T

he global energy
supply outlook is very
different to what it
was a decade ago,
and the path towards
energy independence
has enormous geopolitical
ramifications. Another major
story is the changing picture
of global demand for oil. Oil
consumption, especially liquid
fuel, may continue to rise in
emerging markets.
Although governments have
promoted renewable energy
sources such as solar and
wind in recent years, they
are believed to be relatively
weak alternatives for modern
automotive and industrial
requirements. Renewables
will grow dramatically, nearly
tripling by 2030. But on a
worldwide scale, the mix in
energy demand will not be too
different to what it is today.
Furthermore, oil prices have
a habit of surprising everyone,
as weve seen. After all, prices
do not exist in a vacuum, but
are the product of economic
growth, political developments
and technology. Forecasting
oil prices is a fraught business,
even for the experts.
For years, the prospect of
an energy transition away
from conventional sources,
and towards new alternatives
has been discussed and debated.
However, whatever the timing,
the transition in energy thinking
is certainly at hand. This shift
carries great significance for the
supply and politics of world oil,
especially liquid fuels.
Since the beginning of the 21st
century, a fear surrounding oil
prospects has been fuelling
anxiety about the stability
of global energy supply
and prices. This has been
aggravated by rising prices
and growing demand,
especially from China, India
and other emerging economies.
Based on current and
prospective scenarios, it
appears that the worlds
production capacity for oil
and related liquids should
grow from about 92 million
barrels per day (mbpd) at
present, to over 110 million
barrels by 2030.
But there are many ifs and
buts, when it comes to ground
realities. Meeting future
demand will require
innovation, investment
and the development of

MEDIA SERVICES PHOTOFILE (LIOC)

O I L S U P P LY C H A I N

LIQUID FUEL REMAINS THE KING

Praveen Jaiswal highlights the upcoming challenges for energy security
more challenging resources.
Though things do not stand still
in the energy industry, with the
passage of time, unconventional
sources of oil will become
a familiar component of the
worlds petroleum supply.
The worlds liquid petroleum
consumption is set to increase
by 38 percent by 2040,
spurred by higher demand
in Developing Asia and the
Middle East, according to
projections made by the
US Energy Information
Administration (EIA). Its
International Energy Outlook
2014 reveals that these two
regions combined account for
85 percent of the total increase
in liquid fuels used worldwide,
during the period under review.
World markets for liquid
petroleum have entered a period
of dynamic change, in both
supply and demand, which led
the EIA to reassess its outlook
for long-term markets. Overall,
the globes liquid fuel use is
projected to grow from 87
million mbpd at present,
to 119 in 2040.
Potential demand growth is
focussed on the emerging
economies of China, India
and the Middle East. Similarly,
growing populations and
economies in Africa will
increase demand for both
transport and industrial uses.
Africas consumption of liquid
fuels is projected to rise by 2.8
mbpd, by 2040. Real GDP in
Africa could also accelerate

The transition in energy

thinking is certainly at
hand. This shift carries great
significance for the supply
and politics of world oil

by 4.8 percent a year. With an

expected favourable investment
environment and relative
political stability in the long
term, growing consumer
demand will drive demand for
consumer goods and services
as well as liquid fuels,
particularly for personal
transport and freight services.
Diversification of sources of
supply is an important element
of liquid fuel supply security.
Diversity of supply avoids
overreliance on any single
source, and helps mitigate
risks from potential supply
disruptions.
For example, Australia has

a high level of diversity built

into its fuel supply chain.
Within this diversified supply
chain, Australias liquid fuel
security risks are spread over
a variety of different sources,
including imported and
domestic crude, and products
from a number of sources.
There is an important role for
governments in meeting future
challenges, strengthening the
security and operation of the
liquid fuel market, and
facilitating the substantial
investment in infrastructure
that is necessary to meet the
growing liquid fuel needs
of generations to come.
Policy stability is key to
the delivery of any ongoing
energy security and attracting
the necessary investments to
meet future liquid fuel needs.
An attractive investment
environment and more
efficient, timely and consistent
national planning, approval
and regulatory processes
would support ongoing
investments in the growth
and maintenance of key
infrastructure, supporting
the liquid fuel supply chain.
A strong market-based
approach must now be nurtured
by governments, which will
help establish a flexible and
robust policy framework that
is capable of responding to
the ever-changing global
oil market, and harness
technological developments
in the industry.

The writer is a senior oil and gas professional with multinational, multicultural experience. He is currently based in the UAE.

159 | MAY 2015 | LMD