Just like other oil and gas provinces, the global deepwater industry is adjusting to the new normal of low oil prices. However, that adjustment has not been as quick or granular as the response of US tight oil to OPEC’s 2014 decision not to cut production. Karen Boman reports.
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Mad Dog 2. Image from BP. |
Still, deepwater projects can work, provided a company is in the right field, has the right efficiency, and existing infrastructure that can make a project economically feasible, BP officials said Tuesday (13 June) during a webcast for the 2017 edition of the BP Statistical Review of World Energy. The company has a number of such projects around the world, including the Mad Dog 2 project in the Gulf of Mexico, said Lamar McKay, BP’s deputy group chief executive, during the presentation.
BP Group Chief Economic Spencer Dale said during the webcast that the idea of classifying projects as low and high cost is misleading. Instead, wide bands of cost variation exist, and companies can be competitive if they’re lower in the band.
The review highlights the short-run adjustments and long run transitions in the global energy market. Last year, global energy demand was weak for a third consecutive year, growing by just 1%, around half the average growth rate of the past decade. Once again, almost all this growth came from fast-growing developing economies, with China and India together accounting for half of all growth, BP said.
The year’s low prices drove demand for oil higher by 1.6%, while growth in production was limited to only 0.5%. As a result, the oil market returned broadly back into balance by mid-year, but prices continued to be depressed by the large overhang of built-up inventories. Natural gas production was also adversely affected by low prices, growing by only 0.3%. US gas output fell in 2016, the first reduction since the advent of the shale revolution in the mid-2000s, BP stated.
Renewables were again the fastest growing of all energy sources, rising by 12%, BP found. Although providing still only 4% of total primary energy, the growth in renewables represented almost a third of the total growth in energy demand in 2016. In contrast, use of coal – the most carbon-intensive of the fossil fuels – fell steeply for a second year, down by 1.7%, primarily due to falling demand from both the US and China.
The combination of weak energy demand growth and the shifting fuel mix meant that global carbon emissions are estimated to have grown by only 0.1% – making 2016 the third consecutive year of flat or falling emissions. This marks the lowest three-year average for emissions growth since 1981-83.
“While welcome, it is not yet clear how much of this break from the past is structural and will persist,” said BP Group Chief Executive Bob Dudley. “We need to keep up our focus and efforts on reducing carbon emissions. BP supports the aims set out in the COP21 Paris meetings and is committed to playing our part to help achieve them.”
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