ExxonMobil Plans Five-Year Investment of $185 Billion To Develop New Energy Supplies

November 2012, Vol. 239 No. 11

ExxonMobil plans to invest approximately $185 billion over the next five years to develop new supplies of energy to meet expected growth in demand, Chairman and CEO Rex W. Tillerson said recently in a presentation at the New York Stock Exchange.

“During challenging times for the global economy, ExxonMobil continues to invest to deliver the energy needed to underpin economic recovery and growth,” Tillerson told investment analysts. He said that even with significant efficiency gains, ExxonMobil expects global energy demand to increase by 30% by 2040, compared to 2010 levels. Demand for electricity will make natural gas the fastest growing major energy source and oil and natural gas are expected to meet 60% of energy needs over the next three decades.

To help meet that demand, ExxonMobil is anticipating an investment profile of approximately $37 billion per year through the year 2016.

“An unprecedented level of investment will be needed to develop new energy technologies to expand supply of traditional fuels and advance new energy sources,” said Tillerson. “We are developing a diverse portfolio of high-quality opportunities across all resource types and geographies.”

A total of 21 major oil and gas projects will begin production between 2012- 2014. In 2012- 2013, the company expects to start up nine major projects and anticipates adding more than 1 million net oil-equivalent barrels per day by 2016.

For further analysis, ExxonMobil has published 2012 The Outlook for Energy: A View to 2040, an update of the trends that company analysts believe will shape global energy supply and demand over the coming decades. The company identifies The Outlook as its guide to global investment decisions.

The views vary by region, reflecting diverse economic and demographic trends as well as the evolution of technology and government policies. Everywhere, though, ExxonMobil says it sees energy being used more efficiently and energy supplies continuing to diversify as new technologies and sources emerge.

Other key findings of Outlook include:
• Energy demand growth will slow as economies mature, efficiency gains accelerate and population growth moderates.
• In the countries belonging to the Organization for Economic Cooperation and Development (OECD) energy use remains essentially flat. Non-OECD energy demand will grow by close to 60%.
• By 2040, electricity generation (get fuel into electric generation chart & electricity generation by fuel chart) will account for more than 40% of global energy consumption.
• Oil will remain the most widely used fuel, but natural gas (get natural gas by type and by region charts and gas supply growth from region chart) will grow fast enough to overtake coal for the number two position.
• For both oil and natural gas, an increasing share of global supply will come from unconventional sources, such as those from shale formations.
• Demand for coal will peak and begin a gradual decline.
• Gains in efficiency through energy-saving practices and technologies will temper demand growth and curb emissions.
• Global energy-related carbon dioxide (CO-2) emissions will grow slowly, then level off around 2030.

Natural Gas
Natural gas will be the fastest-growing major fuel to 2040 with demand rising by more than 60%. Much of this growth will come from electric utilities and other consumers shifting away from coal in order to reduce CO-2 emissions. By 2025, natural gas – which emits up to 60% less CO-2 emissions than coal when used for electricity generation – will have overtaken coal as the second-most popular fuel, after oil.

Demand is expected to grow in every part of the world, but especially in the non-OECD countries in the Asia/Pacific region where demand for natural gas is expected to triple over the next 30 years. The Middle East also will see significant growth, while Russia/Caspian demand flattens.

Natural gas produced via conventional methods is growing in many regions, but declining in Europe and the United States. In the U.S. this decline will be offset by growth in unconventional gas – the natural gas found in shale and other rock formations that was once considered uneconomic to produce. Advances in unconventional U.S. natural gas production are expected to keep domestic supplies ample for the foreseeable future.

Energy Demand
Homes and businesses represent a significant portion of global energy demand, especially when electricity usage is considered. Through 2040, economic expansion, rising prosperity and a continued rise in the number of households globally will cause demand to grow by 25% in the residential/ commercial sector. Virtually all of this increase will come from non-OECD economies and almost all of it will be met by electricity and natural gas.

