ExxonMobil 2014 Outlook for Energy

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The Outlook for Energy: A View to 2040

2014


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1The Outlook for Energy: A View to 2040


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The Outlook for Energy is ExxonMobils long-term global view of energy demand and supply. Its ndings help guideExxonMobils long-term investments, and we share the Outlook to help promote better understanding of the issues shapingthe worlds energy future. Updated each year, this editioncovers the period to 2040.

2 exxonmobil.com/energyoutlook


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Few of us especially those of us living in advanced economies ever pause to re ect on the pervasive importance of energyto our lives. Thats only natural given the convenience andreliability of the energy we use. Consider electricity, for example.It ows when we ip a switch and suddenly theres light.We turn on a cell phone and instantly connect with othersaround the world. It happens so automatically, that onlydisruptions get our attention.

At the same time, few of us ever get a glimpse of the energybeing used miles away to produce this electricity for our bene t.Similarly, we expect our local service station will have fuel whenwe drive our car or truck in for a ll-up. Do we ever considerthe energy it took to get the gasoline to the station, let alone theenergy used to build our car?

Jim Yong Kim, President, World Bank Group



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Energy is everywhere andit transforms everythingThink about it. Energy is all around us. Vital in virtually

every aspect of our lives, its remarkable that the value of energy doesnt get broader recognition.

How are modern energy supplies paired with todaystechnologies to improve your own life? Yourewarmed in the winter and cooled in the summer,thanks to energy. Electricity powers your alarm clock, your television, and your cell phone. A refrigeratoruses energy to keep your food safe to consume and your oven uses energy to cook it. And before that, your food was grown by farmers, then processed,packaged and transported to the grocery storefrom another part of the country or the world,using energy at every step along the way.Essentially every task you perform and everyproduct you use throughout the day is madepossible because of energy.

It raises the question: why energy? The answer issimple. Energy helps us survive and frees us to pursuefuller lives in thousands of ways.

Today, most people are fortunate to have energysupplies and clean water owing directly to theirhomes. Modern appliances can handle tasks likecooking and laundry while we read an e-book,watch television, shop online, hit the treadmill,or challenge the kids to a video game, all in atemperature-controlled room.

We have unparalleled travel options. We can use amotorcycle, car, bus, truck, train, boat or plane.

We can dash to school, to work or to the grocerystore in minutes. We can drive hundreds of miles tosee family or y across an ocean in hours. And wecan trade goods with others thousands of miles away.

Energy not only powers all of this travel, it helps usbuild the vehicles and infrastructure that it requires.

When our loved ones are sick, energy is integral togetting them to the doctor and restoring their health.From hospitals and urgent-care facilities, to basicpharmaceutical drugs, to materials that keepequipment sterile, to high-tech diagnostic tools suchas MRIs, energy has a hand in producing andpowering our health system.

Our lives are also a ected by electric-powereddevices that are transforming communications andcomputing. Today, we can be in touch with someoneelse basically anytime, anywhere in a matter ofseconds. And with the Internet, we can transform theeducation of our children, telecommute to work,capture new trade opportunities, see distant friendsand family, or attend online classes to improveour education.

These technologies are widely used today onlybecause they provide practical value to people like



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you; value that would not exist without convenientaccess to modern and reliable energy supplies.This combination of technology and energy providesimportant synergies that improve human life. We canmeet basic needs much more e ciently and in turnpursue more valuable activities, whether it s timewith family and friends, furthering our education,inventing a new medical treatment, building a

business, playing or simply helping a neighbor.

Energy and human progress

The last two centuries have seen remarkablechanges across our world. The global populationhas increased from 1 billion to 7 billion people.At the same time, living standards have advanceddramatically in many parts of the world, supportedby modern technologies and access to energy.People with the freedom to innovate and thrive in

an environment of investment risk-and-reward leda burst of human progress, the pace and scaleof which has been remarkable. As an indicator,energy consumption worldwide is now about25 times higher than in 1800.

Expanding use of advanced technologies has alsocorrelated with increasing demand for coal, oil,natural gas and electricity. As technologies and needshave evolved, people have naturally sought practicalsolutions with energy that are reliable, a ordable andconvenient. An often unrecognized sign oftechnologys progress over time is dramatic energye ciency gains. For example, a steam engine in 1800at 6 percent e ciency pales in comparisonto a modern combined-cycle gas turbine with about60 percent e ciency. Its no coincidence that peoplesquest to improve the use of their resources alsoextends to energy.

Together, technology and energy advances havehelped bring about an unprecedented improvementin the key indicators of human well-being, includingincomes, literacy rates and average life expectancyin many parts of the world.

Still, this dramatic progress has not been seeneverywhere. According to the International EnergyAgency (IEA), 1.3 billion people live without access toelectricity, while 2.6 billion people rely on traditionalbiomass energy for cooking.

As the worlds population approaches 9 billion peoplein 2040, we are challenged to not just meet basicneeds, but also to improve living standardsthroughout the world.

In our view, meeting this challenge will requirean increase in energy use worldwide of about35 percent. The scale of the challenge may seemdaunting, but history demonstrates a remarkableability of people to overcome hurdles to progress.Fortunately, the world not only holds a vast and

diverse array of energy resources, but we alsopossess increasingly advanced technologies that cansafely and reliably supply this energy.

Another important aspect to improving standardsof living concerns the environment. Perhaps mosturgent are needs in many areas of the world forcleaner air and cleaner water. Nations around theworld also need to continue to address risksassociated with rising greenhouse gas (GHG)emissions. We expect advanced technologies andlower carbon fuels will help energy-related CO 2 emissions plateau around 2030.

In pondering our Outlook to 2040, we recognize thatpeoples lives and those of their children are beingtransformed by access to energy and technology.Going forward, we expect people everywhere willcontinue to invent, innovate, work and deliverpractical solutions to build a brighter future.Now, as always, that path to progress will bepowered by human ingenuity and energy.

Maria van der Hoeven, Executive Director, IEA



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Columbia Universitys Center on Global Energy Policy

Energy is about people individuals and societies usingelectricity, transportation fuels and other energy to makelife better. As economies and populations grow, and asliving standards improve for billions of people, the need forenergy will continue to rise. Even with signi cant e ciencygains, global energy demand is projected to rise byabout 35 percent from 2010 to 2040.



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People and economies needenergy to grow and thrive

From 2010 to 2040, the worlds population isprojected to rise from 7 billion to nearly 9 billion,and the global economy will more than double.Over that same period, global energy demandis likely to rise by about 35 percent.

But our worlds energy landscape is always morecomplex than it seems at rst glance.

Even a casual assessment reveals that the world is notone homogenous place, but rather many individualcountries and regions, each at a di erent stage of

economic and energy development. For example,economic growth in Organisation for EconomicCo-operation and Development (OECD) countrieswill likely average 2.0 percent annually, whilenon-OECD countries are expected to average4.4 percent a year through 2040. This growth ingross domestic product (GDP) means improvedquality of life for billions of people.

2000 2020 2040

Global populationBillions of people

0

3

6

9

OECD*

Key growth

China

India

Rest of world

*Mexico and Turkey included in key growth2000 2020 2040

Economic output (GDP)Trillions of 2005 dollars

0

80

60

40

20

100

120

OECD*

Key growth

China

India

Rest of world

*Mexico and Turkey included in key growth



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We can categorize our world in broad groups:

The United States and other OECD member nations.This group already has relatively high living standards,urbanization levels and per capita energy usere ecting well-advanced economies. As OECDeconomies continue to expand, improvements toenergy e ciency and slower population growth willcombine to keep overall energy demand essentially

at in these countries through 2040.

China and India. These two countries are the worldsmost populated, and each is in the process of makingbroad gains in living standards. By 2040, nine of theworlds 20 most populous cities and one of everythree people on the planet will be in Chinaor India. Together these nations account for halfof the projected growth in global energy demand.

China has been a dominant force in energy trendsover the past 20 years as its economy grew and livingstandards rose. Chinas energy demand will continueto grow substantially, but by 2040, China will have amuch more mature economy, with energy demandgrowth as well as economic and population growth slowing to a more temperate pace. India willcontinue to experience strong growth, with its largepopulation realizing signi cant gains in livingstandards. Since 2005, India has surpassed Japan andRussia to become the third-largest energy consumerbehind China and the United States a position it willlikely retain through 2040.

