over the next 10 years or so, after which demand gradually plateaus. The growth stems partly from increasing demand from the transport sector, shown here by these blue bars, but these blue bars gradually fade as vehicle efficiency increases and other fuels penetrate the transport sector. The single largest and, indeed, most persistent source of demand growth is the noncombusted use of liquid fuels, shown -- used in the industry, shown by the gray bars here, especially as a feedstock into the petrochemical sector. Much of the growth of the noncombusted use of liquid fuels is driven by the increasing production of plastics, which is by far and away the fastest-growing source of noncombusted demand.



 So what might happen if increasing environmental concerns cause the regulations of plastic to tighten significantly? How big an impact could that have on oil demand? The likelihood of some material tightening in plastics regulation is already built into the ET scenario, including a doubling of recycling rates to around 30%. As a result, the growth rate of plastics over the outlook almost halves relative to the past 20 years, despite only a slight slowing in GDP growth. And this tightening reduces the growth of oil demand by around 3 million barrels a day. This is shown by this little arrow box here relative to the counter factor with the extrapolation of past trends. So quite a bit already built into the ET scenario, but it's possible that regulation may tighten by even more.



 When assessing this risk, it's worth remembering that around 2/3 of the plastics -- of all plastics are used to produce durable goods. Just look around you. The chairs you're sitting in, the TV monitors you're watching, the microphone I'm using, the lectern I'm standing at, these long-lived products are not the focus of current concerns. Rather, the environmental concerns are concentrated on the use of plastics for packaging and other single uses. Plastic bags, bottles, straws, et cetera, which currently account, you can see that by the blue bars here, for around 3.5 million barrels a day of oil. And in the ET scenario, that increases to around 6 million barrels a day by 2040.



 So what would happen if the regulation of plastics tightened even faster than assumed in the ET scenario? Assumed culminating in a worldwide ban on the use of all plastic packaging and other single uses from 2040 onwards, as shown in this yellow alternative single-use plastic ban scenario. The demand for oil and other liquid fuels using the noncombusted sector still grows, but only just. So this yellow line is only just above the blue line. And overall growth of oil and other liquid fuels is reduced to around 4 million barrels a day. So the growth in oil -- overall oil demand is roughly half over the next 20 years.



 I took 2 main points from this scenario. First, although a complete worldwide ban on single-use plastics looks pretty unlikely, it does highlight that the speed and extent to which the regulation of plastics does tighten over the next 20 years could have a material impact on the pattern of oil demand growth. The numbers are big enough. Second, and this is important, I think, the scenario doesn't account for the energy needed to produce the alternative materials that are used instead of single-use plastics. The point here is that the reason why the demand from plastic packaging and other single uses is set to increase so substantially over the next 20 years is because they provide an effective and efficient solution to many everyday needs. They work.



 Several experts have raised concerns that, without further advances in alternative materials and the widespread deployment of efficient collection and reuse systems, such a ban could lead to an increase in energy demand and an increase in carbon emissions. Beware unintended consequences.



 When responding to the environmental concerns associated with single-use plastics, it's important to also consider the alternative products and materials that will be used instead and the impact they may have on the energy use and the environment.



 Just to round off this discussion on the prospects for oil demand, this chart shows the different profiles for oil demand implied by the various scenarios considered in this year's outlook. The green line is the ET scenario. The red and orange lines at the top and bottom of the range are the more energy and the rapid transition scenarios I mentioned earlier. One other scenario to highlight is the greater reform scenario, shown by this sort of burgundy line here, which considers the possibility that the increasing abundance of oil resources and the resulting risk that large quantities of recoverable oil may never be extracted leads to greater competition between oil producers, lowering prices, and so boosting demand growth somewhat.



 The scenarios differ in terms of the point at which oil demand peaks, if it peaks at all, and they also differ in terms of the level of oil demand in 2040, ranging from around 80 million barrels in the rapid transition scenario, closer to 130 million barrels in that top scenario. But despite these differences, all the scenarios suggest that oil demand will play a significant role in the global energy system out to 2040. And just to repeat a point that we made in last year's Energy Outlook, all the scenarios imply a significant amount of investment in new oil production will be needed over the next 20 years to meet these levels of demand.



 This black dotted line is based on some analysis in the IEA's World Energy Outlook. This considers the consequences if all future oil was restricted to managing existing fields and there was no new investment -- there was no investment in new fields. The IEA estimate that will be consistent with an average rate of decline in global oil production of around 4.5% a year, which, in our framework, causes oil supplies to fall to around 35 million barrels a day by 2040.



 To increase production to even the lowest level of oil demand in our range, the rapid transition scenario of 80 million barrels a day would require many trillions of dollars of investment. Many trillions of dollars of investment in new oil. Without that investment, the world will not even be close to delivering on the more energy aspect of the dual challenge. Remember, we need to think about both aspects of the dual challenge. That's all I wanted to say on oil demand.



 I wanted to turn next to the issue of the recent trade disputes and how they may affect the global energy system if they were to escalate further. Now the aim here is not to consider the implication of any particular dispute, but rather to think about the more general issues of how the energy system may be affected if these types of disputes became more frequent and commonplace.



 To assess their possible impact, we consider a scenario in which increasing trade disputes lead to 2 persistent effects. First, the reduced level of openness in trade causes productivity advances in one part of the world to spread more slowly to other regions, leading to a slight reduction in the trend growth of global GDP. And that type of mechanism is pretty commonplace within the economics literature.



 The second impact is that increased concerns about energy security leads countries to attach a small risk premium of about 10% on imported sources of energy. So for example, suppose a country which imports oil and suppose the oil price was, let's say, $60, this would imply they'd be willing to pay up to $66 for domestically produced oil or an equivalent, given the extra security that would provide. What is quite striking is that although the assumed size of these 2 effects is pretty modest, the impacts on the global energy system in this alternative less globalization scenario are really quite significant. The level of global GDP is around 6% lower than in the ET scenario, and global energy demand is around 4% lower. Now some of you may be thinking, 4%, that doesn't sound that big. 4% and the reduction in energy demand associated with 4% by 2040 is roughly equivalent to the entire energy consumption of India today. So it's fairly material, I'd say.



