July 19th, 2007 10:17 EST
Exxon, Global Economics and Energy
How much energy will the world need by 2030? To answer that, we analyze two primary factors influencing energy demand: population and economic output. In considering these factors, we assess developed (OECD) and developing (non-OECD) countries separately.
As populations expand and living standards improve, energy usage " for homes, cars and businesses " goes up.
The world`s population is expected to reach 8 billion by 2030, representing an average annual growth rate of 0.9% versus 2000. About 95% of this growth will occur in non-OECD countries.
Global GDP is likely to grow by 2.8% per year (market exchange rate basis) on average through 2030, with economic output more than doubling. OECD output will remain predominant but non-OECD output will grow faster.
Reflecting global population and GDP gains, we expect energy demand to rise by an average of 1.6% each year through 2030, reaching close to 325 million barrels per day of oil-equivalent (MBDOE). That`s 60% higher than in 2000. Again, energy demand will rise fastest in non-OECD nations, which will account for approximately 80% of the global increase.
Through 2030, energy demand will continue to grow more slowly than economic output. This reflects continuing gains in energy efficiency around the world.
As the global economy grows, so does demand for energy. But over time, the world also becomes more efficient in energy use.
In economic terms, this means the world is steadily reducing its energy intensity. In practical terms, it means we`re using energy more wisely through increasingly efficient homes, cars, appliances and businesses.
Ongoing gains in energy efficiency are critical to meeting future supply and demand challenges. We project that energy intensity reductions will represent savings of 140 MBDOE by 2030 compared to 2005 levels.
Put another way: If the world were to remain at 2005 energy intensity levels, global demand by 2030 could be 40% higher than our current outlook. It`s obvious that continuing to develop and adopt efficient energy practices and technologies is extremely important and prudent.
Most of the world`s growing energy needs through 2030 will continue to be met by oil, gas and coal.
Today, fossil fuels account for 80% of energy usage, and that percentage is expected to remain stable through 2030.
Demand for oil and other liquids (e.g. biofuels) is expected to climb by 1.4% each year, with rising demand tempered by efficiency gains. Driven by rising demand for electricity, the fastest-growing major energy sources are natural gas at approximately 1.7% annually and coal at about 1.6% annually. Demand for coal is driven by growth in non-OECD countries, primarily concentrated in the Asia-Pacific region.
Other energy sources " including nuclear power and renewable fuels such as biomass, hydro and geothermal power, wind, and solar energy " are expected to grow in total by 1.5% annually on average. The fastest-growing non-fossil fuels " wind and solar power " are expected to climb by 10.5% annually on average, but by 2030 will account for only about 1% of global energy demand.
We are a world on the move and liquids fuels are essential to meet these demands.
Not surprisingly, the projected 1.4% annual growth in global liquids demand through 2030 will be led by the transportation sector: mostly cars and trucks, but also airplanes, ships and trains.
Driven by increasing needs in non-OECD countries, global liquids demand for transportation is expected to rise by 1.8%, outpacing gains in industrial and residential/commercial demand.
Total liquids demand for transportation in 2030 will be about 65 million barrels a day, or about 50% higher than today.
It is an economic fact: people tend to buy cars as their incomes go up.
Countries whose economies are expanding rapidly usually see significant increases in vehicle purchases, until eventually they reach a vehicles-per-capita saturation point, where purchases level off. China, for example, is in the early stages of vehicle penetration. South Korea is in the middle of its development, while the U.S. is nearing saturation.
Globally, the number of light duty vehicles (such as cars and SUVs) is expected to rise by 2.1% annually through 2030.
That increase will come mostly from non-OECD countries, where fleets are seen rising by about 5% per year on average. In 2000, non-OECD vehicles totaled about 100 million. By 2030, that number will be almost 500 million, or about 40% of the world`s light duty fleet.
OECD nations today account for 80% of all the world`s light duty vehicles. But since their populations are growing slowly and they are closer to their vehicle saturation levels, vehicle fleet growth through 2030 is seen at only 1% annually.
Advances in technology continue to make vehicles more energy-efficient.
For example, in the U.S. the popularity of SUVs and small trucks " which make up half of all new light duty vehicle sales " has led to a significant rise in the average vehicle weight since 1980.
Normally, heavier vehicles consume more fuel. But average U.S. new car fuel economy has remained relatively stable since 1980 because real efficiency gains in vehicle technologies have worked to offset increased vehicle weight.
Had the weight of the average U.S. vehicle stayed the same since 1980, new vehicles in the U.S. could have seen a 1.3% average annual increase in fuel economy.
New technology will continue to make vehicles more efficient in coming decades.
One technology on the road today " a hybrid vehicle " uses an internal combustion engine (ICE) in tandem with an electric motor and battery pack to provide greater fuel economy and lower emissions by adjusting performance to better match driving conditions.
Other emerging technologies, such as Homogeneous Charge Compression Ignition (HCCI), show significant promise for fuel economy gains in the near-to-medium term. Engine technology featuring HCCI begins by mixing fuel and air in a cylinder, with the key result being a uniform mixture above the piston. Ignition occurs via compression, like a diesel engine, with very efficient combustion resulting in low emissions, like a gasoline engine.
ExxonMobil is working with automotive manufacturers on research with the goal of making HCCI a practical and effective engine technology option.
By 2030, we expect these types of advanced technologies to exist in about 30% of new vehicles, and about 10% of all light duty vehicles on the road. These may be hybrids, HCCI vehicles, or likely a mix of both. On average, we expect them to achieve 30% better fuel economy than conventional gasoline vehicles.
