Our Energy Future: An Optimistic Outlook from Big Oil

The president of ExxonMobil, the world's largest energy company, Rex Tillerson gave a recent presentation on the energy outlook for the next few decades in Houston, Texas. Here are a few choice quotes and my comments.

"the total amount of energy used by 2030 will have increased by almost two-thirds"

According to Tillerson, Exxon expects (hopes?) that "by 2030 the share of energy supply from wind and solar will amount to less than 1% of the world's total energy demand."

"The world energy market is huge, and it will take a great deal of investment and a very long time before significant changes are going to be evident in the mix of energy sources that we depend upon for our economic prosperity."

And it will take a lot longer to change the energy mix if the world continues to be reliant on petroleum and becomes increasingly reliant on Liquefied Natural Gas as Exxon would like.

"We still have a fair amount of work to do to help governments and the public to understand that LNG is needed, can be supplied safely, and is a source of new reliable and affordable energy for this country."

ExxonMobil expects trade in natural gas between regions to continue to grow, with its share of total supply rising from 8% this year to 22% in 2030.

According to Tillerson "providing the enormous increase in global LNG that will be needed will be very extensive."

For extensive read expensive.

Tillerson noted that the International Energy Agency estimates LNG investments will total $250 billion through 2030. "When coupled with investments required for all other energy needs, this will present challenges to finance the incredible amount of energy infrastructure that will be needed."

Imagine if instead of spending hundreds of billions of dollars in building an internationl infrastructure to move around dwindling supplies of a finite resource (i.e. natural gas) the money was invested in renewable energy.

"Even with efficiency gains and new technology or alternative ways to generate energy, oil demand will continue to rise, such that by 2030 it could be almost 50% higher than it is today. That's a volume approaching 120 million b/d of oil. So if something is going to replace it, it's going to have to be very large"

Tillerson isn't kidding. Oil is a finite resource. And yet Exxon would like us to become more dependent on it in the coming decades.

In 2020, Tillerson noted, more than three quarters of oil and gas supply will have to come from new fields and new developments.

"for the foreseeable future, the world will be increasingly dependent upon the Organization of Petroleum Exporting Countries and the Middle East for energy."

"It is simply a reflection of where resources are to be found and how much energy will be needed to ensure continued global economic growth. There is very little that can be done to materially alter this reality with regard to conventional oil." Tillerson expects non-OPEC production of crude and condensate to peak in the next 10 years.

Beginning about 2010, the call on OPEC increases rapidly and will require OPEC to add more than 1 million b/d/year of capacity," Tillerson forecast. "The resources available to OPEC are adequate to accommodate this increase, and we are assuming that OPEC countries will make investments in a timely manner to meet rising demand."

That's one huge assumption. Let's just be clear that contained in that one sentence is the admission that world economic prosperity and security of energy supply is in the hands of the OPEC producers. I'd like to know on what basis Tillerson can confidently state that "the resources available to OPEC are adequate to accomodate this increase". OPEC reserves are national secrets and are not publicly available or independently audited. What if OPEC reserves aren't enough?

Article on the president of Exxon Mobil's speech in the Oil and Gas Journal

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