Although world oil demand might never fully recover to pre-pandemic levels, oil and gas companies that are pivoting toward the energy transition will still need to invest in upstream infrastructure and assets in the coming years, industry experts said.
"There is still a massive and exciting need for oil and gas," BP PLC Executive Vice President Gordon Birrell said during a Dec. 1 industry event hosted by Reuters.
Oil and gas will be at the "heart" of BP's transformation into a broader energy company because BP will use revenues from its traditional oil business to drive its organizational restructuring plans, Birrell said.
Amid investor pressure to address climate change and reduce emissions, many of the largest oil companies, particularly those based in Europe such as BP, have started to diversify and decarbonize their portfolios by using gas, electricity and renewable energy to meet self-imposed emissions reductions goals. BP is speeding up its move into power and renewables by slashing oil production by 40% in the next 10 years, which will help the company achieve net-zero greenhouse gas emissions across its operations by 2050.
Energy-related carbon emissions have dropped sharply as petroleum use declined amid coronavirus-related lockdowns, and demand likely will not recover to pre-pandemic levels if the energy transition moves at a pace that is quicker than expected, BP economist Michael Cohen said during a Dec. 2 industry event hosted by The National Capital Area Chapter of the United States Association for Energy Economics.
Cohen, chief U.S. economist and head of oil analysis on BP's Economics team, highlighted some of the findings from BP's "Energy Outlook" released in mid-September. Under all three scenarios that BP's outlook considers, fossil fuels lose market share while renewable energy growth increases. Under a so-called "rapid" scenario, BP shows oil demand falling by about 50% by 2050, while under a "net-zero" scenario, consumption is likely to decline by 70% in that time.
In the report's "business-as-usual" situation, oil demand would recover and flatten out at pre-pandemic levels of 100 million barrels per day for the next 20 years before slipping to about 95 million b/d by 2050.