Key growth countries and other non-OECD. Economic progress will drive demand for energyin other non-OECD countries, where many morepeople will be able to a ord some or all of thehallmarks of a middle-class lifestyle, such as betterhomes, air conditioning, appliances, personal vehiclesand computers. The biggest gains should be seen in

10 key growth countries: Brazil, Indonesia,Saudi Arabia, Iran, South Africa, Nigeria, Thailand,Egypt, Mexico and Turkey. By 2040, these10 countries will have energy demand approachingthe level of China. Although Mexico and Turkey areOECD members, their signi cant population,economic and energy demand growth closelyresemble that of the other countries in this group.

Growing urbanizationdrives energy demand

As we have seen in developed economies overthe previous century, one important fundamental ofenergy demand is the migration of populations fromrural to urban areas. Naturally, the expansion of urbaninfrastructure creates demand for iron, steel, cementand other industrial goods that are energy intensive.

Urbanization also tends to drive energy demandhigher for several other reasons: Average urbanincome levels are higher than in rural areas;energy-intense manufacturing and other industriescluster around cities; and in developing economies,the number of people per household is usuallylower in urban settings, which leads to a highernumber of actual households.

2000 2020 2040

Global energy demandQuadrillion BTUs

0

450

300

150

600

750

OECD*

Key growth

China

India

Rest of world

*Mexico and Turkey included in key growth



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2010 city 10 million +

75-100% urban

50-75% urban

2040 city 10 million +

0-50% urban

Global urbanization and major cities in 2040

Source: United Nations and ExxonMobil estimates



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All this, combined with an expanding middle class,leads to a higher penetration of consumer electronics,personal vehicles, and other demands for energy.

By 2040, the proportion of people living in urbansettings in non-OECD countries is projected to rise

to about 60 percent, up from 45 percent in 2010and 30 percent in 1980. OECD urbanization ratesare likely to rise to 85 percent, from about 75 percent.

Even with all of this progress, the growth in globaldemand for energy is actually slowing down.While the projected rise in energy demand from2010 to 2040 is substantial, it is only about80 percent of the growth seen from 1980 to 2010.This is all the more remarkable because the growthin economic output from 2010 to 2040 will be morethan double the growth from 1980 to 2010.

This means that the world is continuing to becomemore e cient as prosperity advances.

This shift is due in part to advances in technology;for example, fuel demand for light-duty vehicles isexpected to be relatively at through 2040 asadvanced cars with better fuel economy enter themarket.

Energy e ciency works in every aspect of theworlds economy to o set demand growth.Its importance is il lustrated by recognizing that theprojected rise in population and GDP through 2040could have caused global energy demand to riseby more than 100 percent. But much of that demandincrease will be avoided because of advances inenergy e ciency across all sectors.

Another reason for the slowdown in global energydemand growth is the fact that over time,an increasing percentage of the worlds population including OECD countries and China will alreadyhave achieved a relatively high standard of living,with relatively stable energy needs.

While our economies become more e cient,commercial activities and consumer preferenceswill still drive global energy needs higher.While worldwide demand for energy that people usedirectly (in cars and homes) will grow through 2040,

there will be even larger increases in demand forenergy that serves people indirectly through thebroader economy. These needs include fuels formanufacturing, trucking and shipping, as well asenergy for power generation to support industrialcustomers, computers and telecommunications.

All energy sources should be pursued to meetglobal demand through 2040. New technologieswill continue to expand the worlds energy options.One prominent example is the rapid growth in theproduction of tight oil and shale gas that hasrevitalized North American energy production.

While oil will remain the fuel of choice fortransportation, natural gas is emerging stronglyas a growing fuel of choice for other sectors.Utilities and other consumers are turning to this

abundant, a ordable and clean-burning fuel. Half ofthe growth in demand for natural gas is being drivenby the need for electricity around the world, which isexpected to increase by 90 percent from 2010 to2040. Nuclear and renewable energy will also growto support electricity needs.



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People use energy for home, work and travel. People also use energyindirectly in ways they may not think about by purchasing goodsthat took energy to manufacture, package and ship; by making useof hospitals, schools and public safety services; or simply by using theInternet. Through 2040, the largest source of energy demand will befor fuels used to make electricity.

Daniel Yergin, Vice Chairman, IHS



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Energy use rises withimproved living standardsThree signi cant drivers of global energy trends increasing population, urbanization and rising livingstandards are clearly evident in the residential and

commercial sectors.

The majority of the growth in energy demand usedin buildings is expected to come from the residentialsector, although energy for commercial and otherpublic facilities will actually grow at a faster pace.These energy needs re ect rising populations as wellas an ongoing shift of people from rural to urbansettings. This shift generally leads to greater energyuse in homes and other buildings for cooking, indoor

temperature control, lighting, appliances and otherequipment (e.g., computer/information systems).

Demand in the residential sector is driven by twofactors: the number of households and the amountof energy used per household (energy intensity).

The total number of households in the world willrise signi cantly in coming decades; we expect anincrease of close to 50 percent, from 1.9 billionhouseholds in 2010 to 2.8 billion by 2040, due to increasing population and urbanization.

At the same time, urbanization and rising incomes particularly in China, India and the other 10 keygrowth countries are driving demand for energynot just for basic needs but also modern uses such as

Res/Comm demand by regionQuadrillion BTUs

0

50

100

150

Rest of world

Africa

India

China

OECD

2000 2020 2040

Households by regionMillions

OECDIndiaChina Africa0

200

300

500

600

900

100

400

700

800

Rest of world

2010

2040

Residential energy use per householdimprovements from 2010 to 2040

-21 %

-8 %

-8 %

-24 %

-14 %



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Urbanization ratioPercent

0

30

60

90

2010

India OECD World Africa China

2040

Source: United Nations

air conditioning, appliances and electronics. In ruralChina, there are only 16 air conditioners for every100 households; in urban areas, that ratio is 112 per 100.

Much of the underlying growth in residentialenergy demand, however, will be o set by thefact that household energy use continues to re ecte ciency gains . For example, according to theEnergy Information Administration (EIA), U.S. homesbuilt after 2000 consume about the same amount ofenergy as older homes despite being, on average,30 percent larger.

Globally, residential energy intensity is projected to fallby about 15 percent over the Outlook period ashomes become better insulated and make greateruse of energy-saving lighting and appliances.

Accounting for all of these factors, energy demand inthe residential sector is expected to rise by about20 percent from 2010 to 2040, with growth taperingafter around 2030 as Chinas urbanization begins toslow and residential energy demand in mature OECDeconomies actually declines.

The United States and other highlyurbanized economies have reached a point

where growth in energy use in homes isattening. Improvements to e ciency

better windows, for example areactually beginning to produce a netdecline in residential energy demand.But many other countries are in earlierstages of urbanization.

China. In 1990, only about 25 percent ofthe people in China lived in urban areas;by 2010, that number had grown close to50 percent. Over that time, residential

electricity use per capita had grown about20 times. By 2040, Chinas urbanization rateis projected to reach about 75 percent, butits growth in residential energy demand isexpected to begin leveling o .

India and Africa. In India, the proportionof people living in urban areas is expected torise from 30 percent in 2010 to 45 percent in2040. Africas urbanization rate is expectedto rise from about 40 percent to 50 percent.Demand for energy for residential purposesis expected to grow by about 35 percent inIndia and 70 percent in Africa over theOutlook period.

Urbanization brings a shift away fromtraditional fuels. In India and Africa,millions of people still get a signi cantamount of energy from biomass fuels likewood. Growth in the use of these fuels isslowing in favor of modern energy such asnatural gas, lique ed petroleum gas (LPG)

and electricity. Modern fuels burn muchcleaner, and are far more e cient.When used for cooking, modern fuelssuch as natural gas and LPG are about fourtimes more e cient than wood. The IEAestimates that 2.6 billion people, mostly inAfrica and developing Asia, lack access tomodern cooking fuels.

Energy and the city: Urbanization andits impact on residential energy trends



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Rising living standards and urbanization will alsoenable many people to change the types of fuel theyuse in their homes. The world will see a continuedshift toward electricity and natural gas and awayfrom biomass fuels, like wood, which today stillaccount for approximately 40 percent of globalresidential energy needs.

By 2040, electricity will likely account for aroundone-third of residential energy demand, comparedto 20 percent in 2010. Another fuel source thatshould see large growth is natural gas.

The shift away from less-e cient fuels like woodin the residential sector will help people in developingcountries improve their quality of life withoutnecessarily increasing their overall energy use.

