The 2012 Exxon Mobil view of the future

Each year the major oil companies publish their projections on fossil fuel supplies as they foresee them developing over future decades. Last year I reviewed those for BP; Exxon Mobil; and the projections from Shell. Exxon Mobil (EM) has just released their new set of projections. With this publication they have also stepped a little further into the future, looking to an end point in 2040, rather than the shorter 2030 time frame of last year’s report.

One of the immediately striking effects of the change in end date is the highlight on the growth of the global population. In last year’s document the global population was expected to reach 7.9 billion by 2030, now the projection is for the population to increase to nearly nine billion by 2040. We are at roughly 7 billion today, and the acceleration in the future growth rate of the population will make it more difficult to improve the average global lifestyle. This is particularly true when the locus of that growth is defined as coming largely from India and Africa.

Anticipated growth in population in various parts of the world (EM Outlook for Energy 2012)

More tellingly EM anticipates that the number of households will increase by 50% over the next 30 years, and with that growth comes the demand for electrical power. EM looks at both industrial and domestic energy demand growth, tying it in with this population growth, and expects that, while OECD GDP will more than double, it will do so with only a small amount of growth in energy demand, with the somewhat smaller growth in GDP in the rest of the world using a considerable amount more of the growth in energy demand that EM foresees. In countries such as China the increased demand for space and energy come as, with greater affluence, families will no longer remain crowded into multi-generational dwellings but will move more to single family occupancy.
(As an update and an illustration how two different folk can view the same document, you might find Gregor's post on the same topic of some interest).

Where the growth in demand will come from (EM Outlook for Energy 2012)

With the rising affluence of the developing countries, EM still continues to see continued improvements in energy efficiency lowering the overall average household demand for energy through the next three decades. It is an argument that I believe requires more justification than they provide. It is interesting, apropos my recent interest in Azerbaijan and Turkmenistan, that EM do not see much change in the fortunes of those who like around the Caspian Sea. It is perhaps a cynical, but realistic view of where that energy wealth will end up.

Change in domicile, and the energy demand for the average home (EM Outlook for Energy 2012)

The most important part of the Review however, since it deals with energy, is how EM decides where this future energy will come from. They see a large movement towards diesel in the transportation industry as hybrids and electric vehicles reduce gasoline demand, and increased fuel efficiency with lighter vehicles combine to stabilize the overall levels of gasoline required.

Change in the fuel mix needed for transportation.

Overall the amount of oil needed for transportation will continue to increase, overall by about 80%, and when this is combined with other needs, EM sees that global demand for oil will increase, by 2040 to around 110 mbd at a steady rate of increase overall from today, although the way in which the mix is put together is anticipated to change considerably. (And as an aside this projects less than a 1 mbd per year increase in demand, which falls below the levels which others, such as OPEC, foresee. OPEC anticipate a growth in demand of 1.1 mbd in 2012, according to the December MOMR).

Anticipated sources for oil through 2040 (EM Outlook for Energy 2012)

There are many features of interest in this summary chart. Given the decline rates that are now evident in conventional wells around the world, I do not see the discoveries being made that will justify the production levels that EM are predicting. The plot which is included, showing the production history from discoveries of different ages, is telling in this regard.

Production for well discoveries of a certain time (EM Outlook for Energy 2012)

EM notes that modern wells are more likely to be drilled with long laterals, rather than the simple vertical or slightly deviated wells of little more than a decade ago. But these new wells carry with them a much higher decline rate at the end of their lives than do the conventional wells (often more than double). Thus, as production declines from the older wells, so reliance must pass to new-found deposits, and that particular reserve is, as the above graph shows, somewhat thinner than volumes from the past, which are now starting to decline.

The savior of the next decades is foreseen to be the offshore Deepwater deposits, and certainly as one looks along the shores of Africa, South America and the Gulf of Mexico, to name but three, there is a considerable potential for some gain. Whether it will provide the sustained volumes needed to balance other declines and also produce enough to match increased demand is going to be a continuing question. With that in mind it is worth revisiting last year’s review to see where EM expect this Deepwater oil to come from.

Deepwater oil production (EM Outlook for Energy 2011)

As befitting an oil and gas company, perhaps, EM expects that oil production will remain a major part of the energy mix through 2040, with natural gas rising to carry an increasing burden of the overall picture at the expense of coal, and biomass whose shares of the global market are expected to decline starting somewhere about now.

Change in natural gas demand over the next 30 years. (EM Outlook for Energy 2012)

Composition of the fuel mix according to EM over the decades

Even though they project that coal will still be the cheapest fuel to buy and while solar will remain a luxury item, nevertheless EM anticipate that coal’s share of the electricity generating market will fall to less than 30% by 2040, and to less than 20% of the overall energy supply. This remains consistent with their opinions from last year. However they are now projecting a larger role for oil than they expected last year (when it was around 26% of total supply by 2030 and falling).