ENERGY TRANSITION

OUTLOOK 2019
OIL AND GAS
A global and regional forecast to 2050

SAFER, SMARTER, GREENER

DNV GL ENERGY TRANSITION OUTLOOK 2019 — OIL AND GAS

FOREWORD

More than half of senior professionals surveyed

for our 2019 research on the outlook for the oil
and gas industry said their company is actively
adapting this year to a less carbon-intensive
energy mix. That number has steadily increased
over the past few years. Decarbonization once
brought companies in our sector a competitive
edge. It is now becoming an imperative to their
license to operate.

Our Energy Transition Outlook makes it clear

that there is no single pathway to a decarbonized
energy mix. A combination of energy sources will
be needed over the coming decades to provide
the world with a secure supply of affordable,
decarbonized energy for the long term.

LIV A. HOVEM

CEO
““ Our Energy Transition Outlook
makes it clear that that there
is no single pathway to
a decarbonized energy mix.
DNV GL – Oil & Gas
From the middle of the next decade, the world’s
largest source of energy will be gas. As oil demand
peaks — around the mid-2020s, according to our
ETO — demand for gas will increase to such an extent
that it will account for nearly a third of the world’s
energy supply by mid-century. Supply of energy
from renewable sources will also increase, from 14%
of the world energy mix today to 40% in 2050.

2
 FOREWORD

While we forecast demand growth for both gas
and renewables during the next 30 years, neither
of these alone will make for a successful energy
transition.
As gas increasingly complements variable
renewables, its production and consumption must
be decarbonized for countries to achieve the
net-zero emissions targets they are considering
or beginning to implement.
ahead. Public scrutiny of our sector is at an
all-time high, and will continue to grow.
We must maintain the highest safety and
environmental standards today, if we are to win
the public support needed to bring a secure
supply of sustainable and affordable energy
to tomorrow’s world.

The successful and rapid decarbonization of the

gas mix will rely on hydrocarbon and renewable
energy technologies working together, not in Liv A. Hovem
competition with each other. In this report, we
provide several examples of how experts from
across the energy value chain are collaborating to
achieve this. Their efforts are quickly bearing fruit.

Just a decade ago, the concept of using wind

turbines to electrify an offshore platform would
have been considered unnecessary; the thought
of fuelling a city’s gas networks entirely with
hydrogen, unfeasible. Our industry is rapidly
innovating towards a common goal. It is inspiring,
and we need more of it.

As we work to decarbonize the oil and gas value

chain for the long-term future, it is important to
remember that our actions today will have a
significant bearing on our success in the decades

3
DNV GL ENERGY TRANSITION OUTLOOK 2019 — OIL AND GAS

CONTENTS

EXECUTIVE SUMMARY 06
1 INTRODUCTION 14
2 OIL AND GAS DEMAND FORECAST 20
3 TRENDS AND IMPLICATIONS 28

3.1 Onshore and Offshore Oil Exploration and Production 30

3.2 Onshore and Offshore Gas Exploration and Production 36
3.3 Midstream and Downstream Technologies 42
3.4 Emerging and Enabling Technologies for Decarbonization 52
3.5 Digital Transformation in the Oil and Gas Industry 62
3.6 Regional Variations 68

4 THE NEXT FIVE YEARS 78

OUR OUTLOOK REGIONS 88

REFERENCES 89

4
CONTENTS

5
DNV GL ENERGY TRANSITION OUTLOOK 2019 — OIL AND GAS
EXECUTIVE SUMMARY
The pace of the energy transition is accelerating. Pressure is growing
on the oil and gas industry to demonstrate it can continue to deliver a
secure and environmentally-sustainable supply of affordable energy.
From subsea to shore, and from shore to street,
the sector is increasing its efforts to play a key role
in decarbonizing the world’s energy system, and
helping to achieve international and national
targets for climate change mitigation. The
production of oil and gas accounts for a relatively
small proportion of greenhouse gas emissions
along the value chain.* It is during the consumption
of oil and gas products where most emissions occur.
Upstream, more effort is now being directed
towards gas developments than oil. This lower-
carbon shift is also evident in the midstream and
downstream. New sources of gas (e.g. biogas,
hydrogen and synthetic methane) are being
introduced to domestic and commercial energy
systems, helping to decarbonize gas consumption.
These gases are being used in transport as
lower-carbon fuels for shipping, rail, and for heavy
and light road vehicles.
Refining and petrochemicals face the challenge
of reacting to changes in feedstocks. These are
due to the increasing use of heavier crudes from
countries such as Iran and Venezuela, and new
product slates to meet changing environmental
standards. Examples here include International
Maritime Organization limits on sulphur in fuel in
international shipping from 2020.
As a growing number of countries begin to consider
net-zero carbon emissions targets, the case is
growing for carbon capture and storage (CCS)
although the current pace of implementation
is very slow.
6 * For example, Oil & Gas UK’s Environment Report 2019 states that oil and gas exploration and production
accounts for 3% of the UK’s greenhouse gas emissions, although this percentage may vary by country.
The energy transition is playing out against the
backdrop of historic changes in demand for
energy and society’s expectations for how
energy is produced. Based on DNV GL’s model
of the world energy system, our key forecasts
related to fossil fuels are as follows:
—— Global final energy demand: The total energy
consumed by end users such as buildings,
manufacturing, and transport will peak in
2033 at about 462 exajoules per year (EJ/yr;
see page 22 for further information on units of
measurement). This is 12% higher than in 2017.
It will then decline slowly to 446 EJ/yr by 2050.
This reflects the accelerating improvement in
global energy efficiency, driven largely by
electrification of the world’s energy system,
in which renewables will have a much greater
share than today.
—— Oil and gas: These fuels will still meet a substantial
46% of world energy demand in 2050 compared
with 54% in 2017. We see global gas demand
overtaking demand for oil in 2026 to become
the world’s primary energy source. Based on our
model’s current assumptions, oil demand will peak
around the mid-2020s, and gas demand will keep
rising to 2033. Demand for gas will then plateau,
and remain dominant until the end of our
forecast period in 2050, when it will account for
29% of the world energy mix. This all pre-supposes
no unexpected geopolitical or market shocks.
As the energy transition unfolds, and pressure for
decarbonization increases, it is important that the

oil and gas industry keeps sight of its responsibility
to address the energy trilemma: how to provide
a secure supply of both sustainable and affordable
energy. As our model’s findings suggest, oil and,
in particular, gas will continue to play key roles in
this regard over our forecasting period.
THE ENERGY TRILEMMA
le
lab
Gr
vai
ee
da
na
an
nd
le
cle
ab
ord
an
Aff
Secure and reliable
It is also important to remember not only the
significance of oil and gas in providing energy
for power and transportation, but also their value
as raw materials for making chemicals, fertilizers,
paints, pharmaceuticals and plastics. We estimate
that around a quarter of every barrel of oil goes
into non-transport or non-energy uses. A wide
variety of commonly used items are made from
materials that start off as oil or gas. These
include toothbrushes, PVC pipes in homes,
fibre in carpets, furnishings and clothing, and
disposable medical syringes.
Oil will still be needed for transport during the
transition. However, demand will be much reduced
by society’s uptake of battery electric or hydrogen
fuel-cell vehicles, and by increasing efficiency of
internal combustion engines. With global demand
for oil looking most likely to peak within the next
five years, we forecast that oil production will be
40% less in 2050 than it was in 2017.
While natural gas will meet 29% of world energy
demand by mid-century, we expect gas supplies
EXECUTIVE SUMMARY
to be decarbonized as hydrogen and biogases are
added to the gas mix. As the least carbon-intensive
fossil fuel, gas will play a pivotal role in continuing
to displace coal, which peaked as a global energy
supply source in 2014. Gas will provide the energy
security and stability we need alongside variable
renewables in the transition.
Continued investment in new oil and gas
developments will still be necessary. Global oil
and gas reserve levels decline at a rate of around
4% per annum because of the depletion of
existing reservoirs, which is occurring faster
than our projected rate of demand decline.
We forecast that new resources will need to be
developed to counter the depletion effect and
meet new demand from growing economies.
Our forecast emphasizes that that there is no
single pathway to a decarbonized energy mix.
A combination of energy sources will still be
needed throughout the forecast period.
Despite a substantial increase in CCS in our 2019
Outlook, our model still expects this technology
to capture only 807 megatonnes (Mt) of carbon
dioxide (CO2) in 2050: 4% of global energy-related
emissions. This forecast is based on current policy
positions from governments, and the relatively
low prevailing carbon price. The amount of
carbon captured via CCS is very sensitive to
carbon price. Sensitivity studies from our model
show that a doubling of existing carbon prices
results in a tenfold increase in CO2. Factors such
as carbon price could change quickly as more
countries consider CCS as a cost-effective way
to achieve net-zero carbon emissions.
In the absence of significant near-term uptake of
CCS, the oil and gas industry must continue to
reduce its carbon footprint by curtailing methane
emissions from its value chain. Its tools for achieving
this are reducing flaring and fugitive emissions;
introducing lower-carbon and environmentally
sensitive solutions for exploration and production;
and, ‘greening’ of gas distribution.
7
DNV GL ENERGY TRANSITION OUTLOOK 2019 — OIL AND GAS
Our model forecasts that global emissions will
exhaust 2-degrees-Celsius (°C) carbon budgets
before 2050. It indicates an end-of-century
global average temperature 2.4°C higher than
pre-industrial levels. This is not in line with the
COP 21 Paris Agreement on climate change,
which aims to keep global warming to ‘well
below 2°C’ and pledges to pursue efforts to
limit the increase even further to 1.5°C. Our main
report describes how industry and society at
large could close the gap and achieve the future
described by the Paris Agreement.¹
““
Our forecast shows that the
world is unlikely to meet the
climate-change mitigation
goals of the Paris Agreement.
The need for the oil and gas industry to consider
the challenge of climate-change adaptation is
increasing. Factors such as rising sea levels, more
frequent severe weather and increasing demands
for decarbonization of production all need
considering today in the design of facilities for
operation over the next 30 years.
Against this background, this report provides an
in-depth analysis of the implications of our
model’s forecast along the oil and gas value chain.
UPSTREAM
Conventional onshore oil production will
continue to play an important role in the global
energy mix for decades to come. Our model
forecasts conventional onshore oil production
to decline by 1.9%/yr on average until 2050, but
that it will still account for approximately 45%
of all oil production by then.
Unconventional onshore oil production remains
flat at 12.6 million barrels per day (Mb/d) between
now and 2025. Beyond that date, it declines in
proportion to overall oil demand until the end of
8
the forecast period in 2050, where it will be 8.6
Mb/d, around 18% of global crude oil production.
Offshore oil production will still be important in
2050. However, our model forecasts it to reduce by
30% from today’s 25.4 Mb/d to 17.7 Mb/d — 37% of
total crude oil production in 2050 — as producers
increase their focus on easier-to-access oil resources.
Given this trend, we believe that the industry’s
appetite for producing resources from
challenging environments, such as deepwater
or Arctic locations, will change, as the commercial
and social costs of such developments may
become prohibitive. However, we already see
some differing opinions emerging over Arctic
developments, with Norway and Canada trending
negatively in their opinion of such projects, while
Russia and the US trend positively. Deepwater
production costs have reduced significantly, but
they still have some way to go to compete with
the lower lifting costs and proximity to markets
of onshore shale deposits.
Global gas demand will peak in 2033, then slowly
decline to 2050, with some variation in supply
sources. Conventional onshore gas production
will peak in 2033, with offshore gas production
peaking in 2040.
Unconventional onshore gas is forecast to
continue rising slowly to mid-century. This will
provide more flexible access to gas at lower
cost, allowing gas to remain competitive as
the cost of renewable energy production falls.
Conventional onshore gas production has
already begun to fall steadily in North America,
but it will continue to rise in North East Eurasia
until 2033, before also beginning to decline.
Total gas production in the Middle East
and North Africa will increase until about
2034 then begin to slow down. Unconventional
onshore gas will retain an important share in
gas supply in North America, with production
remaining stable until 2050.

The oil and gas industry will continue to invest in
enhancing efficiency to control costs and maintain
the important role that our model forecasts for
hydrocarbons in the lead-up to the mid-century.
Advances in standardization and the ability to
incorporate elements of past asset designs
will help simplify requirements , leading to
improvements in the efficiency of the upstream
project-design process both onshore and
offshore. Improved reliability of equipment,
subsea wifi, autonomous underwater vehicles,
and the switch to all-electric utilities will make it
possible to move more assets subsea. Assets that
are not subsea will be designed for use by robots
rather than people, leading to a fundamental
change in the approach to, and simplicity of,
designs. Autonomous supply vessels are rapidly
moving closer to becoming reality.
““
The oil and gas industry will
continue to invest in enhancing
efficiency to control costs and
maintain the important role
that our model forecasts for
hydrocarbons.
Despite our desire to decarbonize, some
developing countries will seek to exploit national
resources as a matter of strategic priority. We
recognize that the desire to exploit hydrocarbon
resources in these regions has the potential to
outweigh the considerations of our model.
MIDSTREAM AND DOWNSTREAM
As the upstream sector focuses on oil production
from easier-to-develop resources — such as
onshore shale oil, and conventional oil in the
Middle East, Russia and Venezuela — processing
demand will increase in the midstream and
downstream oil systems.
EXECUTIVE SUMMARY
Larger amounts of oil will be transported by
pipeline to local storage facilities and refineries,
increasingly catering for a local, rather than
global, liquids market. We will see an increase in
storage for oil, gas and intermediate products
as countries strive to add value to oil resources
locally, and to reduce the carbon footprint of
transporting base materials. As an example,
data from data from the Oil Companies
International Study Group for Conservation
of Clean Air and Water in Europe (CONCAWE)
shows 21 refineries have closed in Europe since
2009, with a reduction in capacity of more than
2 Mb/d of refined crude oil.
Globally, oil refinery products output will
increase slowly to reach a high by 2022, at
3.4% above 2017 levels. This will be followed
by a substantial 45% decline in output by 2050.
This is due to significantly reduced demand for
liquid fuels in the transport sector. We expect
greater refining sector focus on producing cleaner,
higher-grade transport fuels in mature markets
with existing infrastructure. Transportation of
refined products is likely to decline as refinery
capacity adjusts to delivering only what local
markets need. Greater proportions of refinery
output will be directed towards the petrochemicals
sector as feedstock rather than fuels.
Refiners face an increasing challenge: how
to maximize returns per barrel processed.
We expect the ‘heavier’ end of the barrel to
struggle to find markets in the future because
of substantially reduced demand for diesel and
maritime fuel oil. This creates new economic and
environmental challenges for refiners in what has
historically been a low-margin business. Only the
most advanced refineries, with the most efficient
processes, are likely to survive these challenges.
Among the regional trends that we forecast, new
petrochemical investments in the Middle East will
be increasingly based on cheaper, liquid feedstocks
such as naphtha and gasoil, or mixed gas/liquid
feedstock, instead of exclusively on gas. We expect
9
DNV GL ENERGY TRANSITION OUTLOOK 2019 — OIL AND GAS
North America’s low-cost feedstock advantage of
recent years to decline slightly as new ethylene-
cracking capacity and export opportunities boost
demand for ethane and propane, which could
increase prices. Substantial petrochemicals growth
in China and India, driven by local GDP growth, will
increase demand for gas imports, mainly sourced
from Middle East and North American exports.
Gas trade forecasts and other results from our
model support the requirement for new pipelines
including those for cross-border transmission;
and, significantly increased demand for liquefied
natural gas (LNG) terminals of varying scale
(liquefaction and regasification terminals, fixed
and floating assets). We predict seaborne natural
gas trade (LNG and liquefied petroleum gas
combined) to more than quadruple, from 383
million metric tonnes per year (Mt/yr) in 2017 to
1,604 Mt/yr in 2050. A shift in gas transportation
trends towards increasing diversity of supply
will also drive globalization of markets for gas
trading, particularly in the form of LNG.
With gas demand set to remain strong until at least
2050, we expect increased expenditure on, and
activity associated with, older pipeline systems in
several regions, including Europe, Middle East and
North Africa, North America, and North East Eurasia.
In several countries, pipeline systems and
compressor networks will continue to be
repurposed and undergo changes of service
due to shifts in where gas is produced and
consumed. This will be driven by new gases
(e.g. hydrogen and biogases) entering gas
networks at local distribution level, and by
a growing share of LNG imports over
traditional, piped gas from offshore locations.
Gas transmission system operators will
progressively incorporate advances in composite
materials, artificial intelligence, robotics,
augmented realityand the Internet of Things
into systems and processes. This will assist them
to build, maintain, repair and operate networks
10
safely and cost efficiently, and to provide
customers, regulators, and partners with tailored
analyses of large volumes of operating data.
As new gases enter gas distribution networks,
customers will increasingly buy units of energy
rather than volumes of gas. Metering and billing
will require more accurate and consistent
measurement of the energy value delivered to
end users. Greater computing power and more
advanced data analytics will allow gas
distribution system operators to manage more
complex data and customize results for internal
and external stakeholders.
Globally, we forecast a drive to decarbonize
production and optimize lifecycle performance
for existing and new-build facilities throughout
the refining and petrochemicals sectors.
Greater and more sophisticated digital
technologies such as autonomous plant
operations, and more efficient electrical
drives and controls, will assist these efforts.
We also foresee an increase in the creation
of low-carbon industrial clusters sharing
by-products such as hydrogen, and for CCS
and carbon capture, utilization and storage
(CCUS). Utilization of CO2, an emerging area
of interest, is the process of ‘locking up’ CO2
in products such as plastics or concrete, or of
using the CO2 for processes such as enhanced
oil recovery, or the production of chemicals
such as formic acid (see page 60).
EXECUTIVE SUMMARY

11
DNV GL ENERGY TRANSITION OUTLOOK 2019 — OIL AND GAS

ENERGY TRANSITION TIMELINE:

THE OIL AND GAS HORIZON

1890 1977 2015

First offshore oil First use of a Floating Coal peaks as global
and gas production Production Storage and energy supply source
Offloading (FPSO) unit

54%

1949 2011 2017

First use of hydraulic fracturing First drillship to drill in more Oil and gas provides
than 10,000 ft of water 54% of world energy

12
 EXECUTIVE SUMMARY

25% 46%

2022 2026 2036 2050

Global oil demand peaks* Gas overtakes oil as the Global refinery capacity reduces Oil and gas provides
world’s primary energy source* by 25% compared to today* 46% of world energy*

2025 2033 2039

Global CO2 emissions peak* Global gas demand peaks* Global LNG regasification and liquefaction
capacity doubles compare to today*

*Forecast by our 2019

Energy Transition Outlook model.

