Global management consulting company, McKinsey and Company has said that fossil fuel (oil and gas) demand will peak before 2030.
They stated this in their October 2023 Global Energy Perspectives report.
According to the report, total demand for fossil fuels is projected to peak by 2030 in all scenarios.
Although a sharp decline in coal demand is expected under all scenarios, oil and natural gas are expected to grow further in the next few years and then remain a core part of the world’s energy mix for decades to come.
Looking ahead to 2040, McKinsey highlights the fact that the future of energy investment is marked by several key trends and considerations:
Persistence of Fossil Fuel Investments
Despite increasing regulations aimed at reducing carbon emissions and a declining demand for fossil fuels, a substantial portion of investments (20 to 40%) in 2040 will still be directed toward fossil fuel projects.
This is partly due to the rising development costs of fossil fuel initiatives, while green technologies are expected to become more cost-effective.
Growing Natural Gas Demand
Natural gas demand is expected to rise through 2040, primarily due to its role in balancing renewable energy sources, especially until large-scale battery deployment becomes widespread.
However, the trajectory of gas demand varies depending on different scenarios, from steady growth in conservative projections to a sharp decline in scenarios where renewables and electrification advance rapidly.
Annual investments in the global energy sector are projected to increase by 2 to 4% per year, roughly in line with global GDP growth. By 2040, these investments could range from $2 trillion to $3.2 trillion.
Shift towards Green Technologies
There will be a gradual transition of investment focus from fossil fuels to green technologies and electric transmission and distribution.
In 2015, these green technologies represented only 20% of total investments, but they are projected to make up between 40 and 50% of total investments by 2040.
In essence, the global energy investment landscape is evolving. Natural gas remains a crucial player in the transition to renewable energy, and while investments in fossil fuels persist, a significant shift is underway toward green technologies and sustainable practices.
The Nigerian context
During the 3rd Biennial International Conference on Hydrocarbon Science and Technology (ICHST) organized by the Petroleum Training Institute (PTI) on Monday, October 23, Minister of State for Petroleum Resources – Heineken Lokpobiri stressed the paramount importance of addressing the unique challenges that confront the oil industry.
He encouraged researchers to concentrate their efforts on developing solutions specifically tailored to the industry’s distinct needs.
This approach aligns with the Federal Government’s commitment to increasing oil production, underlining the government’s dedication to enhancing the country’s oil sector.
Meanwhile, the Minister of State for Gas, Ekeprikpe Ekpo, highlighted the necessity of focusing on critical issues such as energy transition, sustainability, and energy security.
This focus is vital to ensure that Nigeria effectively harnesses the full potential of its abundant gas resources.
He pointed out that recent global events, like the Russia-Ukraine conflict, have underscored the delicate balance in the dynamics of energy demand and supply. He said:
- “With a particular reference to gas, Nigeria was inadequately prepared and did not seize the opportunities created by the increase in the demand for gas supply to Europe and other parts of the world.
- “On our home front, there is the need to boost the domestic market for gas. Nigeria is known to be a gas-rich country rather than oil with a proven reserve of over 200tcf of gas. Local issues include inadequate infrastructure, unfair regulatory environment for gas, sabotage of pipelines and the inability to optimize value from abundant gas reserves.”