BP BP Plc

By Christopher Alessi 

LONDON -- The vast majority of global energy supply growth is expected to come from renewables and natural gas over the next two decades, but steep investment in oil exploration and production will be needed to meet crude demand in 2040, BP PLC said Thursday.

In its annual energy outlook report, the British oil-and-gas giant outlined as its central scenario a future in which renewable energy sources -- including wind, solar, geothermal, biomass and biofuels -- and natural gas will together account for 85% of the world's energy growth in the run up to 2040.

As part of the scenario, renewable energy production is projected to grow at a rate of 7.1% a year, with its share in primary energy increasing to 15% by 2040, compared with just 4% today. Natural gas would grow by 1.7% a year, surpassing coal as the world's second largest source of global energy and rivaling oil for the top spot by the end of the outlook period.

The new analysis "brings into sharp focus just how fast the world's energy systems are changing, and how the dual challenge of more energy with fewer emissions is framing the future," said BP Chief Executive Bob Dudley.

BP's central forecast assumes that current government policies, technology and societal preferences will continue evolving the way they have in recent years.

The company underscored that its central forecast is one of six possible scenarios, none of which it would endorse as most likely. The other scenarios included the world requiring more energy to support growth, a more rapid transition to lower carbon fuels, mounting trade disputes that limit globalization, a ban on single-use plastics and some oil-producing nations reforming their economies at a faster pace.

"All of the scenarios suggest that oil will continue to play a significant role in the global energy system in 2040," BP said in the report, with the level of oil demand at the end of the period ranging from 80 million barrels a day to 130 million barrels day. That compares with the 99 million barrels projected for 2020.

As a result, the company said trillions of dollars of investment in developing new oil fields will be needed to meet the world's appetite for oil in 2040.

As part of the central scenario, BP continues to expect the world's appetite for oil to peak around 2035, at close to 110 million barrels a day, before plateauing through 2040. Until 2018, BP had predicted crude oil demand wouldn't stop growing until the 2040s.

BP's competitors are divided on when -- or whether -- they see oil reaching a point of peak demand. Royal Dutch Shell PLC has said that peak demand could come as soon as 2025, while U.S. oil majors Chevron Corp. and Exxon Mobil Corp. don't foresee a peak.

Write to Christopher Alessi at christopher.alessi@wsj.com

(END) Dow Jones Newswires

February 15, 2019 07:39 ET (12:39 GMT)

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