energy transition and the impact on oil
TRANSCRIPT
ENERGY TRANSITION AND THE IMPACT ON OIL
CLAUDIO GALIMBERTI
SENIOR VICE PRESIDENT, ANALYSIS
AUGUST 17, 2021
Meet the speaker
Claudio Galimberti
Senior Vice President, Analysis
Claudio Galimberti is a Senior Vice President of Analysis at Rystad Energy with an
expertise in oil demand forecasting, both short- and long-term, Energy Transition and oil
price modeling. An economist by training, he has worked in the oil industry for 20 years.
He started his career with Shell Trading and Supply in Europe and has held a variety of
senior Strategy, Commercial and Analytics roles out of the US over the past decade. He
was at Shell for more than 15 years and gave a decisive contribution to the development
of Shell Energy Transition Scenarios.
Prior to joining Rystad, he was with S&P Global Platts as Global Head of Demand,
Refining, Agriculture & Risk in the Analytics organization, and subsequently as Senior
Director of Platts Analytics Content Transformation. He was also at Trafigura as Global
Head of Product Analysis. Claudio holds a Laurea Degree in Economics from Bocconi
University in Milan, a Master of Finance from Tulane University and has been working on
his Finance PhD from EDHEC.
• Oil Demand in Rystad’s Three Energy Transition Scenarios
• Oil Supply, Call on Sanctioning and Oil Price projections under the Three Scenarios
• Global Energy System: Rystad’s latest 1.5 DG Scenario
• Signposts: which trajectories is the Energy Transition likelier to follow?
Topics
3
4
Long-term oil demand scenario
Rystad oil demand scenarios and IEA’s Net Zero Emissions: key characteristics and differences
Source: Rystad Energy research and analysis, OilMarketCube, August 2021
Long-term oil demand scenario Million barrels per day
0
20
40
60
80
100
120
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
IEA NZE
Key obstacles to follow “net zero” scenario by IEA:
- Lack of regulatory framework
- Immature technologies in some low carbon sectors
- Need for new infrastructure
- Lack of economic diversification for some countries
- Need for structural change on demand side (towards low carbon products)
32
2029,
1062026,
104
2024,
102
IEA’s NZE
looks too
aggressive in
the short-term
1.5 DG
1.7 DG
1.9 DG
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10
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25
30
35
1.7 DG scenario 1.5 DG scenario 1.9 DG scenario
Base Case scenario by sector and scenario
Passenger road transport oil demand will undergo a profound shift in all three scenarios due to the fast-growing fleet of non-ICE powertrainsLong-term oil demand scenario revisionsMillion barrels per day
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Vehicles Trucks Petchem Aviation Maritime Buildings Industry Ags Power
Source: Rystad Energy research and analysis, OilMarketCube, August 2021
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0
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10
15
20
25
30
35
1.7 DG scenario 1.5 DG scenario 1.9 DG scenario
Base Case scenario by sector and scenario
Commercial road transport oil demand will be affected to a lesser degree, at least in the short-medium term, due to heavy duty vehicles’ reliance on dieselLong-term oil demand scenario revisionsMillion barrels per day
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Vehicles Trucks Petchem Aviation Maritime Buildings Industry Ags Power
Source: Rystad Energy research and analysis, OilMarketCube, August 2021
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5
10
15
20
25
30
35
1.7 DG scenario 1.5 DG scenario 1.9 DG scenario
Base Case scenario by sector and scenario
Petrochemical could follow very different trajectories in the three scenarios based on regulatory/behavioral variables (plastic bans & recycling) & potential for fuel substitutionLong-term oil demand scenario revisionsMillion barrels per day