 The other key impact is the reduction in energy is concentrated in traded fuels, particularly oil and gas, as you can see here, the green and the red bars, as countries switch to domestically produced energy because of the extra security that, that provides. The combination of this lower level of energy demand, together with the increasing home buyers for domestically produced energy, leads to a sharp reduction in energy trade. For example, China's net imports of oil and gas in 2040 are 20% lower than in the ET scenario as they switch into domestically produced coal and renewables.



 This, in turn, has a knock-on effect for energy exporters. U.S. net exports of oil and gas in 2040 are around 2/3 lower than in the ET scenario, with the emerging U.S. trade surplus in oil and gas severely dented.



 I've always been struck that the share of oil in the global energy system peaked in 1973, the year of the oil embargo, and it's pretty much declined every year since. The message from history and from the less globalization scenario is that concerns about energy security can have persistent scarring effects. That's all I wanted to say on trade disputes.



 On to the fourth question of just how quickly could renewable energy grow. As I mentioned, renewables are the fastest-growing source of energy in the ET scenario, accounting for around half of the increase in primary energy and around 2/3 of the growth in power generation. This rise and rise of renewable energy is led by wind and solar power, which increased by a factor of 5 and 10, respectively, over the outlook, accounting for broadly similar increments in global power. As shown on the chart in the right here, the growth in renewable energy means it replaces coal as the primary source of global power generation by 2040.



 The growth of renewable energy is dominated by the developing world, which accounts for around 2/3 of the increase. The particularly rapid growth of renewables in the developing countries is helped by the strong growth in power demand, which ensures there's considerable scope in which renewables can grow. In contrast, the much slower expansion of power demand in the OECD means that the scope for renewables to grow in many developed economies is often limited by the pace at which existing power stations are retired.



 Indeed, this year's outlook includes some analysis which shows that doubling in the rate at which existing thermal power stations are retired increases the penetration of renewable energy almost as much as the doubling in the pace of technological progress. Continued technological gains in renewables are a necessary condition to achieve a rapid decarbonization of the power sector, but they are unlikely to be sufficient.



 This is a particular example of the more general point that the capital intensity of the energy system acts as a sort of speed bump on the pace at which new energies can penetrate. This chart, which some of you have seen before, puts this point into a broader historical perspective. For those who haven't seen this chart before, it's a really cool chart. You just need to spend a moment to get your head around how it works, then it's a cool chart. So the clock on this chart starts at the point when each one of these fuels provided 1% of world energy. And it then shows how that share of world energy increased over the subsequent 50 years. So for oil, the chart starts in 1877 when oil first accounted for 1% of world energy. For nuclear, it was 1974, and as you can see, we haven't quite reached the end of the 50 years of nuclear.



 A key point to take away from this chart is the sheer length of time it takes for these new energies to penetrate the energy system. It took almost 45 years for the share of oil to increase from 1% to 10%. It took natural gas, in red, over 50 years. The capital intensity of the energy system acts as a brake on the pace at which new energies penetrate. Energy transitions in history have taken multiple decades.



 So what about renewables? Renewables, in orange, the clock for renewables started 10 years ago in 2006 -- so just over 10 years ago. And you can see, so far, renewables have followed pretty much the path of nuclear energy.



 What will happen next? The profile implied in the ET scenario suggests that the share of renewables in world energy increases from 1% to 10% in 25 years. So more quickly than any fuel ever seen in history, helped by policy support and sustained technological improvements. In the rapid transition scenario, which is consistent with meeting the Paris climate goals, the growth of renewables is literally off the charts. I had to rescale the chart for it to fit in here, with renewables accelerating from 1% to 10% in just 15 years.



 I'm not suggesting this is implausible or impossible, rather I drew 2 points from this analysis. First, to get anywhere close to a pathway consistent with Paris will require a speed of change and transition in the global energy system, which is truly unprecedented. Second, to achieve this pace of transition will require a comprehensive set of policy measures, which brings me to my fifth and final question. What more needs to be done to ensure a rapid transition to a low carbon -- lower-carbon energy system?



 As I mentioned earlier, in the ET scenario, CO2 emissions, shown here on the left, continue to edge up, increasing by around 7% over the next 20 years. The good news is that the pace of this growth is far slower than in the past. Over the previous 20 years, CO2 emissions increased by almost 45%. You can see how that line is flattening off relative to the past. So the world is making some progress. The bad news is the pace of this progress is nowhere near fast enough to be consistent with the Paris climate goals. CO2 emissions need to fall substantially over the next 20 years, not just grow less quickly.



 The chart on the right shows a sectoral breakdown of those carbon emissions. The power sector, here in purple, accounts for around 40% of CO2 emissions in 2040 in the ET scenario. It's the single biggest source of CO2 emissions from energy use both today and in 2040. This despite, remember, the unprecedented growth in renewables we just saw. Industry and transport each account for around 20 -- for 1/4 of the emissions; and buildings, about 10%.



 The idea behind the rapid transition, or RT scenario, is to consider a range of policy measures that can be applied in these sectors to achieve a faster transition to a lower-carbon energy system. We don't have time today to go through all the various policy measures. They are described in some detail in the main book, [they will be --] go through each sector in turn. So what I'm going to try and do today is just give you a flavor of what we try to do.



 So we applied a wide range of measures stretching across each sector, with the policies chosen so as to be broadly equivalent in terms of their implied costs and effort. As Bob said, there's no silver bullet. A comprehensive set of policy measures is needed. Carbon prices play a central role, particularly in the power and industrial sectors, encouraging a switch into lower carbon fuels and supporting investment in carbon capture use and storage, CCUS, with carbon prices reaching $200 per tonne of CO2 by 2040 in the OECD and $100 elsewhere.



 The carbon prices are increased only gradually to avoid a premature scrapping of productive assets. And this means there's a role, at least for a period, for targeted regulatory measures to help create the right incentives for new investments until carbon prices get to meaningful levels.



