Although much has been written about the idea of peak oil, particularly concerning the first decade of this century in terms of declining availability of ‘easy’ oil, the market dynamics have swung back to the issue of demand as opposed to supply.
Advances in technology have opened up harder-to-reach unconventional resources and producers are once again seeking ways to stave off the inevitable plateauing and reversal of global oil demand over the coming decades.
Long-range forecasts up to the 2040s suggest that while demand for crude oil will wane by then, due to natural gas and alternative energy sources increasing in popularity, the reasons for the decline in demand follow the confluence of some interesting global trends.
Despite oil demand reaching 104.7 million barrels a day (b/d) by 2023, according to the International Energy Agency’s balanced forecasts, the slowdown could begin as soon as the early 2020s.
One trend is the strengthening growth in sales for the global petrochemicals industry. As millions of people move up the economic ladder into the middle class, particularly in Asia, they are driving demand for greater consumer goods — demand that can still largely only be met through the production of oil-and-gas-derived petrochemicals. Examples of such goods are ubiquitous: from fertilisers and food preservatives to paints and lubricants.
As greater economic growth and increased commercial transportation go hand in hand, operators in this space will wish to keep costs down by seeking efficiencies wherever they can. Faced with tightening emission-reduction targets, global supply chain operators, particularly marine shippers, will naturally be among the first to be affected and will try to modulate their fuel demand accordingly.
As seaborne shipping is by far the easiest and most economic means of transporting large quantities of cargo around the world, any gains in efficiency and cuts in emissions will have significant impact on the type of fuel being produced for this market.
The International Maritime Organisation (IMO) has set aggressive targets to reduce the sulphur content in marine fuel from the current 3.50 per cent mass by mass (m/m) to 0.10 per cent m/m by 2020 — a move that will oblige operators in the major trade routes of the world to find ways to meet the new regulations.
The IMO suggests that in order to meet the new regulations, the heavy fuel oils currently used in shipping will need to be blended with low-sulphur content fuels such as gas oils. Some shipping companies are already looking at alternative cleaner ways of powering their fleets, with some operators testing LNG and kite-and-sail powered vessels.
The IEA, however, highlighted earlier this year that its forecasts on the marine fuels sector are not conclusive, saying that “the total demand for oil products will not be dramatically altered, but the impact of the changes on the product mix is a major uncertainty in our forecast.”
This article is extracted from a report produced by MEED and Mashreq titled The Future of Middle East Energy. Click here to download the report