By 2040, there will be 2.8 billion households in the world, an increase of nearly 50% from 2010. These households will need energy for lighting, heating, cooking, hot water and refrigeration, as well as electricity to run everything from computers to air conditioners.

One of the most profound shifts in energy usage through 2040 will come from the transportation sector. The proliferation of hybrid and other advanced vehicles – along with improvements to conventional-vehicle efficiency – will result in flattening demand for personal transportation, even as the number of personal vehicles in the world doubles. In contrast, demand for fuel for commercial transportation will continue to rise sharply.

From 2010-2040, demand for energy for commercial transportation will rise by more than 70%. Most of this growth will come from heavy-duty vehicles. Global economic growth will drive a steep increase in demand for energy for commercial transportation as business activity and rising incomes enable increased movement of goods – both within and between nations.

Though the industrial sector may seem less connected to the daily lives of consumers it uses energy to make a host of essential products including plastics, steel and textiles. This sector also includes energy used for agriculture as well as the energy required to produce oil, natural gas and coal.

Globally, industrial demand for energy is expected to grow by about 30% from 2010-2040 and will continue to come from non-OECD countries. By extending The Outlook for Energy to 2040 this year, some important trends emerge within the non-OECD: a flattening of industrial demand in China and a pickup in growth in places like India and Africa. Through 2040 global demand for electricity will continue to rise steeply as the fuels used for generation continue to shift to lower-carbon sources, such as natural gas, nuclear and renewables.

Supply And Technology
Through 2040, improvements in technology will further expand supplies of oil and keep pace with expected strong growth in demand for natural gas. A global drive toward lower-carbon energy sources also will support strong growth in nuclear and renewable fuels, and the first-ever extended global decline in coal usage.

Oil and other liquid fuels will remain the world’s largest energy source in 2040, meeting about one-third of demand. Globally, demand for liquid fuels will rise by almost 30% over the next 30 years with nearly 80% of this increase tied to transportation.
Advances in technology will be key to expanding liquid fuel supplies. As conventional crude oil production holds relatively flat through 2040, demand growth will be met by newer sources. The biggest gains will come from global deepwater production which more than doubles through 2040, illustrating the power of new technologies. Deepwater production was in its infancy just 10 years ago; by 2025, it will provide 10% of global liquid fuels supplies.

The composition of liquid fuels is changing but the world continues to hold significant oil resources. Even by 2040, ExxonMobil estimates that less than half of the world’s oil will have been produced. As new technologies develop, estimates of the amount of remaining global resources continue to be revised.
liquids supply by type chart

More than 95% of crude oil produced today was discovered before the year 2000. About 75% was discovered before 1980. As demand rises, advances in technology continue to layer on new sources of supply. Decisions made decades ago to invest in technology, exploration and development are critical to meeting today’s energy demand. Decisions made today will help meet demand for generations to come.
global oil production by discovery date chart

Over the next 30 years, advances in technology will continue to remake the world’s energy landscape. Fuels will continue to grow less carbon-intensive and more diverse.

Through 2040, population and economic growth will drive demand higher, but the world will use energy more efficiently and shift toward lower-carbon fuels.

Population growth is one reason why ExxonMobil sees global energy demand rising by about 30% from 2010-to 2040. By 2040, there will be nearly 9 billion people on the planet, up from about 7 billion today.

But population growth is slowing. In some places many OECD-developed economies plus China, populations will change little by 2040. This global deceleration, coupled with gains in energy efficiency (1) (greenhouse gas reduction chart), will further the significant slowdown in energy demand growth that has been under way for decades. Of particular importance is a country’s working-age population – 15 to 64 – because that group is the engine for economic growth and energy demand.

Demographics by region chart

The world’s economies will continue to grow, but at varying rates. OECD economies are seen expanding by about 2% a year on average through 2040 as the U.S., European nations and others gradually recover and return to sustained growth. Non-OECD economies will grow much faster, at almost 4.5% a year.
This economic growth – and the improved living standards it enables – will require more energy. While the 30% increase expected in global energy demand is significant, and meeting it will require trillions of dollars in investment and advances in energy technology, growth in energy use would be more than four times that amount were it not for expected gains in energy efficiency across the world’s economies.

