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BP says that the world still has enough proven oil reserves to provide 40 years of consumption at current rates, in spite of a slight fall last year.
The BP Statistical Review of World Energy 2007 also shows that global energy use has grown much faster and created more carbon dioxide emissions in the past five years than in the second half of the 1990s, despite the big rise in the prices of oil and natural gas.
The discovery of new reserves has kept the four-decades production buffer steady despite increases in production.
Peter Davies, BP's outgoing Chief Economist, rejects the "peak oil" claims that oil production is already at or near its peak.
"We don't believe there is an absolute resource constraint," he said. "When peak oil comes, it is just as likely to come from consumption peaking, perhaps because of climate change policies or for some other reason, as from production peaking." However, the big oil majors including BP are facing increasing challenges in getting access the oil reserves, with almost two-thirds located in the Middle East.
The BP review also shows that the world's proven reserves of natural gas rose slightly, and are sufficient to provide more than 60 years of current consumption.
However, coal is the fossil fuel that has seen the greatest growth in usage because of the huge market for it in China.
Coal creates more greenhouse gas emissions than other fuels and while the growth rate in world energy use accelerated from an average 1.2 per cent a year in 1996-2001 to 3 per cent a year in 2001-06, the growth in emissions from fossil fuels tripled to an annual average of 3.4 per cent.
BP says that the year 2006 was another year of high and volatile energy prices. But despite high prices, world energy consumption growth remained above average, continuing the trend of recent years. Energy use is also increasingly shifting away from OECD countries and becoming more carbon-intensive.
It was a year when energy markets were once again the centre of attention, attracting the interest of politicians, consumers and policy-makers alike.
“Last year showed markets at work. Primary energy consumption growth has decelerated – particularly for fuels which have seen the highest increase in price,” said BP’s Chief Economist-designate Christof Rühl speaking today at the launch of the report. “However, global carbon intensity – the link between carbon emissions growth and energy growth – has increased.”
For the second year in a row, world energy growth slowed, rising by 2.4 per cent, down from 3.2 per cent in 2005, but still just above the 10-year average.
The pattern of recent years, which has seen robust demand in Asia Pacific and China in particular, was repeated with Chinese energy consumption rising more than 8 per cent. China’s usage of all forms of energy rose in the year, taking the country’s share of total global consumption to more than 15 per cent.
Continued high energy prices resulted in slower consumption growth amongst the main energy importers, particularly the US where primary energy consumption fell by 1 per cent in 2006 compared with 2005, despite economic growth. Oil, natural gas and coal usage were down while nuclear energy and hydro-electricity were up very slightly.
Oil and gas reserves were largely unchanged in the year with the reserves-to-production ratio remaining above 40 years for oil and 60 years for gas. Despite a small decline in 2006, oil reserves are still some 15 per cent higher than a decade ago, at 1,208 billion barrels. Global gas reserves were slightly higher at 181 trillion cubic metres, with the US and several Opec members showing increases.
Oil: a 400,000 barrel per day (b/d) fall in OECD oil consumption, the biggest decline from that grouping for more than 20 years, underlines the impact of rising oil prices. Prices peaked at more than $78 a barrel in August as the average price of dated Brent increased by nearly one fifth to $65.14 a barrel in 2006. The OECD fall was the main factor behind the weakest global growth rate for oil since 2001, at 0.7 per cent or half the average for the past decade.
Overall global production was up some 0.4 per cent to 81.7 million b/d. Faced with weak demand, Opec cut production late in 2006 for the first time in nearly two years. For the year as a whole, Opec increased its production by an average 130,000 b/d to 34.2 million b/d.
Amongst Opec producers the main increases came from United Arab Emirates and Iraq while there were declines in Saudi Arabia, Venezuela and Nigeria. Outside of Opec output was up some 300,000 b/d in 2006, though this rise was less than half the 10-year average. The biggest growth came from Russia, up by some 220,000 b/d, and Azerbaijan, Angola and Canada. Oil production was down in the UK for the seventh year in a row, and in the US for the sixth year in a row.
Gas: consumption, strongly fuelled by demand growth in Russia and China, rose by some 2.5 per cent in 2006, close to the average of the past decade. These rises in demand offset the declines in the US and Europe. The European fall was due to a combination of higher prices and warmer-than-normal weather. Russian gas demand, almost as large as the total consumed by the whole Asia Pacific region, increased by some 7 per cent in 2006, accounting for 40 per cent of the global increase. China’s consumption grew more than 20 per cent to 55.6 billion cubic metres.
Gas production was up more strongly than it has been for many years, by some 3 per cent, led by Russia. The US also staged a recovery following the severe hurricane damage in 2005. UK production fell for the sixth year in a row.
Coal: dominated by China, coal was once again the world’s fastest growing hydrocarbon. For the eighth year in a row China’s demand grew, but at 8.7 per cent was well down on the double digit growth of recent years. China still accounted for 70 per cent of global growth in coal consumption. Even excluding China, global coal consumption is increasing. While US consumption was down for the second year in a row, consumption in the UK and elsewhere in the OECD was up for the third consecutive year.
Nuclear and Hydroelectricity: the OECD countries accounted for the lion’s share of the global increase of some 1.4 per cent in nuclear output, mainly through increased capacity utilization and capacity upgrades. Hydroelectric generation was above the decade average at 3.2 per cent, with notable capacity-related increases in China, India and Brazil. Increased rainfall in the US offset declines in Canada and Scandinavia.
Renewables: use of wind and solar continue to grow rapidly but from a low base. Installed wind power capacity was up by some 25 per cent in 2006 but still accounts for less than 1 per cent of worldwide electricity production. Solar power was also up sharply but its contribution, like wind and other renewables relying heavily on government subsidies, is still an even smaller contributor to global power. Ethanol use rose by 22%.