 If we go back to the chart showing CO2 emissions for the ET scenario, I can now add in the rapid transition scenario in which carbon emissions fall by around 45% by 2040. The blue swath shows a sample of external projections which claimed to be consistent with meeting the Paris climate goals. What is striking about this swath is just how wide it is, and this is by no means exhaustive. It would be possible to produce an even wider range. There is no unique path to Paris. But as you can see, the rapid transition scenario is pretty much in the middle of this range. So in that sense, you can think of the rapid transition scenario as being on the pathway consistent with meeting the Paris goals.



 In terms of the sectors, which essentially get us off this green line and onto something closer to the orange line, what's doing the work getting us off the green on to the orange, around 2/3 of the movement from green to orange is due to the reduction in carbon intensity for the power sector, the purple line here. Some of you remember, we discussed last year, policies aimed at the power sector are central to achieving a material reduction in carbon emissions over the next 20 years. Much of the remainder of the movement from green to orange is due to reductions in buildings and industry, the red bar.



 In absolute terms, the increased use of CCUS in the power and industrial sectors to around 4.5 gigatonnes of CO2 by 2040 accounts around 1/4 of the reduction in carbon emissions relative to current use -- relative to current levels. It's striking that the transport sector, despite an equally stringent set of measures being applied, accounts for only a very small proportion of the carbon emissions relative to the ET scenario. The point here is most of the low-hanging fruit in terms of reducing carbon emissions over the next 20 years lies outside of the transport sector.



 In terms of the nature of the global energy system in 2040, despite significant gains in energy efficiency, global energy demand still grows by around 20% in the rapid transition scenario, that need for more energy again. All of the growth in energy demand is met by increasing renewables with their share of primary energy increasing to over 30% by 2040. Remember that off-the-charts growth in renewables we just saw a moment ago.



 But even in that case, that off-the-charts growth of renewables, with renewables accounting for around 1/3 of global energy in 2040, something has to provide the other 2/3. With oil and gas, shown here in the green and red bars, together accounting for almost 50% of primary energy in 2040 in the rapid transition scenario. As we saw earlier, the level of oil demand falls to around 80 million barrels a day by 2040. In contrast, the demand for natural gas actually increases over the outlook, helped by the growing use of CCUS. By 2040, around 40% of natural gas consumption is used in conjunction with CCUS in this scenario.



 The rapid transition scenario is obviously highly stylized, but the hope is that it provides some guidance of the type of actions that might help to make a decisive change over the next 20 years. At its heart is a set of policy measures focused on the lowest-hanging fruit in terms of carbon emissions. The power sector is key in that respect. Think power first, second and third. Carbon prices are critical. They provide incentives for everyone, producers, consumers, investors to play their role, supplemented by targeted regulations, especially in initial phases, if carbon prices are increased only gradually. Finally, many energies are likely to be required for many years. As Bob has often said, this is not a race to renewables. It's a race to reduce carbon emissions.



 Just one final point before wrapping up. Even if the world was to achieve everything envisaged in the rapid transition scenario, a significant level of CO2 emissions from energy use would still remain in 2040. The rapid transition scenario represents a major step towards Paris, but it represents just that. It takes us roughly halfway. For those of you who live in London, it's like getting to Calais, right? It's a good start, but there's still a long way to go.



 This chart shows the central breakdown of carbon emissions that still remain in 2040 in the rapid transition scenario. These emissions are concentrated in hard-to-abate processes and activities, particularly in the transport and in industry. This year's Energy Outlook considers a role that different technologies and activities may play in greatly reducing these emissions beyond 2040, if we are to move to a net 0 emissions world in the second half of this century.



 Now we don't have time to go through that analysis in detail, but just to highlight a few of the key points. A key development would be the need for an almost complete decarbonization of the power sector, together with greater electrification of end-use activities. That, in turn, is likely to require more renewables, more CCUS to support gas and perhaps even coal, and energy storage and demand side response to help alleviate some of the growing intermittency issues associated with the increased reliance on renewables.



 But the IEA recently estimated that only 2/3 of final energy use has a technical potential to be electrified, highlighted -- highlighting the need for other forms of low-carbon energy and energy carriers such as hydrogen and bioenergy. There will also be a need for accelerated gains in energy efficiency, including a substantial expansion of the circular economy. And finally, a range of technologies for the storage and removal of carbon emissions, including CCUS, as I mentioned, and also a range of negative emissions technologies such as land carbon. The road to Paris is long and challenging.



 On that sobering thought, let me conclude. The global energy system is in transition. One obvious dimension of that transition is the need to shift to a lower-carbon energy system. But that's only one dimension. The pattern of energy demand is also in transition, drawing -- driven by growing prosperity in the developing world as billions of people start to enjoy just a tiny fraction of the comforts that most of us take for granted. Meeting the dual challenge for more energy to continue to support growth and prosperity while reducing carbon emissions is a key challenge facing all of us.



 It turns out, there is some uncertainty as to the precise origins of Valentine's Day. My preferred version is that of the Roman priest, Valentine, who married soldiers in secret after they were forbidden to marry because, apparently, single men made better soldiers.







 I'm afraid a new Energy Outlook can't compete with the excitement of clandestine weddings, and it certainly won't make you a better soldier. But I hope, at least, it will make you a bit better informed about the considerable uncertainties and challenges facing the global energy system over the next 20 years. And for those of you who've left it too late to buy a Valentine's gift for your loved ones, we have some small bags of special Energy Outlook Valentine's chocolates for you to pick up on your way out.

 Thank you very much.

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 William Zimmern,    [3]
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 Hello. Welcome back. That was the live launch of the Energy Outlook, which was filmed in London last Thursday.

 Apologies. We've just -- our fire alarm has just started. So I'll just pause there while we -- we'll let the fire alarm happen.

 (technical difficulty)

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 William Zimmern,    [4]
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 Great. Sorry about that. These unplanned things do occasionally happen.

 So as I was saying, that was the live launch of the Energy Outlook.

 (technical difficulty)

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 William Zimmern,    [5]
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 Perhaps an indication of BP's dedication to safety. We have that every hour, just so you're aware. We don't, really. Sorry.