Natural Gas Will Become Number Two Fuel

Even with advances in efficiency, rising populations and expanding economies will produce a net increase in global energy demand. Demand for all forms of energy is projected to rise at an average annual rate of 0.9% a year from 2010-2040. Oil will remain the world’s top energy source, led by 70% growth in liquid petroleum demand in non-OECD nations. The fastest-growing major energy source will be natural gas with global demand rising by about 60% from 2010-2040. Demand for coal, on the other hand, will peak around 2025 and then gradually decline, as improved efficiency couples with a shift to less-carbon-intensive energies, particularly in the electricity generation sector. Global demand for the least carbon-intensive fuels – natural gas, nuclear and renewables – will rise at a faster-than-average rate. Wind, solar and biofuels also will see strong growth.

ExxonMobil expects global energy-related CO-2 emissions to level off around the year 2030, even as overall energy use continues to increase to support economic development and human progress around the world.

This global emissions trend is the result of significant improvements in energy efficiency, plus shifts toward natural gas and other less carbon-intensive fuels, as efforts continue to manage the risks posed by rising greenhouse gas emissions.

Concerns about the risks posed by rising greenhouse gas (GHG) emissions have prompted many countries to seek to curb their energy-related CO-2 emissions. Emissions growth is already slowing on a global level, and emissions are falling in North America, Europe and other OECD regions. But from now to 2040, several factors will combine to produce an important milestone: After emissions plateau around 2030, they will remain essentially unchanged from 2030-2040.

In the OECD, emissions are expected to decline by 20% through 2040. One factor is China, which accounts for 25% of global emissions. China’s emissions are expected to begin declining after about 2025, ending decades of very large increases associated with rapid economic development and industrial activity.

China’s drop in emissions will be brought about by many of the same trends at work today in the OECD. The biggest factor is improved efficiency: vehicles with better fuel economy, more efficient power plants and new technologies and practices that save energy across all end-use sectors. A shift toward less carbon-intensive fuels, particularly in the electricity generation sector, also will play a role. In China, as in the OECD, demographic trends also are moderating energy demand and emissions.

Because of efficiency and a shift to lower-carbon fuels, from 2010-2040, the rate of increase in global CO-2 emissions will be about half the rate of growth in global energy demand. However, the projected downturns in emissions in the OECD and China will be offset by continued increases from other non-OECD nations such as India.

Per-capita CO-2 emissions patterns are shifting. While the United States’ per-capita emissions remain the highest in the world, they are expected to decline significantly by 2040. Europe, whose per-capita emissions today are less than half the level seen in the U.S., also will see declines. China’s per-capita emissions, which have risen sharply in recent decades, will reach a par with the levels seen in Europe, but then begin declining after 2030.

However, many countries with very low per-capita emissions will see steep increases through 2040 as economic growth more than offsets the effect of improved efficiency. India will see its per-capita emissions rise by nearly 70%. However, even by 2040, India’s per-capita emissions will still be less than half the level seen in China. Large increases in per-capita emissions also will be seen in Africa and Latin America.

ExxonMobil has invested more than $125 billion in energy projects over the past five years, but the International Energy Agency estimates that to meet energy demand, global energy infrastructure investment will need to average $1.5 trillion per year (in year-2010 dollars) through 2035, with half of that amount related to oil and natural gas.

To avoid flaring, business environments need the right conditions, including available markets, nearby infrastructure, and appropriate regulations. Unfortunately, ExxonMobil says many of its remote upstream operations do not yet meet these criteria. In 2011, upstream flaring averaged 405 MMcf/d, an increase of 16% from 2010 and a reduction of 53% from 2007. Relative to ExxonMobil’s net direct GHG emissions, flaring contributed approximately 9%. Nigeria and Equatorial Guinea account for most of the flared gas, contributing about 68% of ExxonMobil’s total upstream flaring. The company says it will continue to make infrastructure investments to improve gas management in these countries.

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