Tuesday, February 1, 2011

The ExxonMobil view of the future

A couple of weeks ago I reviewed the BP Energy Outlook to 2030, and noted, in passing, that there were a couple of assumptions that might be quite optimistic – though I did not get into the details of the forecast. ExxonMobil (EM) has also put out a forecast, and it could be informative to see what, comparatively, they anticipate for this same future period. I am going to try and follow the same steps that I did with the review of the BP plan, to make comparisons easier.

The first difference is in world population, which BP anticipates will grow by 1.4 billion by 2030, EM is a little more conservative, with growth closer to 1 billion for a total of 7.9 billion. (Current population is 6.9 billion. EM relies on the UN and the World Bank for its figure). In itself this changes the overall level of demand, since both expect that per capita consumption of energy will also rise. There is one oddity that I might initially mention (and yes I know the dollar base differs) but contrast these two graphs – the left is from BP and the right from EM.

While I did not get the scales exactly the same, you can see, to a first estimate, that the global GDP in 2030 for EM is roughly the same size as the Non-OECD GDP estimated by BP. (A quick check on Google says that the current GDP is at $58 trillion). This difference continues in the assumptions of the areas of greatest growth. While, as can be seen above, BP sees OECD growth as virtually flat and all the increment being from non-OECD, EM has OECD growing at 2% and non-OECD at 5%. But that will still only put the non-OECD at 40% of the global economy by 2030, which is the inverse of the BP projection.

Change in GDP does not however easily translate into changes in energy consumption, particularly given the much lower relative energy consumption of the non-OECD countries. EM sees energy use in the OECD staying relatively flat, the gain in GDP is accomplished with an increase in the efficiency of energy use. (Which agrees with the BP position). Thus by 2030 it is the non-OECD countries that will increase demand to the point that they will have an energy demand that is 75% higher than that of the OECD.

With that as background, where and how much energy does EM anticipate will be used in this future. To make the two forecasts simpler to follow I have had to convert since while BP works in millions of barrels of oil equivalent (mboe) throughout, EM uses Quadrillion Btu’s or Quads in places. (A barrel of oil is equivalent to 5.8 million Btu, or conversely 1 Quad is equivalent to 172 million boe). And then to make life a little more fun BP has used tons of oil equivalent, making the Quad equivalent to 24 million tons of oil equivalent. (Using 7.16 barrels to the ton to simplify future arithmetic). Having done that, and with a little Photoshop scaling, I can compare the two energy projections.

Comparison of BP and EM energy futures, (The vertical scale is in billions of tons of oil equivalent. )

One of the immediately obvious items is that the amount of coal use that EM is projecting is considerably less than that projected by BP, there is a little more use of oil, and about the same amount of NG.

BP had generated a graph that predicted that by 2030 oil’s share of the global market would continue to fall, while after an initial increase in percentage use, coal would fall on a parallel path with oil, so that, by 2030, both would share equally with natural gas at about 26% of the global energy market each. The remainder of the market, at about 7% each would be equally divided between Hydro, Nuclear and Renewables. Of these renewables (which include biofuels and biomass) would have the steepest increase.

Sources of Future Energy Supply (BP Energy Outlook)

EM on the other hand see the energy supply in 2030 being divided so that oil retains 32% of the overall; natural gas has risen to 26%, and coal has fallen to 21% of the overall. The non-fossil sources are divided 8% for nuclear, 3% for hydro and 11% for the renewables that include biofuels and waste (which is not separately identified by BP).

EM estimate of how fuel use will change over the next 20 years

The above plot shows percentage growth, rather than market share, so that while wind, solar and biofuel energy production grows strongly, by 2030 it is still providing only 3% of global energy.

Looking at the individual fossil fuels in turn – EM sees that India will provide the largest new market for coal, while Chinese demand will soon peak, and demand in the more industrialized nations declines in the face of increased concerns over carbon dioxide emissions.

Increased production from the Canadian oil sands will team with the growth of biofuels in a combined 5% contribution to global liquid fuels according to EM (this is a little less than that projected by BP, who has 2 mbd for oil sand and just over 4 mbd in biofuel growth). And, by 2030 EM expects that NGL supply will amount to about 10% of total hydrocarbon liquids, totaling around 11 mbd. This is quite a bit more than BP project (at about 4 mbd – though that is assigned only to the OPEC nations, and there could be more from other sources though that is not mentioned in the BP document).

EM’s answer to where all the additional oil is going to come from is Deepwater. It projects that by 2030 deepwater production will be at over 14 mbd. The more than doubling of production is anticipated to be almost across the globe, whether Africa, Europe, Latin America or North America.

Because of this emphasis on deepwater, and in order to provide reassurance against the likelihood of another major spill, EM discuss, within their document, the development of the Marine Well Containment System, which is designed to ensure against what happened this past year.

Natural Gas is the seen as the major growth fuel of the next 20 years, and EM anticipate that use of NG will rise to make it the second most popular fuel (bypassing coal but not oil) by 2030. Interestingly they see the supply of NG over the 2005 volumes as coming almost equally from conventional wells, from unconventional (gas shale) wells in the US and Canada, and from imports. (Though it doesn’t say where from). Unconventional supply is anticipated to grow five-fold.

In the end EM seems to be expecting more from natural gas than other fuels over the next twenty years, more so than BP. This seems to be a reasonable assumption, as I said when reviewing the BP projections, providing only that that there is that one new development (cheaper production and longer well life) that is needed for more viable shale gas production. This is particularly true when one looks at the primary sources of electric power generation, in the three main sectors of the world.

EM sees the United States and Europe being much more aggressive in reducing coal use, and expects a greater role to be played by nuclear power plants than BP.

In summary ExxonMobil has a much more positive view of the long term sustainability of oil as a fuel, with a much greater contribution from the deepwater than BP had projected. It sees the role of coal fading from the future energy field, while natural gas will continue to develop and gain market share.

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