 So that was the live launch, which happened last Thursday. You'll be aware it's not Valentine's Day anymore, and apologies, we don't have any Valentine's chocolates to give to people on the Internet, but you are very welcome here. Thank you for joining, and thank you for watching that video.

 My name is William Zimmern, and I manage the Energy Outlook. And I'm here with Spencer Dale, who you just saw presenting some of the key findings of the outlook.

 Many thanks for all the questions you have already sent in. It's not too late. So if you have other questions, please write them down and send them in, and we'll try and get through as many as we can in the next 30 minutes or so.

==============================
Questions and Answers
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 William Zimmern,    [1]
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 So I'm going to start with one from [Collins Nwosu] from Nigeria. And he said, "Spencer, how will alternative energy change the market of fossil fuels? Is this impact going to be felt in developing countries in Africa with huge energy deficits and significant fossil renewable resources?"

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 Spencer Dale,  BP p.l.c. - Group Chief Economist   [2]
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 Yes. Africa is very sort of noticeable by its absence in the presentation you just heard, in the sense that Africa over the next 20 years in that evolving transition scenario doesn't emerge as a major source of energy demand. So in that evolving transition scenario, by 2040, Africa account -- has about -- 1/4 of the world's population live in Africa, but it accounts for only 6% of energy demand. And so my expectation is, if we look beyond 2040, Africa becomes a major source of growth of energy demand in the period beyond 2040. And the nature of that growth of energy demand and the extent to which it's based on renewable energy will be a key factor in bringing down those carbon emissions beyond 2040. Today, Africa actually has quite a significant energy surplus. So it produces more energy than it consumes, with much of that surplus concentrated within oil. Over the next 20 years, we do expect to see some growth in Africa, both as GDP and also as energy demand. And as a result of which, the size of that surface will gradually -- we expect to decline in the evolving transition scenario, particularly in terms of oil as demand for oil increases more quickly than domestic production. But we also see quite a significant growth in renewable energy within Africa, and we had some analysis in the outlook, which looks at the nature of the African power market. And as the African power market -- growth of African power demand increases, we see strong growth in renewable energy feeding into that African power market, allowing for gradual decarbonization of the African power sector. So Africa, [Collins], an increasingly important factor shaping global energy markets on both the supply side and the demand side over the next 20 years and beyond.

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 William Zimmern,    [3]
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 Great, Spencer. So the next question is from [Joe Watling] in Australia. And the question is, "How will China's rapid solar adoption impact global energy demand and carbon emissions?" A very relevant question.

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 Spencer Dale,  BP p.l.c. - Group Chief Economist   [4]
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 Indeed, and I think -- [in terms] as I think about this -- China's role in terms of shaking the global energy markets, in having sort of 2 roles here. First is just the sheer size of China means what's happening in China has big effects in itself. So what we are seeing in China is quite significant changes in their pattern of energy demand. In part, the growth of their energy demand is slowing quite substantially. Over the last 20 years, China's energy demand grew by something like 6% a year. And in that evolving transition scenario I was speaking about, it grows close to an average of 1% a year. That sharp slowing in the growth of energy demand reflects both a slowing in overall GDP growth, so just slower economic growth, and also a shift in the pattern of that growth away from the industrial sectors, which tend to be very energy intensive, towards a more service consumer-orientated growth, which is less energy intensive. In addition to that, you're seeing a significant shift in the fuel mix within China, away from coal into cleaner, lower carbon fuels, and that's a key role of renewable energy. So a very significant shift over the last 3 or 4 years has been a very substantial increase in renewable energy in China, an almost 1-for-1 reduction in coal. So what we're seeing in China now and what we expect to happen going forward is a strong growth of renewable energy, supported also by a strong growth in nuclear energy and also natural gas taking the place of coal. And that in itself, those reductions in coal consumption in China and that rapid growth in renewable energy are the major factors driving global demand in coal and global demand in renewable energy. So that's sort of the direct effect of China. There's also an indirect effect. This very strong growth we've seen in China's demand for renewable energy and also their investment in renewable technology has meant that greater adoption has caused the cost of renewables to fall very dramatically. China's adoption and its investment in renewable is one of the key factors which has allowed renewable energy to fall, the cost of that renewable energy to fall so significantly over the last 10, 15 years. And that falling cost has allowed -- has sort of fueled an increased adoption around the world. So China, big [inflows] both in itself and also the impacts of its increasing demand for renewable energy allowing renewable energy to move along its learning curve cost to fall and allowing, therefore, greater adoption around the rest of the world. So China, hugely important in this respect.

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 William Zimmern,    [5]
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 And I would say China -- in terms of any global energy conversation, you almost always have to include China in a huge impact in whatever energy source.

 So the next question is from [Evie] from Indonesia, and she asks, "What is the right method to effectively substitute plastics in daily life? And what is the right action to protect the environment and support the country's development?"

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 Spencer Dale,  BP p.l.c. - Group Chief Economist   [6]
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 Thank you very much for your question, [Evie]. Well, I come to Indonesia at least once a year, and so it's nice to actually have a question from you. What we were trying to do in the Energy Outlook was make 2 points about plastics. One was to recognize that the growth of plastics over the next 20 years in the evolving transition scenario was a major factor driving the growth of overall oil demand. And therefore, recognizing that if the world started to regulate more aggressively against plastics, that could have an impact on oil demand and just on exploring the nature of that uncertainty. The second point was just to note that if we did see increasing tightening in the regulation of plastics, such that we saw particularly single-use plastics started to be phased out around the world, we should just stop and ask ourselves, "Well, what's going to be put in their place?" And without significant investment in collection and reuse facilities and without further advances in different types of materials science, there was a risk that swapping plastics for other types of materials could lead to a worse outcome. So in terms of your question, what should we substitute for plastic in everyday life? I think, I mean the answer is keep on recycling as much as possible. Keep on reusing your plastic bags as much as possible. Recycle plastics which you can't use again. Recycle, and hopefully, they will come back. Likewise, if you're producing materials, if your product's in glass, make sure you recycle glass as well. And I think that was one of the points I was trying to stress at the end of the presentation today, was when we think about really going sort of the extra half beyond 2040, how are we going to get carbon emissions down to a net 0 world, the expansion of the circular economy, reuse and recycling of products to reduce our overall demand for those products, I think, will be key. And so plastics is just part of that broader circular economy issue.

