Energy outlook to 2040

December 16, 2012

The world’s largest energy producer, Exxon-Mobil, has published an outlook for world energy consumption and production to 2040. It is an interesting read and suggests a few things about the northern economy.

The report provides a 30 year view, extrapolating current trends.

• Energy demand in developing nations (Non OECD) will rise 65 percent by 2040 compared to 2010, reflecting growing prosperity and expanding economies. Overall, global energy demand will grow 35 percent, even with significant efficiency gains, as the world’s population expands from 7 billion people today to nearly 9 billion people by 2040.
• Technology is enabling the safe development of once hard-to-produce energy resources. This trend is apparent today with hydraulic fracking and horizontal drilling.
• Oil will remain the No. 1 global fuel, while natural gas will overtake coal for the No. 2 spot. Use of nuclear power and renewable energy will grow, while demand for coal peaks and then begins a gradual decline.
• North America will likely transition from a net importer to a net exporter of oil.
• China’s energy demand increased significantly over this period and now exceeds that of the United States. By 2040, almost 75 percent of China’s population will live in cities, nearly a complete reversal compared with 1980. China, like the west (OECD) is becoming a lower growth consumer society.
• Consumption of energy in North America and Europe is flat, while Asia/Africa heading higher.
• The two greatest energy supply growth areas are natural gas and the oil sands.By 2040, only about 55 percent of the world’s liquid supply will come from conventional crude oil production

There are shocking parts in the report, since they are not apparent from current trends. These are:

• Electricity generation represents the largest driver of demand for energy. Demand will grow by 85%. Now OECD consumes twice what the non OECD consumes. In less than 10 years they will consume equally. By 2040, non-OECD will consume 2.5 times the OECD.
• The rise of India and Africa in terms of relative importance in energy consumption by 2040. India’s population grows over 300 million between 2010 and 2040, and Africa’s population grows by about 800 million people. India becomes the most populous country in the world by 2030.
• Energy consumed by personal vehicles will gradually peak and then begin to fall as our cars, sports utility vehicles (SUVs) and small pickup trucks become much more fuel-efficient. The efficiency of light duty vehicles will increase from 27 mpg to 47 mpg due to: a)hybridization, b)vehicle downsizing, c)body and accessory advancements, and d)powertrain improvements.
• The two greatest transportation markets for natural gas are heavy duty trucking and marine. These two sectors have unique qualities that may provide stronger economic incentives for use of natural gas compared to light duty vehicles. ExxonMobil sees a shift toward natural gas in the marine sector, where it accounts for 8 percent of total demand by 2040.
• World CO2 emissions peak in 2030, then decline.
• There is a 200 year supply of natural gas at current demand levels.

 

Commentary

What does this report mean for the north to 2040 (if the projections are correct) ?

• The long term growth of demand for natural gas suggests LNG exports from BC and Alaska are viable. Natural gas use in heavy trucks and ships will accelerate.
• The outlook for uranium mining in Saskatchewan and Nunavut is positive as more nuclear reactors will need fuel.
• The development of the oil sands in Alberta and heavy oil in Saskatchewan/Alberta/Alaska will continue. This suggests that oil prices will remain high enough to spur this development.

Sources

• a) Exxon-Mobil "An outlook for energy to 2040" see http://www.exxonmobil.com/Corporate/files/news_pub_eo.pdf