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Vehicles Trucks Petchem Aviation Maritime Buildings Industry Ags Power
Source: Rystad Energy research and analysis, OilMarketCube, August 2021
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0
5
10
15
20
25
30
35
1.7 DG scenario 1.5 DG scenario 1.9 DG scenario
Base Case scenario by sector and scenario
Electrification is unlikely to affect aviation over the horizon considered but bio-jet could play an increasingly key role. In Maritime, LNG & H2/ammonia could displace fuel oilLong-term oil demand scenario revisionsMillion barrels per day
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26
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Vehicles Trucks Petchem Aviation Maritime Buildings Industry Ags Power
Source: Rystad Energy research and analysis, OilMarketCube, August 2021
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0
5
10
15
20
25
30
35
1.7 DG scenario 1.5 DG scenario 1.9 DG scenario
Base Case scenario by sector and scenario
Stationary sectors’ oil demand will continue to decline at varying speeds - with potential exception of Ags - following historical trends and the regulatory push to decarbonize.Long-term oil demand scenario revisionsMillion barrels per day
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26
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20
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Vehicles Trucks Petchem Aviation Maritime Buildings Industry Ags Power
Source: Rystad Energy research and analysis, OilMarketCube, August 2021
Passenger vehicles: Manufacturers EV targets
Auto manufacturers have proposed ambitious long-term EV sales targets, which are aligned with our 1.5 DG scenario. Yet, we taper them down in our 1.7 DG mean scenario
By EV – electric vehicles we define BEV, FCEV and PHEV. BEV- battery electric vehicles, PHEV – plug-in hybrid electric vehicle, HEV – hybrid electric vehicle, FCEV – fuel-cell electric vehicle. Source: Rystad Energy research and analysis, August 2021
5%
8%11%
14%18%
23%
28%
33%
38%
43%
48%
0
10
20
30
40
50
60
70
80
90
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
China OEMs
Renault Nissan
VW Group
Tesla
Toyota
Ford
Hyundai Kia
Daimler (Mercedes)
BMW
Volvo
India OEMs
Fiat-PSA Group
Honda
GM
Mazda
EV adoption in Base Case: 1.7 DG
10
Manufacturers’ targets (identified targets shown in shaded columns; remaining targets interpolated)Million vehicle sales per year
Passenger vehicles: EV adoption in Base Case (1.7 DG)
EVs sales pick up speed and market share after 2025 as technology is rapidly adopted worldwide, although we will still witness vast regional differences.
Source: Rystad Energy research and analysis, August 2021
EV adoption rates (EV sales / Total passenger vehicle sales) by region
0%
20%
40%
60%
80%
100%
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
United States
America S
China
India
Japan
Asia high
Asia low
Germany
Norway
Europe high
Europe low
Middle East high
Middle East low
Africa high
Africa low
Russia
Global
Passenger vehicles: EV adoption
Large variability in EV penetration in the three scenarios, depending on key regulatory and technology assumptions, with the 1.7 DG scenario as the most likely trajectory
BEV – battery electric vehicles, PHEV – plug-in hybrid electric vehicle, HEV – hybrid electric vehicle, FCEV – fuel-cell electric vehicle. By EV – electric vehicles we define BEV, FCEV and PHEV. Source: Rystad Energy research and analysis, August 2021
23%
48%
84%96%
29%
72%
98% 99%
15%
24%
49%
70%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%20
10
201
1
201
2
201
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9
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0
Base Case: Mean (1.7°)
Low Case:-Sigma (1.5°)
High case: +Sigma (1.9°)
12
EV share in total passenger vehicle sales by scenarioPercent
Passenger vehicles: EV adoption in Base Case (1.7 DG)
Demand of raw materials for EV batteries – potential bottleneck?