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 William Zimmern,    [7]
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 And if you don't mind, I mean, I think the circular economy issue is hugely important. And I think it obviously includes plastics, but it can be thought of as a much wider concept and can include all sorts of products. And in terms of industrial products, how do we reuse steel? How do we reuse aluminum, concrete? So it can become -- and I expect it to become more and more important in terms of energy conservation and resource conservation in the future.

 Great. So we have a question from [Manish] from India, and he asks, "How deep is the impact of electric vehicles going to be? And what will this -- what impact will this have on fossil fuels over the next 30 years?"

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 Spencer Dale,  BP p.l.c. - Group Chief Economist   [8]
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 So today, there is around 3 million or 4 million electric vehicles on the planet today out of -- or 3 million or 4 million electric cars in the planet today out of the total global carpark of 1 billion. So a very small fraction of the number of electric cars today -- the cars in the road today are electric. But it seems almost certain that, that number will grow very significantly over the next 20 years. Exactly how much it will grow, it's very hard to predict. So the confidence bands here are enormous. In that evolving transition scenario, the number of electric cars goes from about 3 million today to around 300 million or a little over 300 million by 2040. So they move from a fraction, from less than 1% of the world's carpark today to around 15% of the global carpark by 2040. So we expect the global carpark in 2040 to be close to 2 billion electric cars -- 2 billion cars, of which 300 million will be electric. We also expect those electric cars to be used more intensely than normal cars, particularly due to the interaction of electric cars' shared mobility and autonomous driving. And as a result of which, we expect 25% or so of passenger car kilometers to be powered by electricity in that evolving transition scenario. So electric cars, becoming a very significant part of the mobility sector. The impact that will have on urban air quality and improving the air quality we breathe here in London and you in Delhi or in Mumbai in India will be very significant. The impact it has actually on oil demand is -- appears to be relatively small. So that number of 300 million electric cars, so a massive growth, would reduce oil demand relative to a world where you saw no growth in electric cars by 3 million or 4 million barrels a day by 2040. So that's 3 million or 4 million barrels a day in the total world demand of closer to 100 million barrels a day. So the impact on oil demand, not very significant. But the impact on the nature of the mobility system, very significant. And the impact that will have on urban air quality, also very significant.

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 William Zimmern,    [9]
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 And I think it's fair to say that, that's the 2040 sort of off the page. As we go to 2050, 2060 and beyond, it becomes far more significant. But yes, absolutely.

 So the next question is from [Marcus] from Singapore. So -- and he says, "How will the LNG market -- what does the LNG market forecast look like?"

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 Spencer Dale,  BP p.l.c. - Group Chief Economist   [10]
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 [Marcus], so -- and in Singapore, LNG matters an awful lot, so I can understand your question. So just for those who aren't so familiar with this, LNG, liquefied natural gas is the process by which you -- where natural gas is liquefied. It's put in barrels and tanks, and therefore, can be shipped around the world. And so it greatly increases the accessibility of natural gas around the world. If you go back 10 or 20 years, natural gas was tended to be traded only by pipelines from one country to another. If you as a country which had a demand for natural gas, and you had a country nearby which produced that natural gas, that was fine. But if you were one -- but if you were in parts of the world which couldn't easily have access to pipeline gas, that meant your demand (sic) [supply] for natural gas was severely constrained. The growth of liquefied natural gas, led in particular initially by Qatar, more recently by Australia and the U.S., has revolutionized the nature of global gas markets, leading to far greater integration of gas markets in the U.S., Europe and Asia than we have ever seen before. That leads to a more competitive market, and as a result, which helps to underpin the growth of natural gas in the evolving transition scenario. In that evolving transition scenario, we expect the sort of global supplies of liquefied natural gas to more than double over the next 20 years and liquefied natural gas to overtake pipeline gas as the major source of traded gas. On the supply side, it's Qatar and the U.S. we expect to grow as they emerge as the key sources of that growth, with Qatar and the U.S. together by 2040 accounting for around 40% of the growth -- 40% of LNG supplies to the world in 2040. On the demand side, the key markets today, and over the last 5 or 10 years, has been a combination of Japan and Korea. But what we are seeing is a growth in China, other emerging Asian economies and India becoming the major source of demand for that LNG, and those traditional markets in Korea and Japan becoming less important.

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 William Zimmern,    [11]
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 Great. So we have a question from [Kerry] in Canada. Now Kerry , I don't know if you've woken up early or you're staying up late, but you are very welcome. So the question is, "How will the energy sector balance tensions between financial growth, jobs and climate?"

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 Spencer Dale,  BP p.l.c. - Group Chief Economist   [12]
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 [Kerry], yes, and well done. I hope you're getting up early rather than staying up late. I think your question goes to sort of the heart of the biggest theme we were trying to bring out in this year's Energy Outlook, and that big theme was the nature of what we describe as the dual challenge facing the energy system, the need for more energy as well as less carbon. Now the second part of the dual challenge, the need for less carbon, I think is well understood and appreciated around the world, where climate science is real. We need to see a significant fall in carbon emissions if we're going to stop the very pernicious impact that climate science -- global warming could have on our economy and our well-being, and that is critical. On the other side, however, the world also needs more energy. Not in rich, developed countries like the U.K. or Canada. Energy demand there is likely to be flat to falling. All of the growth in energy demand over the next 20 years in evolving transition scenario comes from the developing world, led in particular by fast-growing developing economies in Asia, led by China and India. That growth in energy demand is largely driven by increasing prosperity. In evolving transition scenario, we have billions of people moving from low to middle incomes. And as they move from low to middle incomes, they can start having access to electricity, to clean cooking facilities, to other household appliances. Eventually, they can save up and have their first -- buy their first motorbike, and even long enough, their first motorcar. It's that increasing prosperity in Asia which drives global economic growth, and it's that increasing prosperity in Asia which drives energy growth. And so the nature of the global energy system, we need to think about both of these issues, try to solve this dual challenge, the need for more energy and less in coal. And as I was saying on the presentation, there's no simple answer to this problem. We can't just wave a wand. Energy efficiency is critically important. The growth of cleaner, lower carbon fuels; renewable; swapping renewables energy, nuclear energy; swapping natural gas with coal are all part of the story. But the big message we were trying to convey here is any viable, sustainable path for the energy system needs to take account of both aspects of this dual challenge, more energy, less carbon.

