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NUOVA ENERGIA’S INTERVIEW WITH EXXONMOBIL CORPORATION’S SENIOR ENERGY ADVISOR


by Carolina Gambino


             
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Nei mesi scorsi ExxonMobil ha presentato l’aggiornamento annuale del suo Outlook for Energy, uno dei più qualificati e approfonditi report in ambito internazionale sulle future dinamiche della domanda e dell’offerta mondiali di energia. Nuova Energia ha incontrato Todd Onderdonk, Senior Energy Advisor di ExxonMobil, per approfondire i passaggi
più importanti e significativi dell’Outlook.
A fare da filo conduttore all’intera intervista un preciso messaggio di fondo. “Con una domanda di energia prevista in continua crescita e una popolazione mondiale che dovrebbe aumentare di due miliardi entro il 2040, puntando a una qualità della vita sempre più elevata, nessuna delle opzioni tecnologiche e delle fonti a nostra disposizione può essere esclusa a priori. E proprio lo sviluppo tecnologico sta liberando una quantità di risorse, inimmaginabile anche solo pochi anni or sono”.
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Nuova Energia interviewed ExxonMobil Corporation’s Senior Energy Advisor, Todd Onderdonk, focusing on increased energy demand, unconventional supplies and the need to keep all the energy options open.



What technical and scientific pillars does your Outlook rest on; and, what set of criteria did you choose for your forecasts?

**Our Outlook is based on a couple of fundamentals, the first being the overall world population, likely to reach about nine billion people by 2040, who will continue to strive to improve their lives with an impact on the overall economic output.
Global GDP is going to be rising by about 3 percent/year out to 2040; so the world’s economy will more than double.
People use technology every day and all the energy that is coupled with that technology. More and more modern economies rely on electricity, so though there’s still 1.3 billion people in the world without electricity, we expect a significant growth in electricity demand - about 90 percent by 2040.



Natural gas is going to be one of the key sources of energy to meet that growing need...
**Of course. In the last decade oil and gas technologies have really unlocked a much more abundant resource that is now available to meet people’s need for reliable and affordable energy. In North America we have unlocked more than a hundred years supply of natural gas using technologies that have been in place for decades but are now being combined: horizontal drilling and hydrofracking technologies for example. Some of these technologies are also being applied to develop tight oil resources in North America, where the growth has been phenomenal: we expect supplies of tight oil to increase from basically zero to about four billion barrels a day by 2025. Technology has really been essential to unlocking much more abundant resources and as the world’s energy needs continue to rise this energy is going to be critical to ensure that people have reliable and affordable energy.



The next question may sound a bit tricky. Considering that the energy sector keeps changing so fast, isn’t it too risky to try and outline scenarios that are 25 years away? After all, even the most reputable agencies’ forecasts made in the 90’s about our present days were mostly proven wrong by what happened in the real world…
** Certainly looking so far ahead is a challenge, but not too risky. On the contrary, our company and any company that’s involved in a really capital intensive industry like energy has to look ahead and anticipate what the market needs are, as the investments that we put in place are very long-lived in terms of development. It may take 10 to 15 years actually to develop a project that may stay productive for 30/40 years. Since we are spending 40 billion dollars a year to bring out new sources of supplies, we have to have a sound view of what the future is likely to hold.
Regardless of weak or strong economic growth, over the longer term of decades we continue to see a growing economic output, improving living standards, an expansion in consumer needs for all kinds of products and the energy associated with that. It just makes good sense to us that we try to anticipate what those needs are to plan our own business and contribute making that energy available. We look at the types of supplies that might be required 10 to 30 years from now, which helps our own R&D efforts to make sure that we are equipped as a company to deliver effective technology to the market place.



Today, the development of shale gas is having a huge impact on the energy sector. Which do you think will be the main drivers of change in a view to 2040?
**The evolution of shale gas has been quite remarkable, in the US it is already providing a very significant portion of gas supplies and that revolution is likely to extend in North America but also to expand into other parts of the world. It is already changing the energy landscape in North America and the business environment is now really conducive to new investments by companies. A hundred billion dollars of new chemical plant projects was proposed for that region. This abundant energy resource is really helping revitalize the North American economy and providing a sound foundation for a future growth.



This is not to be ignored by other regions around the world...
**They certainly noticed what’s happening in US and are looking at ways to take advantage of the same technology for resources in their own areas. There is also a competitive aspect: industries are now competing with companies based in North America that have access to lower cost energy; some governments around the world, including in Europe, are beginning to look at their own energy profile and recognize the need to ensure that companies here in Europe as well have access to reliable and lower cost energy. In the next decade or so, we expect a pursue of shale gas resources here in Europe as well to help supplement other types of resources.



I would like you to focus on a few energy issues. Could you please, for each of them, provide a brief overview of the most significant prospects in the world scenario towards 2040? Let’s start with renewables.
** Renewables cover a wide range of energy types, historically hydropower has been a very important renewable component in the energy mix, it’s widely used and efforts are made to expand it; it tends to be a fairly cost-effective and reliable source of renewable energy and one we expect to continue to grow. We have also seen a very strong growth recently in wind, solar, geothermal, modern biomass, that keep growing pretty strongly around the world.
A lot of that growth has been fueled by subsidies and mandates which are helping forcing it into the marketplace. We have also seen some improvements in their cost, still we anticipate that without subsidies and mandates renewable energy types are yet not fully competitive with some of the traditional energy sources. Still, we see a strong penetration of wind and solar and the impact of these intermittent supplies in the power sector is really important. When they go offline, some other type of back-up capacity is needed because people need electricity when they need it.
To make sure the grid remains reliable we’re likely to see increasing need for back-up capacity, typically in the form of a natural gas power plant whose energy and technology can quickly ramp up and down to meet changes in the power supply from renewables and big changes in consumer demand. