Energy's New Era: Supply Diversification and the Accelerating Shift in Global Demand

The global oil and gas industry is undergoing a profound transformation, driven by the dual forces of the worldwide energy transition and a significant geopolitical realignment, according to a recent analysis. This shift is characterised by a persistent eastward movement of energy demand towards emerging Asia-Pacific markets and a gradual westward migration of supply towards unconventional resources in the Americas. These trends are identified as pivotal threads reshaping the industry's future.

Compounded by the dual catalysts of technological breakthroughs and climate policies, the sector now exhibits distinct characteristics, including a restructuring of supply-demand dynamics, accelerated technological iteration, and diverging policy orientations. Nations and regions are consequently forging differentiated development paths based on their resource endowments and strategic imperatives.

Core Characteristics of Global Energy Development

1. Supply Enters an Era of Diversification

Clean energy is experiencing rapid expansion, propelled by policy support, industrial development, and technological innovation. Between 2011 and 2021, the European Union witnessed an average annual growth rate of 6.9% in wind and solar energy consumption, with these sources accounting for 13.2% of its primary energy consumption by 2021.

Confronted with energy supply gaps, Europe has partially shifted its stance on nuclear power while accelerating the development of renewables. Multiple nations are advancing hydrogen and advanced nuclear technologies: the US established its Hydrogen Economy Roadmap, Europe released its European Hydrogen Roadmap, and Japan introduced its Hydrogen Utilisation Timetable. Significant progress has been reported in advanced nuclear technologies, including ultra-high-temperature gas-cooled reactors and sodium-cooled fast reactors, alongside controlled nuclear fusion.

Canada has built a comprehensive industrial system centred on oil sands resources, with over 98% of its oil reserves derived from this source. Its crude oil production reached 3.5 million barrels per day in 2013, of which oil sands contributed 1.9 million barrels per day.

Brazil, leveraging breakthroughs in sub-salt oil exploration technology, is projected to triple its production by 2035, potentially ascending to become the world's sixth-largest oil producer.

Concurrently, the relative standing of the Middle East as a traditional supply hub has diminished. Although nations like Saudi Arabia and Kuwait retain substantial reserves, OPEC's dominance has weakened alongside production growth from non-OPEC nations, heralding an era of diversified global supply.

2. Demand Centre Accelerates Eastward Shift

In stark contrast to the westward shift in supply, the global energy demand centre is accelerating its movement towards the Asia-Pacific region. The share of energy demand from developing economies is projected to rise from 59% in 2020 to 73%, with the Asia-Pacific region driving 61% of demand growth and accounting for 46% of total demand by 2060.

As the world's largest energy consumer, China's growing demand exerts increasing influence on global markets. By 2025, its crude oil reserves are set to reach 100 days' worth of consumption, establishing it as a key stabilising force. Emerging economies such as India and Southeast Asia, undergoing industrialisation, maintain annual oil and gas consumption growth rates of 3% to 5%, becoming the primary drivers of global demand expansion.

Within the energy consumption sphere, electrification is emerging as a core trend. Although the three conventional energy sources currently account for 82.3% of global energy consumption-representing 70.7% and 84.8% in Europe and the Asia-Pacific region respectively-new energy sources have become the primary driver of consumption growth.

3. Dual Breakthroughs in Unconventional Development and Low-Carbon Transition

Sun Longde, Academician of the Chinese Academy of Engineering, noted that the energy industry is shifting from 'resource dependency towards technological dependency-that is, innovation dependency'. He stated that although the world remains in the oil and gas era, production methods have undergone significant transformation, advancing in three dimensions: 'drilling depths exceeding ten thousand metres, nanoscale precision, and operational lifespans spanning over a century'.

4. Major Reconfiguration of Energy Trade

Regarding energy trade flows, the analysis notes that the United States has enhanced its influence in oil and gas trade, while China leads global development in new energy sources.

Development Trends and Policy Directions in Major Regions

1. Americas: Strengthening as an Unconventional Energy Hub

The Americas have established themselves as the new global core for oil and gas supply. The United States continues to consolidate its shale energy advantage, with policies focused on technological iteration and export expansion. Canada adopts a dual-track strategy prioritising both oil sands development and low-carbon transition. Brazil has designated deepwater oil development as a national strategic priority, aiming to become one of the world's top six oil producers by 2035.

2. Middle East: Traditional Powerhouses Seek Strategic Breakthroughs

Confronted by shifting supply dynamics and the low-carbon transition, Middle Eastern producers are pursuing strategic breakthroughs. Saudi Arabia is establishing a comprehensive regulatory system through its Petroleum and Petrochemicals Law, while maintaining production cuts via the OPEC+ mechanism. It is also accelerating its Vision 2030 initiative to diversify its economy.

Countries like the UAE and Kuwait are adopting a dual-track strategy of 'supply stability plus market expansion', maintaining traditional European market share while significantly increasing exports to Asian markets. Iran and Iraq are focusing on restoring production capacity to regain global market share.

3. Europe: Radical Low-Carbon Transition

The European Union remains firmly committed to becoming a carbon-neutral union by 2050. It has placed climate objectives at the core of its energy policy. Through the Carbon Border Adjustment Mechanism (CBAM), the EU incorporates carbon costs into refined oil imports, increasing refinery carbon costs by $12 per tonne.

On 27 July, US President Donald Trump and European Commission President Ursula von der Leyen held talks, culminating in a historic US-EU trade agreement. This includes a commitment by the EU to purchase $750 billion worth of US energy products over three years-equivalent to $250 billion annually.

Countries such as Germany and France are driving traditional oil and gas companies towards becoming integrated energy service providers, requiring major corporations to increase capital expenditure on low-carbon businesses to over 30%.

4. Asia-Pacific: Balancing Security and Transition

As the epicentre of global energy demand, the Asia-Pacific region exhibits a policy approach characterised by 'security first, gradual transition'. Professor Cui Shoujun of Renmin University of China stated that China should 'actively advance a diversified energy diplomacy strategy', deepening cooperation with the Middle East while expanding its footprint in the Americas.

India adopts a dual strategy of 'supply diversification plus strategic reserves', establishing 20 million tonnes of strategic coal-to-liquids emergency capacity. Japan and South Korea are vigorously developing LNG infrastructure and exploring integrated LNG-hydrogen utilisation pathways.

5. Russia: Strategic Shift to 'Eastern Expansion'

Driven by geopolitics, Russia's energy strategy has accelerated its pivot towards the Asia-Pacific. It has substantially increased crude oil and natural gas supplies to China, elevating the Asia-Pacific market's share of its exports from 30% to over 50%. Domestically, policy focuses on enhancing production capacity in eastern regions to establish a 'two-way east-west' supply system.

Report Highlights Four Key Energy Security Risks

The Global Energy Security Report (2024) released by CNPC's Economic Research Institute highlights four critical risks: 'geopolitics, electricity security, artificial intelligence, and sustainability'.

Among these, geopolitical confrontation represents the greatest threat. The report suggests a potential return of Donald Trump to office could intensify competition for oil and gas market share. Electricity security risks are becoming increasingly prominent due to unstable green electricity supply and extreme weather.

There is also a risk of artificial intelligence becoming 'uncontrollable', necessitating strengthened regulation. Furthermore, the pace of sustainability enhancement remains insufficient to safeguard humanity's future survival, with current global efforts in energy transition falling far short of climate targets.

Within this evolving landscape, the global energy and oil & gas industries are departing from an era of single-core dominance, entering a new phase characterised by 'diversified supply, Eastern demand, technology-driven innovation, and low-carbon transition'.