Natural gas to overtake coal, says ExxonMobil

NEW YORK - The Associated Press

ExxonMobil predicts demand for oil and gas will grow steadily because shippers and truckers will need more diesel to move more goods and utilities will need additional gas for power generation. REUTERS photo

Natural gas will overtake coal as a global energy source in the middle of the next decade, mainly due to the environmental benefits it offers, according to the latest energy outlook of ExxonMobil, the world’s largest energy company.

In its 2014 Outlook for Energy: A View to 2040, the company says around 2025 gas will become the world’s second most-used fuel on an energy-equivalent basis, behind oil, upon the rising demand for gas in power generation.

The outlook predicts demand for oil and natural gas, Exxon’s main products, will grow steadily because shippers and truckers will need more diesel to move more goods and utilities will need additional natural gas to make electricity for more people.

Use of coal, now the chief fuel for electricity and the second most important fuel in the world after oil, will flatten in the

next decades and slip to third place as countries shift to cleaner natural gas. Nuclear power and renewable electricity sources such as wind, solar and biofuels will grow fastest of all, but remain a small part of the energy mix by 2040 because they will remain expensive.

Reducing gas emissions

Exxon expects governments to impose costs on fossil fuel consumption and subsidize renewable energy in an effort to reduce emissions of gases that scientists say are causing climate change. Exxon expects those costs to be roughly $80 per ton of carbon dioxide— a price that may be explicit in the form of a carbon tax or baked in to the cost of new technology and equipment needed to meet stricter emissions limits.

Traditional fossil fuels will remain abundant, thanks to improvements in drilling technology. Drillers have learned to extract oil and gas from formations deep offshore and in shale and other rocks that were once impossible to tap. The amount of oil that can be extracted with today’s technology is growing, even though the world burns 90 million barrels of it every day.

By 2040, Exxon says, 65 percent of the world’s recoverable crude oil will still be in the ground.

A problem for drillers, though, is that the new oil that is being unlocked is more and more expensive to produce. That puts enormous strain on the global energy industry as it works to develop new fields to meet rising demand as current fields decline.

Despite the boom in oil production in North America, the Middle East will remain the center of world oil production. Exxon predicts the nations of OPEC will produce 45 percent of the world’s oil by 2040 up from about one-third now.

“In one way or another governments will put in place policy that will increase the cost of hydrocarbons, whether it’s on supply or consumption,” said Ken Cohen, Exxon’s vice president of public and government affairs.

The world energy demand will grow 35 percent by 2040 as electricity and modern fuels are brought to some of the billions of people in the developing world who currently live without power or burn wood or other biomass for cooking and heating, the company said.

Those growing needs will be somewhat offset by a slow decline in consumption in the far more energy-hungry economies of the developed world.