Energy demand shift

This morning we received a release from BHP Billiton titled Innovation and Trade Key to Meeting Global Energy Challenges which looks at their view on energy demand now and in the future. This statement from CEO Andrew Mackenzie I found very interesting.


"A fifth of the world's population still lack access to modern energy. However, as economic growth transforms developing nations over the next 20 years, 1.7 billion people will gain access to electricity for the first time. More broadly, global energy demand will increase by over 30 per cent, driven largely by China and India, with the fastest growth in Africa."


You see we are still coming off a low base with 20% of the worlds population have limited access to electricity. The important question now is what will be the source of this energy?


According to Mr Mackenzie renewables will be a growing source but fossil fuels will still remain the dominant provider. BHP anticipate that by 2030 over 70% of energy will still be supplied by oil, gas and coal. Of course gas has been very much in the spotlight since the fracking revolution and us as South Africans with big gas reserves should take note here.


But Billiton feel that shale gas is unlikely to take the globe by storm as it has in the States. This means that coal still has a very important role to play, especially in the developing markets. We can see that taking shape here locally. Billiton are well diversified amongst all the dominant energy sources and have positioned themselves to benefit from any growth in demand. More importantly the location of these assets are also very suitable.


We are strong believers that energy demand is going to be a strong growth area going forward. As you can see Billiton is a great way to benefit from such growth but is not the only one in our portfolios. Sasol has also positioned itself favourably with big expansion plans in Gas. GE in our US portfolios are very involved in alternate energy sources. It is a theme we will continue to back and invest in but we will remain very selective of the companies we use as entrants.