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 William Zimmern,    [13]
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 Great. So we have a question from [Mohammed]. I'm not exactly sure where you're based, Mohammed , but your question is, "The bulk of electricity production today is from coal. With low coal prices, how and when do you see coal being substituted in countries ranging from Germany, Poland, India and China?" A very relevant and important question.

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 Spencer Dale,  BP p.l.c. - Group Chief Economist   [14]
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 [Mohammed], one of the -- in addition to producing the Energy Outlook each year, we also produce -- BP produces something called the Statistical Review of World Energy, which looks at past trends in energy, particularly the last year, but a broader backdrop to have a sense about how the nature of the energy system is evolving in the past. One of the striking features of last year's Energy -- last year's Statistical Review, which we brought out, was the share of coal in the global power sector in 2017 was exactly the same, exactly the same, as the share of coal in the global power sector 20 years ago. So in 2017, the share of coal in the global power sector was 38%. And sure enough, in 1998, 20 years previously, the share of coal in the global power sector was 38%. So we need to make very significant progress in the power sector, but we are not making that progress quickly enough. Now in the evolving transition scenario, as you would have seen in the presentation, we expect the share of coal to gradually decline over the next 20 years. And that share, to a very large extent, to be taken up by an increase in renewable energy. The pattern of that around the world differs quite significantly. So with the falls, those pronounced falls in the share of coal happened within the OECD economies and also within China. In Europe, there's -- we have different factors built in. We see the role of coal within Germany actually phasing out almost entirely by the end of 2040, although we expect to see some more persistence within countries like Poland, where coal plays a bigger role. China, a very significant movement away from coal. So its share falls very substantially within the power sector with outright declines in Chinese coal consumption, and it increasingly appears that China's coal consumption now is likely -- it appears that it peaked 2 or 3 years ago. Even though it may rise this year, it's unlikely to get back to the levels we saw in 2013, 2014. In contrast, in India, we expect coal consumption in the power sector to continue to grow. Renewable energy in India is likely to expand very rapidly in the next 20 years. That's certainly the story in the evolving transition scenario. But the growth of power demand in India is likely to grow even more quickly, and something else has to take -- provide the residual energy to produce that power. And in India, coal is the most natural fuel to do that. So continuing growth of coal in India and other smaller developing Southeast Asian economies offset by falling coal in the OECD and China.

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 William Zimmern,    [15]
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 Great. So we have a question from [Silvana] from Indonesia again. Welcome. So the question is quite a simple one, which is how to reduce the cost of renewable energy. But I'd quite like to elaborate that, which is, Spencer, what is your view or what are our views on the cost of renewable energy going forward? And how do they compete with other forms of energy in terms of thermal fossil fuels?

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 Spencer Dale,  BP p.l.c. - Group Chief Economist   [16]
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 [Silvana], one of the sort of the most biggest success stories over the last 5 or 10 years of global energy has been the truly remarkable falls in the cost of renewable energy, particularly solar cost, where in the last few years, the cost of solar auctions around the world have been coming out at levels which would have been unthinkable 5 or -- 10 or even as little as 5 years ago. A number of factors have contributed to those falling costs, and they're likely to persist going forward. So some of those falling costs have been helped by government support. There's been some very significant government support in China, and also to a lesser extent, there are still there in India. And that support can take many different forms. Some of it can take the forms of direct subsidies. Other times, it can take the forms of government long-term contracts' purchasing power agreements, PPAs. And those types of long-term contracts makes it cheaper for companies to raise finance to finance renewable energy, and that helps to bring down the cost. So some government support is important. The other key factor here is there's a learning curve for renewable energy. So for solar energy, for example, every time the amount of -- in history, the amount of capacity installed in solar energy has been doubled, costs have fallen by somewhere between 18% to 20%. So every time you're seeing those -- that doubling of capacity, costs fall. In the evolving transition scenario, solar power increases by a factor of 10. So you see another further substantial fall down in the cost of solar energy. And around the world, we see both wind and solar energy being able to increasingly compete against coal and natural gas without the need for explicit subsidies. So in that evolving transition scenario, government supports have faded out during -- by the mid- to late 2020s, and that growth we see in renewable energy beyond that is due to -- by the fact that renewable energy is able to compete alongside natural gas and coal.

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 William Zimmern,    [17]
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 Great. So we have a question from [Takao] in Japan, and he's saying, "Why is the contribution of the transport sector to reduce CO2 so limited? Have the relevant technologies not been developed yet?"

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 Spencer Dale,  BP p.l.c. - Group Chief Economist   [18]
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 And that's a really important question, [Takao]. So one of the messages I tried to land in this year's presentation was in terms of the low-hanging fruit and the easiest types of carbon emissions that can be reduced, the transport sector -- most of those like outside are the transport sector. And I think the simple reason for that, Takao , is that oil has a very strong comparative advantage when used within the transportation system. It is hard to substitute oil for other forms of energy due to the density of that energy for -- when you're using that in -- for the transport, and the energy needs to be mobile. We are certainly seeing some of that -- some substitution from oil into both electricity and natural gas, and the electricity and the growth of electric cars is growing. But as I was saying, even if we see that rapid growth of fruit from 3 million or 4 million cars a day to sort of 300 million cars in 2040, that will only account for around 15% of the global carpark over that 20 years. That's for cars. If you go to heavy-duty trucks, the ability to substitute oil for electricity or natural gas there, it is harder to achieve, particularly in terms of electricity because the battery size has to get bigger. By no means impossible, and it will be achieved at different points in time, but it's harder. If you then go to aviation in terms of flights, there will be the ability to substitute oil, say, for electricity in terms of electric power. Planes will increase for very small short distance flights. But the vast majority of flights are longer distance flights, and the idea that we will have transatlantic flights powered by electricity rather than oil in the next 20 years doesn't seem very likely, you can see. And so therefore, it is -- that's just -- the technology will need to evolve over time for the ability for other fuels, electricity, natural gas and other environments, to substitute out of oil into other fuels. And a part of that will be, as I say, electricity. Part of it will be natural gas. But I was just saying towards the end, beyond 2040, I think hydrogen could also play a significant role, particularly in some types of long-distance road haulage and also marine transportation. And biofuels, I think, will be important in terms of aviation.