In fact, one of the great challenges over the Outlook period will be extending access to the 1.3 billionpeople who are without electricity and 2.6 billionpeople who lack modern cooking facilities.

Signi cant trends are also seen in the commercialsector , which includes energy used in o ces, retailstores, hospitals and schools. Globally, commercial

demand for energy is rising, with growth projectedto gradually slow toward 2040. In addition, a greatershare of commercial energy use is likely to comefrom electricity rather than the direct use of fuelssuch as oil or coal. Commercial demand shouldrise by about 50 percent from 2010 to 2040.

Combined, total residential and commercial energydemand is projected to rise by around 30 percentfrom 2010 to 2040.

The residential/commercial sector is a growingcontributor to electricity demand, ultimately leadingto greater demand for the fuels used by utilities andother power generators.

United Nations, Energy for a Sustainable Future

Res/Comm demand by fuelQuadrillion BTUs

Electricity

Biomass

Coal

Gas

Oil

Other

2000 2020 2040



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The eet expands as manymore people can a ord carsLight-duty vehicles the cars, pickup trucks andsport utility vehicles (SUVs) that people use in their

daily lives represent one of the most visibledemand sectors.

Demand for fuel for these personal vehicles, which ismet nearly exclusively from oil, is expected to riseslowly over the next decade before gradually trendingdownward over the remainder of the Outlook period.

This shift in demand wont be because of fewer vehicles in the world. In fact, from 2010 to 2040, thenumber of light-duty vehicles the global eet is expected to more than double from about 800million to about 1.7 billion , as the worlds populationgrows and more people in developing economies areable to a ord cars.

In 2010, about 75 percent of the worlds vehicleswere in OECD countries. However, looking ahead,about 80 percent of the growth in the global eetwill come from non-OECD countries.

For example, it is estimated that in 2010 China hadonly about ve light-duty vehicles per 100 people,while India had fewer than two per 100 people; thiscompares to about 75 vehicles for every 100 peoplein the United States. However, by 2040, China andIndia are expected to increase their levels by morethan 500 percent. In fact, by 2030, we expect Chinawill have surpassed the United States as the countrywith the largest number of personal vehicles, eventhough Chinas vehicles per capita will be aboutone-third the level of the United States at that time.

Signi cant growth will also come from countries inLatin America, Africa and the Middle East, whichtogether will account for about 15 percent of thegrowth in the global eet. Collectively, these countriesare likely to increase their vehicle ownership by about80 percent as their total number of cars nearly triples.

Importantly, the increase in the number of light-duty vehicles in the world through 2040 will likely benearly o set by the fact that the vehicles themselveswill be far more fuel e cient . As a result, theaverage e ciency of the worlds vehicle eet is

Transportation demand by sectorMillions of oil-equivalent barrels per day

0

50

75

2000 2020 2040

25

Heavy duty

Aviation

Marine

Rail

Light duty



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projected to reach about 46 mpg (about 5.1 liters per100 km) compared to 24 mpg (9.8 liters per 100 km)in 2010.

This unprecedented improvement in global fueleconomy is expected to re ect a surge in hybrid vehicle sales. Hybrids, which combine an internalcombustion engine and an electric motor, are

expected to account for about half of globalnew-car sales by 2040, as they become increasinglycost competitive compared to conventional vehicles.

By 2040, hybrids are expected to account for about35 percent of the global light-duty vehicle eet, upfrom less than 1 percent in 2010. Over the sameperiod, electric and plug-in vehicles are expected togrow to about 70 million cars, or less than 5 percentof the total eet. This slower growth is attributed tothe relatively higher cost of the vehicles, driven by thecost of batteries.

Light-duty feet by typeMillion cars

0

600

1000

1200

1400

1800

200

2010 2015 2020

400

800

1600

Conventional dieselCNG and LPG

Full hybrid

Electric/plug-in

Conventional gasoline

2025 2030 20402035

Vehicle penetration 2000 to 2040Cars per 100 people

0

20

30

50

60

10

40

70

80

0 10 20 30 40 50

ChinaBrazil

Europe

Indonesia

United States(1960-2010)

GDP per capita (thousands of 2005 dollars)

As income (GDP per capita) rises ina country, vehicle ownership grows.

0

30

45

75

15

60

Range of average vehicle efficiency On-road miles per gallon

2010 2025 2040

United States

EuropeJapan

Global Average



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Demand climbingfor commercialtransportation fuels

While global energy demand for personaltransportation is expected to be relatively atover the next few decades, demand for energy for

commercial transportation trucks, planes, shipsand trains will continue to grow signi cantlyas economies expand and evolve.

Global demand for energy for commercialtransportation is expected to rise by 70 percentfrom 2010 to 2040, driven by the projected increasein economic activity and the associated increase inmovement of goods and freight.

Nearly every country will see an increase incommercial transportation energy demand through

2040, but China will see the largest increase morethan 4 million oil-equivalent barrels per day. In 2010,China trailed Europe, the United States and theMiddle East in terms of energy demand forcommercial transportation. By 2040, China isexpected to be in the No. 1 spot. India and Brazilwill also see large increases, with India having thehighest growth rate globally.

The increase in energy demand in the commercialtransportation sector is likely to be partially o setby signi cant improvements to fuel e ciency.For example, more e cient truck, aviation,marine and train eets, along with logistical systemimprovements such as intermodal shipping, will helpslow the growth in transportation energy demandin many countries.

The largest driver in commercial transportation

energy demand will come from heavy-duty vehiclessuch as trucks and buses. Demand for fuel forheavy-duty vehicles is projected to rise by about70 percent, and account for about 60 percent of thetotal increase. In fact, by 2040, the world will be usingabout the same amount of energy in heavy-duty vehicles as the total energy demand in all ofAfrica today.

0

8

12

20

4

16

Commercial transportation demand by regionMillions of oil-equivalent barrels per day

Rail

Marine

Aviation

Heavy duty 2010

2025

2040

Asia Pacifc North America Europe Latin America Middle East Rest of world



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Over the next few decades,we expect the mix of fuelsused for transportation tocontinue to evolve Liquid fuels gasoline, diesel, jet fuel and fuel oil will remain the energy of choice for most types

of transportation, because they o er a uniquecombination of a ordability, availability, portabilityand high energy density.

We expect global demand for gasoline (includingethanol) to be relatively at from 2010 to 2040,largely because cars and other light-duty vehicles willbecome much more e cient. On the other hand,demand for diesel (including biodiesel) will growsharply by about 75 percent to power the rise inactivity in trucks and other commercial transportation.Diesel will also play a more signi cant role in the

marine sector in the latter half of the Outlook period,in response to stricter marine emissions standards.Demand for jet fuel will also grow close to75 percent.

Natural gas is likely to grow in use as a transportationfuel, with its attractiveness enhanced by its relativelylow emissions and its a ordability relative to oil inmany parts of the world.

We expect that growth in natural gas as atransportation fuel will be seen mainly in commercial vehicles mostly eet trucks that can run oncompressed natural gas (CNG) and long-haul trucksthat can use lique ed natural gas (LNG). (See nextpage.) Lower-sulphur fuel regulations for marine vessels expected over the next decade may attractsome shipping companies to invest in LNG capability.

In 2010, natural gas accounted for about 1 percentof all transportation fuels, with about 45 percentof that demand concentrated in Asia Paci c. By 2040,the share of natural gas will likely rise to 5 percent,with growth driven by Asia Paci c andNorth America.

02000 2020 2040

Europe

0

15

20

25

30

10

5

2000 2020 2040

North America

0

15

20

25

30

10

5

Transportation fuel mix by regionMillions of oil-equivalent barrels per day

0

15

20

25

30

2000 2020 2040

10

5

Asia Pacifc

OtherNatural GasFuel Oil

Jet FuelBioDiesel

Diesel

Ethanol

Gasoline



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The rise in production of abundant naturalgas in North America and other regions hasled to heightened interest in natural gas as a

transportation fuel. The outlook for growthin natural gas in the transportation sectordi ers widely by mode of transportationand by region.

Around the world, the biggest interest innatural gas as a transportation fuel iscoming from owners of heavy-dutycommercial vehicles. Globally, andparticularly in the Asia Paci c region,compressed natural gas (CNG) is alreadya popular fuel choice for transit buses anddelivery and refuse truck eets. In theUnited States, equipping a truck to runon CNG costs about $30,000 more than adiesel truck, but potential fuel cost savingscould enable a ve-year payback time.

