Oil may still be the big kahuna in terms of world demand by energy source, but natural gas use is growing more rapidly and should continue to do so going forward, an expert told attendees at the recent annual meeting of the International Institute of Synthetic Rubber Producers (IISRP).
``The role of oil, as important and prominent as it is, is actually diminishing as a share of the world energy market and being replaced by some other fuels,'' said William Veno, director of global downstream for Cambridge Energy Research Associations, which studies energy markets.
Looking at the global picture for energy, Mr. Veno said he sees growth in demand for natural gas, liquefied natural gas, coal and renewable energy sources, while oil will continue to take a smaller and smaller share of the mix.
Oil accounts for about 40 percent of the world's consumption of energy, gas and coal each have roughly 25 percent shares, followed by nuclear with 7 percent and renewable sources, such as solar and hydroelectric power, at about 3 percent.
Natural gas, in particular, should see strong growth, with demand expected to increase 4 percent annually or roughly twice the rate of that for oil over the next 10 years.
``Natural gas is favored for a number of environmental reasons, and its growth has contributed significantly more to the energy picture than oil has,'' Mr. Veno said.
He also sees the use of coal expanding in terms of the rate of growth in energy demand.
While oil is expected to remain the preeminent energy source over the next decade, demand should lessen as a result of technologies for improving the efficiency of using oil.
Oil has been the most aggressive in achieving reductions in energy use intensity-that is, the energy used per unit of real GDP (gross domestic product), Mr. Veno said. Still, ``it's pretty hard to substitute a ton of coal to fly from here to Boston,'' he added.
Addressing concerns that the world is running out of oil and that oil development has peaked, Mr. Veno said, ``We certainly do not subscribe to this theory.''
He sees considerable good quality crude coming out of Africa and Brazil as well as a significant increase in Russian Caspian oil. In addition, reserves from Venezuela and Canada have not been included in peak oil assumptions. Condensates in natural gas liquids also will contribute to the oil supply picture.
Altogether, this development of non-OPEC oil production should weaken crude oil prices, he predicted.
While Mr. Veno foresees a steady supply of oil, he also sees a disconnect between where oil and natural gas are found and where they are being consumed.
Unlike oil, the market for liquefied natural gas has been primarily regional, moved by pipeline and not moved around the world by vessel. That situation is changing.
The natural gas supply in the U.S. is pretty bleak, Mr. Veno said, but the supply globally is growing rather dramatically.
``What we're going to see is much more of this gas moved around the world just like oil. And what we're going to see in addition is much more of a global clearinghouse for gas prices-that is essentially what we've been seeing for a number of years with oil.''
Demand for energy in the next 10 years will be fueled by the Asia Pacific region, particularly China and to some extent India, Mr. Veno said. Slower growth can be expected in the mature markets of North America and western Europe.
Regarding coal, Mr. Veno said the U.S., which once had significant surpluses of coal productive capacity and used to be an exporter of the mineral, is now a coal importer.
One of the issues globally that's constrained mining is a shortage of off-the-road tires.
The extractive industries that use trucks to move materials out of mines and developing sites have basically not had tires, he said. ``So there's this hoarding going on. So the ability to grow coal productive capacity is constrained because the rubber is limited.''
Along with all the changing landscape for global energy markets, there remains environmental and regulatory concerns. ``Environmental issues and regulatory concerns are going to drive the kinds of energy we use,'' Mr. Veno said.
``Everything will need to be cleaned up and will need to have considerable investment in improved product quality not just in OECD (Organisation for Economic Co-operation and Development, which consists of 30 countries committed to democratic government and the market economy) markets, but certainly in the developing markets as well.''