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Exxon’s 2040 Outlook: Fossil Fuels Aren’t Going Anywhere

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Gas, Nuclear, and Renewables Will Grow the Most, in that Order

The global energy mix will not look that much different for oil and gas in 2040, according to Exxon Mobil’s (ticker: XOM) recently released 2017 Outlook for Energy: A View to 2040.

(Click to enlarge)

Source: Exxon 2017 Outlook for Energy

Both the middle class and world GDP is expected to double in the next 15 years, accelerating demand for air conditioned homes, cars, and appliances such as refrigerators, washing machines, and smart phones. Non-OECD nations, particularly China and India, will experience the most economic growth, driven by urbanization.

Oil is expected to remain the world’s primary energy source, driven by demand for transportation fuel and feedstock for the chemical industry. Plastics and other advanced materials provide advantages to manufacturers and consumers including energy efficiency gains.

Natural gas is projected to grow the most of any energy type, accounting for a quarter of all demand by 2040. Coal will remain important but will lose a significant amount of its share as the world transitions to cleaner energy.

The World Electrifies

Increasing electrification will drive the growth in global energy demand over the next 25 years, 55 percent of energy demand growth coming from power generation to support increasingly digital and plugged-in lifestyles and electricity will grow the most of any sector.

(Click to enlarge)

Source: Exxon 2017 Outlook for Energy

Natural gas demand will increase significantly, with the fuel gaining share across all sectors due to its abundance and flexibility. Different sectors will use different types of energy based on their economic supply options and suitability to different purposes.

A wide variety of energy types will support electricity generation, with gas, nuclear, and renewables all increasing their share in the mix to offset the decline of coal.

LNG Critical to Supplying Natural Gas Net Importers

Evolving natural gas supply and demand will also cause gas trade balances to shift, with North America, Russia, and the Middle East being net gas exporters by 2040.

(Click to enlarge)

Source: Exxon 2017 Outlook for Energy

Asia Pacific will continue to be the largest gas importer despite growing production, with regional gas demand doubling by 2040. Demand in Europe will also grow as regional gas production there declines. Unconventional gas is expected to account for 33 percent of total gas production by 2040.

To meet increasing demand, LNG export supplies will need to diversify, with major new exports expected from the U.S., Canada, Australia, and East Africa. North America is expected to become the largest exporter due to growth in unconventional resources.

The LNG market is expected to remain highly competitive due to abundant resources and many potential exporters, so lower cost supply sources will have the advantage.

Liquids Demand Grows 20 percent ; Don’t Forget About Conventional

Demand for liquids, covering NGLs and all liquid fuels, is anticipated to grow 20 percent through 2040, with Latin America, Africa, Russia, the Middle East, and the Asia Pacific accounting for the largest increases. Chemical demand is expected to increase in all regions.

(Click to enlarge)

Source: Exxon 2017 Outlook for Energy

As with gas, Europe and Asia are expected to account for the majority of net imports, with the U.S., Middle East, and Russia remaining major exporters

Production from tight oil, deep water, and oil sands reserves will grow to account for over 25 percent of the liquid supply, with the U.S. producing the majority of all tight oil in 2040. However, continued investment in conventional crude and condensate will also be required to offset the decline in existing fields.

Exxon estimates that continued demand for liquids through 2040 will require upwards of $450 billion to meet demand. A lack of investment will cause liquids production to decline steeply and 80 percent of the current new liquids supply is needed to offset natural declines.

By Oil & Gas 360



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  • Bill Simpson on January 16 2017 said:
    They are wrong about the proportion of cars which will be electric in 2040. Pollution will force many countries to mandate them in developed, and even some lesser developed countries. My guess is about 30% of all new vehicles sold in 2040 will be pure electric. Batteries will get about 15% better by then. And gasoline will be very expensive by then. It could even be rationed. Oil is finite.
  • Jonathan Pulliam on January 15 2017 said:
    Author of this is sure no Nostradamus.
    Fusion power will have completely usurped role of fossil-derived hydrocarbon by 2040. Incontravertable fact. I'm sure people will still oil their sewing machines and machine tools with fossil-based lubricants. Just as the electrical industry requirements for gold are very minute, the demand for heating with fossil fuels in developed countries will be vanishingly small by 2040 if it exists at all..
  • Ras Moyag on January 11 2017 said:
    Climate change, not a mention. Well, of course, it's not expected in a report on energy production and forecasts, unless we really don't care about the world, and don't want to make any changes in the way we live. We don't want to make changes, but maybe we will be forced to. But let's just work on the basis that life's grand and it can only get better and better and better. Is there a doctor in this madhouse? Calling Dr Pangloss. Dr Pangloss?
  • Albrecht Glatzle on January 03 2017 said:
    JHM: Your optimistic view of the volatile renewables represents severe misinformation. There is one simple reason, why volatile energies, such as wind and solar never can outcompete traditional electric energy generation based on coal, gas, nuclear and also hydropower: You need conventional plants at a hundred % level of maximum demand to backup renewable energy supply, as there are quite a number of days without wind and sun, - at least as long there is no storage technology available that would not inflate the end consumer price at least 5-fold.
  • Ryan on January 02 2017 said:
    Matt Biddick - please add to the fact that the Nevada Solar plants have a high mortality rate for birds - they are being singed out of the skies yet the coverage for the protests are only shown in documentaries and (barely) on local media
  • Jeff on January 02 2017 said:
    Essentially Same prediction for 2040 as EIA, IEA and every other major institution whose job it is to analyze and forecast the energy industry.