Long-haul trucks may favor lique ed naturalgas (LNG) because of its higher energydensity than CNG and the ability to travel upto 750 miles between ll-ups while pullingheavy loads. Fuel cost savings could recoupthe higher investment costs for an LNGtruck ($70,000 to $90,000 compared todiesel) within about three years.

In terms of light-duty passenger vehicles likecars and SUVs, several countries currentlyhave conditions that favor CNG vehicles,such as air pollution concerns in large urban

areas or an ample supply of natural gasrelative to re ned oil products. These includeArgentina, Brazil, Iran, Pakistan and India,

which together account for around80 percent of the global CNGpassenger eet.

However, ExxonMobil expects that outsideof these countries, growth in natural gas asa transportation fuel for light-duty vehicleswill be limited. While natural gas prices maybe lower than gasoline prices, fuel cost is just one dimension of a consumers decisionabout which vehicle to purchase. Otherdimensions include the fact that natural gas vehicles are more expensive.

In the United States today, CNG cars cancost about $8,000 more than comparablegasoline-powered cars. CNG vehicles havefuel economy similar to conventionalgasoline engines, so a typical driver wouldtake more than ve years to recoup theextra purchase cost.

Consumers looking to save fuel costs aremore likely to choose hybrid vehicles, whichare slightly more expensive thanconventional vehicles but have far higherfuel economy. CNG vehicles also have ashorter driving range up to 40 percentless than comparable vehicles using liquidfuels due to CNGs lower energy densityand the fact that an adequately sized

fuel tank is sometimes challenging to tinto a car.

In all sectors and regions, development ofa fueling infrastructure is one of the largesthurdles to natural gas vehicle (NGV)penetration. Fleets of vehicles that returnto base each day can economically bene tfrom a single, highly utilized CNG fuelingstation. Trucks that travel on establishedlong-haul corridors also have the potentialfor highly utilized, and therefore economic,LNG fueling stations.

Most challenging is building the fuelinginfrastructure for passenger vehicles,including a large network of easilyaccessible refueling stations, particularlybecause of the shorter driving range ofNGVs. In the United States, only about1 percent of fueling stations are equippedfor natural gas. Home refueling is an option,but the equipment cost can be as highas $4,000.

Ultimately, consumers individuals andbusinesses will assess their needs and thecosts of various options when deciding ifnatural gas as a transportation fuel is rightfor them. Markets will determine whichtransportation sectors can bene t most fromnatural gas and a fueling infrastructure willdevelop around those markets.

Natural gas as a transportation fuel



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Urbanization helpsfuel industrial demandThe industrial sector is a major consumer of energy,accounting for about half of all the electricityconsumed around the world and about 30 percent

of primary energy use.

Urbanization and rising living standards continue todrive industrial demand for energy. The expansion ofurban infrastructure creates new demand for steel,cement and other energy-intensive industrial goods.Growing middle-class populations will alsoincrease demand for consumer goods appliances,apparel and electronics that require energyto manufacture.

Urbanization is one reason why global industrialenergy demand is projected to rise by one-third through 2030, with almost all of the growthconcentrated in non-OECD countries. Global demandthen attens, however, as rising demand in India andother leading growth countries is o set by a major

development in the industrial sector: decliningindustrial demand in China post 2030 .

China is the worlds largest industrial energy userand is projected to remain so over the Outlook period. But Chinas industrial energy demand willlikely peak around 2030, re ecting e ciencyimprovements and the natural maturing of itseconomy after decades of rapid growth. In 2010,China produced almost 50 percent of the worlds iron,steel and cement; after 2020, we expect Chinasmarket share of these heavy industries to decline asits economy shifts toward higher-valuemanufacturing and services that have lowerenergy intensity.

By 2040, Chinas industrial demand is expected to be just 25 percent higher than in 2010; in contrast,Brazils will be nearly double and Indias about2 1/2 times the 2010 level.

Industrial energy demand by regionQuadrillion BTUs

2000 2020 20400

100

150

200

250

300

50

OECD

China

India

Rest of world

World Economic Forum, Global Agenda Council onAdvanced Manufacturing, 2013



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Global industrial energy use also is driven by thechemicals sector, where demand for energy is risingabout 50 percent faster than overall energy demand.Chemical companies use energy in two ways: as afuel and as a feedstock to make plastics and otherproducts essential to manufactured goods (seepage 27). Demand for these goods from consumerelectronics to medical equipment goes hand-in-

hand with rising living standards. The globalproduction of petrochemicals is expected to morethan double from 2010 to 2040. At the same time,fertilizer production will grow by about 25 percent,keeping pace with population growth.

The energy industry itself accounted for about20 percent of industrial energy demand in 2010,but its share is declining as the industry continuesto improve e ciency. More e cient energy extractionand processing, along with reductions in naturalgas aring, are likely to limit the growth in the energy

industrys demand to only 30 percent of the totalfossil-fuel growth rate.

Industrial demand for energy is afunction of production activity such as the manufacturing of steel,automobiles and chemicals andenergy intensity, or the amount ofenergy needed to produce eachunit of output.

Production activity (yellow bars) isexpected to rise with increasedurbanization and expanded globalprosperity. At the same time, continuedimprovements in energy e ciency(green bars) are expected to reduce

energy intensity. Because of thisimproved e ciency, growth in industrialenergy demand will be well below thegrowth in global production activity.

For chemicals, energy demand includesboth fuel and feedstock. Improvementsto energy e ciency can reduce only thefuel portion about 40 percent of thechemicals sectors energy demand.This is why chemicals e ciencyimprovements appear modest relativeto the improvements in heavy industryand the energy industry.

Efficiency offsets production growthQuadrillion BTUs

-100

-50

0

50

150

Net change in energy demand2010 vs. 2040

Increased production activity

Improved efficiency

Heavy industry

Chemicals

Energy industry

100

Industrial e ciency saves energy

Heavy industry

Other

Energy industry

Chemicals

Industrial energy demand by sectorPercent

2010

2040

American Iron and Steel Institute



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Two other elements of the industrial sector are thedemand for fuel for agriculture, which will rise tosupport a growing population, and growth inasphalt demand for road construction.

Increased industrial activity is one reason for theprojected strong growth in demand for energy fortrucks and other forms of commercial transportation

through 2040 (see page 21). This is especially truefor China, India and other leading growth countries,where rising domestic consumption and exports driverobust industrial growth.

Through 2040, there are likely to be signi cantchanges in the types of energy used in the industrialsector. Growth in unconventional sources of oil andnatural gas is helping the industrial sector shift awayfrom coal and curb direct CO 2 emissions. By 2040,the industrial sector is projected to get only about15 percent of its direct energy from coal, compared

to over 20 percent in 2010. At the same time, naturalgas and electricity are likely to increase their sharesof industrial energy.

In the chemicals sector, rising demand for chemicalproducts will drive increased demand for the liquidsthat are used as chemical feedstocks: oil-basedfeedstocks like naphtha and natural gas liquids(NGLs) such as ethane.

2040

NGLs

Naphtha

Otheroil

Other

Electricity

Coal

Gas

2010

Industrial energy demand by fuelPercent

McKinsey Global Institute,Manufacturing the future: The next eraof global growth and innovation. November 2012



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One aspect of global oil and natural gasdemand that is not always obvious is thelink to the plastics and other petrochemicalsthat are integral to many of todaysmanufactured products.

The chemicals industry is unique amongenergy consumers because it uses energyin two ways. Only about 40 percent of theindustrys energy consumption is used fortypical purposes like heat and power. Theremainder is the oil and natural gas liquids(NGLs) that chemical companies use as rawmaterials to make the building blocks for awide range of essential products. NGLs suchas ethane, propane and butane are the valuable byproducts of production fromnatural gas wells.

The products of oil and NGL feedstocksinclude consumer goods such as plastics,rubber, paint, ink, electronics,pharmaceuticals, packaging and personalcare products. They also include industrialproducts like solvents, resins and coatings.And they include manufactured productssuch as auto parts, furniture, ooring,appliances, medical equipment and surgicalsupplies. Natural gas itself can also be afeedstock for products such as fertilizers.

At a chemical plant, steam cracking is one ofthe main processes used to turn feedstocksinto intermediate chemical products such asethylene and propylene, which are furtherprocessed to form plastics and otherend-use products. About 70 to 80 percentof the energy consumed in steam crackingis due to the raw materials that are notcombusted as fuels but rather transformedinto other materials.

