Thursday, January 27, 2011

Exxon on Gas: The Future's So Bright...

Exxon Mobil today released its annual Outlook for Energy report.  The report attempts to divine energy usage through the year 2030, placing energy use in a larger context of time and geography and it forms the basis for the company's strategy going forward.

Among the bottom line conclusions is that developing nations, especially China and India, will drive energy consumption in the next 20 years as a greater percentage of each country's "under-served" population gains access to integral components of modern life, such as automobiles and electricity, and industrial and manufacturing production in developing nations continues to grow at a rapid pace.  Not an earth-shattering conclusion, but it's interesting to see how energy fits into that larger picture.

Of particular interest, as summarized by an article in the Wall Street Journal, is that Exxon sees a brighter future for natural gas, especially to satisfy growing demand in developing nations.  Exxon expects natural gas to supply 26% of the world's energy needs in 2030, up from 21% in 2005, surpassing coal and second only to oil's 32% share.  The red bar on the graph below is natural gas.

Coal is not going away, as shown on the graphic below indicating that coal is is expected to continue to drive power generation in the Asia Pacific region, which will far surpass power generation in Western nations.  It's kind of scary to see the ramp up of coal use in the region:  as the graphic notes, coal used in power generation there will be more than four times the amount used in North America and Europe.

While Exxon estimates that coal will supply 20% of the world's energy needs in 20 years, its use is expected to drop significantly in the developed world, especially in North America for a variety of reasons.

The report is very interesting - it has a slick "annual report" feel and it is something of a marketing piece for Exxon, but it is full of interesting facts and analysis. But it also makes me realize that we - those of us with an interest in the Haynesville Shale - sit at the crossroads of a significant structural shift in the global energy market.  It's pretty amazing when you look at it in a larger context.

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