0
1
2
3
4
5
6
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Cobalt (+12%)
Lithium (+41%)
Manganese (+40%)
Nickel (+35%)
Total materials demand for key battery raw materials Million tonnes
Source: Rystad Energy research and analysis, August 2021
Passenger vehicles: Base Case (1.7 DG)
Global EV fleet reaches 18% of total LDVs by 2030, while passenger road transport oil demand remains high through the end of this decade
-
5
10
15
20
25
30
35
0
500
1,000
1,500
2,000
2,500
2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046 2048 2050
ICE* fleet PHEV fleet BEV fleet
ICE – internal combustion engine vehicles; BEV – battery electric vehicles; PHEV – plug-in hybrid electric vehicleSource: Rystad Energy research and analysis, OICA, IEA EV Outlook 2020, August 2021
Global passenger vehicle fleet Global passenger vehicle oil demand
Million vehicles Million barrels per day
EV share in total sales
EV share in total fleet
5%
2020
1%
23%
2025
6%
48%
2030
18%
73%
2035
37%
84%
2040
59%
90%
2045
76%
2050
88%
96%
Call on sanctioning
Mean demand scenario (1.7 DG) requires 61 million bpd of supply from new wells by 2030 and 65 million bpd by 2040.
* Under development does not include drilled but uncompleted (DUC) shale/LTO wells as a significant share of the investment decision lies aheadSource: Rystad Energy research and analysis, OilMarketCube, Ucube, August 2021
61
65
44
0
20
40
60
80
100
120
201
2
201
3
201
4
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9
205
0
Seasonal (Other liquids) Producing (non-shale) Producing (shale)
Under development offshore Under development onshore Call on sanctioning (Mean = 1.7 DG)
Demand (Mean = 1.7 DG) Demand (1.5 DG) Demand (1.9 DG)
15
Liquids supply from producing wells and developments* vs total liquids demandMillion barrels per day
16
Call on sanctioning
Sanctioning is much needed in all three scenarios although existing stock of global discoveries is sufficient to meet demand, at least until mid-2030s.
* Volumes include drilled but uncompleted (DUC) shale / LTO wellsSource: Rystad Energy research and analysis, OilMarketCube, Ucube, August 2021
6165
44
55
49
31
65
80
69
0
10
20
30
40
50
60
70
80
90
100USD/bbl <40
USD/bbl 40-60
USD/bbl 60-80
USD/bbl > 80
Uncommercial
Call on sanctioning (Mean = 1.7 DG)
Call on sanctioning (1.5 DG)
Call on sanctioning (1.9 DG)
Liquids supply from pre-FID wells* and call on sanctioningMillion barrels per day
1.9 DG scenario calls for
additional exploration activity
17
*Includes crude oil, lease condensate and NGLs extracted at gas processing plants. Source: Rystad Energy research and analysis, OilMarketCube, Ucube, August 2021
US shale liquids: Long-term potential
Vast uncertainty for US Shale liquids production in 2025-2035 and convergence in 2040s.
US shale should be able to fill supply gaps via adequate price signals over next 15 years.
21.2
14.2
6.5
17.9
12.9
6.0
11.3
11.0
13.5
9.8
4.9
0
5
10
15
20
25
2010 2015 2020 2025 2030 2035 2040 2045 2050
Brent@70 Brent@60 Brent@50
US shale/LTO oil production* long-term outlook Million barrels per day
If there will be deficit of supply on the
market in 2025-2035 due to lack of
investment in upstream, US shale
would be one of the key source of
additional barrels
18
Call on sanctioning
Equilibrium price at $45/bbl should satisfy 2030 call on sanctioning, with onshore infill generating one third of the 61 million bpd needed.
* Shale/LTO volumes include drilled but uncompleted (DUC) wells. All supply segments include uncommercial discoveries and undiscovered projects.Source: Rystad Energy research and analysis, OilMarketCube, Ucube, August 2021
Cost of liquids supply curve for pre-FID wells* for 2030 by supply segment typeUSD per barrel (real), Brent-equivalent
5
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15
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25
30
35
40
45
50
55
60
65
70
- 5 10 15 20 25 30Million bpd
Shale/LTO*
Offshore (infill)
Offshore (new fields)
Onshore (infill)
Onshore (new fields)
Cut-off
High LTO volume
potential between
$30 and $45 /bbl.
Highly competitive
drilling in Mid East.
