Hot off the heels of another tumultuous and eventful year for the global energy landscape, 2024 is already continuing the trend of disruptions, headwinds and opportunities. Last year ended with a momentous agreement at COP28 to cut global methane emissions, a significant contributor to emissions worldwide.
The coming year will be another rollercoaster ride for the industry, posing important questions about whether the net-zero targets outlined in the Paris Agreement can be achieved. Elections, supply chain issues and the maturation of nascent industries are all on the cards.
Experts from Rystad Energy have released their predictions for what lies in store for the energy sector in the year ahead:
Geopolitics to shape the oil market more than ever
Jorge Leon, Senior Vice President, Oil Market Research: “It is often said that oil is the most political of all commodities. This year, about 4.2 billion people will face political change with general elections in more than 70 countries. The outcome of these will have a significant impact on national politics and geopolitical developments and, inevitably, on the oil markets. The future of the US’ support for Ukraine, EU’s climate policy ambitions, tensions in the South China Sea, trade frictions between China and the West, and the ongoing conflicts in the Middle East all threaten to upset the market drastically.”
Natural gas to help secure energy needs and support the energy transition
Xi Nan, Senior Vice President, Gas and LNG Market Research: “Gas will continue its effort to solve the energy trilemma (security, affordability, and sustainability) in 2024. Global gas production is expected to grow by 3% or 130 billion m3 in 2024. Investments in greenfield LNG projects are set to slow down this year compared to 2023 but remain at a robust level to support global LNG demand, reaching 500 million t by 2027. Gas will play an enabling role in the energy transition, especially in the power sector. It will be relied upon on a global scale for the foreseeable future, including in Europe.”
M&A trend moves into the supply chain
Audun Martinsen, Head of Supply Chain Research: “The consolidation trend that has gripped the upstream oil and gas industry lately will cross over into the supply chain in 2024. As interest rates stabilise, or even fall, elevated cash flows will encourage suppliers to explore strategic acquisition opportunities to grow capacity inorganically. This will be true for the oilfield services and clean energy markets, where organic capacity expansion may not be the most efficient option, given the peak activity in oil and gas in 2024 and excess capacity within low-carbon sectors.”
Hydrogen projects take off in 2024
Artem Abramov, Head of Clean Tech Research: “Activity in the clean hydrogen sector is surging globally, fuelled by maturing policies in Europe and the US, in addition to early commercial-scale projects in the Middle East, Australia and Africa. However, 2024 promises more than just momentum – it's a year of clarity. Several key feasibility studies will be completed, revealing promising new use cases for hydrogen consumption. In the US, expect both a surge in clean hydrogen project approvals (FIDs) and potential cancellations, thanks to the long-awaited 45V tax credit regulations from the Inland Revenue Service (IRS). In 2024, a series of global auctions and grants will unfold, providing essential insights into key aspects of the emerging clean hydrogen sector. These events will shed light on pricing dynamics, technological advancements and the eventual victors and contenders in this transformative landscape.”
Muted US shale growth helps OPEC
Espen Erlingsen, Head of Upstream Research: “Oil prices are expected to stay elevated in the near term, but evolving strategies in the US shale sector mean output is not growing as quickly as in previous years. Investments in the shale patch are not expected to grow in 2024, keeping activity and output relatively flat, and enabling OPEC to effectively regulate the market. As a result, extended periods of high oil prices could be in store.”
Renewable growth doubling down
Carlos Torres Diaz, Head of Renewables & Power Research: “This year is expected to be another record breaker for the solar and wind markets, adding more than 510 GW of solar PV and wind capacity globally. The resulting new generation from these sources – more than 900 TWh – will be enough to cover most of the growth in demand, helping limit the need for fossil-fuelled power generation. Although capacity will continue to grow, governments need to put in place the right incentives for renewable energy projects to ensure the momentum continues.”
Potential for an OPEC+ type group in the refined products market, notably in China
Mukesh Sahdev, Head of Downstream: “China's downstream oil sector has revamped its strategy with a bullish move in shifting from quarterly to annual crude import quotas and broadening product export allowances for independent refiners. This is a signal for higher flexibility and autonomy in China refining, both state owned and independent players to keep markets guessing of their next moves, potentially injecting volatility into crude procurement and product exports. This points to an expectation where run rates are set to climb near 15 million bpd, staying elevated throughout the year and peaking at 16 million bpd by September. Notably, the combined refinery capacity of China, the Middle East and Russia, totalling around 38 million bpd, has surpassed that of North America and Europe. The rise of a supply management framework in the refined products market, resembling OPEC+, could be an emerging trend to look out for in the year ahead.”
Offshore wind not out of the woods yet, but long-term outlook is robust
Alexander Flotre, Vice President & Head of Offshore Wind: “In 2023, challenges like inflation, interest rates and supply chain issues led to project setbacks and renegotiations in offshore wind. While the year ahead may not bring a drastic shift, a change can be noted with authorities supporting long-term goals with improved terms in auctions and industry-specific inflation adjustments. At the same time, the soaring inflation experienced in recent years is flattening out, removing the need for further interest hikes and rising capital costs for developers and suppliers. Despite market uncertainty, 2023 saw a record year for FIDs for over 12 GW of offshore wind projects globally (excluding China), suggesting healthy activity levels in the coming years. Furthermore, governments are expected to uphold commitments moving forward, with increased auction volumes, realistic pricing, a focus on faster permitting, and emphasis on supply chain efficiency — all adding to the momentum that’s needed to maintain the energy transition journey.”
Coal generation to start decline in 2024 as Asian growth slows
Steve Hulton, Head of Global Coal Industry Research: “Global coal-fired power generation will decline in 2024, thanks in part to the evolving Asian power grids. We predict coal generation in the power sector will fall by 33.7 TWh, a 0.3% annual decline, as Asia starts hitting the brakes on new coal power projects. The modelled fall is small but significant as 2023 represents the high water mark for global coal power. China, India and Indonesia remain the top coal consumers for now, but the tide is turning. Surging new renewable energy capacity installations and aging coal plants will soon tip the scales clearly in favour of fossil-free alternatives and a falling share for coal in the power mix will only gather pace.”
Read the article online at: https://www.globalhydrogenreview.com/special-reports/24012024/whats-in-store-for-energy-in-2024/
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