    The reason readers are surprised by this is because the media has promoted renewables to such a degree. Result is that many believe solar and wind have already taken over, or are the process of doing so. In fact they are just a tiny fraction of total energy consumption. Solar less than half of one percent. But when polled the public thinks solar provides about 30%. The public thinks the fossil fuel industry is dying but don't realize that fossil fuels provide the same fraction of total primary energy in 2016 as they did in the 1970s.

    The public is misinformed and popular media is to blame.
  • Lee K Jehms on January 02 2017 said:
    Solid forecast from a solid company. No wailing or gnashing of teeth such as we hear from greenpeace or serra club.

    Wind and solar cannot survive without deep pocket government support. They are unreliable and cannot be called upon whenever needed.

    And who won the last election? Someone who wants to pour more billions down the drain of unreliable and poor quality energy? Not hardly.

    The big green fraud was the biggest loser.
  • Matt Biddick on January 02 2017 said:
    citymoments captured it quite succinctly I think. As for the other commenters, if they will dig into the actual Outlook report and look at how many hundreds of quadrillions of BTUs our global economy/lifestyle/existence requires then they will find the "rub" with the supposed transition to a fossil energy-free utopia. Renewables simply can"t get it done. I am all for renewables as long as they compete on a level playing field, meaning they use the same tax provisions that any business (in the USA anyway) has to their benefit. And by the way, the oil and gas industry gets slammed with fines if any bird so much as lands in a mud pit or a saltwater tank, but the wind energy folks can take out all the birds they want, including bald eagles, golden eagles, hawks, owls, bats, etc.
    When it comes to the energy business, it's Animal Farm all over again.
  • citymoments on January 02 2017 said:
    The earth climate has been changing since the time of earth formation - about 4 billion years ago. The earliest land plants appeared around 450 million years ago; the oldest multi-organ animal, jellyfish have roamed the sea for at least 500 million years. Human, as the homo sapient species, can only inhabit on land, under very fixed condition of air atmosphere, humidity and temperature. That is why we humans , only emerged as very late animal species on this planet, about one million years ago.

    Without some significant climate changes taken place before human existence, there would have been no such a species called homo sapient on this planet. Climate change, just like storms and earthquakes, has been a natural phenomenon for 4 billion years . '

    'Man made CO2 is the main cause for climate change on earth' is the most fraudulent notion in human history sanctioned by corrupted incompetent politicians, peddled by intellectual prostitutes, in order to extract taxes from the most productive people to fund the republic of parasites.
  • JHM on January 01 2017 said:
    Sounds too good to be true. Volume is one thing, profitability another.

    The problem with solar and wind is that it is so darn cheap, and battery storage is coming on as well. Both solar and wind are pressing into prices below $30/ MWh. The most efficient gas plants need to burn 8 mmbtu to generate 1 MWh. Thus, solar and wind put a price cap of about $3.75/mmbtu on gas and coal, and this price cap ignores recovery of capital and other O&M on fossil plants. So this price cap only applies to fully depreciated plants. For an new plant, Lazard has non-fuel cost at $26/MWh, so price for gas would need to be under $0.5/mmbtu to make the new gas plant competitive with a renewable PPA at $30/ MWh. So clearly renewables are close to shutting out new fossil generation, and exerting pricing pressure on gas and coal. What happens as solar gets cheaper? And what happens as the cost of combined solar with battery storage, which Lazard costs at $92/MWh, continues to fall? Either the price of gas and coal must continue to fall or the volume consumed must fall. For gas to remain profitable over the next 25 year it must retreat to being a niche fuel.

    So the folly of Exxon's rosy volume forecast is that it is only possible if gas can continue to fall in price about 10% each year to remain price competitive with wind, solar and batteries. How many years can the gas industry go down the path of 10% fall in prices while growing supply? Eventually, the ROI gets so poor that investments decline and renewables swoop in to gain market share.

    Be wary of volume forecasts. What matters is the price.
  • Lee James on December 31 2016 said:
    The world's largest publicly-traded oil company predicts business as usual. It's brilliantly self-serving.

    I love their product, but I can't wait to get off of it. The reasons are many and compelling: rising cost of production, health, having access to clean air and water, and -- too often overlooked -- national security. We are still a net importer of petroleum. World-wide, too many exporters use petroleum revenue to buy weapons and make war. We used to do it; now we have Russia and Iran eagerly jumping in to do some exalted person's supreme will.

    Time to do something different when it comes to burning fossil fuel. There's a big picture to consider and, hopefully, a long horizon.
  • k on December 31 2016 said:
    What a bunch of hooey. ExxonMobil reminds me of the story "emperor's new clothes". By 2040, Gas business will be severely challenged by renewables.

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