19
Global liquids supply cost curve
We maintain our base case of $50 Brent (real) in 1.7 DG Energy Transition scenario.
* Shale/LTO volumes include drilled but uncompleted (DUC) wells. All supply segments include uncommercial discoveries and undiscovered projects.Source: Rystad Energy research and analysis, OilMarketCube, Ucube, August 2021
Cost of liquids supply curve for 2030, 2040 and 2050 against range of demand scenariosUSD per barrel (real), Brent-equivalent
20
25
30
35
40
45
50
55
60
65
70
75
80
85
90
95
100
105
110
115
120
35 45 55 65 75 85 95 105 115
Million bpd
Cost of Supply 2050 Cost of Supply 2040 Cost of Supply 2030
1.7 DG
Demand in
2030
1.9 DG
Demand in
2030
1.5 DG
Demand in
2030
1.9 DG
Demand in
2040
1.7 DG
Demand in
2040
1.5 DG
Demand in
2040
1.9 DG
Demand in
2050
1.7 DG
Demand in
2050
1.5 DG
Demand in
2050
20
Long-term case price assumption
Rystad Dynamic Oil Price Model shows how equilibrium prices could play out in the three Energy Transition scenarios
* Nominal price using a 2.5% annualized inflation rate on the real (2021-dollar) price assumption.Source: Rystad Energy research and analysis, Ucube, August 2021
4650 48 42 40
37
4752 52 56
65
74
44 4340
3530
26
-5
15
35
55
75
95
115
135
2010 2020 2030 2040 2050
1.5 DG
Historical Forecast
Mean 1.7 DG
1.9 DG
Brent oil price (real 2021-terms) in the three demand scenarios
USD per barrel
21
The global energy system – real testing of case with disruptive technologies and recent policy statements
Source: Rystad Energy global energy system model; World Cube Pilot, August 2021
Heat Work Light/
Calc.
Use as
material
Industry• Chemicals/Plastics
• Mining/Metals
• Ceramics/Cement
• Textiles/Leather
• Pulp/Paper
• Machines/vessels
• Electronics/SW
• Food process
Transport and work• Road
• Sea
• Air
• Rail
• Construct.
• Other
Buildings• Heat/cool
• Cook/clean
• Work/play
Biofuel
Oil
Natural gas
Nuclear
End use
losses
Food and Land• Agriculture
• Forestry
Pumped hydro
Batteries
Gravity
Coal
H2 grey/blue
NH3
CH4 (na/syn)
NGLs
Gasoline
Diesel
Jetfuel
Coal, Coke
Upstream losses
Liquids
Storage
Shipping
Pipeline
Solar
Wind
Other renew.
Hydro
Geothermal
Gas
Solid
Heat
Transmission
Primary energy
Wood… Solid
H2 green
CCSU
Refine fuel Make electrons
En
d-u
se
of e
ne
rgy
Electricity
Molecules
Heat
Forest
Modern bioenergy
and waste
Plants and animals
Nuclear reactor
Gas turbine
Steam turbine
Steam turbine
Bio boiler
Fuel turbine
Heat
storage
H2 storage
Fuelcell
H2/NH3 Power
Distribution & Storage
Electricity
Grid
Refining losses Generation losses Distribution losses
Hydro turbine
CCSU
22
Global primary energy mix will see a rapid shift towards Renewables under Rystad 1.5 DG scenario
0
100
200
300
400
500
600
700Traditional Bio
Coal
Oil
Natural Gas
Nuclear
Modern biomass and waste
Geothermal
Hydro
Wind
Solar
Total primary energy
EJ
Forecast
Source: Rystad Energy Energy Scenario Cube – 1.5 DG scenario, August 2021
Historical
75%
23%
50%
11%
23
-
100
200
300
400
500
600
700
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
Coal OilNatural Gas NuclearModern biomass and waste Traditional BioGeothermal HydroSolar Wind
Rystad Energy’s 1.5 DG Scenario vs. IEA’s NZE: more solar and more oil, less bioenergy and nuclear in Rystad’s.
