(Editor’s Note: In the past several years, few have doubted the growing importance of natural gas in the global supply picture. In this Q&A, originally published in the Lamp, an ExxonMobil magazine and reprinted here courtesy of ExxonMobil, Bill Colton, vice president, Corporate Strategic Planning, discusses the company’s global energy outlook through 2030, and the critical role that natural gas will play in meeting energy needs. Many of his comments are based on the company’s annual Outlook for Energy, regarded as one of the most relevant reports on oil and gas issues. For more information visit exxonmobil.com/energyoutlook.)
Q: What is the forecast for future energy demand worldwide?
Colton: According to our outlook, by 2030 ExxonMobil projects that global demand for energy will be about 35% higher than it was in 2005, even with substantial gains in energy efficiency.
Q: How does the world’s projected growth in energy demand differ between developed and developing nations?
Colton: Energy demand among the developed economies of the Organization for Economic Cooperation and Development (OECD) countries essentially will remain flat through 2030. This is quite an achievement when you consider that over this same period we expect GDP to expand by 60%. New technology makes this possible through improvements in energy efficiency. You can say that the greatest source of energy for the future is learning to use energy more efficiently.
Energy demand in non-OECD countries led by China and India will increase by more than 70%. This growth supports the expansion of these developing economies as living standards improve and GDP grows by more than 200%. The non-OECD countries’ faster growth rate will also give them an increasing share of global economic output, approaching 40% of global GDP by 2030. Accordingly, they will account for a growing share of energy demand.
Q: How do changes in the world’s population and standards of living affect energy-demand trends?
Colton: Population growth is one key factor behind rising energy demand. The world’s population in 1800 was about 1 billion. By 1950, it had grown to 2.5 billion. Today, only some 60 years later, the world’s population has expanded to about 6.7 billion. Advances in medicine, agriculture and other fields have improved health and longevity, impacting population trends.
Along with these advances has come a growing prosperity fueled by new technology and increased access to expanded forms of energy. A century ago, wood and coal were the primary sources of energy. Today, increased access to modern technology continues to drive growing demand for – and supplies of – oil and natural gas. Nuclear energy, wind, solar and biofuels are also contributing to the energy mix.
Throughout human history, we see a continual striving by people in all countries for a better quality of life for themselves and their families. This universal desire and demand for energy are linked. By 2030, the earth’s population is expected to be nearly 8 billion, with 85% living in non-OECD countries. A mix of economical energy supplies will be essential to the economic development that will make the improved living standards we all seek possible.
Q: It’s estimated that 20% of the world’s population – some 1.4 billion people – lacks access to electricity. Since electrical power for homes and businesses is critical to raising the standard of living you spoke about earlier, what is the outlook for electricity demand in the coming years?
Colton: The growth in demand for electricity will be tremendous, rising by more than 80% through 2030. Some 80% of this global growth will likely occur in non-OECD countries as they transition to more-developed economies. Indeed, electric-power demand in non-OECD countries led by China is expected to soar by more than 150% from the 2005 level. In comparison, demand in the developed economies will increase by about 25%.
The bulk of this growth will be in the residential/commercial sector, driven mostly by the addition of hundreds of millions of new households and rising economic prosperity. It has been estimated that by 2030 there will be 2.6 billion households in the world, compared with 900 million in 2005. Almost 90% of those new households will be in non-OECD countries.
Q: With demand for electricity growing significantly, what will be the impact on natural gas in fueling electric-power plants?
Colton: We project that natural gas will be the fastest-growing fuel, with demand increasing by 60% by 2030. This includes the direct use of gas in residences and commercial buildings, displacing coal, oil and traditional biomass fuels such as wood for heating and cooking.
However, the single largest factor will be power generation, where we see demand for natural gas growing by 85% from 2005 to 2030. By 2030, we project that natural gas will replace coal as the top source for generating electricity.
The reasons for the growing use of gas in generating electricity include cost and availability. In most regions, coal and natural gas are the most economical fuels for power plants. Further, advanced drilling, production and transportation technologies are making significant new supplies of natural gas available that in the recent past were considered too costly to develop. Among these are hydraulic fracturing combined with horizontal drilling and other technologies that in the United States alone have increased gas resources by 35 Tcf in just the last two years. In fact, recent studies have shown that the United States now has enough natural gas resources to supply the country’s needs for about 100 years at current demand levels.
