Equinor: New Oil and Gas Investment Still Needed

Norway's Equinor says investment in new oil and gas supplies will still be needed to satisfy global demand, even under the most optimistic energy transition scenario presented in its latest Energy Perspectives report. The latest edition of the annual report shows a wide range of outcomes for oil and gas demand, depending on the pathway taken to achieve net-zero emissions by mid-century. Under Equinor’s rapid energy transition scenario, Rebalance, oil demand would fall to 46 million barrels per day by 2050, excluding biofuels. But in its Rivalry scenario, the energy transition "limps along" and global oil demand remains at 110 million b/d in 2050. Even in the Rebalance scenario, which limits global warming to 1.7°-1.8°C, "there is a need for investing in new sources of supply from discovered resources, and probably some competitive, carbon-efficient undiscovered resources," said Equinor Chief Economist Eirik Waerness. "With much tougher energy and climate policies and falling demand, the competition between different sources of supply will be fierce," he added. Net Zero Delayed Until 2070 The International Energy Agency's recent Net Zero by 2050 report was criticized as too radical by some in the oil industry. It suggested that no investment in new oil and gas supply would be necessary under its pathway to net zero emissions by mid-century (NE Jun.10'21). Of the three scenarios presented by Equinor, Rebalance comes closest to the climate goals of the Paris Agreement. But it does not go as far or as fast as the IEA report -- net-zero emissions would not be attained until around 2070, with oil and gas demand falling by 54% and 21% respectively from 2018-50. Nevertheless, the Rebalance scenario assumes big gains in energy efficiency and rapid growth of renewable energy and carbon capture and storage. Equinor assumes that 2 gigatons per year of carbon dioxide is captured by 2050 -- less than the 7.5 gigatons per year required under the IEA's Net Zero scenario. "What is absolutely clear is that carbon capture and storage will have a massive role to play if we are to deliver on any kind of climate emissions ... It's the key to hydrogen," Waerness said. "It highlights the urgent need for governments to establish policies and support that make the technology competitive and available," he added. Wind and Solar Power Electricity demand grows in all three of Equinor's scenarios. Its share of global energy consumption jumps from 20% today to 44% in the Rebalance scenario. This is accompanied by a rise in electricity generation from wind and the sun from 7% of global electricity output in 2018 to 52% around 2050. Equinor's head of renewables Pal Eitrheim said the company's new CEO has made clear that he wants to accelerate the company's growth in the renewable energy space. He flagged three potential challenges going forward, including the "fierce competition" to find profitable investment opportunities. "Secondly, the policies and regulations that are in place are still insufficient to drive and stimulate the type of investment level that we need to deliver on the transition. And thirdly ... there is a risk when you have massive, fast growth that you will start seeing cost inflation and bottlenecks in the supply chain," Eitrheim said. However, he also said that as projects have been getting bigger, the supply chain has been able to improve efficiency and bring down costs. Technology development "is just stunning" and Equinor sees renewables becoming "the cheapest source of power in more and more markets," he added. Deb Kelly, London