Total primary energy – Rystad Energy, 1.5 DG August 2021
EJ
Source: Rystad Energy WorldCube – 1.5 DG scenario, August 2021
74%
48%
Total primary energy – IEA NZE May 2021
EJ
Oil 2030: 95 mpd
Oil 2030: 72 mpd
Solar: 50 PWh
0
100
200
300
400
500
600
700 WoodCoalLiquidsMethaneHeatHydrogen/AmmoniaElectricityElectricity via storageLosses from el gen
Total primary energy
EJHistorical Forecast
Source: Rystad Energy Energy Scenario Cube – 1.5 DG scenario, August 2021
67%
23%
Storage:
32%
Electrification – crucially accompanied by power storage - will play an increasingly dominant role in the 1.5 DG scenario
0
100
200
300
400
500
600
700Energy sector
Industry
Transport and work
Buildings
Losses
Source: Rystad Energy, Energy Scenario Cube – 1.5 DG scenario, August 2021
Total primary energy
EJForecastHistorical
From the end-user perspective and the economy, the 1.5 DG scenario will represent a massive efficiency gain!
51% of total
primary
energy is
currently lost
in
conversion
30%
48%
Signposts: Regulatory environment, economic signals and technology changes.
▪ Updated NDCs
▪ Compliance
Source: Rystad Energy research and analysis, August 2021
Passenger vehicles: Manufacturers’ EV targets
Investments in energy transition technology by producers, adoption rates by consumers and regulatory environment will ultimately determine the Energy Transition pace
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2019
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20
25
BMW Regional OEMs* Ford Hyundai Kia Tesla Toyota VW Group Renault Nissan GM Others**
Targets as of 2Q21 Targets as of 1Q21BMW Regional OEMs*FordHyundai Kia TeslaToyotaVW GroupRenault NissanGMOthers**
Source: Rystad Energy research and analysis*Regional OEMs include vehicle Manufacturers in China and India ** Others include Fiat- PSA group, Daimler, Mazda and Honda, August 2021
27
Electric vehicle manufacturers’ targets: Recent reporting vs reporting as of Oct-20 (previous)Million vehicle sales
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assessment, e.g. when evaluating an investment.
These statements are not guarantees of future performance and undue reliance should not be placed on them. Such forward-looking statements necessarily
involve known and unknown risks and uncertainties, which may cause actual performance and financial results in future periodsto differ materially from any
projections of future performance or result expressed or implied by such forward-looking statements. All forward-looking statements are subject to a number of
uncertainties, risks and other sources of influence, many of which are outside the control of the Company and cannot be predicted with any degree of accuracy.
In light of the significant uncertainties inherent in such forward-looking statements made in this presentation, the inclusion of such statements should not be
regarded as a representation by the Company or any other person that the forward-looking statements will be achieved.
The Company undertakes no obligation to update forward-looking statements if circumstances change, except as required by applicable securities laws. The
reader is cautioned not to place undue reliance on forward-looking statements.
Under no circumstances shall the Company, or its affiliates, be liable for any indirect, incidental, consequential, special or exemplary damages arising out of or
in connection with access to the information contained in this presentation, whether or not the damages were foreseeable and whether or not the Company was
advised of the possibility of such damages.
© Rystad Energy 2021. All Rights Reserved.
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Rystad Energy is an independent energy consulting services
and business intelligence data firm offering global
databases, strategy advisory and research products for
energy companies and suppliers, investors, investment
banks, organizations, and governments. Rystad Energy’s
headquarters are located in Oslo, Norway.
Headquarters
Rystad Energy
Fjordalléen 16, 0250 Oslo, Norway
Americas +1 (281)-231-2600
EMEA +47 908 87 700
Asia Pacific +65 690 93 715
Email: [email protected]
© Copyright. All rights reserved.