Rising natural gas production, particularlyin North America, has reshaped thechemicals industry by shifting theeconomics of chemical production infavor of North American manufacturers. Aside from the Middle East, North Americais the only region of the world where moststeam cracking facilities are designed to useNGLs rather than the more expensiveoil-based feedstocks used in Europe and Asia Paci c.

The twofold advantage of access toan abundant supply of a ordable naturalgas (for fuel) and NGLs (for feedstocks)is leading to a resurgence in theNorth American chemicals industryand positioning the region to help meetrising global demand for chemicals.

Energy demand from the chemicals industryis projected to grow faster than the overallgrowth in energy demand as risingstandards of living, particularly by the middleclass in developing parts of the world,drive growth for goods made fromchemical products.

Global chemicals energy demand isexpected to rise by about 55 percentfrom 2010 to 2040, and will account for35 percent of the growth in the industrialsector. Most of the growth in energydemand in the chemicals sector will be forthe feedstocks to make manufacturedgoods; fuel demand will grow more slowlyas improvements to e ciency reducedemand growth.

Today, natural gas and electricity alreadyaccount for more than half of the energyused for fuel purposes in chemical plants.That percentage will continue to grow overthe Outlook period, as solid fuels like coaldecline over time.

Chemicals demand more than just fuel



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Power generation isthe fastest-growingmajor demand sector

Only a century ago, electricity was just emerging

for general use. Its remarkable, then, that powergeneration today is the worlds single-largest sourceof energy demand. Worldwide electricity use isprojected to increase by 90 percent from 2010 to2040, with developing countries accounting for theoverwhelming majority of that increase.

Improved living standards are one reason for thisprojected growth in electricity demand. Urbanization

and rising incomes lead to increases in householdand industrial electricity consumption, including widerpenetration of electronics, appliances and othermodern conveniences. Other contributors to thegrowth in electricity demand include expanding useof the Internet, wireless communications and other

information technologies.

As a result, electricity is expected to capture asigni cant share of the overall growth in nal energyneeds in the residential/commercial and industrialsectors, continuing a trend of the last 20 years.

In the residential/commercial sector, electricity isexpected to account for about 85 percent of the

Global electricity demand by sectorThousands of terawatt hours

0

10

20

30

40

2000 2020 2040

Residential

Commercial

Heavy industry

Transportation

Other industry

Global electricity supply by fuelThousands of terawatt hours

0

10

20

30

40

2000 2020 2040

Gas

Coal

Nuclear

Wind and solar

Other renewables

Oil



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growth in energy needs and help displace biomassfuels like wood, which are far more labor intensive,much less e cient and potentially harmful tohuman health.

In the industrial sector, electricity usage will likelyincrease about 90 percent and account forapproximately 40 percent of the growth inenergy needs.

Electricity use for transportation is also an area ofsigni cant interest. However, while this demand islikely to more than double by 2040, transportationsshare of global electricity demand will remain small at about 2 percent in 2040.

The same fundamentals that have contributed tohigher electricity usage in OECD countries areincreasingly driving higher electicity demand inother parts of the world.

For example, the Asia Paci c regions electricity usageper capita is expected to double over the Outlook period, after already having risen about 1.5 times over

the past 20 years in conjunction with urbanizationand rising living standards. China and India areexpected to play an important role in this growth,with Chinas per capita electricity consumption morethan doubling, and Indias nearly quadrupling.

Even by 2040, the Asia Paci c regions per capitaelectricity usage will likely only be about one-thirdof North Americas level. Electricity use per capitain China is expected to be about half that of theUnited States, while India is expected to be about15 percent that of the United States in 2040.

0

2

6

8

10

12

Electricity use by regionMegawatt hours per capita

Population (billions)

0 1 2 3 4 5 6 7 8 9 10

North America

Europe

Middle East

Asia Pacifc

Latin America

Rest of world2010

2040

4



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Natural gas to overtake coalas largest source of electricity Utilities and other power producers around the worldcan choose from a variety of fuels to make electricity.They typically seek to use energy sources andtechnologies that enable reliable and relativelylow-cost power generation while meeting

environmental standards. Over the Outlook period,we anticipate that public policies will continue toevolve to place tighter standards and/or higher costson emissions including CO2 while also promotingrenewables. As a result, we expect the power sectorto adopt combinations of fuels and technologies thatreduce emissions but also raise the cost of electricity.

At the same time, the sector will also need to managereliability challenges associated with increasingpenetration of intermittent renewables, like wind andsolar. These renewables have a cost, which is often

overlooked, related to reliablility for times when thewind is not blowing and the sun is not shining.

Fuel input to power generation is projected to riseby more than 50 percent, faster than any othersector, over the Outlook period.

In 2010, coal was the worlds No. 1 fuel for powergeneration, accounting for about 45 percent of fueldemand. Though coal use will likely increase byabout 55 percent in developing countries by 2040,it continues to lose ground in developed countries primarily to natural gas and renewables such as windand solar.

By 2040, demand for natural gas in the powergeneration sector is expected to rise by closeto 80 percent. At that t ime, natural gas will beapproaching coal as the worlds largest energysource for power generation, and coals sharewill have dropped to about 30 percent. Natural gaswill actually produce more electricity than coal,re ecting e ciency advantages of gas- red versus coal- red power plants.

Increased local natural gas production inNorth America and elsewhere, along with expanded

international trade, is expected to supply the gas forpower generation.

By 2040, we expect that the use of nuclear powerwill approximately double and renewables willincrease by about 150 percent, led by wind andhydroelectric power.

Fuel input to power generationQuadrillion BTUs

0

100

200

350

2000 2020 2040

300

Renewables

Nuclear

Coal

Gas

Oil

250

150

50

Growth in fuel for power generation2010-2040 in quadrillion BTUs

0

20

40

60

80

100

- 20

Renewables

Nuclear

Oil

Gas

Coal

North America

Latin America

Europe Rest ofworld

MiddleEast

AsiaPacifc



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The shift away from coal and toward natural gas,nuclear and renewables in the power generationsector is an important contributor to the projectedslowdown in global energy-related CO 2 emissionsover the Outlook period (see page 32).

Trends vary by region. In China, the worlds largestconsumer of fuels for power generation, demand for

coal will likely continue to climb through 2025, butthen begin to decline as the country advances itse orts to improve air quality and diversify its energysources. By 2040, coal is likely to account for onlyabout 45 percent of energy used for powergeneration in China, compared to about 85 percentin 2010.

The use of coal for power generation will likelycontinue to rise in many developing countries,such as India and much of Southeast Asia.

As with any decision about energy usage, economicsplay an important role. In the power generationsector, cost-bene t analyses are in uenced by policiesthat seek to reduce CO 2 emissions by e ectivelyimposing a cost of carbon. Natural gas and coal are,in general, the lowest-cost options for powergeneration. But when a signi cant cost of carbon is

imposed, coal- red plants become less competitivewith lower-emission alternatives like natural gas,nuclear and renewables.

To reduce CO 2 emissions associated withpower generation using natural gas and coal,one technology often discussed is carbon captureand storage (CCS). Since new gas- red power plantsare likely to generate about 50 percent fewer CO 2

emissions than new coal- red plants, we expectgas- red CCS plants will provide lower-cost electricitythan coal- red CCS plants. However, CCS technologyin any case faces substantial economic and practicalhurdles, which are expected to continue to limit itssigni cant deployment over the Outlook period.

0

3

6

9

12

15

$0/Tonneof CO2

$60/Tonneof CO 2

Gas Coal Nuclear

Average U.S. cost of electricity generation in 2030Cost per kilowatt hour in 2013 cents

CCS gas Onshorewind

Solar PVutility

Reliability cost*

Baseload Intermittent

*Reliability cost includes integration, backup capacity and additional transmission costs.

CCS coal

$0

$0

$60

$0

$0

$60

$60

$60



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Markets, technology andpublic policies a ect energychoices and emissionsIn recent years, many nations have begun to

identify and address climate risks associatedwith rising GHG emissions. Since energy useis a signi cant contributor to GHG emissions,climate policies that target these emissions arelikely to play a signi cant role in the worlds energyfuture by directly and indirectly a ecting peoplesenergy choices.

