The IEA has downgraded its forecast for oil demand growth in 2021

MOSCOW, May 12. /TASS/. Global oil demand in 2021 will recover by 5.4 million barrels per day (b/d), the forecast has been lowered by 270 thousand b/d compared to last month’s estimate, according to a May report from the International Energy Agency (IEA) received by TASS ).

The IEA lowered its forecasts for demand growth in Europe and developed countries of the American continents for the first quarter of this year by 320 thousand b/d and 515 thousand b/d. For India, the demand forecast was lowered for the second quarter - by 630 thousand bpd.

At the same time, the agency maintained its forecast for demand growth in the second half of the year, believing that mass vaccination will still allow the pandemic to be brought under control.

The recovery in oil demand is still fragile amid the rising number of Covid cases in countries such as India, Brazil, Thailand and Europe. Thus, if in March global oil demand grew by 1.6 million b/d, then in April it decreased by 160 thousand b/d, to 94 million b/d. Global consumption is still below late 2021 levels.

Demand for oil in India began to fall in March - by 110 thousand b/d compared to February; in April the drop was already 390 thousand b/d compared to March amid the introduction of lockdowns. According to the IEA forecast, in May the decline will intensify to 825 thousand b/d by April.

IEA - energy agency of developed democratic countries

This is the main message of the concept of global reduction of CO2 emissions and transition to green energy, presented on May 18 in Paris by the International Energy Agency (IEA). It is an autonomous division of the Organization for Economic Co-operation and Development (OECD), which unites industrialized democracies.

Cover page of the IEA report

Most IEA members are energy importers, but the agency also includes such major oil and gas powers as the USA, Mexico, Canada, Norway, as well as, for example, Poland, which has significant coal reserves, and Australia, a major exporter of both coal and liquefied coal. natural gas (LNG).

The 220-page vision for achieving climate neutrality by mid-century is entitled "Net Zero by 2050" and is a "road map for the global energy sector." An international team of more than 60 authors worked on it, who also involved over 100 experts and high-ranking government officials in different countries as consultants.

Of particular interest to readers in Russia, Kazakhstan, and Azerbaijan is an assessment of the prospects for the global oil and gas industry on the path to climate neutrality. This term describes a situation in which greenhouse gas emissions equal the volumes of CO2 absorbed naturally or artificially, resulting in zero emissions, in other words, the concentration of these gases in the atmosphere ceases to increase.

The IEA assessed the impact of the pandemic on the electricity market

Global electricity demand is projected to decline by 2% in 2021 due to the COVID-19 pandemic, according to the International Energy Agency's (IEA) electricity market report released today. Nuclear power production is expected to fall about 4% this year, the agency said. Global electricity demand is forecast to grow by about 3% next year.

The report includes an assessment of 2021 trends and 2021 forecasts for electricity demand, supply, capacity and emissions—both globally and by country.
The pandemic is expected to reduce global GDP by 4.4% in 2020, significantly more than the 0.1% contraction in 2009 following the global financial crisis. Current forecasts are for global economic output for 2021 to be roughly the same as in 2021, driven by a strong recovery in emerging and developing Asia, especially China and India. It is expected that pre-pandemic levels will still not be reached in advanced economies.

China is projected to be the only major economy to see higher electricity demand in 2021. However, its expected growth of about 2% is well below the recent average of 6.5%. Other major electricity consumers, including the US, India, Europe, Japan, South Korea and Southeast Asia, are expected to experience declines for the year as a whole.

Further, electricity production from renewable energy sources will grow by almost 7% in 2021 compared to traditional energy sources. Coal production will fall by about 5%, the largest decline on record; electricity production using gas - by 2%. Overall, CO2 emissions from electricity generation will be reduced by 5% in 2021.

Nuclear power production is projected to decline by about 4% in 2021, impacted by both the pandemic and reduced capacity availability. Less production capacity was available throughout the year as power plant outages in France, Sweden, Germany, Switzerland and the United States occurred in late 2021 and early 2020. The main exception to this rule was China: its nuclear generation increased by about 6% due to the launch of new capacities.