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 William Zimmern,    [19]
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 Great, Spencer. A tricky one here from [Darrell], again from Indonesia. So he asks, "What more needs to be done in the industry sector to facilitate a more rapid energy transition?"

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 Spencer Dale,  BP p.l.c. - Group Chief Economist   [20]
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 And that's a great question, [Darrell]. It's a great question because that point I was trying to make during the presentation that the industrial sector accounts for half of the world's total energy use. It accounts for 2.5x more use of energy than in the transport sector. So although lots of policy focus and column entries in newspapers are focused on the transport sector, it's industry where -- which really has a significant impact. And a key part here is increasing the incentives for people to use energy more efficiently. And so as an economist, I would say a key part of that is increasing the price on carbon. If we increase that price on carbon, that encourages industries to use all energy more efficiently and also to substitute away from the most carbon-intensive fuels, such as coal, into lower-carbon fuels, electricity powered by renewables where that's possible, if not into natural gas. So part of the story here is the carbon price. Why that carbon price is rising over time, perhaps some targeted regulations, targeted regulations at levels of trying to improve energy efficiency, relating back to the -- one of the earlier questions on plastics, trying to think about incentives to increase the circular economy. So in that lower carbon -- so in that rapid transition scenario, some of the measures we made to reduce the carbon levels within industry was trying to increase the levels of energy efficiency and also expand the role of the circular economy. So some of that via price measures in terms of the carbon price. And some of it, especially initially via, targeted regulations.

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 William Zimmern,    [21]
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 Great. So we have a question from [Cesar] in the U.K., and he was saying sort of, "If solar costs have come down so quickly, why are we still seeing growth in fossil fuels?"

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 Spencer Dale,  BP p.l.c. - Group Chief Economist   [22]
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 And the point here, [Cesar], is because the pace at which new energies can penetrate the energy system are slowed by the capital intensity of the energy sector. So I showed some charts during the presentation that in evolving transition scenario, the share of renewables goes from around 3% or 4% today to about 15% by 2040 in evolving transition scenario. If it achieved that, that would be the quickest growth of any fuel ever seen in history. In the rapid transition scenario, the growth of renewables is roughly double that. It gets to 30% by 2040. That's off the charts, literally off the charts relative to anything seen in history. But even if you saw that, so that very optimistic scenario, with renewables growing off the charts by anything we've seen, it still only provides around 30% of the world's energy. So that matters as a matter of sort of mass. Something else has to provide the other 70%. And remember, the world needs more energy to lift these billions of people from low incomes into middle incomes, and that's the role for oil and gas. Now in that scenario, that rapid transition scenario, the level of oil wasn't growing. Oil demand in that scenario peaks in the mid -- by the mid-2020s. And by 2040, it's around 80 million barrels a day. So it's around 20% lower than current levels. But even in that scenario, oil is still playing a very significant role in that energy system. And secondly, you will need literally trillions of dollars of investment in oil to make sure the world can provide just 80 million barrels a day of oil. So the reason why we are likely to see oil and gas continuing to play significant role is because even if you take a very optimistic scenario for renewable energy, that would not provide -- be able to provide all of the needs of the world. So one of the messages I was taking from that rapid transition is the world would need many energies for many years. And as Bob Dudley, our CEO of BP, often says, when thinking about the energy transition, don't think about this as a race to renewables. Think about it as a race to reduce carbon emissions. And you can reduce carbon emissions by a whole range of different practices. Renewables, absolutely key and central. But improving energy efficiency, also incredibly important. The greater use of carbon capture use and storage, CCUS, also important alongside the use of natural gas. So many different ways in which we can achieve that reduction in carbon emissions.

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 William Zimmern,    [23]
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 Absolutely, and I mean, it's probably worth saying that there is a limitation to what electricity can do. There are certain processes, some very high heat processes in industrial sector in terms of mobility. I think long flight, it's going to be a long time, many, many years, I think, before people see the electricity will be able to provide mass sort of transportation in the aviation sector. So there is a limit to what electricity can provide, and therefore, there's a limit to sort of how renewables can replace other forms of fuels.

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 Spencer Dale,  BP p.l.c. - Group Chief Economist   [24]
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 I think that's a really good point, and it's a point which often isn't fully understood yet. We try to make it -- there's some really nice work by the International Energy Agency, the IEA, in their World Energy Outlook, which estimates that in -- around 2/3 of the final use of energy has the potential to be electrified. And that would be if we could get to that 2/3 and in a decarbonized power sector, that'd be a very significant role going forward. But it does suggest some unique other forms of either low carbon energy or energy carriers to play a role. Renewable energy on itself via electricity may not be able to play that full role. That has a key role for things like hydrogen, as I was mentioning earlier, which can play a significant role, particularly in some industrial processes; but also for bioenergy because the most natural way in which you, for example, will decarbonize aviation is by using different forms of bioenergy. So many energies for many years because there's many different ways in which energy is used, and renewables is a solution to some of those issues, but not all of them.

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 William Zimmern,    [25]
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 Great. So we have a question from [Hui Ping] in China. So welcome, Hui Ping . And you may have talked about this already, but the question is, "What are the short- and long-term effects of trade policies on the global Energy Outlook?" So I know you've covered some of this in your presentation, but you may want to say a few more words.