Another key reason is the fact that gas is cleaner burning than coal. The power-generation sector is the largest single source of global energy-related carbon dioxide (CO-2) emissions. ExxonMobil expects that more governments will pursue policies to limit greenhouse gas emissions by placing a cost on CO-2 emissions. Coal, which emits far more CO-2 than other fuels, would become more costly. In fact, natural gas produces up to 60% fewer CO-2 emissions than coal. As a result, we anticipate that natural gas will become the fuel of choice for power generation.
Q: How is ExxonMobil positioned to take advantage of the demand growth for natural gas, both in the United States and worldwide?
Colton: ExxonMobil is very well-positioned, with a diverse global portfolio including both conventional and unconventional resources.
We’re the largest gas producer in the United States, and we have active exploration and development programs in most of the key gas plays to build on that position. We’re also the largest holder of natural gas on the Alaska North Slope in and around the giant Prudhoe Bay field, where gas resources are estimated at about 35 Tcf.
Worldwide, the company has access to more than 10 million net acres in emerging high-potential unconventional-resource (oil-sands and shale) plays in North and South America, Europe and Southeast Asia. ExxonMobil is also a leading gas producer in Europe and remains among the largest suppliers of domestic gas in Australia and Malaysia.
The company has a significant global position in the LNG market, supported by ventures in Qatar and Indonesia and new projects in Western Australia and Papua New Guinea. These will be increasingly important in supporting the steep demand increases projected for the Asia-Pacific region. We also have ownership interests in a number of LNG-regasification facilities in Europe and the United States.
Q: Looking at the United States, what is needed from a policy standpoint to develop more natural gas and other energy resources?
Colton: We need policies that allow natural gas to compete on a level playing field with other lower-emitting sources of fuel for generating electricity, such as renewables, clean coal and nuclear, without mandates or preferences. We also need policies that allow full access to potential U.S. resources.
Perhaps most importantly, we must have stable, predictable regulatory frameworks that allow for long-term planning and investment. By unlocking the United States’ vast shale-gas resources through technological advances, the oil and gas industry has provided Americans with a historic opportunity to restore economic growth and strengthen energy security. Sound, stable and sensible government policies are crucial to making this potential a reality.
Myths And Facts About Hydraulic Fracturing
Hydraulic fracturing has led to the development of trillions of cubic feet of natural gas in tight-sands and shale plays throughout North America in recent years, as well as new estimates that the United States has more than 100 years of recoverable supply. With natural gas projected to be the world’s fastest-growing fuel, especially in power generation, over the next 20 years, hydraulic fracturing will play a major part in the development of new gas supplies. However, there has been increasing debate about the responsible development of unconventional resources utilizing this technology. Here, according to ExxonMobil, are some common myths and the real facts:
Myth: Fracturing is risky, untested technology.
Fact: The industry has used hydraulic fracturing safely for more than 60 years in more than a million wells. In the past few years, fracturing has been combined with horizontal drilling, multi-zone stimulation and other technologies to recover trillions of cubic feet of unconventional gas trapped in low-permeability rock such as shale, tight sandstones and coal beds.
Myth: Hydraulic fracturing pollutes drinking water supplies.
Fact: Shale gas is typically produced thousands of feet below drinking water supplies. Between that water and the shale are multiple layers of impermeable rock. In addition, each well has steel pipe (known as surface casing) cemented into place for the explicit purpose of protecting groundwater. Government and independent studies have found no cases in which fracturing has contaminated underground drinking water supplies.
Myth: Companies refuse to disclose the materials they use in fracturing.
Fact: Water and sand comprise about 99.5% of the material used in hydraulic fracturing. ExxonMobil strongly supports the disclosure of the ingredients used in hydraulic-fracturing fluids on a well-by-well basis. In fact, ExxonMobil and other companies already list such ingredients on an Internet registry (www.fracfocus.org) dedicated to such disclosure. The website is a joint effort of the Interstate Oil and Gas Compact Commission (a multistate government agency that advocates for environmentally safe energy development) and the Groundwater Protection Council (an association of state water-protection agencies).
Myth: Fracturing consumes excessive volumes of water.
Fact: The volume of water used in hydraulic fracturing operations is far less than what is required to produce an equivalent amount of energy from coal (2 to 10 times as much water) or ethanol (up to 1,000 times as much water).
Myth: Water used in fracturing is routinely disposed of improperly.
Fact: There is nothing unique to the development of unconventional gas that creates different water-management issues than those the industry has long dealt with successfully and in compliance with government regulations. States regulate water use and disposal under the Federal Clean Water Act, the Safe Drinking Water Act and other statutes. Where possible, the water used in fracturing and natural gas development can be treated and reused in future wells, or it can be disposed of in accordance with applicable regulations.