More than 8 GW of new nuclear generation capacity came online in 2021, with new units in China, India, Russia, Belarus, South Korea, Slovakia (potentially delayed until early next year) and the UAE starting operations, mostly late in the year. This will more than offset the closures of power units in France, Sweden and the US, which will remove around 5 GW of power.

About 13 GW of nuclear capacity is planned to come online in 2021. In the US, 5.5 GW of nuclear capacity is expected to retire in 2021, while in Germany, three of the remaining six units are expected to retire at the end of next year, with the remaining three to close at the end of 2022.

In advanced economies, the growth of renewables and nuclear power will continue to reduce the capacity remaining for fossil fuel generation, the IEA says. Expected increases in natural gas prices will likely impact the natural gas market itself more than the coal market. In emerging and developing economies, demand growth is projected to outpace growth in renewables and nuclear power, leaving some room for expansion in coal and gas production. The expected net result globally is that coal generation will grow by about 3% in 2021, while gas-fired power plants will increase output by about 1%. This will lead to an increase in CO2 emissions from the energy sector by approximately 2% in 2021.

Falling demand, lower fuel prices and increased renewable energy production have led to lower wholesale electricity prices in 2021. The IEA Wholesale Electricity Market Price Index, which tracks price movements in major advanced economies, shows an average price decline of 28% this year, having previously fallen 12% in 2021.

“Electricity plays a central role in today’s energy world – a role that will only become more important as the transition to clean energy accelerates,” said IEA Executive Director Fatih Birol. “The IEA’s new electricity market report, based on the latest available data, provides a fresh perspective on this critical sector. Starting next year, we will publish a new version of the report every six months.”

Green economy will create millions of new jobs

In its concept, the IEA assumes that by 2030 the world economy will grow by 40%, but energy consumption will decrease by 7%. This will be possible thanks to a worldwide push to improve energy efficiency. Energy efficiency is set to grow by 4% annually this decade, about three times faster than previously planned.

Hybrid power plant in Germany: wind turbine, biogas, electrolysis and hydrogen tanks

The IEA is confident that existing technologies are sufficient to meet the 2030 interim targets, but then innovations that are still in the prototype stage will be required, such as facilities for capturing CO2 from the atmosphere and storing it.

The roadmap lists in detail what large investments will be required to solve the tasks. At the same time, the document emphasizes that by 2030, the development of green energy will create 14 million new jobs. So, the accelerated cessation of the use of fossil energy resources will not lead to mass unemployment on the planet, the authors of the report are confident.

April 2021

In April 2021, OPEC+ countries fulfilled their obligations under the agreement by 114%, mainly due to voluntary production cuts above quota by Saudi Arabia. At the same time, non-OPEC countries participating in the OPEC+ agreement increased production by 100 thousand barrels per day in April 2021, to 40 million barrels per day at the expense of Russia, which, along with Kazakhstan, received the right to ease restrictions. According to IEA estimates, Russia fulfilled the terms of the OPEC+ agreement in April 2021 by 91%, producing 9.52 million barrels per day, which is 140 thousand barrels per day above the target level. Commenting on the IEA data, Russian Deputy Prime Minister A. Novak noted that the agency’s methodology differs from the approach when taking into account the implementation of the terms of the OPEC+ agreement, but admitted that Russia fulfilled the OPEC+ agreement in April 2021 at a level below 100%. In general, according to the IEA, OPEC countries in April fulfilled the terms of the OPEC+ agreement by 126%, and non-OPEC countries by 90%.

Peak demand for oil has passed, the price of a barrel will fall to $35

The section on the oil and gas industry states that states should stop issuing permits for new oil and gas development now; they will not be required. “Oil demand will never return to its 2019 peak,” the IEA predicts, and will decline by an average of 4% annually over the next three decades.