Since energy use is pervasive in every aspect of lifearound the world, and since policies to address

GHG and more speci cally CO 2 emissions willtend to raise the cost of energy and related activities,many countries are taking care in structuring both thenature and the pace of GHG policy initiatives. Thisapproach is understandable as a way to manageclimate risks associated with GHG emissions while

also minimizing related policy impacts on localeconomies, industrial competitiveness, energysecurity and the peoples ability to pay higher costs.

Although climate policies remain uncertain today,for purposes of the Outlook to 2040, we assumethat governments will continue to gradually adopt awide variety of more stringent policies to help stemGHG emissions.

Over time, as these policies advance and peoplerespond to rising energy costs, we anticipategreater adoption of energy-saving technologiesand practices, as well as lower CO 2 emissions perunit of energy consumed. For example, in the powergeneration sector, policies to stem GHG emissionswill likely raise electricity costs for consumers,slowing demand growth. Power producers will alsoseek to utilize more e cient electricity-generatingtechnologies, and shift from coal towardlower-emission fuel sources like natural gas,nuclear and renewables.

To help model the potential impacts of a broadmosaic of future GHG policies, we use a simple costof carbon as a proxy mechanism. For example, inmost OECD nations, we assume an implied cost ofCO2 emissions that will reach about $80 per tonne in2040. OECD nations are likely to continue to lead theway in adopting these policies, with developingnations gradually following, led by China.

Energy-related CO 2 emissionsBillion tonnes

0

10

20

30

40

North America

Europe

Russia/CaspianLatin America

Africa

Middle East

Asia Pacifc

2000 2020 2040



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CO2 emissions relative to energy efficiency and fuel mix changesThousands of BTUs per dollar of GDP (2005$)

0

20

25

35

5

0

10

15

30

100

Tonnes of CO 2 per billion BTUs

71980

182010

272040

Billion tonnes CO2

11 1980

Non-OECD

OECD

13 2010

102040

20 40 60 80

Energy-related CO 2 emissionsTonnes per capita

0

6

10

12

2

OECD

1980

4

8

2010

Non-OECD

2040

Greenhouse gas emissionsrelated to energy use areprojected to plateau by 2030

Market forces as well as emerging public policiesare already having an impact on energy-relatedCO2 emissions in many parts of the world.

After decades of growth, we expect worldwideenergy-related CO 2 emissions will plateau around2030 before gradually declining toward 2040,despite a steady rise in overall energy use.

Regionally, we see a variety of emission patternsthrough 2040, re ecting the di erent stages ofeconomic development and varying degreesand types of energy used at a national level.Increasingly, the worlds CO2 emissions will be drivenby developing nations. Overall, non-OECD emissionsare likely to rise about 50 percent, as energy demand

rises by about two-thirds. Over the same period,OECD emissions are likely to decline approximately25 percent and approach a 25 percent share of globalemissions down from about 40 percent in 2010.

While emissions in non-OECD nations will play amore signi cant role going forward, some historicalperspective is appropriate. First, in 1980, the OECDaccounted for about 60 percent of global emissions.Since then, both OECD and non-OECD nations havemade progress in slowing the growth of CO 2 emissions by improving the energy e ciency of theireconomies. In addition, OECD nations have graduallyreduced the carbon intensity of their energy use byswitching to lower-carbon fuels, namely natural gasand renewables. Together, these factors have helpedenable the decline in CO 2 emissions that has alreadybegun in the OECD.

Non-OECD emissions surpassed OECD emissionsin 2004, largely due to signi cant economic progressand a carbon-intensive energy mix heavily dependenton coal. Looking ahead to 2040, we anticipatenon-OECD nations will continue to improve theenergy-e ciency of their economies, but also shifttoward less carbon-intensive energy sources.Together, these factors will help global CO 2 emissionspeak around 2030. Even then, emissions on a percapita basis in non-OECD nations will remain abouthalf the level of OECD nations.



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Advances in technology continue to make a wide range ofenergy supplies available to consumers. At the same time,the fuels that people and businesses choose to meet theirneeds continue to evolve. These choices are based not just onprice, but also on attributes like convenience, performance andenvironmental e ects. Natural gas is expected to be thefastest-growing major fuel through 2040.

Center for Strategic and International Studies,The Shifting Geopolitics of Natural Gas, July 2013



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Oil resource basecontinues to expandOver the coming decades, energy sources willcontinue to evolve and diversify, driven by changesin technology, consumer needs, and public policies.

But liquid supplies primarily crude oil areprojected to remain the single biggest source ofenergy and vital to transportation.

Ongoing advances in exploration and productiontechnology continue to expand the size of the worldsrecoverable crude and condensate resources. Despiterising liquids production, we estimate that by 2040,about 65 percent of the worlds recoverablecrude and condensate resource base will have yet to be produced.

Even as global oil production rises, the estimated sizeof the global recoverable resource base continues toincrease as a result of advancements in science andtechnology that have enabled the production of newsources of liquid fuels. In the early 1980s, the U.S.Geological Survey estimated that there were 55 yearsof crude and condensate supply given the demand atthat time. In 2012, that estimate had risen to125 years with current increased production.

Globally, while conventional crude production willlikely decline slightly over theOutlook period, thisdecline will be more than o set by rising productionfrom supply sources enabled by new technologies including tight oil, deepwater and oil sands.

North American liquids production is expected torise by more than 40 percent from 2010 to 2040,boosted by gains in oil sands, tight oil and NGLs.With production rising and demand falling,

Crude and condensate resourceTrillion barrels of oil

2040

0

2

3

4

5

6

1

Remaining resource

Cumulative productionthrough 2040

Source: IEA



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North America is expected to shift from asigni cant crude oil importer to a fairlybalanced position by 2030.

Latin American liquids production will nearlydouble through 2040 with the developmentof the Venezuelan oil sands, Brazilian deepwaterand biofuels.

The Middle East is expected to have the largestabsolute growth in liquids production over theOutlook period an increase of more than35 percent. This increase will be due to conventionaloil developments in Iraq, as well as growth in NGLsand rising production of tight oil toward the latterhalf of the Outlook period.

In Africa, large deepwater developments areexpected to result in the continent seeing abouta 10 percent rise in liquids production from

2010 to 2040.

Rise in tight oil, NGLs andother emerging sourcesFor decades, the vast majority of the worlds oil camefrom conventional sources wells drilled on land ornot far o shore. But that will change signi cantly overthe next few decades. As conventional productiondeclines, more of the worlds oil demand will be metby emerging sources that only recently becameavailable in signi cant quantities oil sands, tight oil,deepwater, NGLs and biofuels.

Growth in these emerging sources is largely due toadvancements in science and technology; theexception is biofuels, which in most countries is linkedto government policies that mandate the use of thesefuels derived from agricultural products like corn,sugar, seeds or palm oil.

By 2040, emerging supplies will account formore than 40 percent of global liquids supply,as technology enables increased developmentof these resources (see page 39).

The largest contribution comes from NGLs, whichshould grow by 80 percent from 2010 to 2040.NGLs such as ethane, propane and butane are extracted from natural gas. NGLs are expected toapproach 15 percent of global liquids supply in 2040amid rising production in North America and theMiddle East. The projected strong growth in naturalgas production, driven in part by unconventional

drilling activity, means rising output of NGLs too.Like some oil-based liquids, NGLs can be used asfeedstocks to manufacture plastics and otherchemical products, as heating fuels or as additivesto engine fuels.

Change in liquids production2010-2040 in millions of oil-equivalent barrels per day

-2

2

4

10

0

6

8

Latin America

North America

Europe Africa MiddleEast

AsiaPacifc

Russia/ Caspian



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Global liquids supply by typeMillions of oil-equivalent barrels per day

2000 2020 20400

40

60

80

100

120

20

Deepwater supplies will grow by more than150 percent from 2010 to 2040. Deepwaterproduction, which refers to wells drilled in morethan 400 meters (1,312 feet) of water, is concentratedin Angola, Nigeria, the Gulf of Mexico and Brazil.Globally, deepwater drilling is expected to plateaunear the end of the Outlook .

Another rapidly emerging source is tight oil.These are liquids extracted from low permeabilityrock formations, which until recently were noteconomic to produce. Tight oil production isprojected to rise by more than 1,000 percent from2010 to 2040, when it will account for 5 percent of

global liquids production. Tight oil production will beled by North America, followed by Russia and thenother areas. To put this in perspective with OPECproducers, North American tight oil supply in 2015will likely surpass any other OPEC nations current oilproduction with the exception of Saudi Arabia.

Oil derived from oil sands will rise by almost

300 percent over the Outlook period. These liquidsupplies are concentrated in Canada and Venezuela.

