ExxonMobil recently released its report "Outlook for Energy: A View to 2040" which this year, as the title states, provides energy industry forecasts out to 2040. The report covers global industry fundamentals, forecasts for each major market segment (residential/commercial, transportation, industrial, electricity generation), emissions and technologies. It also includes a comparison to IEA forecasts. Some highlights of the report are:
- Global energy demand will increase by 30% by 2040 but growth in OECD countries will be essentially flat while growth in non-OECD countries will be nearly 60%
- Electricity generation will be the biggest driver of energy demand accounting for more than 40% of global energy consumption
- Natural gas will overtake coal for the number two position behind oil with demand for gas increasing 60% and an increasing amount of supply coming from unconventional resources like shale gas
- Gains in efficiency will temper demand growth and help curb emissions
The report contains some interesting implications for the oil and gas industry and for technology vendors serving this market. To start, with nearly all of the energy demand growth coming from non-OECD countries, this begs the question of how well the vendors are positioned to serve these countries? Most large technology vendors like SAP, Oracle, IBM, HP and Microsoft have a presence in the top emerging markets like China, India, Brazil and Russia. But do they have oil & gas industry specialists in those countries? And what about other countries in Latin America, the Middle East, Africa and the Caspian region? When you start looking at smaller more specialized vendors they may not even have basic coverage beyond North America and Europe. Vendors will need to rethink their ability to market and support their products and services for oil and gas companies in these non-OECD countries if they want to take advantage of the growth in energy demand that ExxonMobil is forecasting.
With respect to electricity generation, the report forecasts that the industry will see an 80% rise in global demand for electricity over the forecast time frame. ExxonMobil goes on to state that this growth will break down as follows: industrial (45 percent), residential (30 percent) and commercial (20 percent). The report is not bullish on electric vehicles, stating that the use of electricity for transportation, while growing, will remain limited. Additionally, it predicts that the fuels used to generate electricity will continue to shift away from coal and toward lower-carbon sources like natural gas, nuclear and renewables, with natural gas as the big winner. Does this growth imply that oil and gas companies will diversify into power generation? Personally I think that's unlikely to happen in a big way but we may see some companies ratchet up their investments in merchant generation including natural gas plants and renewables. If that happens, technology vendors may need to break down their traditional internal barriers between their oil and gas industry vs. utility industry marketing and product groups.
Finally, as we pointed out in our recent Worldwide Oil and Gas Industry 2012 Top 10 Predictions, unconventional resources such as shale gas, coal bed methane, tight oil and deepwater offshore will be a major focus for the industry in upcoming years. This will drive the need for increased IT investments in capital project/well planning, rig scheduling, supply chain management, EAM, EH&S, hydrocarbon accounting, ETRM, collaboration and business analytics.