Projections from the BP Energy Outlook 2016 spell out an interesting time ahead for Africa's oil and gas operators
The report, which is released annually by BP, concluded that while Africa accounts for more than half the world's population increase and is projected to have 30 per cent more people than China by 2035, the continent accounts for less than 10 per cent of the growth in both global GDP and energy consumption over the outlook. The outlook makes projections up to 2035.
Globally, the outlook reports that fossil fuels remain the dominant source of energy for the world economy, providing 60 per cent of the growth in energy and accounting for almost 80 per cent of the total energy supply, down from 86 per cent in 2014. Across the world, gas is the fastest growing fossil fuel at 1.8 per cent per annum, with its share in the overall energy mix gradually declining. Lower gas demand, combined with more US shale gas on the market, has led to a downward revision for non-OECD gas supply, particularly for Africa.
Oil is growing steadily at 0.9 per cent, although the trend of declining share continues. LNG is also projected to grow, which is positive news for emerging LNG projects in Africa.
Coal, which has grown steadily since 2000, is projected to decline sharply at 0.5 per cent per annum. It is expected that, by 2035, coal's share of the energy mix will be at an all-time low with gas replacing it as the second-largest fossil fuel source. Shale gas production, which has transformed the US energy market, is slowly increasing in Africa.
Among the non-fossil fuels, renewables are growing rapidly at 6.6 per cent per annum. Today, renewables make up three per cent of the overall energy share and this is projected by BP to rise to 9 per cent by 2035.
Power generation is an important source of growth for oil and gas in Africa as more than half the increase in global energy consumption is used for this purpose as part of the long-run trend towards global electrification. The report found that more than a third of the growth in the power generation sector takes place in regions, such as Africa, where large parts of the population currently lack adequate access to electricity.
Improvements in energy intensity - the amount of energy used per unit of GDP - means that energy demand is growing far less quickly than global GDP (34 per cent versus 107 per cent). For Africa and other non-OECD economies, this means the energy intensity is projected to keep falling even as African countries go through the industrialisation phase of their development. However, carbon emissions in non-OECD countries continue to rise, compared to a slow but steady drop for OECD countries. BP recommends a meaningful global price for carbon as the most efficient means of achieving improvements in carbon emissions.