North America will see a dramatic rise in technology-enabled supplies. Canada, for example, is expected tosee more than 200 percent growth in oil sandsproduction from 2010 through 2040. In North America, tight oil and NGLs will account for almost35 percent of liquids production by 2040.

Liquids production from recently emerging sources isexpected to grow fastest in non-OPEC countries,

where conventional production is declining fastest.But OPEC member nations will also expand theirproduction of liquids. By 2040, about 45 percent ofthe worlds liquids supply will come from OPECcountries, compared to about 40 percent in 2010.

Biofuels

Oil sands

Tight oil

Deepwater

Other

NGLs

Conventional crudeand condensate

North America liquids supply by typeMillions of oil-equivalent barrels per day

2000 2020 20400

10

15

20

25

5



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High-impact drilling andcompletion technologies

These elds have been developed with the Yastreb rig, one of the worlds largest and

most sophisticated land-based drilling rigs.Since 2007, ExxonMobil has drilled 19 of theworlds 30 longest extended-reach wells,including the Z-44 well drilled at the Chayvo

eld. This well extended for a total length of12,376 meters (40,604 feet) more than7 miles. Because of the application of otherproprietary technologies, these Sakhalin-1wells were also the fastest-drilled extended-reach wells in the world.

Well completion is the nal step of the

drilling process, where the connection tohydrocarbon-bearing rock is established.Here again, advances in technology haveenabled more oil and natural gas to berecovered from the length of each well,improving production and reducingthe environmental footprint ofenergy production.

For example, by combining extended-reachdrilling capability with advanced stimulation

technology, operators can optimize how andwhere stimulation uid interacts with rock,allowing sustained production rates alongthe length of the wellbore. Companies arepushing completions in excess of 3,000meters (9,842 feet) in length, compared to atypical completion of 30 meters a couple ofdecades ago.

These types of drilling and completiontechnologies have also enabled the recentgrowth in production from shale and other

unconventional oil and gas reservoirs inNorth America, using a combination ofhydraulic fracturing and horizontal,extended-reach drilling. ExxonMobilsPiceance project in Colorado pioneeredthe capability to place multiple hydraulicfractures in a single well, and was rst touse e cient pad drilling operations thatnow characterize all unconventional oiland gas production.

Advances in technologies used for welldrilling and completion have enabled the

energy industry to reach new sources of oiland natural gas to meet rising demandaround the world. New technologies havealso helped reduce the environmentalimpact of energy production by allowingmore oil and gas to be produced withfewer wells.

For example, the Gorgon Janszdevelopment o shore northwest Australiawill include wells that deliver natural gas atrates in excess of 300 million cubic feet per

day. Just one of these wells could meetthe residential gas demand of more than40 million households in China every day.

Advances in technologies will play a criticalrole in meeting global energy demandbecause they enable the discovery ofnew resources, access to harsh or remotelocations and the development ofchallenged reservoirs that previouslywere not economic to produce.

The Arctic is the worlds largest remainingfrontier of undiscovered oil and gasresources. With its remote location,harsh weather and dynamic ice cover,the Arctic presents extraordinary challenges.Technology solutions include ice-resistantand iceberg-resistant platforms, icebergsurveillance research to characterize thehazards associated with icebergs andsimulation capabilities to predict thepotential magnitude of ice impacts.

For example, at the Sakhalin-1 projecto shore eastern Russia, advances in drillingtechnologies have enabled several elds faro shore to be reached by a land-baseddrilling rig, improving production rates andreducing environmental risk.

~ 1 m i l e

2 - 7 m i l e s

~1 mile

An illustration of land-based extended reach technology State-of-the-art proven technology safely reaches and develops offshore oil resources

Marine habitats are undisturbed, as thereis no drilling through the ocean orbreaching of the ocean oor.



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The world has about200 years of natural gasat current production levels

Natural gas will continue to play an increasingly

important role in meeting global energy needs.Utilities, industries and other consumers arechoosing this fuel because it is versatile,a ordable and produces relatively low emissions.

Natural gas will be the worlds fastest-growingmajor energy source through 2040. Global demandis projected to rise by close to 65 percent from 2010to 2040 and account for about 40 percent of thegrowth in global energy needs. By roughly 2025,natural gas is expected to overtake coal as thesecond-largest energy source, behind oil.

Non-OECD countries drive 80 percent of theprojected global growth in natural gas demand.About 50 percent of the growth is expected tocome from Asia Paci c, with China accounting forhalf that increase. In OECD countries, demand fornatural gas is expected to rise through 2035, thenplateau. About two-thirds of the increase in OECDdemand will likely occur in North America, supportedby abundant domestic resources.

Natural gas resources are plentiful. The IEA estimatesthe remaining recoverable natural gas resourceworldwide to be about 28,600 trillion cubic feet (TCF) about 200 times the natural gas the world currentlyconsumes in a year.

Estimates of recoverable gas have doubled in thelast 10 to 15 years as hydraulic fracturing andhorizontal drilling technologies have unlocked theprospect of recovering unconventional gas the natural gas found in shale and other denserock formations that only recently became

economic to produce.

Gas resources also are geographically diverse; six ofseven regions each hold 10 percent or more of theworlds remaining recoverable resource. Conventionalgas constitutes approximately 60 percent of theworlds remaining recoverable gas resource,of which about 55 percent is in the Middle Eastand Russia/Caspian.

CBM*

Tight

Shale

Conventional

Africa

Middle East

Asia Pacifc

Russia/Caspian

North America

Europe

2012 2012

Latin America

Remaining recoverable natural gas resourceThousand trillion cubic feet

10

20

30

Source: IEA

0

*Coalbed methane



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Natural gas production will expand and diversifyover the coming decades. While North America andRussia/Caspian will continue to be the two leadingnatural gas-producing regions , other regionswill also see strong growth. Asia Paci c, Africa andLatin America are each expected to more thandouble their gas production over the Outlook period. This growth will be spurred by both strong

regional demand and export projects.

Shale, LNG continue toreshape natural gas marketTwo signi cant developments in natural gas shalegas production in North America and the growth ofthe global LNG market are likely to play a majorrole in expanding and reshaping natural gas suppliesover the coming decades.

Unconventional gas including shale gas, tight gasand coalbed methane accounts for about40 percent of the worlds remaining recoverable gasresource, according to IEA estimates. Unconventionaldevelopment is expected to play an increasing role inthe global gas supply.

Advances in technology and favorable marketconditions have unlocked North Americas vastresources of shale gas and other unconventionalsources such as tight gas and tight oil. From 2010 to2040, unconventional gas production in NorthAmerica is expected to grow by around 65 billion

cubic feet per day, which is about the size of totalU.S. gas production today. This abundant supply isexpected to enable North America to shift from anet importer to a net exporter of natural gas by2020 as production outpaces demand.

2000 2020 2040

Africa

Middle East

Asia Pacifc

Russia/Caspian

North America

Latin America

Europe

Natural gas production by regionBillion cubic feet per day

0

400

300

200

100

500

600

20202000 2040

Rest of world Asia Pacifc

North America

Conventional

Unconventional

Natural gas production by typeBillion cubic feet per day

0

400

300

200

100

500

600



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There is also large potential for unconventional gasproduction in other parts of the world, notably Asia Paci c. Australia, China and Indonesia, alongwith Argentina and other nations, are activelypromoting exploration and development of theirunconventional gas resources, aspiring to replicateNorth Americas success. In each country, the paceof development will depend on geology, appropriate

technology adaptations, governing policies anddevelopment economics.

About 65 percent of the growth in natural gassupplies through 2040 is expected to be fromunconventional sources, which will account forone-third of global production by 2040. NorthAmerica will lead unconventional gas production,accounting for more than half the growth throughmost of the Outlook period.

Like oil, natural gas is often found in remote areas,

far from large, urban energy demand centers. LNG,or lique ed natural gas, can be transported by ship,enabling gas to be delivered economically to moredistant markets than can be reached by pipeline.

All around the world from the highlands of PapuaNew Guinea, to the deep water o east Africa, tofrigid far east Russia, to the U.S. Gulf Coast LNGprojects are in various stages of planning anddevelopment to produce gas destined for farawayports. These projects will bring jobs and economicopportunity to gas-rich regions, while supplyingmuch-needed cleaner energy to burgeoning cities. An increasing share of global natural gas demandthrough 2040 is expected to be met by gasimported as LNG.