13
 CHAPTER 1
INTRODUCTION
DNV GL ENERGY TRANSITION OUTLOOK 2019 — OIL AND GAS
1 INTRODUCTION
Driven by our purpose of safeguarding life, property and the
environment, DNV GL enables organizations to advance the
safety, efficiency and sustainability of their businesses.
We are a global provider of quality assurance,
risk management, and technical advisory services
in more than 100 countries. Approximately 70%
of our business is energy related. Two of our main
business areas support the oil and gas, and
renewables and power generation industries in
producing, transporting, storing and processing
energy safely and sustainably. As the world’s
largest ship classification society, ship fuels and
the seaborne transportation of energy in all its
forms are also key topics for us.
This publication is one in DNV GL’s suite of Energy
Transition Outlook (ETO) reports. In all, four
publications provide predictions through to 2050
for the entire world energy system. Alongside the
company’s main Outlook report1 and a companion
Executive Summary document,2 the suite includes
three reports discussing implications for separate
industries: oil and gas; power supply and use;3
and maritime.4
Our ETO reports are based on DNV GL’s
independent energy model, which tracks and
forecasts regional energy demand and supply,
as well as energy transport between regions.
Several DNV GL customers act as independent
reviewers of the publications.
16
Our ETO was first published in September 2017.
Based on our insights and knowledge of the
industries that we serve, we continue to update
and refine our forecast of the world’s energy
future and how the energy transition may unfold.
This updated forecast is based on our 2019 ETO.
The implications for the oil and gas industry and
its customers in a rapidly changing energy
landscape are considered in this report.
Our core ETO model is a system dynamics
feedback model, implemented with the Stella
modelling tool. It predicts global and regional
energy demand and the energy supply required
to meet it. DNV GL’s model forecasts the energy
transition in 10 global regions (page 88), and
this publication includes some key local oil and
gas trends and analyses (Section 3.6). Key
demand sectors such as buildings,
manufacturing, and transportation (air, maritime,
rail and road) are analysed in detail.
In a somewhat crowded field of energy
forecasting, our work seeks to create value through:
—— Source-to-sink treatment of the entire energy
system, including, for example, the impact of
increased global transport of LNG on emissions
from ships.
—— Focus on technology trends and needs for
the future.
—— Focus on the accelerating pace of the energy
transition and decarbonization challenge rather
than on the status quo of the energy system.
 INTRODUCTION CHAPTER 1

FIGURE 1.1

Energy Transition Outlook model

Below presents the framework of our model. The arrows in this diagram show information flows.
Physical flows are in the opposite direction. Our model includes feedback loops such as that
shown between the amount of fossil fuel extraction and maritime transport (tonne-miles) as a source
of demand. There are other feedback loops not shown here; for example, the positive feedback
between cumulative installed capacity of renewables and the decline in their costs.

POLICY

POPULATION

Source of Final energy Energy Primary

demand demand transformation energy supply
GDP PER
PERSON

TRANSPORT TRANSPORT POWER GENERATION Solar PV

Measured in Maritime Electricity Wind
tonne-miles,
passenger- Road Direct heat Hydropower
kilometres Aviation Nuclear
and vehicles
Rail

BUILDINGS BUILDINGS HYDROGEN Biomass

Space heating & cool- Residential Geothermal
ing, water heating,
cooking, and appli- Commercial OIL REFINERIES Solar thermal
ances & lighting

FOSSIL FUEL
MANUFACTURING MANUFACTURING
EXTRACTION
Tonnes Manufactured
of goods DIRECT USE Crude oil
and base goods
Natural gas
materials Base materials
Coal

NON-ENERGY

Feedstock

OTHER

ENERGY SECTOR’S
OWN USE

ENERGY EFFICIENCY

17
DNV GL ENERGY TRANSITION OUTLOOK 2019 — OIL AND GAS
In this report for the oil and gas industry, the
energy requirements of key demand sectors that
we have modelled are translated into trends we
expect to see across the value chain.
We discuss in detail how the oil and gas elements
of the energy system will meet this demand from
existing and new conventional and unconventional
production capacity, both onshore and offshore.
We also consider the implications for biogases,
hydrogen, and LNG.
““
Our ETO presents our
independent view of
what we consider to
be the most likely future
amid the energy transitions
unfolding around us.
The enabling roles of digitalization, and emerging
construction and production technologies are
considered in terms of their impact on both
energy supply and demand. We also address how
the oil and gas industry will need to change over
the next 30 years; not only to mitigate climate
change, but also to consider climate adaptation
in its operations.
18
More detailed analysis based on our model is
available from DNV GL on request, and detailed
datasets from our ETO data are available on our
Veracity platform at: www.veracity.com. We also
provide consultancy support to tailor such content
to the needs of individual organizations.
Our ETO, including that for oil and gas, presents
our independent view of what we consider to be
the most likely future amid the energy transitions
unfolding around us. We stress that we present
only one ‘most likely’ future, not a collection
of scenarios.
The coming decades to 2050 hold significant
uncertainties for the planet, and the oil and gas
industry. These uncertainties are notably in areas
such as: future energy policies; emerging energy
sources such as hydrogen; renewable energy
integration with oil and gas production; human
behaviour and reaction to policies; the pace of
technological progress; and, trends in the pricing
of existing and new technologies. A full analysis
of sensitivities related to our energy system
modelling is available in our main report.1
INTRODUCTION CHAPTER 1

19
 CHAPTER 2
OIL AND GAS
DEMAND FORECAST
DNV GL ENERGY TRANSITION OUTLOOK 2019 — OIL AND GAS

2 OIL AND GAS

DEMAND FORECAST

We see a new energy world emerging; one in which

decarbonization tops the agenda, and global primary
energy demand is likely to peak before mid-century.

In 2017, our forecast for total world final energy
demand was 414 exajoules (Figure 2.1). This
converts to some 10,000 million tonnes of oil
equivalent (Mtoe). We forecast that this will
increase to a peak of 462 exajoules (EJ) in 2033,
12% higher than in 2017, before reducing again
to 446 EJ by 2050.
World final energy demand has risen by a third
(36%) over the past 15 years, but we expect it to
increase by only 9% between 2019 and 2033.
Thereafter, it will plateau and slowly decline towards
2050 due to slower growth in productivity and
global population, and continuous increases in
energy efficiency, particularly in transport.
We forecast that gas, followed by oil, will be the two
largest primary energy sources at the end of the
forecast period (Figure 2.2). Gas will provide 29% of
global energy demand in 2050, and oil will provide
16% of demand. Continued investment will be
needed over this period to maintain production at
levels required to meet global demand, even in a
declining market. This is due to ongoing depletion
of oil and gas reservoirs, which we assume to
decline at an average rate of 4% per annum globally.
While oil and gas will remain important sources
of energy throughout our forecast period, the mix
and contribution of renewable energy sources
will increase, driven by strong growth in solar
(12.1% share in 2050) biomass (11.3% share in

MEASURING ENERGY IN OUR OUTLOOK

1 Exajoule
is roughly

24 million 278 terawatt 1 day 2 years 2 minutes 1 year

tonnes of oil equivalent hours (TWh) of energy of the world’s current total of energy consumed by the worth of solar energy of heat used by Germany’s
(MToe) final energy demand New York metropolitan falling on Australia steel sector
area’s transport sector

The oil and gas industry normally presents its energy figures in million tonnes of oil equivalent (MToe), while the power industry is used to
terawatt hours. The International System of Units’ principal measure for energy is joules, or rather exajoules (EJ) when it comes to
global production. This is the unit we have chosen in our Outlook.

22
 OIL AND GAS DEMAND FORECAST CHAPTER 2

FIGURE 2.1

World final energy demand by sector

Units: EJ/yr
500
Transport
Buildings
400
Manufacturing

Non-energy
300
Other

200

100

0
1980 1990 2000 2010 2020 2030 2040 2050
Historical data source: IEA WEB (2018)

FIGURE 2.2

World primary energy supply by source

Units: EJ/yr
700
Wind

600 Solar PV
Solar thermal
500
Hydropower
400 Biomass

300 Geothermal
Nuclear fuels
200
Natural gas
100 Oil

0 Coal
1980 1990 2000 2010 2020 2030 2040 2050
Historical data source: IEA WEB (2018)

23
DNV GL ENERGY TRANSITION OUTLOOK 2019 — OIL AND GAS
2050) and wind (10.6% share in 2050). Our main
Energy Transition Outlook report provides
detailed analysis of the breakdown of the world
energy mix to 2050.1
It should be borne in mind, when comparing
Figures 2.1 and 2.2, that primary energy supply
has a higher value than primary energy demand.
This is because energy is lost in the system between
the point of supply and the point of consumption,
often caused by thermal inefficiencies or
transmission losses. These inefficiencies reduce
towards the end of the forecast period, as thermal
processes are increasingly replaced by renewable
energy sources. As such, our model expects
primary energy supply to decline faster than
primary energy demand towards the end of the
forecast period.
OIL DEMAND
Our model forecasts a small (less than 2.6%)
increase in global oil demand over the next few
years. Peak oil demand arrives in the mid-2020s
under our model’s assumptions, followed by a slow
decline to 2030, and a steeper decline thereafter
FIGURE 2.3
World oil demand by sector
Units: Mb/d
90
80
70
60
50
40
30
20
10
0
1980 1990 2000 2010
Does not include natural gas liquids and bioliquids. Historical data source: IEA WEB (2018)
24
(Figure 2.3). By 2050, we forecast global oil demand
to be just over half (57%) of the current demand level.
Even though our model forecasts global oil
demand to reduce around the mid-2020s, there will
be a continued need to replace the reserves that
are being depleted daily, long after peak demand
is reached. These will likely be developed from both
smaller and often more technically challenging
reservoirs than those in operation today. The
industry must continue to innovate and implement
new solutions therefore, to develop such resources
in cost effective and lower-carbon ways.
We also expect an increase in seismic and drilling
activities as the oil and gas sector works harder
to find the hydrocarbons that the world needs.
Production assets will also be smaller and more
agile, with shorter lifespans than today. To
become ‘faster and fitter’, the sector will need to
develop new, digital solutions to design and
manage approval, construction and operational
processes, without jeopardizing safety or
environmental performance.
The main demand growth for oil in the lead-up
to 2050 is expected from emerging economies.
Transport
Buildings
Manufacturing
Non-energy
Energy sector
own use
Power station fuel
Other
2020 2030 2040 2050

We forecast the largest growth markets to be the
Indian Subcontinent, Latin America, South East
Asia and Sub-Saharan Africa. This will be driven
largely by increased demand for oil feedstock for
petrochemicals rather than transport. Demand
growth in these regions will be sustained
beyond 2030.
Decline in oil demand will begin with significant
decreases beyond 2030 in three regions, according
to our model: Europe, North America, and OECD
Pacific. This is largely caused by a shift to battery
or hydrogen fuel-cell vehicles in passenger and
commercial transport, modal shift of commercial
transport to rail, and the increased efficiency of
next-generation combustion engines.
A shift in petrochemical production locations,
caused by the closure of associated refining capacity
in these regions, will also have an impact. While
transport remains a major source of oil demand
throughout the forecasting period, reliance on oil
for this purpose will reduce by just over 50%
between 2023 and 2050, from 56 million barrels
per day (Mb/d) to 28 Mb/d. This will be influenced
by growing use of electric and hybrid vehicles.
Refineries will need to re-balance their product
slates to reflect lower demand for liquid fuels,
for road, rail and maritime consumption, and
greater demand for petrochemicals in most
regions, particularly in Greater China, the Indian
Subcontinent and Sub-Saharan Africa (see
Section 3.3).
Significantly, we forecast non-hydrocarbon
energy sources to account for 46% of energy use
in transportation in 2050, compared with only
4% in 2017.
Direct oil demand — oil as an energy source, not
as a process feedstock — in manufacturing and
buildings is already relatively small. However, it is
expected to further reduce in both sectors over
the forecast period, from 5.2 Mb/d in 2017 to
2.3 Mb/d in 2050 for manufacturing, and from
OIL AND GAS DEMAND FORECAST CHAPTER 2
2.7 Mb/d in 2017 to 1.1 Mb/d in 2050 for buildings.
The power sector will also reduce its demand for
oil to about 2.4 Mb/d from 4.8 Mb/d in 2017, as
power generation is increasingly sourced from
gas or renewables.
GAS DEMAND
Gas has a much brighter future than oil in the
energy mix. Global demand for this least carbon
intensive of fossil fuels has risen 102% in the past
30 years and will keep increasing for the next
18 years, according to our model. Gas demand
will peak in 2033 at just below 5,500 billion
cubic metres per year (Gm³/yr), 19% higher than
today (Figure 2.4). Thereafter, gas consumption
will plateau, reducing slightly to 5,170 Gm³/yr
by 2050. This is still 13% higher than today’s
demand however.
The nature of the gas we consume will begin
to change quite dramatically in the lead-up to
mid-century, as the gas supply begins to be
decarbonized through the introduction of
new forms of gas such as biogas, hydrogen
and syngas.
Hydrogen demand has increased in our forecast
compared with the results of our 2018 modelling,
but it still only provides less than 2% of global final
energy in 2050. This is largely due to the lack of
current policy to support the large-scale rollout
of hydrogen as an energy carrier.
There is clear evidence of the benefits of hydrogen
as a low-carbon fuel for heating, industrial
decarbonization and transport, and several
ground-breaking projects are developing its
applications. However, our model reflects a lack
of clear support for carbon capture and storage,
which is a necessary engineering solution to
allow ‘blue’ hydrogen (produced from fossil fuels)
to be developed at scale, as opposed to ‘green’
hydrogen produced via electrolysis. This trend is
discussed further in Section 3.4 of this report.
25
DNV GL ENERGY TRANSITION OUTLOOK 2019 — OIL AND GAS
The future demand picture for gas shows wide
geographical variation. These will result in new
transportation patterns for gas, particularly in the
form of liquefied natural gas (LNG). For example,
only a few years ago, more than 65 LNG import
terminals were planned for the US; but following
the rapid growth in domestic shale gas, the US
is now an LNG exporter.
Gas demand will peak in Europe at 615 Gm³/yr
in 2021 and in North America at 1270 Gm³/yr
the same year. In OECD Pacific, gas demand
peak was reached at 300 Gm³/yr 2013; and,
in North East Eurasia, at 610 Gm³/yr in 2014.
Gas demand will continue to increase in the
Indian Subcontinent, China, South East Asia,
and Sub-Saharan Africa right through to 2050.
Power generation will be the main consumer of
gas in most regions, challenged by manufacturing
(mainly petrochemicals) in China, India, and Latin
America. Gas use in power generation will
increase over the next 15 years, before levelling
off and then declining towards the end of the
forecast period, when wind and solar start to
dominate power supply.
FIGURE 2.4
World natural gas demand by sector
Units: Gm³/yr
6 000
5 000
4 000
3 000
2 000
1 000
0
1980 1990 2000 2010
Includes natural gas liquids. Historical data source: IEA WEB (2018)
26
Global gas consumption for buildings remains
stable over the forecast period, though we see:
decline in Europe, North America, North East
Eurasia and OECD Pacific; a steady increase in
the Indian Subcontinent and South East Asia;
and, a strong rise in Sub-Saharan Africa. Global
gas consumption in manufacturing will increase
in both relative and absolute terms to become
the most demand-intensive sector for gas
beyond 2035.
Gas use in transport will increase in the maritime and
heavy-vehicle sectors, in the form of compressed
natural gas (CNG), including bio-CNG, and LNG.
However, it will decline in light vehicle combustion
engines in which batteries or fuel cells will take
precedence. Peak natural gas demand in transport
will occur in 2040. Including the increasing use of
hydrogen in fuel-cell vehicles, gas-based fuels will
still meet 10% of all transport consumption of
energy in 2050 however according to our forecast.
Transport
Buildings
Manufacturing
Non-energy
Energy sector
own use
Power station
fuel
Other
2020 2030 2040 2050
OIL AND GAS DEMAND FORECAST CHAPTER 2

27
CHAPTER 3
TRENDS AND
IMPLICATIONS
DNV GL ENERGY TRANSITION OUTLOOK 2019 — OIL AND GAS

3.1 ONSHORE AND OFFSHORE OIL

EXPLORATION AND PRODUCTION
Overall, our model predicts declining global crude
oil production between the mid-2020s and 2050
(Figure 3.1). However, we do forecast production
to rise slightly from 80 million barrels per day (Mb/d)
in 2017, excluding natural gas liquids (NGLs) and
other liquids, to a high of 87 Mb/d in around 2022
before declining, slowly at first, then more rapidly,
to hit 48 Mb/d in mid-century.
We forecast offshore oil production to be much
lower by 2050, some 30% less than today. Mature
assets will still be operating, but new capacity
additions offshore will largely cease by the late
2040s, as costs rise in challenging environments
and it becomes tougher for operators to secure
social license to operate in new frontiers.

Conventional onshore oil will continue to provide

the largest and most stable share of total oil
production in the lead up to 2050. It will still
account for more than 45% of global oil production
at mid-century, though we see a steady decline
in production levels, averaging 3% per year
beyond 2027.
Unconventional onshore oil production remains
flat at 13 Mb/d between now and 2025. Beyond
that point, it declines in proportion to overall oil
demand until the end of the forecast period in
2050, where it will be 9 Mb/d, around 18% of
global crude oil production.
ONSHORE OIL EXPLORATION
AND PRODUCTION
Production from conventional onshore oil resources
will peak in the mid-2020s at around 49 Mb/d, but
will be almost halved to 22 Mb/d by mid-century.
More than half of conventional onshore oil
production will come from the Middle East
and North Africa region by 2050 according to our
model, followed by North East Eurasia including
Russia. The latter region’s production will decline
significantly from 2026, but will still be the second-
largest. Latin America will move into a distant third

FIGURE 3.1

World crude oil production by field type

Units: Mb/d
90 Conventional
onshore
80
Unconventional
70
onshore
60 Offshore
50

40

30

20

10

0
1980 1990 2000 2010 2020 2030 2040 2050
Historical data source: Rystad (2019)

30

place as output from China declines (Figure 3.2).
Venezuela could significantly increase its oil output,
but only after a change in its current political
environment and a significant increase in investment.
This underlines the continued importance
in the future for oil production in Middle East
and North Africa, and its geopolitics. Our model
assumes that regional supply increases are
driven by large-scale, low-cost oil resources,
especially in this region as producers respond
to growing relative abundance by asserting
competitive advantage.
GLOBAL IMPACT: UNCONVENTIONAL OIL
PRODUCTION BEYOND THE AMERICAS
Continual additions to estimated reserves have
delineated 137 shale formations in 41 countries in
recent years (Figure 3.3). Global unconventional
recoverable oil reserves are estimated to be
between 500 billion (bn) and more than one trillion
(trn) barrels. North America and Latin America
dominate production, but other regions such as
China and North East Eurasia will begin to feature
as technology, infrastructure, regulation, public
acceptance and oil demand evolve. More rapid
FIGURE 3.2
Conventional onshore oil production by region
Units: Mb/d
50
45
40
35
30
25
20
15
10
5
0 OPA
1980 1990 2000
*For more information about the world regions covered by our model, see page 88
TRENDS AND IMPLICATIONS CHAPTER 3
production growth outside the Americas will not
happen for another five to 10 years, according to
our model.
With its ability to rapidly turn unconventional
production up and down, the US shale industry
has arguably become the world’s new swing
producer, at least for the short term. For the
foreseeable future, major shale-oil developments
will be centred in the Americas. They will
continue to have an impact on supply and
therefore oil prices in the near term.
Fully capturing the economic benefits of
developing unconventional oil resources
outside the Americas requires:
—— public and regulatory acceptance
—— enough skilled workers
—— access to drilling rigs and equipment
—— efficient horizontal drilling and hydraulic
fracturing technologies
—— new/upgraded pipelines and roads to the many
unconventional oil resources in remote areas.
NAM
LAM
EUR
SSA
MEA
NEE
CHN
IND
SEA
2010 2020 2030 2040 2050
Historical data source: Rystad (2019)
31
DNV GL ENERGY TRANSITION OUTLOOK 2019 — OIL AND GAS
If these challenges can be met, unconventional oil
can play a significant transitional role in providing
energy until mid-century. Our model indicates that
the effect of the North American shale revolution
will be global, even though the related shale
production will not.
OFFSHORE OIL EXPLORATION
AND PRODUCTION
We predict a recovery in production volumes from
offshore sources by the mid-2020s. This is due to
already-sanctioned developments coming onstream,
and continued cost control enabling lower-price
offshore production. Therefore, we forecast that
offshore production will remain stable until the
mid-2030s, when it enters slow decline (Figure 3.4)
Significant structural changes are under way in
the industry as the energy transition gathers pace
however. International oil companies (IOCs) that
would have traditionally developed frontier oil and
gas resources from challenging environments and
FIGURE 3.3
Global unconventional oil and gas resources
  Assessed basins with resource estimate    Without resource
Source: US basins from US Energy Information Administration and United States Geological Survey; other basins from
Advanced Resources International based on data from various published studies
32
reservoirs are instead focusing on becoming
broader energy companies. They are building
increasingly diverse portfolios, including large
investments in battery technology, vehicle
charging networks, hydrogen, and renewable
energy. This calls into question whether IOCs will
have the appetite to develop new deepwater or
harsh-environment resources against a backdrop
of declining oil demand, and societal pressure to
leave hydrocarbon assets stranded.
The scale of investment required for the
exploration and production of these resources
may place them outside the range of risk that
newer, mid-sized, pure hydrocarbon players will
consider. Analysis published by Wood Mackenzie
in November 2018 highlighted the fact that 74% of
deepwater reserves were being progressed by
only eight companies, all of which are IOCs.5
That said, average break-even costs for deepwater
developments dropped from about USD 75 per
barrel (/b) in 2014 to USD 45/b in the fourth quarter
of 2018. Sustained improvements in drilling

efficiency are key, with operators now completing
projects much faster than previously. For example,
the average deepwater well in Brazil or the Gulf of
Mexico can now be drilled twice as fast as in 2014.
Shell has said that it can now develop its
deepwater Brazilian fields at a break-even cost
of USD 30/b. We expect that, based purely on
cost, more deepwater fields will be developed
in the next few years, and there are already some
positive signs of an upturn.
Costs will not remain low forever. As the market
recovers, cyclical benefits, such as lower day
rates for rigs, will fade as service-sector costs
rise again. At its peak in 2013/2014, we saw an
average rig rate of more than USD 500,000 per
day (/d); this is now down at USD 150,000/d due
to reduced demand. As the investment cycle
slowly picks up again, we see it driving rig rates
back up to USD 300,000–350,000/d after 2020;
not as high as in 2013/14, but still double the
current levels.
FIGURE 3.4
Offshore oil production by region
Units: Mb/d
30
25
20
15
10
5
0 OPA
1980 1990 2000 2010
TRENDS AND IMPLICATIONS CHAPTER 3
IMPLICATIONS FOR THE DRILLING FLEET
Day rates for jack-ups have been more than halved
since the heights of 2014, and this is representative
for the whole drilling segment. There have been
a limited number of fleet retirements — about
104 jack-ups — since 2014, with 60 being scrapped
and 44 converted. A significant number of new
generation jack-up units have also been added to
the existing fleet, which has not contributed to
improving the day-rate picture for the older units.
The need for jack-ups will remain relatively high
due to new field developments. There is also likely
to be more demand for these units for in-field
drilling and well maintenance to maintain current
production rates. Improvement in rates and the
need for more units will nevertheless be limited
in the short term. This will increase only when
more units are needed in operation, and when
more have been scrapped. Realistically, jack-up
utilization needs to reach 85% before significant
rises in day rates will be seen.
NAM
LAM
EUR
SSA
MEA
NEE
CHN
IND
SEA
2020 2030 2040 2050
Historical data source: Rystad (2019)
33
DNV GL ENERGY TRANSITION OUTLOOK 2019 — OIL AND GAS
Since 2014, 139 semi-submersible drilling units
have been scrapped, but to restore a healthier
market balance, more units still need to be
retired, as there is insufficient demand for the
existing number. In this segment, there has been
only two new-build orders in the last four years,
and we expect very few new orders to materialize
before 2021, except for a few small units for niche
segments or services.
““
We believe it unlikely that there will
be a rapid rise in oil prices caused
by a supply/demand imbalance.
For ultra-deepwater drillships, we expect to see
the same trend as for harsh-environment jack-up
and semisubmersible units, namely the scrapping
of older units and no new orders; although very
few units are from before 2000, so the scrapping
potential is less. We expect demand for ultra-
deepwater drillships to remain essentially stable,
comparable with today’s levels. However they will
experience a slight increase in the next two to four
years to support deepwater field developments
currently being planned.
COST IMPLICATIONS
The industry has reduced offshore development
and production costs by 30%–40% since 2015
in the face of a substantial reduction in oil price.
These savings have been achieved through:
commercial pressure on the supply chain; rapid
technology implementation allowing improved
design concepts for new development fields;
new contracting and ownership models; and,
greater standardization.
Our model forecasts a small decline in production
costs. Given the predicted decrease in demand
for oil over the forecast period, we believe it
unlikely that there will be a rapid rise in oil prices
caused by a supply/demand imbalance such as
those witnessed in previous cyclical market
changes. We cannot rule out a price recovery
driven by political change or conflict however.
34
This means that the industry will need to continue
innovating to find new solutions to improve cost
efficiency through the energy transition.
We have seen a significant shift from fixed
installations to floating production systems
and subsea tiebacks, even in shallower water.
Although prices for floating solutions have
begun to rise again, we forecast this to continue,
driving the industry to innovate development
solutions. In some cases, it is moving away from
ship-based solutions to smaller, buoy-based or
circular ones, such as the Sevan design.
New developments in data analytics, steerable
drilling and well design have allowed existing
reservoirs to be further exploited. New, previously
marginally economic reservoirs, such as ‘small
pools’ or ‘fractured basements’, are becoming
viable due to technology developments and the
entry of new, lower-cost operators to the market.
This is explored further in Section 3.5.
The arrival of novel ownership models in mature
basins, often backed by venture capital, has
enabled the development of new resources,
often as brownfield modifications.
These smaller owners’ new operating models
are also winning backing from engineering,
procurement and construction (EPC) contractors,
which are providing both financing and operational
support. The combination of well-financed small
operators and lower-cost, faster-to-production
developments in floating production units,
has led to the development of many small pools
previously thought uneconomical. Challenges
to attract project finance still exist however,
as some investors begin to favour greener
investment portfolios.
The emergence of subsea processing will allow
direct export of hydrocarbons to shore without
a surface facility. Reusable installations are also
deployed to exploit a series of smaller, previously
‘stranded’ fields. The provision of shore-based

power to subsea or platform-based projects
reduces costs and brings environmental benefits.
There are other examples of how innovation can
extend field life and reduce costs. The standard
recovery rate from an oil reservoir is about 35%,
with the remainder staying trapped in tight,
difficult-to-reach pore spaces. Finding ways to
improve recovery rates is key to both the
economics of new fields and to field life extension.
Some oil companies are developing new ways
to improve reserve recovery by manipulating
microbes found naturally in the reservoir to create
new processes such as organic oil recovery.6
The world’s energy landscape is now heading
for a peak in oil demand rather than supply.
Consequently, we expect oil prices to stabilize
and exhibit fewer major swings. Shorter-term
spikes will still happen of course, usually in
reaction to disruptions in demand caused by
FIGURE 3.5
Global upstream oil gas capital and operating expenditure
Units: Bn$
1000
900
800
700
600
500
400
300
200
100
0
2020 2025 2030 2035
TRENDS AND IMPLICATIONS CHAPTER 3
supply failures – often as a result of political
sanctions. These shorter cycles are not part of
our forecast; instead we have captured the
longer-term trends towards reduced production,
lower prices, and lower costs.
The increasing pace of decommissioning in
mature basins is an emerging challenge.
Many IOCs are seeking to quit such basins to
explore new, perhaps lower-cost, environments
with larger reserves, or to speed up the transition
from oil to gas in their portfolios. There is a
growing risk that small operators succeeding
them in the market will not have access to existing
infrastructure to develop smaller reservoirs
through solutions, such as subsea tiebacks.
Several governments are seeking solutions to
this life extension challenge; one example is the
establishment of the UK’s Oil & Gas Authority.
Gas
Capex
Opex
Oil
Capex
Opex
2040 2045 2050
35
DNV GL ENERGY TRANSITION OUTLOOK 2019 — OIL AND GAS
3.2 ONSHORE AND OFFSHORE GAS
EXPLORATION AND PRODUCTION
Our model predicts that production of unconventional onshore
gas will increase from 2019 right through to the end of our forecast
period, growing by 68% from 2017 production levels.
Conventional onshore gas production will be
maintained at today’s output rates until the late
2030s. It will then decline slowly to mid-century,
ending at about 19% lower than 2017. Offshore
gas production will rise until 2040, when it will be
58% greater than in 2017, before declining slowly
to 2050, when it will still be more than a third
(39%) higher than in 2017 (Figure 3.6).
ONSHORE GAS EXPLORATION
AND PRODUCTION
After a dip in 2018, caused by low gas prices, our
model predicts that North American unconventional
onshore gas production will rise gradually to a peak
of 1,220 billion cubic metres (Gm3/yr) in 2050
(Figure 3.7). We expect such resources to account
for 85% of North American gas supply capacity
by then.
Continued robust production from existing and
emerging unconventional oil and gas plays will
remain critical to both US domestic energy
security and employment prospects.
Furthermore, unconventional gas will be the
primary source for North American liquefied
natural gas LNG exports and the region’s
growing petrochemicals industry. A switch in
demand for petrochemicals will be caused by
product innovation in markets including agricultural,
pharmaceutical, and industrial fine chemicals.
36
Shale gas production will rise steeply by 2019 in
China at a compound annual growth rate of 12%,
before levelling out and then shrinking after 2033.
However, at the time of its peak gas demand in
2038, gas production in Greater China will still
only be able to meet 10% of demand domestically,
driving massive requirements for imported gas.
North America, Latin America, Middle East and
North Africa, and Greater China (in that order)
hold the largest estimated recoverable shale gas
resources, according to the US Energy Information
Administration (Figure 3.8). Saudi Aramco recently
announced plans to ramp up unconventional gas
production from the Jafurah Basin, eastern Saudi
Arabia.7 The plan also involves a new phase of the
operator’s Jafurah gas-processing plant to produce
raw natural gas, condensate, ethane and natural
gas liquids (NGLs). It aligns with the operator’s
strategy to increase the share of gas in its portfolio.
While shale gas has grown strongly in North
America, other regions are lagging behind in
developing their resources. Some simply do not
need to; others have concerns over water use,
geological issues, and environmental threats
such as fugitive methane emissions. Bulgaria,
France, the Netherlands, Australia’s Northern
Territory, and some US states, counties and cities
have bans in place. The UK government is supportive
of shale-gas development. It is easing planning
regulations to allow it to proceed, but progress
has been slow.
 TRENDS AND IMPLICATIONS CHAPTER 3

FIGURE 3.6

World natural gas production by field type

Units: Gm³/yr
6 000 Conventional
onshore
5 000 Unconventional
onshore
4 000 Offshore

3 000

2 000

1 000

0
1980 1990 2000 2010 2020 2030 2040 2050
Includes natural gas liquids from wells, but not refinery outputs. Historical data source: Rystad (2019)

FIGURE 3.7

Unconventional onshore natural gas production by region

Units: Gm³/yr
1 800 NAM

LAM
1 500
EUR
1 200 SSA

MEA
900
NEE

600 CHN

IND
300
SEA

0 OPA
1980 1990 2000 2010 2020 2030 2040 2050
Historical data source: Rystad (2019)

37
DNV GL ENERGY TRANSITION OUTLOOK 2019 — OIL AND GAS

In most regions, the debate continues, with advocates
of hydraulic fracturing stressing potential economic
and climate benefits, and gas supply security. South
Africa is an example of a nation that has lifted its ban
on hydraulic fracturing.
Despite a wealth of onshore gas resources
suitable for extraction, offshore gas production
in Latin America will grow faster than unconventional
sources. It will increase steadily towards a peak in
2044, some 76% higher than today, before levelling
out. In North East Eurasia, conventional onshore
gas production will also rise slightly from 2020
onwards, reaching a peak in 2033 at 7.2% higher
than in 2017.
Hydraulic fracturing will become more efficient
and less toxic. It will also become less water-
intensive by reusing water or using high-pressure
nitrogen and/or carbon dioxide (CO2) gas streams
to boost production. CO2 is now becoming
a tradeable commodity for enhanced oil
recovery (EOR) in shale developments.
Many IOCs, such as BP, Chevron, and Shell are
investing in North American shale operations to
secure a long-term, lower-cost, gas resource base.8
Our model predicts that, in the long term, average
onshore oil and gas production costs will remain
stable or decrease slightly in most regions.

FUTURE DEVELOPMENT SOLUTIONS

As we discuss in Section 3.1, shale oil and gas
producers have significantly reduced break-even
production costs since 2012 by applying lean
engineering, new contacting strategies, and
increasingly efficient technologies. Continued
innovation in drilling technology will also decrease
the number of wells and the surface area required
for hydraulic fracturing to develop shale gas
resources in a given location.
OFFSHORE GAS EXPLORATION
AND PRODUCTION
Offshore gas production volumes will increase
by approximately 58% between 2017 and 2040.
Growth comes principally from three regions in our
model: Middle East and North Africa, OECD Pacific,
Sub-Saharan Africa and Latin America (notably
Brazil and Mexico). Production will then plateau
until the end of the forecast period (Figure 3.9).

FIGURE 3.8

Technically recoverable shale gas by region

Units: Tft 3
30

20

10

10

20

30

NAM LAM EUR SSA MEA NEE CHN IND OPA SEA
33.8 56.0 12.5 13.8 35.6 13.4 31.6 5.7 12.1 0.0

Source: ‘World shale resource assessments – attachment A: size of assessed shale gas and shale oil resources, at basin- and formation-levels
(last updated 12/29/2014)’, EIA, 24 September, 2015 

38

Europe will remain a significant source of offshore
gas during the forecast period, but production will
slowly decline in the region beyond 2022. The
primary challenge will be reserves replacement,
driven by economic factors. Energean’s Karish-
Tanin project offshore Israel, and Total’s deepwater
gas prospect in Block 11 offshore Cyprus, could
provide new potential gas sources for Europe.
They are indicative of a substantial resource
potential in the East Mediterranean basin.
ENABLING GREATER USE
OF STRANDED OFFSHORE GAS
Offshore gas producers face a significant challenge
with some of the world’s largest natural gas resources
far away from the biggest gas markets, in deeper
waters, and unconnected to export infrastructure
routes or strong local markets.
Substantial growth in the proposed use of floating
liquefied natural gas (FLNG) technology could
unlock development of previously stranded offshore
gas assets by enabling export of production by LNG
carrier rather than uneconomic pipelines. In some
locations, companies may prefer to send LNG direct
to the final market’s entry point rather than processing
gas onshore.
FIGURE 3.9
Offshore natural gas production by region
Units: Gm³/yr
2 000
1 600
1 200
800
400
0 OPA
1980 1990 2000 2010
TRENDS AND IMPLICATIONS CHAPTER 3
FLNG was conceived for large gas fields. However,
the maturing of the technology, and the cost
reductions that it has so far achieved, have also
promoted the development of smaller FLNG
designs such as Petronas’ FLNG1 (also known as
the PFLNG Satu), and Golar’s Hilli Episeyo facility.
Many planned West African developments are
considering small-scale FLNG; these include
BP Tortue and Perenco Cameroon, both initially
based around the Golar FLNG design. Of the
LNG professionals surveyed by DNV GL in 2019,
59% agreed that the industry will increasingly
prefer smaller FLNG projects and tanker
conversions over Prelude-sized FLNG units.9
Significant investments will be required to
develop new gas supply resources such as those
served by FLNG. A recent report by the Gas
Exporting Countries Forum (GECF) estimates
that the cumulative investment needed for
upstream and gas transportation systems
between 2015 and 2040 is USD 8trn.10 GECF
forecasts that the upstream supply element
alone will require almost USD 7.5trn of this, with
the remainder being needed for liquefaction,
regasification, shipping and pipeline projects.
NAM
LAM
EUR
SSA
MEA
NEE
CHN
IND
SEA
2020 2030 2040 2050
Historical data source: Rystad (2019)
39
DNV GL ENERGY TRANSITION OUTLOOK 2019 — OIL AND GAS
As we will discuss in Section 3.3, the challenge
of finding markets and export routes for gas
sales remains, but GECF forecasts global LNG
export capacity will increase by 38% between
2018 and 2040. They also forecast a need for
450 billion cubic metres of new gas pipeline
capacity by 2040.
Break-even costs for deepwater gas developments
dropped from an average price of about USD 75
per barrel of oil equivalent (boe) in 2014 to USD
62/boe in the first half of 2016 and USD 50/boe in
the first quarter of 2018. As we discussed in Section
3.1, the costs of drilling have also dropped
dramatically over recent years, and rig supply is
expected to exceed demand for the next few
years, keeping rig day rates lower.
Beyond cost, we have seen greater demand for
gas in domestic applications in emerging markets.
This is notable in African nations, some of which
see greater value in using a larger proportion of
their gas resources for economic and social
development, rather than exporting all production.
Our model predicts that demand for natural gas
for residential and commercial buildings in
Sub-Saharan Africa will grow tenfold to 50 Gm³/yr
in 2050.
The availability of gas for power generation and
for conversion into useful products, such as
fertilizers, chemicals and plastics, has created new
opportunities for gas developments; particularly
for bringing gas to onshore terminals for
processing, rather than being deployed solely for
export. We expect this trend to continue, with
greater demand for LNG barges and floating
storage and regasification units as a result.
40
TECHNOLOGY DEVELOPMENTS
As we discussed in Section 3.1, we believe that
the offshore gas industry will continue to seek
innovations in facility design, operating models,
and contracting strategies to maintain or improve
operating margins. Increased digitalization,
standardization, and use of remote or autonomous
operations will continue to bring cost savings to
the industry.
We have seen a shift from fixed installations
to FLNG units, even in shallower water. New
developments in drilling and well design
have allowed existing reservoirs to be further
exploited, with new, previously marginally
economic reservoirs, now becoming viable.
In another area of innovation, huge amounts of
methane hydrate have been found beneath Arctic
permafrost, under Antarctic ice, and in sedimentary
deposits along continental margins worldwide.
In some parts of the world, such as Japan, these
deposits are much closer to high-population areas
than any current natural gas field.
These deposits might allow countries that currently
import natural gas to become self-sufficient.
The current challenge is to inventory this resource
and to find safe and economical ways to develop
it. One alternative being explored by Japan and
the US is to inject CO2 into the hydrate formation
to warm it and release the methane, thereby
producing a valuable resource while trapping
an environmentally damaging one. Given the
abundance of gas resources elsewhere in the
world, we believe that this is unlikely to happen
at any great scale, and these sources are not
currently considered in our model.

GAS: THE BROAD PICTURE
Gas will continue to play a key role, alongside
variable renewables, in meeting future, lower-
carbon energy requirements. We expect to see
greater interest emerge in the fuel as traditional
‘oil’ majors reduce the carbon impact of their
portfolios and move to become integrated
energy companies. This will accelerate the switch
from oil to gas production for many majors.
BP’s portfolio, for example, is already about 50%
natural gas. Development of some very large gas
projects, such as Egypt’s Nile Delta, Khazzan in
Oman and Shah Deniz 2 in Azerbaijan, will see the
company increase the share of gas in its portfolio
to 60% by 2025.
The world has abundant natural gas resources:
530 trillion cubic metres (Tm3), of which about
37% (197 Tm3) are proven reserves. Alternative
lower carbon gas sources, such as biogas and
hydrogen, are also emerging. These will start to
enter existing gas distribution infrastructures in
much greater quantities during the 2020s.
North East Eurasia, and the Middle East and
North Africa, will increase natural gas output
towards at least 2035, according to our model.
Production will decline thereafter. North
America, currently the world’s largest gas
producer, will maintain that position until the
end of our forecast period.
Consumption is forecast to rise in South East
Asia, Greater China and the Indian Subcontinent,
more than doubling by 2035 in all three regions.
This rise in consumption will drive a quadrupling
of demand for LNG trade by 2050.
TRENDS AND IMPLICATIONS CHAPTER 3
That said, there are challenges to the market
position of gas. Regulatory issues — such as
carbon pricing, emission caps, and pollution
regulation — could pose risks to the future share
of gas in the global power generation mix.
Gas competes easily with coal on availability and
affordability. While coal-to-gas switching will
continue, energy independence issues will drive
continued use of coal in both India and Greater
China through to the end of the forecast period.
This will occur despite a massive rise in gas
consumption in both countries.
Gas is the cleanest fossil fuel, but it must also
compete with cleaner renewables. Carbon capture
and storage (CCS) is part of the solution to this, and
could further reduce the carbon footprint of gas.
However, our model forecasts CCS uptake to be
low, at least for the next 15 years (see Section 3.4).
Fugitive methane emissions along the gas value
chain come from flaring, venting, or leakage.
These issues must be addressed to reduce the
carbon impact of gas production and support
the fuel in playing a truly significant role in the
energy transition.
41
DNV GL ENERGY TRANSITION OUTLOOK 2019 — OIL AND GAS
3.3 MIDSTREAM AND
DOWNSTREAM TECHNOLOGIES
TRANSMISSION SYSTEMS
Our model predicts substantial increases in gas
demand in countries that have less well-established
gas infrastructure, such as China and India. This
leads to greater need for imports in these regions
as shown in Figure 3.10, and for the creation of a
substantial internal gas infrastructure. For instance,
in the period 2017–2035, our model predicts massive
growth in gas import demand from Greater China,
starting from about 156 Gm3/yr in 2017 to exceed
660 Gm3/yr by 2040.
Seaborne gas trade from North America to
China will increase to more than 230 Gm3/yr from
today’s level of approximately 26 Gm3/yr. We also
expect growth in gas trade from Sub-Saharan
Africa, mainly to the Indian Subcontinent and
South East Asia, of about 97 Gm3/yr in 2050.
As we discussed in Section 3.2, shale gas will
retain an important share of supply in North
America, with production rising continually
towards 2050. Local gas production in Greater
China is predicted to rise to a peak in 2020 at
150 Gm3/yr and then decline sharply towards
2050, driving an increased gas import demand
for the growing Chinese economy.
Based on such trading expectations, our model
predicts that global seaborne natural gas trade
— LNG and liquid petroleum gas (LPG) combined —
will almost quadruple from 414 Mt/yr in 2019 to
about 1,604 Mt/yr in 2050.
42
These trends in demand and trade could also
drive a further surge, beyond current projects,
of new cross-border and national transmission
pipelines, LNG export and receiving terminals,
LNG bunkering and LNG carriers.
Geopolitics and national economic and social
development agendas figure prominently among
the uncertainties related to the growth of gas
trading. For example, the European Union (EU)
supports development and expansion of
LNG-import facilities, in addition to related
downstream onshore gas infrastructure
throughout Eastern Europe. This is to improve
security of supply for countries in this region,
which would otherwise rely heavily on pipelines
from sole-source suppliers such as Russia.
The EU also supports pipelines from new sources
of supply, such as the East Mediterranean and
Caspian regions, as indigenous production in
historical demand centres such as North West
Europe declines. This requires gas transportation
across longer distances in high pressure, large-
diameter, cross-country pipelines.
For new supply regions, LNG provides a more
viable route to monetize large gas reserves in
remote locations, such as Sub-Saharan Africa,
which have no significant markets nearby, and only
limited connectivity to existing demand centres.
GECF estimates that almost a sixth (15%) of
current LNG export facilities are operating below
capacity, due to outages, security concerns,
losses or lack of feed gas. GECF expect this to
 TRENDS AND IMPLICATIONS CHAPTER 3

change by 2025 as demand for gas increases.
Gas transport as LNG is expected to grow faster
than pipeline transport, with the share of gas
transported as LNG to grow from 30% today
to 45% by 2040.
If gas prices to customers remain in the range
According to Business Monitor International,
transport of gas as LNG is expected to exceed
pipeline gas transportation by 2035. This may
support an increase in the global market for gas
trading, with consumers no longer locked into
a pipeline route.

““
of USD 8–12 per million British thermal units
(MMBtu), and upstream operators can deliver Our model predicts that global
gas into pipelines or LNG liquefaction facilities seabourne natural gas trade will
at prices around USD 4/MMBtu, several large almost quadruple.
new gas projects could be initiated as early
as 2021.

FIGURE 3.10

Natural gas net imports by region

Units: Gm³/yr
800 NAM
600 LAM

400 EUR

SSA
200
MEA
0
NEE
-200
CHN
-400 IND

-600 SEA

-800 OPA
1980 1990 2000 2010 2020 2030 2040 2050
Historical data source: IEA WEB (2018)

43
DNV GL ENERGY TRANSITION OUTLOOK 2019 — OIL AND GAS
COST IMPLICATIONS
The Energy Industries Council (EIC) forecasts
that cumulative investment in new pipelines and
additional LNG liquefaction and regasification
terminals will reach USD 1.3trn by the end of 2030
to meet new gas demand.11 Figure 3.11, based
on EIC market intelligence reporting, shows
investment by asset type and year, and includes
plans in various stages of development. It should
be noted that some of these investments are not
yet approved and may not come to fruition.
Pipelines are generally inspected and can be
readily repaired until it is no longer safe or
economically viable to keep them in operation.
More than 70% of the world’s subsea pipelines
are already operating beyond their design lives.
Timely replacement of old assets is important to
stakeholders focused on safety and security of
gas transport supply.
With gas demand set to grow until at the least
the end of our modelling horizon, it seems
inevitable that there will be additional costs for
replacement and refurbishment of older
pipeline systems in regions such as Europe,
Middle East and North Africa, North East
Eurasia and North America. More than half of
US pipelines were constructed in the 1950s and
1960s, and some even earlier. Though lifetimes
may exceed 100 years, we expect a continued
and likely greater effort in asset lifetime
extension for pipelines in these regions.
If we see a widespread increase in the use of
hydrogen as a decarbonized gas source, older
pipelines must operate at higher pressures and
flow rates to be able to deliver the same energy
value as natural gas.
44
Several onshore gas transmission assets have
changed ownership recently. The banking
and venture capital community sees such
infrastructure assets, when operating in well-
regulated environments, as good sources
of long-term, stable income. National oil
companies are also looking for investment, as
they move to a more traditional balance sheet
structure, and open up to foreign investment
due to their needs to raise cash against the
backdrop of stressed domestic budgets.
REGULATORY IMPLICATIONS
Governments play a crucial role in legislating and
assuring compliance to mitigate risk of incidents
in the oil and gas industry. It is good practice for
lawmakers to define independent licensing
authorities to conduct oversight at all stages
of new projects. With our model indicating that
more LNG terminals and pipelines will need to
be built to link new supply regions with fresh
demand centres (some crossing national borders
and in more challenging environments), the
application and oversight of regulations will
become increasingly important. Regulators will
also need to build new capacity to avoid
becoming a bottleneck to the approval of
new developments.
Commercial regulations also play a key role in
price setting and competition control, and
many pipeline networks are also subject to
significant commercial oversight from regulators.
The challenge of having effective commercial
regulation to protect consumers, whilst allowing
transmission and distribution companies to
invest and innovate, is one with which many
countries struggle.
 TRENDS AND IMPLICATIONS CHAPTER 3

FIGURE 3.11

Investment in pipelines, LNG liquefaction, and LNG receiving

Units: Bn$

Pipeline LNG liquefaction LNG receiving

0 20 40 60 80 100 120 140 160 180 200

2018

87

2019 35

134

2020 55

11

68

2021 33

21

137

2022 57

12

54

2023 202

11

26

2024 134

45
DNV GL ENERGY TRANSITION OUTLOOK 2019 — OIL AND GAS
REFINERIES
Several factors will have a profound impact
on the future of the oil refining industry. They
include, among others: global shifts in demand
for petroleum and diesel products; changes to
fuel quality specifications for aviation, road and
marine applications; and, the switch to battery
or fuel-cell electric vehicles. Refiners will need to
keep adjusting refinery configurations to match
the energy transition’s impact on their markets.
This will require investment in refinery locations
and processes, and a focus on the sector’s
energy consumption and CO2 emissions.
The International Maritime Organization has
set a global limit for sulphur in fuel oil used on
ships of 0.5% mass/mass from January 2020.
This is the biggest single specification change
to ever hit the refined product market. It will
cause a major disruption in supply and demand,
and result in more refinery closures. Our model
for the refinery industry forecasts limited global
growth of only 2.5% from current levels.
We forecast a peak in refinery output in 2022
at about 32,000 million barrels per year (Mb/yr)
of liquids, followed by a 45% decline in global
production to 17,600 Mb/yr by 2050. This is due
to significant transitions in regional energy
consumption, and reduced transport sector
demand for liquid fuels.
Regionally, our model predicts refinery demand
growth in only four regions — Greater China,
South East Asia Indian Subcontinent, and
Sub-Saharan Africa — the former two in the near
term and the latter two predominantly post-2030.
The Indian Subcontinent’s need for refinery
processed oil is expected to increase 70%
from today, to reach its peak in 2040. This will
be driven by a doubling in demand for oil in
the region’s road transport sector in this period.
46
This, in turn, indicates a sustained rise in demand
from the region’s indigenous manufacturing
and power sectors, and a corresponding increase
in vehicle transport, across the market in heavy
and light vehicles including powered two and
three wheelers.
Sub-Saharan Africa’s refinery demand will rise 37%
by 2040, albeit from a small base. This will be driven
largely by increased regional transport oil demand,
and a fivefold growth in oil consumption for power
generation, as local prosperity grows.
We forecast that mature refining markets, including
Europe, North America, and OECD Pacific will
shrink by 2050 to refinery processing levels
equivalent to roughly 33%–50% of those seen in
2017. Many refineries will instead be converted into
storage terminals for intermediate or finished
products. This is proportionate to ongoing declines
in each region’s transport sector energy demand.
We expect Greater China, the second-largest
refined oil producer after North America, to cut
its overall oil demand by 2050, to 47% of 2017
levels. During this period, oil demand from the
region’s power sector will be phased out and
replaced by renewables, coal, gas-fired generation
and nuclear energy. We forecast that the region's
transport oil demand will peak by 2024 at 20 EJ/yr,
27% more than in 2017. Demand will then return
to 2010 levels by 2040. We project other regions’
refinery oil demand to be driven largely by similar
policy and technology shifts in the petrochemicals,
transport, and buildings sectors.
 TRENDS AND IMPLICATIONS CHAPTER 3

We expect three key shifts in refinery technology the latter including more-efficient rotating
in the future: equipment and new heat-exchangers.

—— In mature markets, a focus on producing
cleaner, higher-grade transport fuels, and
decarbonizing their production.
—— In the growing Indian Subcontinent and
Sub-Saharan Africa markets, a focus on building
scalable, operationally flexible refinery capacity.
—— In all markets, a focus on optimizing
lifecycle cost performance for existing
and new-build facilities.
Continuous refinery energy efficiency
improvements will be essential for economic and
environmental reasons. Examples include catalyst
and hardware improvements, with examples of
Major capital projects, such as changes to the
technical configuration of individual refineries,
will also be needed. Examples include extensive
revamps of existing facilities; new process plants;
new power/steam generation; and, inter-unit heat
integration. Much work is ongoing into the
development of the next generation of fluid
catalytic cracking, the process at the heart of
most modern refineries. These next generation
processes deliver lower energy consumption in
processing and the recovery of high-value
chemicals, alongside an increase of premium
gasoline production, thereby minimizing waste
and energy input during the refining of crude oil.

FIGURE 3.12

Relationship between world oil demand and world road sector energy demand, by fuel type

Units: EJ/yr
180
World demand
160 Oil

140 Road sector demand

120 Electricity

100 Hydrogen

Biomass
80
Natural gas
60
Oil
40

20

0
1980 1990 2000 2010 2020 2030 2040 2050
Historical data source: IEA WEB (2018)

47
DNV GL ENERGY TRANSITION OUTLOOK 2019 — OIL AND GAS
PETROCHEMICALS
The short-term outlook for the petrochemicals
market is robust. The US is commissioning the
largest fleet of new ethylene crackers in more than
20 years. The global ethylene market will remain
strong, with effective operating rates (the utilization
rate of plants that are running) at 92%. In the
medium- to longer-term horizon, and although we
forecast a growth in petrochemical demand, we see
greater adoption of recycling and the circular
economy playing a key role in reducing overall
feedstock and energy demands.
Ongoing growth in demand will be caused by
product innovation in markets including agricultural,
pharmaceutical, and industrial fine chemicals. For
perspective, the US Food and Drug Administration
approved 46 drugs in 2017, more than twice as
many as in 2016. Many are based on the small
molecules manufactured by the fine chemicals
industry, derived from oil and gas feedstock.
Several trends will likely increase demand for
specialty chemicals. These include a shift to electric
vehicles (EVs) and a move away from the use of
fluorochemical coolants in home refrigerators;
manufacturers are seeking coolants with low
global-warming impact. Many makers of home
refrigerators, especially in Europe and Japan, are
shifting to hydrocarbon-based refrigerants.
China plans to establish a system of quotas
requiring EVs to account for at least 10% of vehicle
output from 2019, increasing annually thereafter.
This will likely bolster demand for battery materials
and electrolyte solutions, and lightweight plastics
and composites for vehicle construction.
Our model predicts only small growth in
petrochemicals production over the next decade
but with wide regional variations driven by
feedstock supply and product demand. It projects
significant growth in three regions: the Indian
Subcontinent; Greater China, and in Sub-Saharan
48
Africa, where greater prosperity and the rise of
middle classes boosts demand for transport and
consumer goods.
Globally, our model forecasts a transition in the
industry’s feedstock mix from 56% oil/37% gas
in 2017 to 50% oil/42% gas in 2050. This further
illustrates increasing gas prominence in the
global energy mix against a backdrop of
declining oil consumption.
We predict that the largest modern petrochemicals
regions will experience the following significant
changes in their shares of global market demand by
2050, ultimately within a much smaller market:
—— Greater China: from 22% in 2017 to 27%
by 2034, then 23% by 2050.
—— North America: from 18% in 2017 to 7%
in mid-century.
—— Europe: 6% by 2050, half of 2017 levels.
The trend in Europe will be because of a pronounced
decline in oil use over the next 30 years and a
shrinking local market for petrochemical products.
Notably, the industry’s 6% proportion of coal-
derived feed in 2017, popular only in China,
represents a larger level of supply than the Indian
Subcontinent’s total pre-growth demand. Coal will
remain an important feedstock in Greater China
through coal gasification.
The feedstock market share of natural gas is forecast
to grow in Europe, Greater China, Middle East and
North Africa, and North America. Oil will continue to
provide most feedstock elsewhere.
Bio-based feedstocks have the potential to reduce
fossil-fuel demand in the long term but will need
strong policy support to start and grow. Issues
around food scarcity and water consumption will
also need addressing before bio-based supplies
can be used at scale.
TRENDS AND IMPLICATIONS CHAPTER 3

49
DNV GL ENERGY TRANSITION OUTLOOK 2019 — OIL AND GAS
GAS TERMINALS
Our model’s prediction of robust and increasing
global demand for natural gas (see Chapter 2)
suggests continued complementary growth in
gas processing, the link between production and
transportation to market. Gas processing separates
NGLs from natural gas, and often performs other
functions, such as contaminant removal,
dehydration, odorant addition, and fractionation.
Demand for butane, ethane, and propane are other
growth drivers for the processing market. Some
60% of propane is recovered during extraction of
natural gas and oil; the remaining 40% is produced
during crude oil refining. NGLs such as propane
can add value based on the difference between
prices for individual liquids and the market value
of unprocessed natural gas.
Globally, more than 1,800 gas-processing plants
are in operation today. Investment in such facilities
is dictated by unique supply and demand
circumstances in different geographies. For
example, Russia, the world’s leading gas supplier,
may spur growth in processing when it starts
delivering even more gas to Asia. Due to declining
50
gas production, we do not expect Europe to
experience any growth in gas processing, apart
from blending facilities for lower-carbon gases.
Gas-processing plants operate at about two thirds
(68%) of capacity on average, for reasons including
transportation constraints, varying input supplied
from gas wells, and regional economics. Lower oil
and gas prices have motivated the natural gas
industry to meet rising demand while reducing
production costs through innovation. Operations
and maintenance improvements are the most
common strategy for maximizing production.
While current oil and gas prices have slowed
investment in gas field development, thereby
delaying gas-processing projects, wider global
demand for gas over the coming decades will
require new processing capacity.
““
Our model’s prediction of robust
and increasing global demand for
natural gas suggests continued
complementary growth in
gas processing.
TRENDS AND IMPLICATIONS CHAPTER 3

51
DNV GL ENERGY TRANSITION OUTLOOK 2019 — OIL AND GAS
3.4 EMERGING AND ENABLING
TECHNOLOGIES FOR DECARBONIZATION
DECARBONIZING GAS CONSUMPTION
In many countries, gas networks transport more
energy at lower cost than electricity networks, and
can be particularly important for meeting peaks in
demand. During peak winter demand periods in
colder climates, gas networks can provide several
times more energy than the electricity grid network,
and they have a significant role to play in energy
storage and peak shaving.
In the UK, for example, metered gas demand peaks
at around 2,500 gigawatt hours per day (GWh/d) in
winter. This is compared with an electricity demand
peak of around 1,000 GWh/d. Including exports,
storage, power stations, industry and local uses,
overall gas demand in the UK peaks at around 4,000
GWh/d per day, around four times that of electricity.12
FIGURE 3.13
Average domestic and industrial gas and electricity prices in the European Union in 2018
Units: € cents per kWh
Domestic
gas
Total:
6.7
Industrial
gas
Total:
3.0
52
Gas is critical to keeping household energy bills
at reasonable levels and ensuring industrial
competitiveness. For domestic customers, the
average price of gas across the EU is 4.9 EUR cents
per kWh, or 6.7 EUR cents per kWh including taxes
and levies. For electricity, the average price is 13.3
Per killowatt hour (kWh), or 21.1 EUR cents per kWh
including taxes and levies. Per unit, electricity is
around three times the price of gas, and the ratio
is similar for industrial consumers (Figure 3.13).13
It is critically important therefore to consider direct
decarbonization of the gas system alongside
greater electrification.
TECHNOLOGIES TO DECARBONIZE
GAS CONSUMPTION
With increasing numbers of countries adopting
or considering net-zero carbon targets, gas
Excluding taxes Including taxes
Domestic
electricity
Total:
20.1
Industrial
electricity
Total:
8.7
 TRENDS AND IMPLICATIONS CHAPTER 3

consumption needs to be decarbonized. The three
principal means to achieve this directly are biogases,
hydrogen and carbon capture and storage (CCS).
BIOGASES
Biogases can be produced in a variety of ways.
Anaerobic digestion of varying biomass sources
to produce biomethane, while advanced plasma
technology produces a synthetic natural gas (SNG)
from waste materials that are usually sent to landfill
or incineration. Bio-LPG for transport or off-grid
properties can also be produced from waste
sources. Although there are issues with calorific
value, biomethane and bio-SNG can be used as
a direct substitute for natural gas, and can also
be used to decarbonize buses and trucks.
According to the European Biogas Association, there
were almost 18,000 biogas plants overall in Europe at
the end of 2017, an 18% increase over the previous five
years. Almost 11,000 of these were in Germany. Total
electricity generating capacity from these reached
10.5 gigawatts, a 5% rise on the previous year.14
For biomethane specifically, production rose 12%
in 2017, reaching 19.3 GWh, or 1.94 bcm. The EU’s
inland consumption of gas, however, was 487 bcm
in 2017, meaning that biomethane represented
0.4% of the total.13
Use of biomethane as a fuel for buses and trucks is
also growing, delivering major reductions in CO2
and air pollutants compared with diesel. In the UK,
there are five compressed natural gas (CNG) filling
stations, including two that provide biomethane, and
12 LNG filling stations, with three using bio sources.15
A cross-industry collaboration in Germany is
looking to accelerate growth of gas in transport
with the aim of seeing one million natural-gas
vehicles and 2,000 filling stations in operation
by 2025. In vehicle applications, we see the initial
uptake here in heavy goods vehicles, which are
unsuitable for battery-based solutions. Several
vehicle manufacturers are already providing
vehicles that can use biogas as CNG, directly
as a fuel.

FIGURE 3.14

Representation of energy capacity by discharge rate

1 year
Super-capacitors

Hydrogen
or gas storage
1 month
Flywheels
Discharge time at rated power

Batteries
1 day
Compressed
or liquid air
energy storage
1 hour Thermal
energy s torage

Pumped hydro
1 min

1 sec
1 10 100 1 10 100 1 10 100 1 10 100
KWh KWh KWh MWh MWh MWh GWh GWh GWh TWh TWh TWh
Energy capacity

53
DNV GL ENERGY TRANSITION OUTLOOK 2019 — OIL AND GAS

FIGURE 3.15

Main options for production, storage and transport of hydrogen

HYDROGEN PRODUCTION OPTIONS

SOURCE

Power + water Natural gas Coal Biomass

PRODUCTION
HYDROGEN

Gasification or
Electrolysis Reforming Gasification
biogas reforming
DECARBONIZATION
MEASURE

Low-carbon Carbon capture Carbon capture None = neutral

electricity & storage (CCS) & storage (CCS) CCS = negative

STORAGE AND TRANSPORTATION OPTIONS

STORAGE
OPTIONS

Pipeline Subsurface Compressed Liquid Ammonia Liquid

infrastructure gas storage hydrogen hydrogen hydrogen
STATE OF TRANSPORT
AND STORAGE

Compressed Cryogenic Ammonia Liquid organic

hydrogen liquid hydrogen hydrogen carrier
TRANSPORTATION
OPTIONS

Pipeline Truck Ship Rail or barge

54
 TRENDS AND IMPLICATIONS CHAPTER 3

HYDROGEN —— China: There are plans to open 300 hydrogen-

Hydrogen emits no greenhouse gases when filling stations by 2025, and 1,000 by 2030, to
combusted or used in a fuel cell, and can therefore support 50,000 fuel-cell cars by the first date
be thought of as the ultimate clean-energy carrier. and one million by the second.19
The range of potential applications is as broad as
—— Japan: The country is planning to power the
for natural gas, although existing equipment will
2020 Olympic Games by hydrogen. Kawasaki
often need to be replaced with equipment that
Heavy Industries has announced a Japanese
is compatible with hydrogen.
Hydrogen Energy Supply Chain that plans to
gasify Australian brown coal in Victoria’s Latrobe
Hydrogen can also be stored seasonally, and
Valley and transport it to Japan by ship.20
blended in the gas grid at low concentrations
(up to 20%), without the need to modify appliances. —— Netherlands: The H2M project will include a
The key requirement is to produce it in a low-carbon natural gas-to-hydrogen production plant with
manner. This is achieved either by employing CCS CO2 capture, with the hydrogen destined to
on hydrogen production from gas or coal (known as fuel the Magnum gas-fired power plant.21
blue hydrogen); by using low-carbon electricity for
—— UK: Several large-scale hydrogen initiatives
electrolysis of water (known as green hydrogen);
are planned, including the HyNet industrial
or, by making hydrogen from biomass sources.
hydrogen scheme in England, 22 the Acorn
Emerging technologies, such as direct pyrolysis of
project in Scotland, 23 and the H21 plan
methane to produce hydrogen with a carbon solid
to convert domestic households to 100%
by-product are possible, but have currently only
hydrogen in cities across the North of England.24
been demonstrated at laboratory scale.

CARBON CAPTURE AND STORAGE

Some 3% of global energy consumption today is
CCS can be used to capture and permanently store
used to produce hydrogen. Only 0.002% of this
carbon emissions from a wide variety of sources.
hydrogen, about 1,000 tonnes per year, is used
These include power generation from gas or coal,
as an energy carrier.16 In our ETO model the
hydrogen production from gas or coal, and directly
contribution of hydrogen as an energy carrier
from energy- and emissions-intensive industries such
results in it meeting only 1.7% of total global
as those making ammonia, cement, and steel. When
energy demand by 2050; yet there is the potential
used with biomass sources in power generation,
for hydrogen to become a major clean energy
CCS can produce negative emissions, which are
carrier in a world struggling to limit global warming.
critical to achieving any net-zero target in practice.

Facilitated by CCS developments or by continuing

CCS starts from a low base, with current activity
growth of renewable electricity generation,
dominated by EOR. In the absence of definitive
hydrogen projects continue to be developed.
policies, CCS uptake will only begin in earnest
They include the following examples:
when carbon prices start to approach the CCS
cost level. Our model forecasts this to happen
—— Germany: The first hydrogen-powered
in the 2040s. By 2050, we forecast that only 4%
passenger trains are in use. By July 2019,
(0.8 gigatonnes of CO2 per year [GtCO2 /yr]) of
the country had 71 hydrogen filling stations,
fossil fuel-related emissions will be captured by CCS.
with 29 more due by 2020, and a further
250 planned beyond that.17 The world’s
There are large regional variations in this.
largest electrolyser (10 megawatts) is to be
We forecast that half of all currently captured
built at a Shell refinery in the Rhineland.18
emissions are in Greater China in 2050. In Europe

55
DNV GL ENERGY TRANSITION OUTLOOK 2019 — OIL AND GAS
it is 19% and in North America 13%, leaving little
captured by the rest of the world (Figure 3.16).
Recent decisions by a number of governments
to set a net-zero target are likely to increase the
demand for CCS solutions, but that is not currently
included in our model.
The Global CCS Institute’s CO2RE database shows
23 large-scale CCS facilities operating (capturing
almost 40 MtCO2 /yr) or under construction.
A further 28 pilot and demonstration-scale facilities
are also operating (capturing 3 MtCO2 /yr) or being
built.25 Notable projects include the following:
—— In Australia, the Gorgon CO2 injection project
will start up in 2019, separating CO2 from
natural gas piped in from offshore gas fields
and storing 3.4–4.0 MtCO2/yr.
—— In 2018, China’s Jilin Oilfield CO2 facility began
operating, reaching an injection capacity of 0.6
MtCO2 /yr for EOR. The facility owned by China
National Petroleum Corporation is the country’s
first large-scale CCS project. A further 20 CCS
facilities are at various stages of planning in China.
—— In the US, NetPower’s 50 megawatt pilot power
station using the Allam Cycle is operating, and
the company is considering sites for a larger 300
FIGURE 3.16
Carbon emissions captured by region
Units: MtCO2/yr
800
700
600
500
400
300
200
100
0 OPA
2017 2020 2025 2030
56
megawatt facility. The Allam Cycle aims to
produce gas-fired power with CO2 capture at
the same cost as current gas-fired power
without CO2 capture.
—— The planned Porthos project at the Port of
Rotterdam in the Netherlands would capture
around 2 MtCO2/yr from industrial facilities in
the region, storing it in disused gas reservoirs
in the North Sea. By 2030, the project could
scale to 5 MtCO2/yr, and could connect to other
industrial clusters, including Antwerp in
Belgium and Germany’s Ruhr area.
—— Norway’s planned full-chain CCS facility would
transport CO2 from a cement plant and an
incinerator by ship to a facility along the coast,
from where it would be piped to an offshore
CO2-storage site. The concept could then be
extended to collect CO2 emissions from other
sources across Europe.
—— In the US, CCS projects will be supported by
staged increases to the 45Q tax credit that was
agreed in the 2018 Budget. By 2026, the credit
for CO2 stored permanently underground will
rise from USD 28/t to USD50/t, while the rate for
CO2 used in EOR or other processes will rise from
USD 17/t to USD 35/t over the same period.26
NAM
LAM
EUR
SSA
MEA
NEE
CHN
IND
SEA
2035 2040 2045 2050

HEATING DUTCH HOMES WITH HYDROGEN
Central boilers in an apartment block in Rotterdam
are running on 100% hydrogen, a first for homes
in the Netherlands. The demonstration project,
involving 25 apartments, is demonstrating that
zero-carbon hydrogen can help to decarbonize
heat by replacing natural gas.
Stedin, the Dutch gas and power network operator
behind the project, is proving the viability of
this approach across the entire gas value chain.
It is supplying two boilers in the apartment block
with green hydrogen from a nearby small-scale
electrolysis facility powered by electricity. Multiple
electrolysers can run individually or collectively as
required to meet varying hydrogen demand.
Their output is supplied through a short, separate
gas distribution network that can safely transport
100% hydrogen. A gas-fired boiler in the block
provides backup if demand is higher than the
electrolysers can meet.
TRENDS AND IMPLICATIONS CHAPTER 3
Stedin’s partners in the project include DNV GL;
burner manufacturer Bekaert Heating; heating
and hot-water systems maker Remeha; a housing
association; and, Rotterdam City Council.
DNV GL scoped and engineered the project,
and is managing it for Stedin. DNV GL’s experts
gave on-site guidance during the building phase,
inspected safety, and performed tests and gas
quality measurements at the company’s
specialist laboratories.
This demonstration is the second phase
(2018–2023) of the Stedin-led Power2Gas
project.a The first phase (2013–2018) produced
synthetic natural gas (SNG), methane, made by
reacting hydrogen with carbon dioxide, for the
apartment block. The same pipeline now delivers
the hydrogen.
57
DNV GL ENERGY TRANSITION OUTLOOK 2019 — OIL AND GAS
THE NEED FOR A FLEXIBLE GAS SYSTEM
Decarbonized gas technologies imply a very
different gas system in the future. Today’s gas
systems transport energy to a wide range of
users at low cost, meet peaks in demand, and
provide a degree of flexible back-up for variable
renewable sources, such as wind and solar
photovoltaic. In the future, gas networks will
continue to play these roles. They will however
need to be much more flexible if they are to
handle a range of low-carbon gases with differing
calorific values and other properties; manage
CO2; and, integrate more deeply with variable
renewable electricity generation.
““
Gas networks will need to be
much more flexible to handle
a range of low-carbon gases.
Several key elements are required for a flexible gas
system. One key element will be the ability to
monitor and bill for the actual energy content of the
gases passing through the network at any given
time. With a narrow calorific value range for natural
gas, the traditional method of billing based on
volume of gas is reasonably accurate. But, with a
range of gases blended into the network, including
biogases and hydrogen, the energy content of gas
may vary greatly in different parts of the network.
A system of accurate measurement and billing is
therefore essential. DNV GL is working with UK
gas distribution system operator Cadent on a
framework for developing the best technical
options for billing consumers this way.27 DNV GL has
also set up a smart meter test laboratory that will aim
to prove that a calorific value measured local to a
consumer can be transmitted to a smart meter.
THE KEY ROLES OF INDUSTRIAL
CLUSTERS AND PORTS
The International Energy Agency’s 2019 review of
the future of hydrogen concluded that ports with
concentrations of refining and chemicals production
would be ideal places to scale up use of low-carbon
58
hydrogen. This is because the hydrogen produced
from fossil fuels without CCS is already being used
in these areas.28
Industrial clusters in port areas offer a key
opportunity to expand the use of decarbonized gas
more generally, particularly if they are located close
to power generation and offshore CO2 storage:
—— CO2 emissions from existing industrial facilities
could be captured, and a pipeline built to
transport the CO2 to an offshore storage location.
—— Power generation from gas or coal could be
retrofitted with carbon capture, or new
CCS-ready power generation built, and the
CO2 transported via the same pipeline. With
biomass power generation, negative emissions
could be achieved when combined with CCS.
—— Hydrogen production from methane
reformation could either be retrofitted with
carbon capture, or new hydrogen production
with carbon capture built in could be constructed;
again using the same pipeline to transport the
carbon dioxide.
—— Hydrogen could also be produced from
electrolysis using renewable electricity
generation such as offshore wind. The
hydrogen could either be produced offshore
or onshore, and would reduce energy
curtailment when wind speeds are high.
—— The low-carbon hydrogen could be used to
replace existing unabated hydrogen sources,
with no need to re-equip industrial facilities.
Other industrial facilities could also fuel-switch
from natural gas to hydrogen.
—— Hydrogen could also be used to fuel ships such
as ferries and short-sea vessels, and by local
facilities refilling hydrogen fuel cells for trucks
and trains.
—— Hydrogen could also be exported and imported,
possibly after its conversion to liquid hydrogen
or to a liquid ‘carrier’ such as ammonia.
 TRENDS AND IMPLICATIONS CHAPTER 3

—— Biogases could be produced in volume as —— Norway: With predominantly electric heating,

low-carbon alternatives to hydrogen, including
for truck transport.
—— Finally, hydrogen and biogases could be
blended into the wider natural gas grid.
Economies of scale, large demand and the
potential to integrate hydrogen, renewables and
CCS in shared infrastructure make these locations
attractive starting points for a wider transition to
decarbonized gas. These features can also help
to overcome the problem of needing a level of
demand to make expanding supply worthwhile,
as the industrial demand already exists.
—— China: Gas penetration in China is growing
POTENTIAL MARKET GROWTH
The EU bioeconomy is already worth over EUR 2trn,29
and global markets for decarbonized gas solutions
are expected to grow substantially over the coming
decades. We see several decarbonized gas solutions
being developed in different countries, depending
on local fossil-fuel feedstocks, the proportion of
households with gas-fired heating, and the extent of
low-carbon electricity generation. There is no single
pathway to a decarbonized energy system. Here are
some examples:
and substantial hydro resources, we envisage
that Norwegian hydrogen will primarily be used
for industry and heavy transport. For this
segment, hydrogen from electrolysis, which
generates the high purity needed for fuel cells,
is likely to dominate. Hydrogen from methane
reformation with CCS is likely for industrial
ammonia and methanol production. Norwegian
gas exports may start to be decarbonized,
either through production of hydrogen in
Norway for export, or from export of natural
gas with hydrogen production and CCS in the
destination country.30
rapidly but still accounted for only 7.5%
of primary energy consumption in 2018.
In contrast, coal accounts for 58% of China’s
energy mix.31 At the same time, there are
high levels of renewable curtailment, partly
due to grid issues. Hydrogen production in
China is therefore more likely to come either
from electrolysis using excess renewable
electricity, or from coal gasification with CCS.
In the first of these cases, it is most likely to be
used in transport applications.

FIGURE 3.17

Abatement cost of carbon capture and storage

Units: USD/tCO2
120

100

80

60

40

20

0
2017 2020 2025 2030 2035 2040 2045 2050

59
DNV GL ENERGY TRANSITION OUTLOOK 2019 — OIL AND GAS
—— UK: The UK has one of the most extensive gas
networks in the world, connecting 85% of
households. There is a large gas-fired power
generation fleet; substantial CO2 storage
capacity; and, a growing level of offshore wind.
It also has clusters of heavy industry. The potential
exists for hydrogen production from electrolysis
using renewable power, and by methane
reformation with CCS. We also envisage CCS
being deployed in industry, and on gas- and
biomass-fired power generation. Hydrogen use
in transport is likely to focus on non-electrified
rail lines, ships and trucks. We also foresee
biomethane’s role in transport growing.
—— North America: The US is assessing a variety of
pathways to capture and convert CO2 to value
added products using renewable electricity.
Such products act as storage media (hydrogen)
or as valorization (e.g. glycols) for excess
renewable electricity. Funded by the US
Department of Energy, DNV GL is scaling up a
technology called ECFORM to produce formic
acid from CO2 using excess electricity and then
using genetically modified bacteria to convert
the formic acid to downstream products such
as glycols. We are also collaborating with
companies to use formic acid as a liquid
hydrogen carrier for power production.
In this case, the CO2 acts as an energy shuttle
between renewable energy and hydrogen,
replacing water as the electrolysis medium.
Ultimately, the development of decarbonized gas
solutions is highly sensitive to policy. For example,
gas with CCS will cost more than the unabated
alternative, and its growth will therefore depend
on carbon prices or other policy mechanisms, as
well as on the development of new uses for CO2.
MEETING NET ZERO
AND THE PARIS AGREEMENT
Despite numerous challenges, decarbonized gas
is widely viewed as essential to achieving net-zero
emissions in practice. The net-zero report from
the UK’s Committee on Climate Change (CCC)
60
envisages hydrogen use growing tenfold to
270 terawatt hours per year (TWh/y) by 2050,
with 176 Mt CO2 being captured and stored
annually by then, including 35 Mt for bioenergy
with CCS. As the CCC concludes: ‘CCS is a
necessity not an option.’ The report also
envisages a growing role for biomethane.32
Globally, the UN Intergovernmental Panel on
Climate Change has concluded that without CCS,
the cost of achieving the Paris Agreement objective
of limiting global warming to well below 2°C
compared with pre-industrial levels would be
138% higher on average. In most models, this
target could not be achieved without CCS.33
DECARBONIZING OIL
AND GAS PRODUCTION
Although oil and gas production accounts for
a small proportion of greenhouse gas emissions
(GHGs) operators are seeking new ways to reduce
their carbon emissions. A traditional offshore oil or
gas platform would use fuel gas to meet its needs
for process heat mechanical and electrical power,
and to transport oil or gas to shore through
a pipeline via pumps or compressors. In some
cases, the role of an offshore platform can be
re-thought, as the following examples illustrate:
—— Platform electrification: Where offshore
windfarms are installed nearby, platforms can
import renewable electricity directly. Equinor’s
Hywind Tampen project is potentially the first to
use wind turbines for electrification of an oil and
gas asset. It forecasts a reduction of 200,000 t
CO2/yr from the Snorre and Gullfaks fields in the
Norwegian North Sea.34
—— Gas-to-wire: Instead of piping gas to shore
which may be uneconomic for smaller, remote
fields, the gas can be used to produce power
offshore. The electricity produced by this
process can then be transported to shore
through the same power cable used by a nearby
offshore wind farm, which may have considerable
spare capacity when wind speeds are lower.

Flexible generation is likely to be in higher
demand in the future, as the share of variable
renewables in electricity supply increases.
—— CO2 storage: Although it is not possible to reuse
all existing offshore oil and gas infrastructure
for CO2 transport and storage, platforms could
be used, for example, to drill new wells for
permanent CO2 storage beneath the seabed.
—— Power-to-gas: Existing gas pipelines could
be used to transport hydrogen produced from
electrolysis of seawater using offshore wind
power, or from offshore-based methane
reformers. The hydrogen could be used
in industry, transport or power generation
onshore, or injected into the gas grid, providing
a more flexible form of renewable energy
(see page 57.)
Illustration copyright Equinor
TRENDS AND IMPLICATIONS CHAPTER 3
—— Energy island: Dutch electricity transmission
system operator TenneT has proposed an
ambitious scheme for a large artificial island
in the North Sea. This could connect up to 30
gigawatts of offshore wind capacity to a six
square-kilometre island, using cheap
alternating current (AC) connections to the
island. The power would then be converted to
direct current (DC) for more-efficient transport
over distance to several neighbouring
countries. This could also allow electricity
trading between the connected countries.35
The IJmuiden Ver (IJVER) project is
investigating the feasibility of a smaller
offshore island to connect around 4 gigawatts
of offshore wind to high voltage DC cables.36
61
DNV GL ENERGY TRANSITION OUTLOOK 2019 — OIL AND GAS
3.5 DIGITAL TRANSFORMATION IN
THE OIL AND GAS INDUSTRY
We see the oil and gas industry exploiting these new technologies
and data-driven opportunities across the value chain to develop
new, more efficient and more sustainable products and services,
and novel business models.
Automation, autonomy, robotics, use of data,
digital tags and wearables, digital twins37 and
the rise of artificial intelligence are merging
the ‘physical’ and ‘virtual’ worlds.
Here are some of the ways in which digital solutions
can help the oil and gas industry maintain sharp
focus on business optimization for safer, more
reliable and more efficient operations, to remain
competitive in the energy transition:
—— By enabling de-manning, therefore reducing
the need to transport people and supplies and
reducing the associated carbon footprint.
—— By enabling new lower-carbon concepts, such
as subsea rather than fixed platforms
—— By enabling new manufacturing solutions, such as
additive manufacturing, that can reduce the GHGs
associated with delivering parts and structures.
THE UPSTREAM DIGITAL HORIZON
We expect technology and innovation to significantly
reduce personnel on board an asset. This reduces
people’s exposure to hazardous environments
and lessens the environmental impact of their
travel to work. Inspections will increasingly be
autonomous, using robotics supported by
advanced sensors and machine vision.
62
With embedded memory and communications,
such systems will report their live status from
a remote location to a central hub onshore.
A growing trend towards moving offshore operations
to the seabed is enabled by: subsea wifi and the
subsea Internet of Things; all-electric solutions;
improved reliability of equipment and control;
and, advances in autonomous underwater vehicles.
Installations will be designed to enable the
movement of robots rather than people. This
leads to a fundamental change in the approach
to and simplicity of design, reducing weight and
associated steel consumption. As installations
also seek to reduce their emissions, all-electric
topsides will proliferate, often taking power from
offshore renewable sources. They will be supported
by autonomous supply vessels, a concept that is
rapidly moving closer to reality.
Advances in standardization, and the reuse of
elements of past asset designs, will help to simplify
requirements and improve the efficiency of the
design process. Two-dimensional design will
give way in most future work to enriched three-
dimensional (3D) models. This will improve
collaboration and visualization in the design
process. Requirement and compliance
management will become simpler, repeatable,
and more collaborative. We will see pre-approved
designs being pieced together and tested virtually
to ensure they work before being built.

Construction will become more automated
and integrated. The main enablers of this will
be lifecycle software tools, fabrication robots,
advanced materials and additive manufacturing,
a sophisticated form of 3D printing. This will lead
to more flexibility, greater productivity, and
shorter build times with the introduction of
advanced modelling tools. These tools will run
scenarios to derive optimum manufacturing
solutions that consume less material.
DNV GL has published the first guideline for using
3D printing in the oil and gas, offshore and marine
industries. Its Global Additive Manufacturing
Technology Centre of Excellence in Singapore
aims to increase the oil and gas industry’s trust in
3D printing by providing technical standards and
guidelines for qualifying and certifying equipment,
processes, products, materials and personnel.
It also serves as an incubator and testbed for 3D
printing technology.
In the operational phase, personnel will
increasingly have advanced wearable tools,
giving them remote, high-speed access to
experts worldwide through video streaming
TRENDS AND IMPLICATIONS CHAPTER 3
or other forms of data exchange. This will improve
decision making, reduce the need to transport
and accommodate experts, and provide real-
time visibility of operations and maintenance.
Developing concepts for detecting, analysing
and predicting health, safety, and environmental
(HSE) risks in real or near-real time can create
barriers to incidents that could damage an
operator or the environment. Dynamic barrier
management utilizing sensors, information and
communications technology, and data analytics is
one such concept.38
The emergence of virtual and augmented-reality
training for operations and hazard awareness will
also be used to improve inspection and maintenance
activities. It will ensure that issues such as lack of
access or multiple permits to work do not delay
tasks. Enhanced mobile computing assisted by
advanced analytics will increase uptime, improve
productivity and reduce margins of error.
Logistics will become smarter. GPS tracking and
algorithms will optimize logistics routes with
potential to share services and products across
differing assets, regardless of ownership. Fewer
63
DNV GL ENERGY TRANSITION OUTLOOK 2019 — OIL AND GAS
deliveries will be needed as de-manning lessens
the call for supplies offshore, and as additive
manufacturing makes components or larger
products at, or close to, where they are used.
Data analytics will continue to optimize subsurface
mapping of the optimum drilling locations, indicating
how and where to steer the drill bit, and suggesting
the best way to stimulate the reservoir. Drilling
automation has shown it can raise performance and
reduce risk and maintenance costs from crown block
to downhole. Greater gains will come through
even wider deployment of smart drill pipes that
report downhole conditions via fast, reliable
telemetry. Robotic drilling systems that respond
to downhole data are on the way and will increase
the safety and efficiency of drilling operations.
THE MIDSTREAM AND DOWNSTREAM
DIGITAL HORIZON
Data analytics will facilitate more sophisticated
network models midstream and downstream.
Augmented by faster network-control systems
and supported by cloud computing, this will
64
enable strategic responses to market demand
and regulation, and to energy policy and
decarbonization targets.
Advanced, self-diagnostic sensors will allow
automated and real-time scenario planning, and
operational adjustment. For example, UK gas
transmission company National Grid is working
with DNV GL to better predict the operational
availability and emissions performance of
compressor station engines in its gas transmission
network, via remote monitoring solutions.
This improves efficiency and reduces emissions.
For gas distribution, digital technologies will be
key to dealing with increasingly complex challenges
in the cost-effective, safe management of networks
to provide readily available, affordable energy.
These include the need for distribution system
operators to ensure consistent gas quality in the
eventual operation of networks using mixed gas
sources such as natural gas, regasified LNG,
biomethane and hydrogen. In addition, gas-flow
directions will change more dynamically, perhaps
including reverse flow from the distribution to
the transmission system.

There will be tighter integration of gas and
electricity networks. Consumers may increasingly
use both for heat depending on geography, the
energy mix, and availability of natural resources.
Amid such complexity, systems will be managed
in real time to achieve the best price for consumers.
There will be an increasing trend towards real-
time pricing and dealing with gas of varying
energy values being diverted to different
consumers at different times.
Data will facilitate smarter pipeline-integrity
management based on predictive analytics.
Robots, autonomous aerial vehicles, and satellite
imaging will be used to monitor and maintain the
infrastructure. National Grid, for example, has
developed a pipeline inspection robot capable
of steering itself through complex pipeline
geometries against gas flow if needed. This
project, known as GRAID, is now being rolled
out into operation.39
As a critical part of national infrastructure, gas
networks will also have to address the increasing
cyber-security challenge posed by a range of
threat sources. Refinery and petrochemicals
operators will need to invest in digital solutions
to react to the more agile nature of their supply
chain and product slate. Greater flexibility in
processing will be required to react to changes
in feedstock and product requirements.
ENABLING TECHNOLOGIES
IN THE DIGITAL TRANSFORMATION
Several technologies will enable digital
transformation, providing increasingly deep
and timely insights to optimize projects and
operations. These technologies will allow us
to share rich, reliable datasets, to which we can
apply analytics that enhance safety, efficiency,
and sustainability. We will also be able to predict
tomorrow’s challenges, enabling faster and
smarter business-driven decision making.
TRENDS AND IMPLICATIONS CHAPTER 3
CLOUD COMPUTING AND PLATFORMS
Collaboration is essential to fully exploit the
digital opportunities that we foresee for the oil
and gas industry. It is becoming progressively
easier and cheaper across the industrial world
to collect, move, analyse, and interpret data.
On-site computing and storage is shifting towards
becoming fully based in the cloud via a hybrid
stage. We foresee most organizations being in the
cloud, maximizing the advantages that this brings.
Digital platforms will emerge to give stakeholders
greater insights. For example, this will support
price reductions and make gas markets more
competitive, particularly across national boundaries.
As industry platforms enable collaboration, such
as sharing data and tools/apps, breaking down
traditional functional silos is vital. The depth, pace,
and success of the transformation rest on asset
and operations managers embracing change as
much as, if not more than, top management.40
The most powerful impact on projects and
operations comes when leading subject-matter
expertise is combined with data analytics,
information management, and real-time control
to optimize operations and maintain safety.
Many datasets can provide solutions to important
problems and inform decisions. However, the size,
complexity, quality, and diversity of these datasets
make them difficult to process and analyse.
We believe there is significant potential for the
industry to become more accustomed to openly
sharing data across projects and operations, using
common cloud-based data platforms such as our
Veracity platform: www.veracity.com.41
DATA ACQUISITION AND SECURITY
Data is a raw material that needs refining and
combining with information from other sources
to realize its value. Focus will shift from volume
of data to quality of data. Utilizing both domain
knowledge and digital know-how will create
maximum value. DNV GL receives large volumes
of data on oil and gas production, transmission,
65
DNV GL ENERGY TRANSITION OUTLOOK 2019 — OIL AND GAS
storage and consumption. We work closely with
the industry to produce insights for improving
energy efficiency, HSE performance and security
of supply.
While cyber security is high on the agenda of
industries, governments and regulators, the safety
and vulnerability of digital systems are not yet fully
understood. The current focus and assurance
methods largely target physical and business
process risks. Our industries urgently need to
properly identify, understand, and manage these
emerging digital risks. At the same time, the
transparency enabled by digital technologies
creates new trust gaps and increases the threat
of cyber attacks.
Artificial intelligence cyber-security solutions will
become increasingly important. Anomaly
algorithms will detect changes in network
behaviour and automatically resolve attacks.
Consequently, some software-controlled critical
systems could be replaced by hard-wired or
mechanically protected ones.
ARTIFICIAL INTELLIGENCE
AND AUTOMATION
Artificial intelligence, and specifically its subset
machine learning,42 will be extensively used to
help make decisions. People currently interpret
dashboard visualizations of information to make
decisions; this will be supplemented by machines.
For example, analysing data within a maintenance
system can provide insights into where to focus
efforts, leading to a reduction in maintenance cost
and improving uptime. Machine learning will focus
on high probability, low-consequence scenarios,43
of which there are many in the oil and gas sector.
Widespread use will be made of virtual robots
to execute repeatable low-level tasks. Acting
together, such robots will bring significant
efficiency gains to administrative tasks.
66
The emergence of robotic technologies for
inspection and maintenance activities across
the industry, from subsea operations offshore
to pipeline and structural assessment onshore,
is proving a game changer in improving
knowledge whilst reducing personnel risk.
DIGITAL TWINS
Digital twins exist in many forms, from time-
domain analytical models to visualization tools.
There will be greater ability to merge and
communicate between different types of models.
These will become an interface and host for all
types of data, with digital twins effectively
becoming an asset’s ‘passport’ in the future. It will
let supply-chain companies incorporate and test
their designs directly into the digital twin master
model, and will enable advanced cyber-security
testing. Digital twins will generate rich datasets
and provide foundations for virtual robots and
automated design-checking algorithms. This will
quickly lead to autonomics, which will reduce
design time and boost the likelihood of a design
being ‘right’ first time. The combination of digital
twins and real-time sensor data will significantly
enhance safety in the operational phase.
DNV GL is working with stakeholders to further
progress the development of the digital twin
concept so that, say, a virtual offshore platform
will provide up-to-date information throughout
the asset’s lifecycle for many purposes. These
include: asset health monitoring; asset risk;
barrier management; facility data management;
managing spare parts; performance analytics;
regulatory compliance; and, simulation and
planning. Elements of the digital model will be
used to produce physical components, using
advanced manufacturing techniques, which will
increasingly be sited local to the physical asset.
TRENDS AND IMPLICATIONS CHAPTER 3

67
DNV GL ENERGY TRANSITION OUTLOOK 2019 — OIL AND GAS

3.6 REGIONAL VARIATIONS

Drawing upon our forecast, this section focuses on DNV GL

experts’ considered insights about the forces and regulations
impacting some countries and regions with oil and gas hubs.
We highlight some of the trends that we expect to play out in
the future as a result of these and wider forces.
Our model forecasts the energy transition in with the largest populations, energy use,
10 world regions and the energy trade between and so on, are assigned more weight when
them (see page 88). The input to, and results calculating averages for relevant parameters
from, each of these regions are the sum of all such as oil and gas supply, demand, and
countries within it. production capacity additions. This means
that prominent characteristics of certain
Weighted averages are typically used for the countries are averaged over the entire region.
world region forecasts in our model; countries

68

NORTH AMERICA
Natural gas dominates our forecast of the energy
transition in North America for years to come,
largely driven by shale gas in the US. According
to our forecast, 31% of primary energy supply in
the region will come from natural gas in 2050.
Three factors will drive rapidly decreasing coal use
for energy generation in the region: low prices for
shale gas; increasing investment in renewable
energy due to incentives at state and local levels;
and, the high cost of operating coal-fired power
plants due to environmental regulations.
US Federal policy on GHGs is in flux. The current
administration has leaned away strongly from any
regulations limiting GHGs. However, the switch
away from coal will happen for at least two reasons,
even if the Federal government loosens
environmental regulations. Firstly, 22 US states
have set GHG emission standards.44 For example,
California has goals for annual emissions in 2020
to be no higher than in 1990, and 80% lower in
2050. Secondly, investment decisions that have
already been made anticipate significant carbon
emission costs. We expect similar trends in Canada.
Lower costs for renewables generation and
storage will encourage more switching from coal
to renewables. We expect significant, varying
shifts in the energy mix of individual US states
because of differing policies and laws affecting
growth of renewables and battery electric
vehicles (EVs) and fuel-cell vehicles (FCVs).
Shifting US trade policies are a significant
uncertainty in the cost of renewables.
Existing contracts will ensure continued
investment over the mid term in offshore
US oil and gas. However, capital investment
in offshore projects is lower than before 2014,
and cost containment is set to persist even as
oil prices stabilize.
TRENDS AND IMPLICATIONS CHAPTER 3
The scale of interstate onshore gas transmission
pipelines and gathering lines has remained largely
unchanged from 1984–2017 at about 500,000
kilometres (km). The kilometrage of gas distribution
lines steadily increased from 2.0 million (m) km to
3.6m km during the same period and is expected
to rise further. The recent large oil and gas finds in
the Permian basin will add demand for further
export capacity from the basin and will necessitate
significant new pipeline construction.45
There has been a small rise in total kilometrage
of hazardous liquids pipelines in recent years;
from 270,000 km in 2004 to 350,000 km in 2016.
The number of plants in North America has also
risen by 22% since 2012, as expectations rise for
the US to experience the greatest growth in LNG
exports over the next three years.47
Hydrogen is viewed as an energy carrier
and storage medium for renewable power.
Transportation of hydrogen through existing
or purpose-built pipelines is considered
developmental. There may be regional variations
in hydrogen transportation and use; some
western US states are showing greater interest.48
Canada’s federal policy is to phase out coal for
electricity generation by 2030 and replace it with
a natural gas and renewables.49 It aims to produce
90% of electricity from non-CO2-emitting sources
by 2030. The country also has a goal to reduce
methane emissions from oil and gas by 40%–45%
by 2025 compared with levels in 2012.50 Reflecting
these goals, some utilities in Canada are divesting
themselves of all fossil power generation.51
69
DNV GL ENERGY TRANSITION OUTLOOK 2019 — OIL AND GAS

FIGURE 3.18

North America primary energy consumption by source in 2050

Natural gas 31%

Oil 20%

Wind 18%

Solar PV 9%

Nuclear fuels 9%

Biomass 6%

Hydropower 3%

Coal 1%

Geothermal 1%

Solar thermal 1%

70

THE MIDDLE EAST
We predict continuing energy demand growth
in the Middle East, but at a slowing pace for oil
and gas, for which combined demand peaks in
the early 2030s; then oil consumption declines.52
Power generation will be the biggest driver of
rising natural gas consumption.
Gas distribution will likely expand, creating
options for combined cooling, heat and power,
and releasing more propane for export. We
forecast that 57% of primary domestic energy
supply will come from gas in the Middle East
and North Africa region in 2050.
Significant gas field development projects and
expansions have been sanctioned, including in
Egypt, Qatar, Saudi Arabia and the UAE. A growing
trend to develop domestic gas resources to
safeguard national security of supply will support
our forecasted increase in local gas consumption.
Onshore wind and solar photovoltaic (PV) grow
fastest from 2020 in our energy supply forecast.53
Cheaper renewables, backed by private investment
and political support for carbon-free energy, make
the region a potential powerhouse for renewables
development. Smaller-scale renewables,
FIGURE 3.19
Middle East and North Africa primary energy consumption by source in 2050
TRENDS AND IMPLICATIONS CHAPTER 3
particularly solar PV, will increasingly contribute
to the region’s energy mix. Seven GW of renewable
power capacity is expected in Gulf Cooperation
Council member states by 2020.54
Shifts to gas-fired power generation, battery
electric and fuel cell vehicles and cleaner transport
fuels are underway. Middle East nations are
interested in how decarbonization elsewhere will
reduce demand for their main exports, but they are
excited by solar PV’s potential for domestic power
generation. Solar PV expansion enables reduced
oil imports (Egypt, Jordan); greater oil exports
(the UAE, Iraq, and Oman); or, cheaper power
generation (Saudi Arabia).
Middle East energy companies are investing
heavily in renewables and energy efficiency.
Digital technologies support development of
smart power grids for improved electricity
transmission, reduced peak demand, and
renewables integration. EXPO 2020 in Dubai will
likely increase focus on implementing renewable
energy pilot projects and showcasing sustainable
technologies in the UAE and the broader region.
Innovations in hydrogen such as production
through direct electrolysis of seawater, are
attracting interest.
Natural gas 57%
Oil 19%
Solar PV 10%
Wind 8%
Coal 3%
Biomass 2%
Hydropower 1%
Geothermal 0%
Solar thermal 0%
Nuclear fuels 0%
71
DNV GL ENERGY TRANSITION OUTLOOK 2019 — OIL AND GAS
RUSSIA
Russia is the world’s second largest natural gas
producer, and third largest oil producer.55
Production far outstrips domestic consumption
and its gas exports in particular are unrivalled.
Continued international sanctions have had
limited immediate impact on energy production.56
However, they may slow newer, more challenging,
medium-term projects, as financing and
technology will be less available and export
routes are uncertain. Local content policies may
have a similar effect.
Europe remains Russia’s key hydrocarbon export
market. State-run Gazprom, the world’s largest
gas producer, exported a record 200-plus cubic
gigametres to Europe in 2018.57 Russia is trying
to diversify its export portfolio and strengthen
European ties. New pipelines — Nord Stream 2,
TurkStream, and Power of Siberia — are due on
stream in 2019. Final approval for Russia’s second
Arctic LNG megaproject is also likely this year.
Crude oil production hit a record 11.26 Mb/d last
year after 10.98 Mb/d in 2017 and despite OPEC+
production caps in 2018.58 The country is
diversifying its oil export portfolio towards Asia.
China is the largest importer of Russian oil after
FIGURE 3.20
North East Eurasia primary energy consumption by source in 2050
72
pipeline capacity between them doubled.59
Russian crude exports to China were 1.48 Mb/d
in 2018 from 1.3 Mb/d in 2017.60
Russia’s Energy Strategy to 2035 suggests its
current policy direction will be maintained.
Despite Paris Agreement emission limits, Russia
and other CIS nations are likely to continue
developing hydrocarbon resources. The Russian
economy’s dependence on oil and gas remains
important. Oil and gas-related revenues in
Roubles accounted for 46% of total federal
income in 2018.61
Russia is developing solutions to decarbonize
production but does not share others’ views on
major contributors to climate change, or on the
use of CCS. It plans greater investment in climate
adaptation to prolong the life of installations,
and protect the public, rather than mitigation.
Hydrogen research focuses on plasma-based
direct cracking of methane to make hydrogen
gas with solid carbon as a by-product for use
elsewhere. Plans for the introduction of
renewable energy sources are low, and our
model forecasts that, in 2050, 80% of energy
supply in North East Eurasia will still be provided
by natural gas, oil and coal.
Natural gas 52%
Oil 23%
Nuclear fuels 7%
Hydropower 5%
Coal 4%
Wind 4%
Biomass 3%
Solar PV 2%
Geothermal 0%
Solar thermal 0%
 TRENDS AND IMPLICATIONS CHAPTER 3

GREATER CHINA Primary energy demand in China will peak at

The People’s Republic of China is heading towards
coal, oil and gas, and non-fossil energy being its
main energy pillars in 2050.62 Cleaner energy
sources will meet new energy demand, gradually
replacing carbon-intensive resources. However
ultra-low-emission technology for coal-fired power
plants will support continued prioritization of using
domestic energy sources. Our model forecasts
that 43% of the primary energy supply in China will
come from coal, natural gas, and oil, with gas being
the fastest growing energy source.
The nation’s general direction is for energy to be
cleaner, though environmentally friendly solutions
must be affordable as many parts of China still need
development funding.
The growth and changing pattern of China's energy
consumption will increasingly affect trends in world
energy and emissions. Industry’s share in energy
consumption will fall, while those of residential
buildings and transport will steadily increase.
Emphasis when purchasing energy will shift from
cost to environmental requirements.
a 2035–2040 plateau of about 5.6bn tonnes per
year of standard coal equivalent. With rapid
energy optimization, energy-related CO2
emissions will peak by 2025. Non-fossil energy
and natural gas will meet incremental demand
above the baseload supplied by coal.
Guided by environmental policies, natural gas
will see greater demand growth. Substantial gas
imports, primarily LNG, will be needed until
at least 2050 to supplement China’s natural gas
production, which will increasingly be
unconventional gas.63
Hydrogen will become an important source of
clean energy, and a major source of automotive
power for light and heavy vehicles in China.
Nuclear power will continue to be important
both for domestic consumption and as an
export technology.

FIGURE 3.21

Greater China primary energy consumption by source in 2050

Solar PV 20%

Coal 16%

Natural gas 15%

Wind 12%

Oil 11%

Hydropower 10%

Biomass 10%

Nuclear fuels 4%

Solar thermal 2%

Geothermal 0%

73
DNV GL ENERGY TRANSITION OUTLOOK 2019 — OIL AND GAS
EUROPEAN UNION
The EU is an energy transition leader through
decarbonization targets, policies, regulations
and energy-efficient technologies and practices.
The future of the Union’s gas consumption is clouded
by decarbonization targets, rising renewables,
and price trends for coal, oil, and carbon dioxide.64
The European Commission (EC) recently published
a plan to facilitate a clean energy future consistent
with the Paris Agreement’s 1.5°C target.65 The Clean
Energy Package66 is being implemented throughout
2019, and a new Gas Package is scheduled for 2020.
Gas and electricity markets have been integrated
over recent decades. Our model forecasts that 42%
of primary energy supply will come from natural gas,
oil and coal by 2050.
The market will support more gas imports in the
future as Union-wide gas production continues to
decline despite increased North Sea activity.
The impact of Brexit on UK integration in EU
energy markets is, as yet, unclear.
Geopolitics and national development agendas
obscure where and how big future EU gas-transport
projects will be. To further support new import
pipelines from new supply regions, the 2018
FIGURE 3.22
Europe primary energy consumption by source in 2050
74
amendment of the EU gas directive67 also extends to
non-EU countries supplying EU states. The directive
also aims to strengthen EU security of supply interest,
through the provision of diverse supply sources.68
North Sea exploration and production companies
drove investment in new oil production to a three-year
high in 2018, mostly in the UK and Norway.69
Europe’s largest oil and gas companies are boosting
investment in natural gas and renewables. Several
EU and national initiatives promote LNG for land
transportation. Renewable gas and biomethane
production are rising.
Other initiatives support development of hydrogen
as a low- and zero-carbon energy fuel for use in
existing gas infrastructure. Current pilot projects
and studies with different scopes (domestic heating,
power-to-gas and road transport) are primarily being
undertaken in areas of North West Europe with
well-developed gas networks.
The EU’s energy transition requires about 2.8% of
GDP (EUR 520bn–575bn) investment annually to
achieve a net-zero GHG economy in 2050, according
to the EC. Using existing infrastructure such as a gas
grids can help to keep down cost increases for
consumers, thus making the energy transition
more socially affordable and acceptable.70
Natural gas 25%
Biomass 15%
Wind 14%
Oil 13%
Nuclear fuels 12%
Solar PV 10%
Coal 4%
Hydropower 4%
Geothermal 2%
Solar thermal 0%

NORWAY
Norway is relying on offset trading mechanisms
to reach carbon neutrality by 2030. A Climate Act
(2017) targets a low carbon-emission society by
2050, starting with a 40% cut in GHGs by 2030
relative to 1990. Some of this 40% will come from
successful government incentives for EVs. Norway
wants all new passenger vehicles to be electric by
2025. In 2018, 31.2% of new passenger cars were
full-electric, 17.9% plug-in hybrids, and 11.1%
combustion hybrids.
Formal climate goals for Norway’s oil and gas
industry will arrive in 2020, with five-yearly checks
and updates thereafter. Average CO2 emissions
per barrel of oil are below half the world average,
due partly to high carbon taxes, EU emission
allowances, and support mechanisms for
emission reduction.
However, Norway’s offshore industry generates
more than a quarter of national emissions. The
government will continue using carbon pricing
and requiring best available techniques to cut
emissions on the Norwegian Continental Shelf
(NCS). Future requirements look set to include:
climate-risk evaluation of new development
projects; assessment of alternative power
solutions; and, low- or zero-emission vessels for
new oil and gas activity. Norway’s oil and gas
industry is updating its 2016 climate road map,
which set emission-reduction goals for 2030
but did not promise actual reductions.
As oil and gas majors worldwide transform into
energy companies, Norway’s Equinor aims to
accelerate its renewables capacity by investing
25% of research funds in low-carbon solutions
by 2020. It aims for 15%–20% of its investments
to be for new energy solutions by 2030.
Large oil and gas operators on the NCS are
adjusting production portfolios for flexibility
in a more complex, fragmented energy future.
Smaller oil and gas operators will mostly keep
TRENDS AND IMPLICATIONS CHAPTER 3
focusing on core competences to meet demand
for hydrocarbons in the coming decades.
Continuing recent trends, most small and
medium discoveries will be subsea tie-ins to
existing infrastructure. Longer term, profitable
development of such discoveries requires new
concepts and solutions within unmanned
platforms, and technology development in
automation, drilling, and subsea production.
LNG export will become more important, countering
any pipeline infrastructure constraints on gas
exports and providing flexibility if key European
markets for piped gas decline or suffer disruption.
New technologies and solutions will reduce
carbon cost and risk for new developments.
Onshore renewables power several offshore
fields, and more will be electrified. Energy-
efficiency initiatives for powering NCS oil and gas
operations are underway. Seadrill’s drilling rig
West Mira will have batteries, which the company
estimates will reduce CO2 emissions by 15%.
Equinor is to support the Snorre and Gullfaks
fields with offshore wind power.
Growing interest in CCS is driven mainly by the
technology’s business case. As part of a full-scale
demonstration, the Northern Lights project
involving Equinor, Shell and Total, has permission
to store CO2 in an NCS geological reservoir. The
first injection well is scheduled for October 2019.
A pilot CO2-capture unit has been tested at an
onshore waste incinerator to verify capture
efficiency and optimize the process.
The break-even oil price for several NCS field
developments has reduced by 30%–50% since
2015. It will be important to maintain this
competitive advantage. Focus on cost control,
enabled by automation, digitalization,
standardization and subsea solutions will
help, particularly with the cost of renewables
expected to fall rapidly, according to our model.
75
DNV GL ENERGY TRANSITION OUTLOOK 2019 — OIL AND GAS
OECD PACIFIC
Australia lacks clear policies to achieve its
commitment to reduce emissions in line with the
Paris Agreement. GHG emissions keep growing
despite booming renewables. Government support
for renewables is unclear. Concerns over reliability
of renewable energy technology are driving interest
in pumped hydro storage and batteries. Coal
production can expand, but its social license is
unclear. Despite the financial importance of
thermal coal exports, primarily to Asia, production
is growing weakly. Australia will soon become the
largest exporter of LNG, but domestic use of gas
is under pressure from export-market pricing
effects. The country is exploring CCS projects,
and domestic use and export of hydrogen for
which Japan and the Republic of Korea (South
Korea) are potential markets. Although Australia
remains a major coal exporter, little is used
domestically, and local coal consumption is
expected to peak in 2020. Our model forecasts
that by 2050, oil, natural gas and coal will provide
only 42% of primary energy, with wind and solar
PV providing the majority of supply.
Japan’s carbon emissions from energy have
plateaued in recent years. Dependence on
FIGURE 3.23
OECD Pacific primary energy consumption by source in 2050
76
imported fossil fuels is still impacted by the
Fukushima nuclear plant disaster among other
factors. These include government plans to keep
re-opening nuclear plants that can demonstrate
improved safety; public finance for new coal-fired
power plants; and, a continuing search for
alternatives to energy imports. Japan is piloting
liquid hydrogen for decarbonizing heat and
transport and targeting growth in offshore wind
and rooftop solar PV for power generation.
South Korea aims to further increase the share of
renewables in its energy mix. Its January 2019
roadmap aims for competitive economic advantage
in hydrogen cars and hydrogen fuel cells (HFC) by
2040. It is a major player in the small but growing
global market for HFC vehicles. Energy policy will
continue to favour LNG, renewable energy and
green transport, due particularly to high and rising
concern about fine airborne particulates.
Leveraging New Zealand’s renewable electricity
advantage is a priority in its transport sector.
Renewables, energy-efficiency improvements,
and efficient use of process heat in energy-intensive
industries will also be priorities. Energy transition
research is being located in areas hit by policy
restricting offshore fossil fuel production.
Wind 26%
Oil 18%
Natural gas 18%
Solar PV 13%
Nuclear fuels 9%
Biomass 6%
Coal 6%
Geothermal 2%
Hydropower 2%
Solar thermal 0%
 TRENDS AND IMPLICATIONS CHAPTER 3

SOUTH EAST ASIA
The overall picture in South East Asia is one of
increasing final energy demand right through to
2050, with natural gas, oil, and coal accounting
for 63% of primary energy supply. The breakdown
by country is however more nuanced.
Cheap coal from Australia and elsewhere will
flood South East Asia to heap pressure on
energy transition mechanisms. Australia
expects growing coal exports to Cambodia,
Myanmar, and the Philippines to replace
potential lost sales to China.
The largest South East Asia nation, Indonesia,
exports and imports energy, and has large fuel
markets between its islands and regions. It has
huge coal and natural gas reserves. Coal is the
dominant fuel, with natural gas close behind.
Access to geothermal and hydropower is
combining with a regional push for solar PV to grow
renewables’ share in the mix, but change is slow.
Electrical infrastructure is developing to enable
growth in renewables distribution, but new gas
distribution is also being built in some locations.
Domestic and imported LNG will rise in volume
to enable greater power generation locally
without the need for large increases in
electrical infrastructure.
Energy policy in Malaysia, a large natural gas
and coal user, is to increase the share of gas
in the generation mix post-2025 and promote
energy efficiency. Coal-fired generation will
increase until then. The government wants to
leverage Malaysia’s manufacturing strengths
to drive production and use of solar PV and EVs.
Singapore, a small energy user with a large
influence on the region, depends much on natural
gas, but with growing solar PV uptake, which it
encourages. It seeks to enhance energy efficiency
and increase imports and use of LNG, including as
a marine fuel. Decarbonized natural gas, mainly
hydrogen, and smart grid technologies are
under development.

FIGURE 3.24

South East Asia primary energy consumption by source in 2050

Natural gas 35%

Oil 19%

Solar PV 12%

Biomass 11%

Coal 9%

Wind 7%

Hydropower 4%

Geothermal 3%

Nuclear fuels 0%

Solar thermal 0%

77
 CHAPTER 4
THE NEXT FIVE YEARS
DNV GL ENERGY TRANSITION OUTLOOK 2019 — OIL AND GAS

4 THE NEXT FIVE YEARS

We see clear indications of an industry addressing the energy

transition with gathering pace, as oil and gas companies continue
to update their strategies.

Large international oil and gas companies are
beginning to position themselves as broader
energy companies and the energy utilities of
the future. Half (51%) of the senior oil and gas
professionals surveyed for DNV GL’s Industry
Outlook 2019 research say their company is
actively adapting to a less carbon-intensive
energy mix this year.72
The pace of change differs considerably by
region however. Energy transition activity
is most pronounced in Asia Pacific (60%),
compared with only 30% in North America.
Amid rapid and geographically diverse change,
here are some of our expectations for the key
challenges and opportunities that the oil and
gas industry will face between now and 2024:

Decarbonization Gas
will top the agenda will become the primary energy source

Cost control Digitalization and automation

will remain critical will cut costs and enhance safety

80

DECARBONIZATION
WILL TOP THE AGENDA
As societal concern over climate change increases,
the oil and gas industry faces growing challenges
to demonstrate how it will continue to supply the
energy that the world needs, in a manner that
minimizes its impact on the environment.
The extraction, processing, and export of
hydrocarbons involves several activities that
produce potentially harmful environmental
emissions. These include combustion processes
to provide electrical power for motors and pumps;
heat demands for processing; flaring and venting
for safety; and, incidental releases from
hydrocarbon loading/unloading operations.
However, such releases are small in comparison
to other emitters. As an example, the upstream
oil and gas industry on the UK Continental Shelf
released 15.7 million tonnes of greenhouse gas
(GHG)-related emissions in 2017. This represented
3% of the UK’s total GHG emissions in that year.73
Many operators are developing new solutions to
decarbonize production. Approximately 70% of
GHG emissions from offshore operations relate
to gas turbines or gas engines, so this is a major
target for action. Recent developments in this
area include Equinor’s Tampen project, which
THE NEXT FIVE YEARS CHAPTER 4
could become the world’s first project to use
wind turbines for electrification of oil and gas
installations.35
Other solutions include WIN WIN, DNV GL’s concept
for wind-powered water injection, offshore energy
islands, power sharing between platforms, and
provision of power to offshore installations from
shore-based electrical supplies.74
Operators are looking at a number of other
opportunities, aside from power generation.
These include conducting carbon capture and
storage (CCS) offshore, hydrogen production
offshore, exporting electricity to shore rather
than gas (gas-to-power), reducing offshore
manning, and alternatives to flaring.
In the midstream and downstream sectors, the
use of gas to heat homes, or to power industry,
are on a clear trajectory to decarbonization
through the introduction of green gases such as
biomethane or hydrogen. In the refining and
petrochemicals sectors, increasing energy
efficiency, the use of CCS, and the growing use
of recycled materials as feedstock is expected
to substantially reduce carbon footprint.
81
DNV GL ENERGY TRANSITION OUTLOOK 2019 — OIL AND GAS
GAS WILL BECOME THE PRIMARY
ENERGY SOURCE
This year, there are even stronger signals from our
model that gas will become the largest primary
energy source from the mid-2020s. Gas demand
will continue to grow until 2033, when it will plateau,
before maintaining this position to the end of our
forecast period in 2050. By then, gas will provide
29% of the world's energy demand.
Gas will play the energy baseload role, alongside
variable renewables, to help meet future, lower-
carbon, energy requirements. The potential for
gas networks to complement variable renewables
is increasingly being recognized. Over the next
five years, we expect the nature of the gas
delivered to end users to change as the system
accepts more ‘green’ gas: biogas, syngas and,
from 2025 in our model, hydrogen.
Major oil companies are actively increasing the
share of gas in their reserves, and we expect this to
increase in the coming years as they decarbonize
their energy portfolios. North East Eurasia, and the
Middle East and North Africa will increase gas
output towards at least 2040. Production will
82
plateau thereafter. Meanwhile, demand for North
American gas will continue to increase until the
end of the forecast period. Unless governments
agree to allow shale gas developments, we predict
continued decline in European gas production,
both on- and offshore.
““ Gas will play the energy baseload
role, alongside variable renewables,
to help meet future, lower-carbon,
energy requirements.
Regulatory and political change could significantly
alter our expectations for the volume of hydrocarbons
in the energy mix however. Such changes could
include increased drive towards a net-zero carbon
emissions target by the end of our forecast period,
possibly supported by carbon pricing, emission
caps, and local air pollution laws. These present
opportunities to further reduce the carbon footprint
of gas by curtailing methane emissions across its
value chain, and by improving the economics of
CCS for gas-fuelled power generation.
 THE NEXT FIVE YEARS CHAPTER 4

However, the other side of that equation is the vessel-loading, and tank storage; 25% from
need to provide energy at a cost that consumers fugitive losses; 25% from flaring; and, 6% from
can bear, to avoid the risk of driving vulnerable energy use. Onshore activity has more than twice
sectors of society into fuel poverty. the methane intensity of offshore activity. Several
oil and gas industry organizations and individual
Our model expects the average prices for emitting operators have recently signed up to the Climate
carbon to rise to no more than a fraction of the & Clean Air Coalition’s set of Methane Guiding
current cost of carbon capture. This is because Principles to enable the reduction of fugitive
of difficulties in agreeing a cross-border carbon methane emissions.76
price. It has historically been difficult to foresee
a large-scale rollout of CCS without higher carbon
prices and clear policy support from governments.
However, governments are increasingly considering
net-zero, or even negative emissions targets, to
reduce the impact of climate change. We therefore
anticipate that, within the next five years, there
will be increasing governmental willingness to
see CCS as a key mitigation mechanism.

It is important that the oil and gas industry maintains

focus on reducing methane leakages. The global
oil and gas industry association for advancing
environmental and social performance, IPIECA,
notes that the sector accounts for 54% of total
methane emissions. Of this, 44% is from venting,

83
DNV GL ENERGY TRANSITION OUTLOOK 2019 — OIL AND GAS
COST CONTROL WILL
REMAIN CRITICAL
Three quarters (76%) of the senior oil and gas
professionals surveyed for our Industry Outlook
2019 research said they are optimistic about the
sector’s growth prospects this year. This is a
sizeable step up from 63% a year ago, and more
than double the levels recorded in 2016 and 2017.
Confidence in the outlook for the industry has
returned to the level we observed in 2010, but
today’s market looks very different to that time.
Companies are faced with a far more volatile
landscape today, and we expect that uncertainty
may continue as the energy transition further
unfolds. For example, the arrival of peak oil
demand, which we forecast to happen in the
mid-2020s, will have an impact on price and
investor confidence, and negatively affect
future developments.
Oil and gas companies will need to proactively
change their short-term tactics to avoid the cost
inflation that the industry has experienced in
the past. We expect to see continued innovation
in facility design, operating models, and
84
contracting strategies to allow companies
to maintain or improve operating margins.
We also expect more merger and acquisition
activity driven by divestment of marginal
and mature fields. Larger players will fine-tune
and decarbonize their portfolios and move into
the broader energy market. Meanwhile, smaller
players will continue to enter the oil and gas
market, optimize existing production facilities
and undertake brownfield projects to become
pure play hydrocarbon producers.
Cost reduction has been achieved through
a series of measures over recent years.
There is now a bias towards shorter-term,
more flexible, new field developments,
with much greater use of floating production
systems and subsea tiebacks for both oil
and gas in the offshore market.
Technology developments are reviving interest
in deepwater and harsh-environment projects.
Average break-even costs for deepwater
developments fell about 10% to USD 52 per
 THE NEXT FIVE YEARS CHAPTER 4

barrel (/b) between 2014 and the fourth quarter
of 2018. If oil holds above USD 50/b, several
deepwater projects could launch in 2020
and/or 2021.
In the midstream and downstream gas market,
commercial regulation is often the driver for
innovation and cost reduction due to proximity
to customers. We have seen many examples of
where digitalization, and the use of new composite

““
materials for pipelines and structures, have
Oil and gas companies will brought about significant cost savings.
need to proactively change their
short-term tactics to avoid the
cost inflation that the industry
has experienced in the past.

Oil and gas executives in production companies

and across the supply chain now accept that
pan-industry collaboration is the most productive
way of maintaining innovation amid cost pressures.
We expect collaborative industry efforts to drive
standardization and digitalization over the next
five years, laying foundations for consistent
reductions in capital and operational expenditure
(capex and opex).

85
DNV GL ENERGY TRANSITION OUTLOOK 2019 — OIL AND GAS
 IGITALIZATION AND AUTOMATION WILL
D
CUT COSTS AND ENHANCE SAFETY
We expect increasing uptake of digitalization and
automation to make a significant contribution to
the trend of improving efficiency and reducing
emissions over the next five years. This is not lost
on industry leaders: three quarters (73%) of those
we surveyed for our Industry Outlook 2019 now
say that their organizations need to embrace
digitalization to increase profitability, compared
to 49% in 2017.
Digitalization will reduce both capex and opex
costs, and improve safety by enabling reduced
downtime while enhancing predictive maintenance,
performance forecasting, real-time risk management
and energy efficiency. The increased use of data
sharing platforms, 3D digital twins, and artificial
intelligence will speed up design processes, and
minimize both human and interface errors.
We expect the uptake of blockchain technologies
to spread rapidly in the industry. Several oil and
gas majors such as BP, Shell and Equinor have
recently joined forces in the development of new
blockchain trading solutions. Management of vast
amounts of data associated with assets and their
supply chain is a growing industry challenge.
Accurately managing thousands of components,
86
their repair and replacement costs, and the
management of suppliers is ideally suited to
a blockchain environment. The fact that an
asset’s lifecycle, and service and test records
can be recorded and traced on a blockchain
system, offers greatly enhanced transparency
and auditability.
A substantial increase in autonomous operations,
and in remote inspection or survey, will reduce
the need to have personnel working in hazardous
environments. This will also lessen the equirement
for travel to offshore operations, significantly
improving safety levels, and will also reduce the
‘hotel’ load on offshore facilities, lowering costs
and delivering environmental benefits.
A growing trend towards locating operations on
the seabed in some environments will require new
information and communications technology,
accompanied by process automation, robotic
maintenance, intelligent sensors, and analytics
for failure prediction. Challenges in how we send
and receive data subsea will be solved, through
the creation of a subsea Internet of Things.
THE NEXT FIVE YEARS CHAPTER 4

87
DNV GL ENERGY TRANSITION OUTLOOK 2019 — OIL AND GAS

OUR OUTLOOK REGIONS

The Energy Transition Outlook model divides
the world into 10 geographical regions. They
are chosen based on geographical location,
resource richness, extent of economic
development, and energy characteristics.
Each region’s input and results are the sum of all
countries within it. Typically, weighted averages
are used: countries with the largest populations,
energy use, and so on, are assigned more
weight when calculating averages for relevant
parameters. Prominent characteristics of certain
countries — nuclear dominance in France, for
example — are averaged over the entire region.

MAP AND KEY OF OUTLOOK REGIONS

North
North America: (NAM) and the US
AmericaCanada NorthEast
North Eurasia (NEE)
East Eurasia: Russia and neighbouring
Canada and the United States Russia and
countries neighbouring
including countries
all former including
Soviet Unionall
states
Latin America: former Soviet Union states except the Baltics.
Latin AmericaAll nations from Mexico to the southern
(LAM) except the Baltics. Includes Mongolia
Includes Mongolia and North Korea and North Korea
tip of
AllSouth America,
nations andto
from Mexico including the tip
the southern Caribbean
of South
America, and including the Caribbean Greater China (CHN)
GreaterChina: Mainland China, Taiwan, Hong
Europe: All(EUR)
European countries including the Baltics. The People’s Republic of China and Taiwan
Europe Kong, Macau
Excludes Russia,countries
All European all former Soviet Union
including republics,
the Baltics. Excludes Indian Subcontinent (IND)
Russia, all former Soviet Union republics, and Turkey
and Turkey India, Subcontinent:
Indian Pakistan, Bangladesh,
India,SriPakistan,
Lanka, Afghanistan,
Bangladesh,
Nepal, Bhutan, Maldives
Sub-Saharan Africa (SSA) Sri Lanka, Afghanistan, Nepal, Bhutan, Maldives
Sub-Saharan Africa:except
All Africa countries All Africa countries
Algeria, Egypt,except
Libya, OECD Pacific (OPA)
Algeria, Egypt,
Morocco andLibya,
TunisiaMorocco and Tunisia Stretches
South Eastfrom Myanmar
Asia: Stretchesto from
PapuaMyanmar
New Guinea.
to Papua New
Includes
Guinea. many smaller
Includes manyisland
smaller states in the
island Pacific
states in the Indian
Middle East andNorth
North Africa (MEA) Ocean. Indonesia is the largest country
Middle East and Africa: Stretching from
Stretching from Morocco to Iran. Includes Turkey and and Pacific Oceans. Indonesia is the largest economy
Morocco to Iran. Includes
the Arabian Peninsula Turkey and the South East Asia (SEA)
Arabian Peninsula Japan,
OECD Republic
Pacific of Korea
: Japan, (‘South Korea’),
Republic of Korea Australia
(‘South
and New Zealand
Korea’), Australia and New Zealand

88

REFERENCES
1 ‘Energy Transition Outlook 2019’, DNV GL,
September 2019, view at www.dnvgl.com
2 ‘Energy Transition Outlook 2019: Executive
Summary’, DNV GL, September 2019, view at
www.dnvgl.com
3 ‘Energy Transition Outlook 2019: Power supply
and use – Forecast to 2050’, DNV GL, September
2019, view at www.dnvgl.com
4 ‘Energy Transition Outlook 2019: Maritime –
Forecast to 2050’, DNV GL, September 2019,
view at www.dnvgl.com
5 ‘Revisiting the deepwater cost curve’, A Rodger,
Wood Mackenzie, 27 November 2018 [online],
view at woodmac.com
6 ‘Saudi Aramco to begin new phase of shale gas
development next year’, J Gnana, The National,
20 March 2019, view at www.thenational.ae
7 ‘Chevron’s mega-deal proves U.S. energy
powerhouse’, K Crowley and K Gilblom, World Oil,
14 April 2019, view at www.worldoil.com
8 ‘The LNG era takes shape’, DNV GL, 2019,
download from https://industryoutlook.dnvgl.com
9 ‘2018 Global gas outlook synopsis’, GECF,
view at gecf.org
10 Data from Energy Industries Council,
see www.the-eic.com
11 ‘Multi-vector energy diagram Great Britain - daily
resolution: Data from: October 2014 to early
March 2019’, IAG Wilson, University of
Birmingham, UK, view at https://www.
researchgate.net/project/multi-vector-energy-
analytics
12 Eurostat gas price statistics at https://ec.europa.
eu/eurostat/web/energy/data/database
13 ‘Statistical Report of the European Biogas
OUR OUTLOOK REGIONS
Association 2018’, EBA, Brussels, Belgium,
December 2018
14 Gas Vehicle Hub [online], see www.gasvehiclehub.
org/refuelling-facility, viewed 21 June 2019
15 Hydrogen is used as an energy carrier only for
mobility. There were about 10,000 active fuel-cell
vehicles at the end of the third quarter of 2018,
including 180 buses, according to US-based
Pacific Northwest National Laboratory’s hydrogen
tools portal online at h2tools.org. Assuming an
average fuel consumption of 100kg of hydrogen
per vehicle per year, possibly a conservative
assumption, this translates to 1,000 tonnes
of hydrogen.
16 ‘Hydrogen filling now available in Aachen’, H2
Mobility, press release, 28 June 2019, view at
https://h2.live/en/presse
17 ‘Project REFHYNE: Clean refinery hydrogen for
Europe’, FCH JU, view at www.fch.europa.eu
18 ‘Hydrogen for policymakers’, Hydrogen Council,
1 February 2019, view at hydrogencouncil.com
19 ‘EPA approval granted for HESC in Latrobe Valley’,
HESC, press release, February 2019, view at
https://hydrogenenergysupplychain.com
20 ‘Evaluating conversion of natural gas to hydrogen’,
Equinor, 7 July 2017, view at equinor.com
21 See https://hynet.co.uk
22 See https://actacorn.eu
23 See https://www.northerngasnetworks.co.uk/
event/h21-launches-national
24 ‘The Global Status of CCS, 2018’, Global CCS
Institute, 2018, see www.globalccsinstitute.com
25 ‘Commentary: US budget bill may help carbon
capture get back on track,’ S Bennett and T Stanley,
IEA, 12 March 2018, view at www.iea.org
89
DNV GL ENERGY TRANSITION OUTLOOK 2019 — OIL AND GAS
26 ‘Future Billing Methodology: NIC 04 – Project
progress report 2’, Cadent/DNV GL, December
2018, download at futurebillingmethodology.com
27 International Energy Agency, The Future of
Hydrogen: Seizing today’s opportunities, June
2019 https://www.iea.org/hydrogen2019
28 ‘A sustainable bioeconomy for Europe:
Strengthening the connection between economy,
society and the environment – updated
bioeconomy strategy’, European Commission,
October 2018, p.5
29 Taken from the report on hydrogen in Norway
by Norwegian DNV GL colleagues
30 ‘Statistical review of world energy 2019’, BP, June
2019, view at www.bp.com/statisticalreview
31 ‘Committee on Climate Change: Net zero
technical report’, Committee on Climate Change,
UK, May 2019, view at www.theccc.org.uk
32 ‘Climate change 2014: Synthesis report.
Contribution of working groups I, II and III to the
fifth assessment report of the Intergovernmental
Panel on Climate Change’, RK Pachauri and LA
Meyer (eds.), IPCC, Geneva, Switzerland, 2014
33 ‘Contract award for Hywind Tampen assembly’,
Equinor, press release, 5 February 2019, viewed
at equinor.com
34 ‘TenneT presents hub and spoke concept for large
scale wind energy on the North Sea’, TenneT, 13
June 2016, view at www.tennet.eu
35 ‘Background: IJVER — At least 4 GW at
approximately 80 km from the shore of Ijmuiden’,
Ijmuiden Ver, view at
https://offshoreservicefacilities.nl/ijmuiden-ver
36 ‘A smarter way to avoid incidents and save costs’,
DNV GL, PERSPECTIVES [online], view at
www.dnvgl.com
37 ‘Veracity – an open industry platform’, DNV GL,
view at www.veracity.com
38 ‘State climate policy maps’, Center for Climate and
Energy Solutions, view at www.c2es.org
90
39 ‘Permian poised for next pipeline wave’,
MW Veazey, Rigzone, 8 July 2019, view
at www.rigzone.com
40 Statistics from US Pipeline and Hazardous
Materials Safety Administration, view at
www.phmsa.dot.gov
41 ‘A new LNG era takes shape: The outlook for
the LNG market’, DNV GL, April 2019, view
at www.dnvgl.com
42 ‘SoCalGas builds on clean energy advancements
with Hydrogen Council membership’, Sempra
Energy, press release, 13 September 2018, view
at www.sempra.com
43 ‘Pan-Canadian framework on clean growth and
climate change’, Government of Canada, 2016,
ISBN 978-0-660-07023-0, downloaded from
publications.gc.ca
44 ‘Canada’s energy transition: An energy market
assessment’, National Energy Board, Canada,
2019, ISSN 2562-5314, view at neb-one.gc.ca
45 ‘Canadian Utilities sells fossil fuel power assets
for $835M’, The Canadian Press, 27 May 2019,
view at cbc.ca
46 Energy Transition Outlook 2019 data, DNV GL
47 ‘A new LNG era takes shape: The outlook for
the LNG market’, DNV GL, April 2019, view at
www.dnvgl.com
48 ‘Middle East energy in the 21st century: Trends
reshaping power supply and demand in the
region’, MEED, Vol 3, Energy, April 2019, view
at www.meed.com
49 Data from US Energy Information Administration,
27 May 2019
50 ‘Western sanctions on Russia’s oil and gas sector:
A damage assessment’, T Mitrova, Carnegie
Moscow Center, 25 July 2018, view at
https://carnegie.ru/commentary/76909
51 ‘Delivery statistics: Gas supplies to Europe’,
Gazprom Export, 27 May 2019, viewed
at www.gazpromexport.ru

52 ‘Russian output reaches record high in 2018’,
G Soldatkin, Reuters, 2 January 2019, view
at www.reuters.com
53 ‘New pipeline doubles Russian oil supply to
China’, I Slav, oilprice.com 2 January 2018, view
at https://oilprice.com
54 ‘Russia's oil exports to China hit new high’, V
Abbasova, Caspian News, 29 January 2019,
view at https://caspiannews.com
55 ‘Higher oil prices boost surplus of Russian federal
budget’, B Viikkokokatsaus, BOFIT, 8 February
2019, view at https://www.bofit.fi
56 `World and China Energy Outlook 2050’, CNPC
Economics & Technology Research Institute
(ETRI), 2017
57 ‘Meeting the challenge of China’s dash for gas’,
DNV GL, PERSPECTIVES [online], 2019, view at
www.dnvgl.com
58 ‘Fostering energy markets, empowering
consumers’, DNV GL study for Council of European
Energy Regulators (CEER), March 2018, download
at www.ceer.eu
59 ‘A clean planet for all: A European strategic
long-term vision for a prosperous, modern,
competitive and climate neutral economy’,
European Commission, COM(2018) 773 final,
28 November 2018
60 ‘Russia's oil exports to China hit new
high’, V Abbasova, Caspian News, 29 January
2019, view at https://caspiannews.com
61 Directive 2009/73/EC and its subsequent
amendments
62 ‘Energy Union: Commission welcomes tonight's
provisional political agreement to ensure that
pipelines with third countries comply with EU gas
rules’, European Commission, news release,
12 February 2019, view at europa.eu
63 ‘North Sea oil and gas exploration still attracting
billions of investment dollars’, G Sharma, Forbes,
29 October 2018, view at www.forbes.com
REFERENCES
64 ‘Gas for climate: The optimal role for gas in a
net-zero emissions energy system’, Navigant
Netherlands, March 2018, download PDF
at www.gasforclimate2050.eu
65 ‘A test of resilience: The outlook for the oil and gas
industry in 2019’, DNV GL, January 2019, view at
industryoutlook.dnvgl.com/2019
66 ‘Environment Report 2018’, Oil & Gas UK,
view at oilandgasuk.co.uk
67 ‘Wind-powered water injection’, J Sandberg,
DNV GL, April 2019, view at dnvgl.com
68 ‘Exploring methane emissions’, IPIECA fact sheet,
June 2015, view at ipeca.org
69 ‘Reducing methane emissions across the natural
gas value chain: Guiding principles’, Climate &
Clean Air Coalition, 22 November 2017, viewed
at ccacoalition.org
70 ‘Gas for climate: The optimal role for gas in a
net-zero emissions energy system’, Navigant
Netherlands, March 2018, downloadable PDF
at www.gasforclimate2050.eu
71 ‘A test of resilience: The outlook for the oil and
gas industry in 2019’, DNV GL, January 2019, view
at industryoutlook.dnvgl.com/2019
72 ‘Environment Report 2018’, Oil & Gas UK,
view at oilandgasuk.co.uk
73 ‘Wind-powered water injection’, J Sandberg,
DNV GL, April 2019, view at www.dnvgl.com
74 ‘Exploring methane emissions’, IPIECA fact sheet,
June 2015, view at ipeca.org
75 ‘Reducing methane emissions across the natural
gas value chain: Guiding principles’, Climate &
Clean Air Coalition, 22 November 2017, viewed
at ccacoalition.org
76 ‘Blockchain oil trading platform backed by Shell
and BP is now live’, Y Khatri, Coindesk [online], 29
November 2019, view at www.coindesk.com
91
DNV GL ENERGY TRANSITION OUTLOOK 2019 — OIL AND GAS

PROJECT TEAM
OIL AND GAS

Steering committee
Remi Eriksen, Ditlev Engel, Ulrike Haugen,
Trond Hodne, Liv Hovem

Project director
Sverre Alvik

Modelling and core team

Bent Erik Bakken, Anne Louise Koefoed,
Onur Özgün, Mats Rinaldo

Lead author
Graham Bennett

Contributors
Rob Coveney, Tim Hare, Warner ten Kate,
Johan Knijp, Sridhar Narasi, Torild Nissen-Lie,
Neil Pollock, Julia Schweitzer, Jan Egil Sæberg,
Lars Sorum, Corin Taylor, Maurice Vos,
Wu Yi Wolfgang

92

HISTORICAL DATA
This work is partially based on the World Energy
Balances database developed by the International
Energy Agency, © OECD/IEA 2018 but the
resulting work has been prepared by DNV GL
and does not necessarily reflect the views of the
International Energy Agency.
For energy related charts, historical (up to
and including 2017) numerical data is mainly
based on IEA data from World Energy Balances
© OECD/ IEA 2018, www.iea.org/statistics,
License: www.iea. org/t_c; as modified by DNV GL.
PROJECT TEAM OIL AND GAS
Published by DNV GL AS - Oil & Gas
Design SDG/Drive McCann/Wildfire/Infogr8
Print 07 Media AS
Paper Arctic volume white 115/250
Images DNV GL (cover, 12, 19, 28, 57, 63, 67, 68,
86) Equinor (illustration 61), Shutterstock (11, 20,
27, 51, 64, 70) iStock (5, 14, 49, 78, 81, 82, 84)
93
DNV GL ENERGY TRANSITION OUTLOOK 2019 — OIL AND GAS
ENERGY TRANSITION OUTLOOK 2019
REPORTS OVERVIEW
ENERGY TRANSITION OUTLOOK
Our main publication details our model-based
forecast of the world’s energy system through to
2050. It gives our independent view of what we
consider the most likely trajectory of the coming
energy transition, covering:
−− The DNV GL Model and our main assumptions;
on population, productivity, technology, costs
and the role of governments and policy
−− The global energy demand for transport,
buildings and manufacturing, the changing
energy mix, energy efficiency and expendi-
tures
−− Detailed regional energy outlooks
−− The climate implications of our outlook and an
assessment of how to close the gap to well
below 2°C
94
POWER SUPPLY AND USE
This report presents implications of our energy
forecast to 2050 for key stakeholders involved in
electricity generation, including renewables;
electricity transmission and distribution; and
energy use. Amidst electricity use increasing
rapidly and production becoming dominated by
renewables, the report details important industry
implications. These include:
−− Substantial opportunities for those parties
involved in solar and wind generation
−− Massive expansion and reinforcement of
transmission and distribution networks
−− Further need for implementation of energy
efficiency technology
−− Acceleration of the electric vehicle revolution
−− The energy transition is fast, but not fast enough
to meet the goals of the Paris Agreement

OIL AND GAS
Our Oil and Gas report discusses how these
hydrocarbons remain key to the secure supply of
affordable energy up to 2050. Key features
include:
−− Gas becomes the primary energy source from
the mid-2020s as oil and gas companies
decarbonize portfolios and gas increasingly
complements variable renewables
−− Gas demand growth plateaus in 2033 but it
remains the dominant primary energy source,
supplying 29% in mid-century. New sources of
gas (e.g. biogas, hydrogen and synthetic
methane) are will be introduced to domestic
and commercial energy systems, helping
to decarbonize gas consumption
−− Oil supplies 17% of primary energy in 2050,
despite oil demand peaking in the mid-2020s
−− A need for greater efficiency and investment in
new oil and gas production are indicated
REPORTS OVERVIEW
MARITIME
This year’s Maritime Forecast zeroes in on the
IMO strategy to reduce greenhouse gas emis-
sions. New fuels, and energy-efficient design
and operation, are key to this. We detail:
−− New ‘barometers’ indicating world-fleet
decarbonization and readiness of alternative
fuels
−− Uptake and characteristics of relevant
technologies, i.e. dual-fuel engines, fuel cells,
and battery electric power
−− How fuel flexibility and bridging technologies
can smooth transition from traditional fuels
−− CO2 emissions and which fuels are likely to be in
the mix towards 2050
−− A new multi-scenario approach for robust
newbuilding strategy based on our expanded
concept of future-proof ships
95
SAFER, SMARTER, GREENER

HEADQUARTERS: DNV GL is a global quality assurance and risk management company.

Driven by our purpose of safeguarding life, property and the environment, we
DNV GL AS
enable organizations to advance the safety and sustainability of their business.
NO-1322 Høvik, Norway
Tel: +47 67 57 99 00 We provide classification, technical assurance, software and independent expert
www.dnvgl.com advisory services to the maritime, oil & gas, power and renewables industries.
We also provide certification, supply chain and data management services
to customers across a wide range of industries.

Combining technical, digital and operational expertise, risk methodology and

in-depth industry knowledge, we empower our customers’ decisions and actions
with trust and confidence. We continuously invest in research and collaborative
innovation to provide customers and society with operational and technological
foresight. With origins stretching back to 1864 and operations in more than
100 countries, our experts are dedicated to helping customers make the world
safer, smarter and greener.

dnvgl.com/eto

The trademarks DNV GL®, DNV® and Det Norske Veritas® are the properties
of companies in the Det Norske Veritas group. All rights reserved.