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 Spencer Dale,  BP p.l.c. - Group Chief Economist   [26]
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 We did pick up on the potential impact of trade disputes in this year's Energy Outlook in our -- what we called our less globalization scenario. So the aim of the less globalization scenario wasn't to focus on any particular trade dispute, but rather to think of the more general issues associated with the world in which if trade disputes became increasingly commonplace and more persistent over time. And then we modeled that by saying, well, those types of trade dispute could have 2 potential impacts. One of those impacts is that if the world started to see less growth in trade, greater protectionism, that would tend to slow global economic growth because productivity gains in one part of the world transfers slower to other parts of the world. That knowledge transfer, it slows down. And putting that type of calibration into the model reduce overall GDP growth by around 6% by 2040 relative to the evolving transition, scenario and overall energy growth by around 4% relative to the evolving transition scenario. And you may have seen on the presentation that I would say, well, 4%, that doesn't sound a big number. But another way to think about that 4% of energy, which is lost -- energy demand which is lost, is roughly equivalent to the entire energy consumption consumed by India today. So a pretty big number. The other point we bring out, which I think is less well understood or less discussed in much of the current debate, is if parts of the world become increasingly concerned about energy security in a world of trade disputes, so if you're a large energy importer, like you are living in China, you may think, well, at the margin, I may be less comfortable in importing oil and less comfortable in importing natural gas because there may be periods where I can't access that oil and gas as easily. And in that world, I may prefer domestically produced energy. So for China, the natural thing would be increases in renewable energy, perhaps coal consumption and nuclear energy. And what you saw is this sort of home -- this bias towards domestically produced energy would tend to dampen very significantly energy trade. So for example, in China, in that less globalization scenario, the level of oil and gas exports in 2040 was around 20% lower than in the evolving transition scenario. So really quite a significant reduction down with the -- compensated, in particular, by a greater growth of renewables and a greater electrification of the Chinese energy system. The sort of corresponding counterpart to that is those countries who are large oil and gas exporters, particularly the U.S. and Russia, the growth of those exports were significantly dampened in that less globalization scenario. So the impact of trade disputes; slower overall GDP growth, and hence energy growth; and the risk that countries move towards domestically produced energy because of this energy securities issues dampening global energy trade.

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 William Zimmern,    [27]
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 Great. So we have a question from [Abigail] in the U.K. -- here in the U.K. saying, "What is the consequence of the peak in oil demand?"

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 Spencer Dale,  BP p.l.c. - Group Chief Economist   [28]
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 [Abigail], I have a -- sort of what sounds like a glib response to peak oil demand, and it's not glib. It's meant to be a serious point to make. My point on peak oil demand is I don't know, and I don't care. And the reason why I say I don't know and I don't care relates to that chart I was showing of all those different profiles for oil demand in the Energy Outlook which I was showing. So I don't know, it's because some of those scenarios had oil demand peaking in 2025. Others of those scenarios had oil demand continuing to grow into 2040. So I don't know because different plausible scenarios can have oil demand growing all the way through into 2040 and beyond or peaking in the next 5 years. So all I would say is beware confident economists when they tell you, "I know when oil demand is going to peak. It's going to peak in sort of 2026." You think, "Well, really, you're far cleverer than I am." That's why I don't know. I don't care was because the other part of that chart where, against all of those scenarios for oil demand, I showed the scenario -- I showed the case will be, suppose investment in oil was limited to just managing existing fields and there was no new investment in new fields. In that world, oil and oil supplies by 2040 would fall to around 35 million barrels a day in our outlook. The gap between that 35 million barrels a day and all of those demand profiles was very large and would take many trillions of dollars of investment in oil. So even if oil demand peaked in the very soonest scenario that we showed, that rapid transition scenario in 2020, in sort of the mid-2020s, and that oil demand fell by 20% over the next 20 years to around 80 million barrels a day, the world would still need many trillions of dollars of investment in new -- in oil production. And that's sort of why I don't care. So in terms of peak oil demand, I know it's a very popular topic in many newspapers and many commentaries. But my view is don't know, and I don't care, and it's that chart I was showing explains that.

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 William Zimmern,    [29]
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 Great. So we have space -- time for one more question, and I'm going to abuse my position as moderator, actually. And I haven't warned you about this. But -- so my question is, so in this year's outlook, what haven't we looked at that you think we should have looked at? Or what do you want to look at next year? And it can be anything, topics, technologies, anything you want. And I'm slightly conscious that I'm sort of setting myself up for a fool here. But...

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 Spencer Dale,  BP p.l.c. - Group Chief Economist   [30]
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 So the reason why Will is worried about asking this question, because he has the job of trying to produce the Energy Outlook each year. So I have the nice job of thinking, "Oh, it'd be nice to do this topic or that topic." And then Will has the hard task of trying to achieve -- trying to work out what to do with that. There are many things about the Energy Outlook we'd like to explore further. The whole point, as I was trying to stress at the beginning of the presentation, is the aim of the Energy Outlook is not to try to predict the future. The aim is to explore uncertainties and the different impacts those uncertainties can have. I think one issue, and I don't know how easy it is to get to, but I think a very important factor driving global economic growth over the next 20 years and also energy growth will be increasing role of urbanization, particularly in some parts of Asia, but also very importantly in Africa. The nature of that urbanization process will be critically important for increasing productivity in Africa, so just how much will wealth grow in Africa and hence energy demand. It will also have a huge impact on the nature of the energy used within Africa in terms of how those cities are designed, whether it's able to develop to the degree of smart cities in Africa. So the nature of the urbanization process, particularly in Africa, I think will be hugely important both for the 20 years and beyond. And it's something we looked at a little bit last year. Again, it's within the background of this year's outlook. But if we were to do something more thoughtful on urbanization, that will be a good thing to do. So since you asked the question, Will, that's my answer.

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 William Zimmern,    [31]
------------------------------
 Great. Okay. Well, thank you, Spencer.

 Everyone, thank you very much for joining us this morning. That's all we've got time for today. If you have any further questions, please send them in, and we'll see if we can respond. If you have ideas for topics, things that we should be going after for the next year's outlook, please just let us know.

 Thank you very much for joining, and I hope you have a good evening, day, morning, wherever you are in the world.

 Thank you.

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 Spencer Dale,  BP p.l.c. - Group Chief Economist   [32]
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 Thank you.




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