Saudi Arabia's largest oil facility in Ras Tannur on the Persian Gulf

As a result, the price of oil will fall to $35 per barrel by 2030. Therefore, oil supplies to the world market will be concentrated in the hands of only a small number of producing countries with the lowest production costs, which the authors of the study include OPEC members. Their share of the global oil market will increase from about 37% in recent years to 52% in 2050, the roadmap says.

In turn, the demand for natural gas, after falling in 2021, will quickly recover and will grow until the mid-2020s, but closer to 2030 it will accelerate the decline, and in 2050 it will be 55% lower than the level of the last crisis year. In such a situation, “no new gas fields will be needed beyond those already being developed,” the IEA concept states. Those LNG production terminals that are currently under construction or are in the planning stage will also be unclaimed.

Normalization of oil reserve levels

Commercial oil reserves of OECD countries fell by 25 million barrels in March to 2.951 billion barrels; this trend continued in April, according to the IEA report.

At this level, they were only 1.7 million barrels above the average over the past five years and 36.9 million barrels above the average for 2015-2019, the report notes. “After a year of tight production curbs by OPEC+, bloated global oil inventories that accumulated during last year’s COVID-19 demand collapse have returned to more normal levels,” the report said.

A decline in inventories was inevitable against the backdrop of a revival in mobility in the US and Europe. At the same time, if reserves can still increase in May, their decline should continue in June, even despite the restoration of oil production in OPEC+, the IEA believes.

The agreement countries will begin to ease restrictions at a gradual pace from May to July inclusive. At their next meeting on June 1, they can discuss actions for the remainder of the year. By this time, the details of the US-Iranian negotiations on the nuclear deal will be clear, the outcome of which should affect oil sanctions against Iran, the report notes. If they are removed, Iran, which was previously the fourth oil producer in OPEC, could return additional barrels to the market. In addition, the increase in the number of Covid-19 diseases in India maintains a situation of uncertainty in the oil market, the IEA reminds.

Preparation of COP26 decisions in Glasgow

The International Energy Agency sees its roadmap, with its ambitious milestones and milestones, as a contribution to COP26, the 26th Conference of the Parties to the UN Framework Convention on Climate Change, which will take place in Glasgow, UK, from 1 to 12 November 2021. It had to be postponed by a year due to the coronavirus pandemic. The decisions of this conference will be binding for all parties to the Paris Agreement, including Russia and China.

Achieving the goals set in this agreement “requires nothing less than a complete transformation of the energy systems that underpin our economies,” states the extensive Net Zero by 2050 writing team, and emphasizes: “We are in a critical year at the beginning of a critical decades for these efforts."

See also:

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  Climate protection in Germany: government program until 2030

The head of Rosneft asked Putin for support amid low oil prices

Igor Sechin, chief executive officer, recently approached the Russian President with a proposal to support the oil and gas business in connection with the current situation. Thus, the global coronavirus pandemic has significantly reduced the need for oil, which has negatively affected the price of the energy resource. During a meeting with Vladimir Putin, held on May 12, Sechin proposed three scenarios at once. He considers it necessary to reduce the cost of pumping oil, finance geological exploration and enable representatives of the oil industry to apply for loans.

According to the executive director, it is now extremely important to formulate new tariffs for transport monopolies, which will be brought in line with the current realities of market prices. Sechin recalled that in 2008 oil could be bought for 1,100 rubles. Now it is offered for 1,200 rubles, while the Transneft tariff over the past 12 years has increased from 822 to 2.1 thousand rubles per ton for pumping 100 kilometers. Thus, transporting the resource requires spending up to 32% of the total cost of oil, which significantly impacts industry income. Vladimir Putin treated the official’s report with understanding and promised to study the issue and take the necessary measures.

Closing coal power plants

The German government has decided to stop using coal in the electricity sector by 2038, the most climate-damaging fossil fuel. Already in 2022, the total capacity of coal-fired power plants will be reduced by a quarter. Those operating on imported coal will be closed at an accelerated pace. A number of German regions will receive multi-billion dollar compensation for curtailing brown coal production.

