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Vol. 9, No. 50 Week of December 12, 2004
Providing coverage of Alaska and northern Canada's oil and gas industry

No small task

Exxon: Industry must cough up $200B a year to meet future energy demand

Ray Tyson

Petroleum News Houston Correspondent

ExxonMobil believes sufficient oil and gas resources exist today to fuel global economies well into the century. But the company also says finding, developing and transporting them to market would require a staggering $200 billion a year in investment through 2030, the reach of the company’s latest industry forecast.

“The world’s remaining oil resources are huge,” ExxonMobil President Rex Tillerson declared. “But meeting this challenge will be a considerable undertaking for the industry.”

Tillerson also told analysts at the Dec. 7 at the Toronto Stock Exchange-sponsored Energy/Oil/Gas Virtual Forum that at current energy growth rates of 1.7 percent a year, the world would need to produce 335 million barrels of oil equivalent by 2030, representing more than a 50 percent increase from today’s 220 million barrels of equivalent per day.

It’s the first time ExxonMobil has released a forecast stretching to the year 2030. Previous forecasts looked out only to 2020.

“The known resource base is adequate to supply this growth but significant investments will be needed to deliver it,” Tillerson concluded.

Estimates include both conventional and unconventional

He said that while the actual amount of oil in place is unknown, reserve estimates for conventional oil range from 3 trillion to 6 trillion barrels, 3 trillion barrels of which are recoverable.

“Estimates of unconventional resources are also large,” Tillerson said, noting that an estimated 4 trillion barrels of in-place extra heavy oil and oil sands are concentrated in Canada, Venezuela, Russia and the Caspian Sea.

Based on “ever-improving recovery factors” of 20 to 25 percent, he said, 800 billion to 1 trillion barrels of heavy oil could be recovered over time, an amount equal to all conventional oil produced to date.

Moreover, it’s estimated that oil shale deposits containing an estimated 3 trillion barrels exist, half of which are located in the Green River formation of the western United States.

“The point being there are resources in place globally sufficient to achieve the levels of oil supply necessary to meet the demand well into the middle part of this century,” Tillerson said.

However, he said that while non-OPEC countries are expected to satisfy most of the growth in oil demand through the end of the current decade, the call on OPEC crude grows rapidly thereafter, “requiring OPEC to add more than 1 million barrels per day of capacity each year.”

Gas growth projected at 2.2% per year

On the gas side, ExxonMobil forecasts that overall growth from now until 2030 will be about 2.2 percent a year, the fastest growing among the major forms of energy. Power generation alone will account for about half of the growth, the company said.

“On a global basis, an increasing portion of gas supply is moving cross border and trans-ocean from exporting regions to importing regions,” Tillerson said.

He said that of total gas demand, imports currently make up about 8 percent of the pie, a level that is expected to increase to 22 percent or 110 billion cubic feet per day in 2030.

ExxonMobil projects that liquefied natural gas will represent about 14 percent of total world gas demand in 2020, or roughly two-thirds of “the global interregional gas trade.” LNG volumes are expected to grow close to 300 percent by 2030, from 16 bcf per day to 65 bcf per day, the company said.

Europe largest importer

Europe will continue to be the largest importer of natural gas, with imports expected to grow from a current 40 percent of supply to 70 percent in 2030, according to ExxonMobil. Pipeline supplies from the Russian and Caspian regions and North Africa will continue to represent Europe’s major sources of gas imports, with LNG shares being significant.

Imports into North America and Asia are expected to continue growing to more than 20 bcf per day by 2030.

“Over this time frame, natural gas will shift from a regional to a more global market, enabled by advances in LNG,” Tillerson said.

However, meeting future oil and gas demand “assumes that governments are willing to provide access to resources with sufficient fiscal certainty to encourage investment by industry, he said.

“These opportunities are capital intensive and are often in remote areas and in difficult physical environments,” Tillerson added.

ExxonMobil does envision a more diversified energy mix by 2030, one that includes more wind and solar-generated power, for example, along with more fuel-efficient automobiles and more stringent regulations governing greenhouse emissions. Without easing the pressure on oil and gas supplies, the company said, worldwide energy demand would rise to 450 million barrels of oil equivalent per day by 2030, rather than the 335 million barrels per day in the current forecast.

“That’s double today’s total energy consumption, an increase of more than 100 million barrels (per day) if we simply stand still,” said Alan Kelly, ExxonMobil’s general manager of corporate planning.

However, ExxonMobil believes that for the “foreseeable future,” fossil fuels are likely to be the only energy forms that have “the scale and versatility” to meet the growth in energy demand.

“If we can’t meet the significant supply and demand challenges, then economic growth is likely to be compromised,” Kelly said.



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