Oil and gas
PERSPECTIVES

Gas, renewables, and CCS must work together to secure a rapid energy transition, DNV GL reports

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Liv Astri Hovem

Liv Astri Hovem

CEO, DNV GL - Oil & Gas

  • DNV GL’s Energy Transition Outlook 2019 finds gas and variable renewables will be the only energy sources in higher demand in 2050 than today
  • The forecast highlights how there is no single pathway to a decarbonized energy mix
  • It explains why decarbonizing oil and gas is vital for climate change mitigation targets
  • Its findings show governments must act if carbon capture and storage is to be used at scale before the 2040s

Contact us:

Liv Astri Hovem

Liv Astri Hovem

CEO, DNV GL - Oil & Gas

Natural gas and variable renewables, such as solar and wind, will be the only energy sources in higher demand in 2050 than today, according to a new forecast by DNV GL (Figure 1). The prediction is in the company’s 2019 Energy Transition Outlook, its third annual independent forecast of developments in the world energy mix to 2050.1 

The forecast foresees a massive, technology-driven energy transition leading to a rapid decarbonization of the energy mix by 2050, when almost half (46%) of the world’s primary energy will come from oil (16%) and gas (29%), and most of the rest from renewables. By comparison, oil and gas accounted for 54% of world primary energy in 2017. 

DNV GL’s model predicts natural gas will overtake oil as the world’s main primary energy source in 2026. Gas demand rises until 2033, then plateaus but remains dominant in the global energy mix through to 2050 (Figure 2). 

“Our Energy Transition Outlook makes it clear there is no single pathway to a decarbonized energy mix,” said Liv A. Hovem, CEO, DNV GL – Oil & Gas. “A combination of energy sources will be needed over the coming decades to provide the world with a secure supply of affordable, decarbonized energy for the long term. Gas will increasingly complement variable renewables, meeting demand in peak periods such as winter in colder climates.”

World primary energy supply by source
Figure 1: World primary energy supply by source. (Graphic: DNV GL) EJ/yr=exajoules per year
World primary fossil fuel supply by source
Figure 2: The Energy Transition Outlook model predicts natural gas will overtake oil as the world’s main primary energy source in 2026. (Graphic: DNV GL)

Billions of dollars needed for new gas production capacity

DNV GL’s Outlook indicates that significant investment will be required to ensure gas production meets demand, including realizing the potential from stranded gas reserves and for reserve replacement. The Energy Transition Outlook forecasts global upstream gas capital expenditure of USD737 billion (bn) in 2025, and USD587bn in 2050. Other important forecasts for the future of natural gas include:
  • Unconventional onshore gas production will increase from now to 2050, rising 68% from 2017 levels by mid-century. It will come mainly from North America.
  • Conventional onshore gas production will maintain current output rates until the late 2030s. It will then decline slowly to mid-century, ending at about 19% lower than in 2017. Production is already falling in North America, but it will continue to rise in North East Eurasia until 2033.
  • Offshore gas production will rise until 2040, when it will be 58% greater than in 2017. In 2050, it will still be more than a third (39%) higher than in 2017, with the Middle East and North Africa providing the greatest production volumes.
  • Power generation will be the main consumer of gas in most regions, challenged by manufacturing (mainly petrochemicals) in China, India, and Latin America.


Decarbonized gas will be crucial for a rapid energy transition

Despite the bright prospects for gas, its production and consumption must be decarbonized to help achieve national and international targets for climate change mitigation.

DNV GL’s Outlook forecasts that society will fall well short of the COP 21 Paris Agreement climate goals without bold policy intervention, indicating an end-of-century global average temperature 2.4°C greater than pre-industrial levels. This is higher than the 2.0°C upper limit targeted by the Paris Agreement. The model’s findings come as most signatory nations to the Paris Agreement, on mitigating global warming, are in the process of updating and increasing their nationally defined contributions towards a zero-carbon future.

All major routes to successfully decarbonizing gas rely on the large-scale uptake of carbon capture and storage (CCS); the only currently-available technology to deeply decarbonize hydrocarbon use. However, DNV GL’s Outlook forecasts that CCS will not be employed at scale for at least another two decades.