Development of renewable energy

By 2030, 65% of the electricity consumed in Germany should be produced from renewable sources (RES), primarily wind and solar. At the time the program was adopted in September 2019, this figure was about 43%. Among the measures to stimulate the development of renewable energy sources is increasing the material interest of local authorities in installing wind generators on their territory.

China leads in capacity growth

Emerging market and developing countries had a total of 42 GW of nuclear capacity under construction at the start of 2021 (out of 62 GW globally), and nuclear power capacity will increase from 110 GW to about 180 GW in 2030. China is on track to become the leader in nuclear energy by 2030, overtaking the United States and the European Union.

“China is one of the few countries that has included nuclear power, along with renewable energy sources, in a low emissions strategy in its Nationally Determined Contribution under the Paris Agreement. Significant programs underway in Russia, India and the Middle East could help expand nuclear power around the world,” the report notes.

Over the next decade, more than 70 GW of nuclear power in advanced economies in the STEPS plan will be permanently shut down, while life extension extends the life of about 120 GWe that would otherwise be shut down by 2030. About 20 GW of nuclear power plants are under construction at the beginning of 2020 in Finland, France, Japan, Korea, Slovakia, Turkey, the UK and the USA.

By 2030, total nuclear capacity in the EU will fall by 20%, with the largest reductions occurring in Germany, Belgium, Spain and France. In the United States, nuclear power capacity will decrease by 10% by 2030. In Japan, installed capacity will fall from 33 GW in 2021 to about 30 GW in 2030, although a gradual restart of the nuclear power plant fleet will lead to an increase in nuclear power output.

Even in countries that support nuclear power, the report said, there is a risk that nuclear power will "disappear faster" than in the STEPS plan as a result of extremely difficult market conditions and the risks associated with new capital investment. This is despite evidence that life extension supports the transition to clean energy and is the most cost-effective source of low-emission electricity in several markets, the report said.

Introduction of CO2 emissions certificates

Anyone who emits significant amounts of greenhouse gases into the atmosphere must pay for it. This is the meaning of the CO2 certificate system introduced in the European Union back in 2005 for industrial enterprises. In Germany, starting from 2021, companies selling various types of fuel to consumers will also be required to purchase such certificates. As a result, it should become more expensive.

Increase in fuel prices

The price of CO2 certificates, according to the government program, will gradually increase in 2021-25. This should lead to a gradual increase in prices, in particular, for gasoline and diesel fuel at gas stations. The goal of the government program is to encourage motorists to use petroleum products more economically and, ultimately, to switch to environmentally friendly modes of transport.

Promoting electromobility

The German government has expanded and extended until 2025 a program to stimulate the purchase of all-electric cars and plug-in hybrids charged from an outlet. Thus, the discount on electric cars priced up to 40 thousand euros has been increased from 4 to 6 thousand euros; for more expensive models it is 5 thousand euros. At the same time, it was decided to install 50 thousand new public charging stations in 2020-21.

Increase in tax on airline tickets

Emissions from aircraft engines contribute greatly to the greenhouse effect, so the German government is seeking to reduce the number of air travel, especially within Germany and Europe. One of the points of the climate protection program is an increase in the tax on air tickets from April 1, 2021. In particular, by 5.65 euros to 13.03 euros when departing from airports in Germany on intra-European routes.

Advantages from fuel tanks of Neftetank Group of Companies

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Tax incentives for railways

The more passengers choose electric trains over cars, intercity buses and airplanes, the better for the climate, the German government believes. One of the points of his program is to reduce VAT on railway tickets from 19% to a preferential 7% from January 1, 2021 and, as a result, reduce their prices on long-distance trains by 10%. The treasury compensates for the lost taxes from the collection from air passengers.

Ban on diesel heating of houses

Significant CO2 emissions occur when buildings are heated. In many German houses, especially individual ones, heating systems using fuel oil or diesel fuel are still in use, often very old and ineffective. The state is ready to bear 40% of the costs of replacing them with modern environmentally friendly technologies. And from 2026, the installation of diesel boilers will be completely prohibited.