The one Energy Outlook I look forward to each January comes from our good friends at ExxonMobil. This year’s version is especially of interest to us because of its focus on natural gas and energy-efficiency issues.
Traditionally, oil companies have shied away from natural gas but recent developments, particularly with shale plays and other unconventional supply sources literally shaking the ground these companies are built on, have caused them to re-evaluate their short- and long-term business strategies. Strategizing in the oil industry is different from most other businesses because upper management needs to look ahead 10 years in planning where their supplies and reserves will come from, or else they won’t be in business.
ExxonMobil made two historic decisions in the past couple of years that strongly indicate where their future lies. First, they agreed to take a partnership with TransCanada in the proposed Alaska gasline project – suggesting they believe that supply will be needed in the lower 48 from 2020 on; second, they bought XTO Energy for $41 billion, placing them squarely in the Marcellus Shale which from all indications is the granddaddy of all shale plays, and making ExxonMobil the nation’s largest natural gas producer.
The Outlook for Energy: A View to 2030, estimates that expanded prosperity for a growing world population will drive an increase in energy demand of about 35% compared to 2005, even with significant efficiency gains, and natural gas will emerge as the second-largest energy source behind oil.
The report suggests that the growing use of natural gas and other less-carbon intensive energy supplies – combined with greater energy efficiency around the world – will help mitigate environmental effects of increased energy demand. This should mean that global energy-related carbon dioxide emissions growth will be lower than the projected average rate of growth in energy demand.
Said ExxonMobil Chairman and CEO Rex Tillerson: “The forecasts show a shift toward natural gas as businesses and governments look for reliable, affordable and cleaner ways to meet energy needs. Newly unlocked supplies of shale gas and other unconventional energy sources will be vital in meeting this demand.”
Rising electricity demand and the choice of fuels to generate it will have a dominant effect on the global energy landscape over next two decades, says ExxonMobil, with demand expected to rise by more than 80% through 2030 from 2005 levels. In the non-OECD (Organization for Economic Cooperation & Development) countries alone demand will exceed 150% as more people gain access to electricity.
With more nations putting an emphasis on limiting greenhouse gas emissions, abundant supplies of natural gas will become increasingly in demand as an economic source of electricity. So demand for natural gas for power generation is expected to rise by about 85% from 2005 to 2030 when natural gas will provide more than 25% of global electricity needs, says ExxonMobil. In China, for instance, natural gas demand by 2030 will be approximately six times what it was in 2005.
The report suggests there will be an expansion of natural gas supply, particularly in the United States, where unconventional supplies should exceed 50% of gas demand by 2030.
Efficiency gains should accelerate between 2005 and 2030 versus historical trends, thus helping curb global energy demand growth through 2030 by about 65%.
Power generation will represent 55% of the total growth in demand through 2030, accounting for about 40%of total primary energy demand.
Oil, natural gas and coal will continue to meet most of the world’s needs through this period with natural gas being the fastest growing because of its abundance, versatility and economic advantages as a fuel for power generation.
Wind, solar and biofuels will grow sharply through 2030 at nearly 10% annual average, but are still likely to contribute just 2.5% of total energy.
Let’s face it: increased use of natural gas is probably going to be one of the few areas where the administration and Republicans with their oil industry allies will be able to work together, at least in terms of any energy policy.
One more thing: Rex, could someone from ExxonMobil return a phone call, just once?