Comments: Global Demand Surge

Abstract

Editor's column Energy statistics continue to confirm oil and gas industry conventional wisdom of the past several years—that global consumption shows no sign of stopping, which will put additional burdens on the industry and its people to pro-duce more energy amid challenging conditions. Last year, world energy consumption grew 5.6%, the largest percentage increase year over year since 1973, according to the BP Statistical Review of World Energy 2011, a well-known annual report on energy data and trends. Demand grew for all forms of energy in all regions. This reflects a sharp reversal of what happened in 2009, when countries across the globe were feeling the effects of recession. That year, global energy consumption decreased for the first time in 30 years, but that appears to be just a temporary dip in a longterm trajectory of rising demand in both industrialized and developing countries. Total consumption of energy surpassed the pre-recession peak of 2008, according to the BP report, and energy consumption is now growing faster than the world economy. China and India, whose demand did not slow during 2009, are showing an even stronger thirst for all types of energy. China’s share of global energy consumption now stands at 20%, making it the largest consuming country in the world, ahead of the US. Average oil prices in 2010 were the second highest on record, but that did not deter demand growth. Prices for natural gas, though, which is a much less fungible commodity, varied from region to region. Gas prices remained weak in North America because of the enormous growth in shale production. The outlook for gas appears bright. The International Energy Agency (IEA) recently offered the idea that the world could be entering a “golden age of gas” led by the growth in unconventional production. It predicts that over the next 25 years, 40% of global gas production will be from unconventional sources. Again, China is the leader. The IEA believes that China’s gas consumption could rise where it would equal total European Union demand by 2035. An interesting phenomenon is the growth in shale oil in North America. The IEA recently revised its expectations for US oil production, and now predicts that US oil output will rise 1 million b/d by 2016 because of the increase in unconventional oil production, an offshoot of the shale gas surge. That figure could climb to 2 million or 3 million b/d by 2020, the IEA said. The suggestion is that the technology that has unleashed the shale boom could offer the same benefit for the oil side. The US Geological Survey estimates that the largest shale oil deposit in the US, the Bakken in North Dakota, could contain as much as 4 billion bbl of recoverable oil, and the Three Forks formation nearby could contain 2 billion bbl in recoverable reserves.