LNG volume is expected to triple over the Outlook period to meet approximately 15 percent of globalgas demand. The growth of the LNG market willfacilitate trade between regions, helping to balanceglobal supply and demand of natural gas.

Overall, international trade of natural gas in 2040 isexpected to be 2.5 times the 2010 level, growingfrom about 15 percent of gas demand in 2010 to25 percent by 2040. Most of this traded volume willbe LNG, particularly in Asia Paci c.By 2040, about40 percent of Asia Paci cs natural gas demand willbe satis ed by LNG, with another 10 percentsupplied by pipeline imports. Europes regional gasimports are also likely to increase from about 45 to60 percent as local production declines.

Rest of world

Middle East basin

Pacifc basin

Atlantic basinEurope

Supply Demand

2010

Asia Pacifc

LNG in 2040

Billion cubic feet per day

0

60

40

20

80

100

International Energy Agency



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Over the Outlook period,we see several major trendsin energy supplies

Oil remains the top global energy source and thefuel of choice for transportation. Demand for oilis projected to rise by approximately 25 percentthrough 2040, led by increased commercialtransportation activity. A growing share of thisdemand will be met by sources such as deepwater,oil sands and tight oil, which are increasing as a resultof advances in technology.

Natural gas will contribute the biggest growth inenergy supplies. Natural gas is a ordable, widely

available, extremely versatile, and emits up to60 percent less CO 2 than coal when used for powergeneration. With abundant resources unlocked bycontinuing technology advances, natural gas isexpected to become more important in the globalenergy mix, accounting for more than 25 percent ofglobal energy needs by 2040, as natural gas demandrises by about 65 percent.

Coal is currently the top fuel for power generationand accounts for the second-largest share of energysupplies today. We expect demand will continue torise until around 2025 and then decline despitethe existence of a huge resource base. Driving thisdecline will be demand reductions in OECD countriesas well as in China, which today consumesapproximately half of the worlds coal production.By 2040, we anticipate that coals share of the globalenergy mix will fall from approximately 25 percent in2010 to below 20 percent.

Nuclear energy will see solid growth. While somecountries scaled back their nuclear expansion plans inthe wake of the 2011 Fukushima incident in Japan,many other countries are expected to expand the useof this energy source to meet electricity needs whilereducing emissions. Growth will be led by the AsiaPaci c region, where nuclear output is projected torise from 3 percent of total energy in 2010 to close to9 percent by 2040.

Renewable energy supplies including traditionalbiomass, hydro and geothermal as well as wind,solar and biofuels will grow by close to60 percent, led by increases in hydro, windand solar. Wind, solar and biofuels are likely to makeup about 4 percent of energy supplies in 2040,up from 1 percent in 2010. We foresee wind andsolar providing about 10 percent of electricitygenerated in 2040, up from about 2 percent in 2010.

Expanding energy will require trillions ofdollars in investment. The IEA estimates that meetingthe worlds energy needs will require expenditures onthe energy-supply infrastructure of approximately$1.6 trillion per year on average through 2035.About half of the investments relate to projectedoil and natural gas needs, while approximately45 percent relate to expected powergeneration requirements.

0.7%

1.7%

20102040

0.0%

2.5%0.4%

5.9% 2.0%

0

25

50

75

125

175

100

150

200

225

GasOil Coal Nuclear

Energy mix continues to evolveQuadrillion BTUs

SolarWind

Biofuels

Biomass HydroGeo



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What does a family in Shanghai preparing their dinner havein common with a taxi driver in New York City? How is acomputer service company in Mumbai similar to an automobilemanufacturer in Germany?

They each are connected to the global energy marketplace.Every consumer, every economy is linked in some way tothe worldwide energy network and the global growth andinternational trade it enables. Maintaining a robust energymarketplace is critical to meeting world energy demand nowand in the future.

Pascal Lamy, former Director-General, World Trade Organization



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Free trade bene tsproducers and consumersTodays global economy is made possible by freetrade. Trade is not a simple one-dimensional linkbetween producers and consumers. Its an extensive

web of buyers and sellers, all at various stages of theglobal value chain. At the micro level, producers/ sellers are also consumers/buyers, because theyexchange what they produce for all other goods andservices they need. At the macro level, worldwideimports and exports balance each other out.As global citizens, we consume what we produce.

Now more than ever, producers utilize whicheverresources are most abundant and suitable, andspecialize in providing products and services thato er the best opportunities to add value and meetthe needs of customers worldwide. Meanwhile,consumers enjoy unprecedented access to a widerange of products and services from around theworld at a ordable prices from raw materialsand intermediate goods to capital equipment,technology devices and nal consumer goods.Trade improves both the quantity and quality ofproducts and services. And the entire global tradenetwork relies on energy.

The link betweenenergy and trade

Traditionally, the goods and services that a countryor company provides to the global marketplace areconsidered either labor intensive (such as textiles andshoes) or capital intensive (such as automobiles andmachinery). In recent decades, knowledge-intensive

goods and services (such as computer software andnancial services) have grown in prominence. But no

matter how a product or service is classi ed, it alwayshas an essential component: energy.

This is the rst major link between energy andtrade: All goods and services traded on theglobal market embody energy in their productionor creation. Whether used as a direct input or as aningredient embedded in capital, labor and technology,energy plays a vital role in the global productionfunction, even as continued advances in technologyenable all segments of society to use energymore e ciently.

In addition, delivering goods and services acrossnational borders and vast distances requirese cient transportation and communication,which both rely on energy. Since the rst ancienttrading routes, advances in transportation andcommunication technologies have helped peopleovercome natural barriers to trade, such as distanceand geography.

Milton Friedman, Nobel Laureate in Economics



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Throughout history, advances in transportation havealigned with the changing ways in which the worldharnesses energy: from horse power and sailboats;to coal- red steam-engine trains and ocean liners;to tractor-trailers, mega ships and airplanes that usethe latest engine and fuel technologies.

The same is true of advances in communication,which not only support the trading of goods,but also the increasingly important service trade.Today, services are exchanged at all times of dayaround the world from information systems tocall centers, from cross-border banking to foreigntourism. Whether transacted via cell phones, fax orthe Internet, all of these services fundamentally relyon electricity and other forms of energy.

The last and perhaps most visible link betweenenergy and trade is the trading of various energyforms themselves. Every economy relies on energy,but energy resources are unevenly distributed aroundthe world. As a result, trading of energy is essential toglobal economic development. It enables both energyexporters and energy importers to realize economicbene ts that would otherwise be impossible to attain.

Unobstructed energy trade helps countries improveeconomic security by o ering diverse supplies tosupplement their indigenous resources. Over time,energy trade minimizes the impact of marketdisruptions and encourages investment in energyexploration and production. More generally,a healthy world energy market makes a crucialcontribution to fostering global political,social and economic progress.

Exports andimports of energyMaintaining a robust global energy marketplace iscritical to meeting rising global energy demand.The backbone of the global energy marketplace is

free trade, which enables energy to move across various boundaries by pipeline, ship, railway or inthe case of electricity, by transmission lines. Oil andnatural gas are the most widely traded energysources, but other forms of energy including coal,electricity and some renewable fuels are alsoactively traded on the international market.

Trade has always been an important aspect of worldenergy markets. It will be even more important inthe future.

Rex W. Tillerson, Chairman and CEO, ExxonMob



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In terms of oil, the worlds single biggest energysource, we expect that about half of global liquidfuels demand will continue to be met viainternational trade by 2040. However, on theregional level, there will be some important changesin trends over that time period:

In the Americas, North America is expected to

shift from a signi cant importer of petroleumsupplies to a fairly balanced position by about2030 as its domestic production risessubstantially. Latin America, already a netexporter, will see strong growth in exportsby 2040 even as local demand increases.

Europe is expected to remain a signi cantimporter of liquid fuels. The Russia/Caspianregion will remain a net exporter, even as itsproduction gradually declines after 2030.

The Middle East is expected to expand oilexports as its production increases through2040. Africa, another signi cant exporter today,is expected to see its exports decline over thecoming decades as local demand rises butproduction remains steady.

The Asia Paci c region already relies on importsfor about 70 percent of its liquid fuels demand;this proportion is expected to grow even higherthrough 2040 as local demand grows by about50 percent. Net imports are likely to rise byroughly 75 percent.

International trading will play an increasinglyimportant role in meeting global demand fornatural gas. Tra

ExxonMobil 2014 Outlook for Energy

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