CCS needs supportive policies

The Energy Transition Outlook argues that governments need to enact policy if CCS is to be used at scale before the 2040s to decarbonize use of fossil fuels. The model expects CCS to capture only 807 megatonnes of carbon dioxide (CO2) in 2050 (Figure 3), representing just 4% of global energy-related emissions.

Carbon emissions captured by region
Figure 3: Forecast of carbon emissions captured by region (Graphic: DNV GL) MtCO2/yr=Megatonnes of carbon dioxide per year
CCS struggles to gain traction because industry has a cheaper option: continuing business as usual. Emitting carbon into the atmosphere costs virtually nothing
Liv A. Hovem,
  • CEO
  • DNV GL – Oil & Gas

The forecast is based on current policy positions from governments, and on the relatively low prevailing carbon price. “CCS struggles to gain traction because industry has a cheaper option: continuing business as usual. Emitting carbon into the atmosphere costs virtually nothing,” said Hovem. 

Sensitivity studies from the Energy Transition Outlook suggest that doubling existing carbon prices would result in a tenfold increase in CO2 captured. The Outlook comments that factors such as carbon price could change quickly as more countries come to consider CCS as a cost-effective way to achieve net-zero carbon emissions.

“The future of CCS lies largely in the hands of policymakers setting a higher carbon price than the cost of the technology. Industry can also play a role in stimulating quicker adoption by focusing on finding ways to reduce the cost of CCS technology,” said Hovem.

“When deployed, we expect CCS to enter a cost learning curve similar to what we saw in the solar and wind industries, with costs reducing 15% to 20% per doubling of capacity. But, we will not move down the cost learning curve unless we start rolling out the technology, and we do not foresee a roll-out of technology before the costs have come down.”

This requires the types of bold decisions that stimulated other technologies for decarbonization to be taken up at scale, she added: “Large-scale uptake of CCS technology will unlock significant opportunities for hydrocarbon and renewable energy technologies to work together to decarbonize the energy mix. The energy industry must however also shift its mindset from ‘gas versus renewables’ to ‘gas and renewables’ for success.”


Integrating hydrocarbon and renewable technologies for decarbonizing gas

The Energy Transition Outlook discusses approaches to integrating hydrocarbon and renewable technology for decarbonized gas production and consumption, including:
  • Introduction of new, carbon-free forms of gas, such as hydrogen, to national gas networks;
  • Power-to-gas, with existing gas pipelines used to transport hydrogen produced from electrolysis of seawater using offshore wind power, or from offshore-based methane reformers;
  • Gas-to-wire, where gas is used to produce power offshore for transport to shore via nearby windfarm cabling;
  • Offshore platform electrification, in which platforms import renewable power directly from offshore windfarms installed nearby.

Reducing the oil and gas industry’s carbon footprint

Without significant near-term uptake of CCS, the oil and gas industry must continue to reduce its carbon footprint by curtailing methane emissions from its value chain, the Energy Transition Outlook notes. This involves reducing flaring and fugitive emissions, and introducing lower-carbon and more environmentally-sensitive solutions for exploration and production.

The increasing need for the oil and gas industry to consider other challenges of climate-change adaptation is also highlighted. The report points out that we need to start considering now factors such as rising sea levels and more frequent severe weather in the design of facilities for operation over the next 30 years.

DNV GL’s suite of 2019 Energy Transition Outlook reports are available to download free of charge. The main report covers the transition of the entire energy mix to 2050 globally, and in 10 world regions. It is accompanied by three supplements forecasting implications for the: oil and gas, power supply and use, and maritime industries.


References

  1. Energy Transition Outlook 2019’, DNV GL, September 2019
  2. Energy Transition Outlook 2019. Oil & Gas: A global and regional forecast to 2050’, DNV GL, September 2019 

Disclaimer: 

DNV GL prides itself on providing accurate information but makes no claims or guarantees about the accuracy, completeness or adequacy of contents in this publication, and disclaims liability for any errors or omissions. The authors’ views here do not necessarily reflect DNV GL’s views.