Exxon outlook affirms the explosive growth of North American crude

Source: Nathanial Gronewold, E&E reporter • Posted: Thursday, December 13, 2012

HOUSTON — North America could become a net exporter of crude oil as early as 2025, according to one of the world’s largest oil, gas and petrochemical companies.

Natural gas will replace coal as the world’s second dominant source of energy in the coming decades, while the market for liquefied natural gas (LNG) will become much more diverse than it is today, executives at Exxon Mobil Corp. predict in their latest global energy outlook.

The company predicts that oil will remain the top source of energy to 2040 as it holds onto its role as the chief fuel for transportation. Any expansion of oil demand will come from commercial fleet vehicles and not from personal light vehicles, according to the outlook, and natural gas will also be increasingly used as a heavy vehicle fuel.

And despite several LNG export projects now in the works globally, Exxon Mobil officials say natural gas markets will maintain their regional pricing dynamics. Natural gas isn’t expected to become a globally traded commodity like oil is for the foreseeable future.

Those are just some of the forecasts laid out in Exxon Mobil’s 2013 outlook for the evolution of the world’s energy supplies and demand. The latest annual report was presented by company executives during a discussion yesterday at the Center for Strategic and International Studies in Washington, D.C.

“Oil remains the single largest source of energy,” said Exxon Mobil’s vice president for corporate strategic planning, William Cohen, during a presentation of the company’s outlook report. “The most significant shift occurs as natural gas replaces coal as the second largest fuel.”

The new report predicts weak demand for coal over the coming decades given concern over its chief role in contributing to climate change. By 2040, global coal demand will be at about where it was in 2010, Exxon Mobil predicts.

Cohen said his firm believes the world’s total energy needs will expand by 35 percent by 2040 from where they are today, to about 700 quadrillion British thermal units’ worth of annual energy output.

Almost all the increased energy demand will come from the developing world, but among advanced nations, Cohen said the United States is expected to account for about 20 percent of new energy demand “aided by a growing working age population.”

For transportation fuels, Exxon Mobil forecasts in its report that the United States will still be the largest demand center by 2040, followed by China. Fuel consumption for personal vehicle for the United States and other more developed nations will plateau and then gradually decline, thanks in large part to demographics and higher vehicle fuel efficiency standards mandated by governments.

Globally, “total transport demand increases by more than 40 percent,” Cohen said. “Heavy duty vehicle demand, the largest subsector, sees the largest growth, up 65 percent.”

In the overall energy mix, the use of renewable energy sources like wind and solar power will grow the fastest in annual percentage terms, but company officials maintain that they will still account for about 3 percent of the world’s total energy production in three decades.┬áNuclear power use will expand but not to the extent that is possible, held back by public opinion against its broader use, the report suggests.

Oil’s reign continues despite gas growth

Exxon Mobil officials say they don’t expect any fundamental changes to their business despite the growth of gas as an emerging major fuel source and its advantages over coal in terms of greenhouse gas emissions.

Looking ahead, the oil and gas supermajor sees crude oil remaining the dominant fuel powering the global economy. By 2040, the company believes 55 percent of crude oil supplies will come from conventional sources with the rest coming from tight and shale unconventional reserves and from deepwater offshore developments. Exxon Mobil predicts a major expansion into deepwater drilling over the coming decades in its outlook.

The United States’ oil imports from nations other than Canada and Mexico are seen as declining significantly over the coming years and perhaps ending entirely by 2025 or 2030. By that time, the world should be witnessing oil exports outside North America to other demand centers, either from Canada to Europe and Asia or even from the United States in limited quantities.

Exports of crude oil from the United States are currently strictly controlled and discouraged by the federal government, but Cohen said his company is holding out hope that officials will eventually come around to allow exports of shale oil as they will likely do for shale gas in the form of LNG.