By 2030, the number of light-duty vehicles on the world`s roads will reach nearly 1.2 billion, close to double the levels of 2000. But increases in baseline vehicle efficiency and the penetration of advanced ICE/hybrid vehicles will help temper the rise in fuel demand.
Fuel usage is expected to rise by only 1.1% per year on average through 2030. All of that gain is expected to come from non-OECD countries, where tremendous growth in the number of vehicles more than offsets efficiency gains.
Light duty fuels demand in OECD countries is forecast to remain essentially unchanged through 2030 as efficiency gains offset modest growth in the number of vehicles.
With rising income levels, the world`s growing population will continue to demand more liquid fuels.
Global liquids demand, which today is ~85 MBDOE, is expected to rise to ~115 MBDOE by 2030.
The most significant source of liquids supply today " at close to 75 MBDOE " is conventional crude oil and condensate. These supplies will continue to grow through 2030.
Contributions from oil sands will also grow through the period, increasing from about 2 MBDOE to nearly 7 MBDOE. Supplies of natural gas liquids (NGLs) will also rise steadily, in line with increasing gas production.
The category labeled other " includes refinery processing gains, gas-to-liquids (GTL), coal-to-liquids (CTL), and shale oil. While growing, this category remains relatively small through 2030.
Biofuels, mainly ethanol but also biodiesel, are expected to grow fairly rapidly, reaching about 2 MBDOE or 2% of total liquid supplies by 2030.
Meeting the world`s growing energy needs will depend, as it has in the past, on advances in technology. Technology not only expands the range of where we produce, but it also extends the types of supplies available to meet demand.
Many of the world`s largest exploration and production projects are made possible by recent advances in technology.
For example, advanced deepwater technology is highlighted in our Kizomba A project off the coast of Angola in West Africa, where production is taking place in 4,000 feet of water. At our Sakhalin Island project in eastern Russia, under extremely challenging and remote arctic conditions, advanced drilling technology is enabling development of resources located six miles offshore from the onshore drilling facility. Synthetic crude upgraders, like the one pictured above in Fort McMurray, are helping capitalize on Canada`s huge oil sands resource base by enabling conversion of a very viscous crude into fuels for consumers.
Technology advances have been vital in overcoming what were once insurmountable challenges. Our ongoing commitment to technology as an enabler of new supplies will allow further extension of the available resource base to help meet growing demand.
Another way of understanding the impact of technology is to look at estimates of the world`s global resource base over time.
In 1984, the U.S. Geological Survey (USGS) estimated that there were less than 2 trillion barrels of conventional oil that could be recovered globally. But that estimate has grown steadily, to more than 3 trillion barrels, as new technologies have expanded the possibilities for exploration and production.
At ExxonMobil, our current estimate of the world`s recoverable conventional oil " 3.2 trillion barrels " is comparable to the most recent one from the USGS.
If we add estimated frontier " resources, such as heavy oil and shale oil, this total rises to over 4 trillion barrels. With continuing improvements in technology, this estimate is also likely to increase over time.
Since only about 1 trillion barrels of the world`s conventional oil has been produced so far, we see ample resources available to meet growing demand for oil through 2030.
In the coming decades, global trade will play an increasing role in meeting demand growth. The chart on the left provides an overview of major global liquids trade flows in 2000. The colored arrows show flows from various regions " for example, the Middle East in red and Africa in yellow. Arrows are sized proportionally to volume flows.
The total flows shown represent about 35 million barrels each day. This means about 40% of the oil consumed in one region originated in another region. North America is an example of a region with supplies coming from a very diverse set of sources.
Looking to 2030, on the right, we expect global liquids trade will increase more than 50%. Globally, more volume will originate from the Middle East and Russia/Caspian regions. Also significant will be increased flows to Europe and Asia Pacific.
This expanding global liquids market will encourage new production and supply diversity.
Biofuels have received a lot of attention as a liquids supply option. In discussing the potential of biofuels, it is important to understand the scale, cost and tradeoffs involved.
Total worldwide biofuels production today is below 1 MBD, but will likely climb to about 3 MBD by 2030 as government incentives and mandates drive average annual growth of about 7%.
However, because biofuels contain less energy than oil, their energy equivalent " volume will be closer to 2 MBDOE. At that level, biofuels will represent about 2% of overall liquids
demand in 2030.
Ethanol is and will remain the predominant biofuel worldwide, and we expect the largest producers will remain the United States and Brazil.
The way in which ethanol is produced varies by country, with scale and cost implications.
In considering scale and cost issues associated with biofuels production, we will begin by looking at the U.S.
The left-side chart shows that in the U.S., where ethanol is made from corn, production costs are about $2 per gallon (at production facilities, adjusted for energy content) based on a yield of approximately 350 gallons per acre. The vertical dashed lines represent estimated production costs for gasoline when crude oil prices are at $30 and $60 a barrel. The chart shows that the production cost of corn-based ethanol exceeds that of gasoline when crude is at $60.
On the right, we consider the issue of production scale. The top pie chart shows that corn-based ethanol currently meets 2% of U.S. gasoline demand. That represents about 4 billion gallons of ethanol, and requires 13% of the U.S. corn crop.
The U.S. government has mandated that ethanol supplies reach 7.5 billion gallons by 2012. At that level, ethanol will meet about 3% of U.S. gasoline demand, but require about 21% of the U.S. corn crop.
While U.S. corn-based ethanol production is likely to grow, this provides some perspective on its ultimate potential as an alternative fuel supply.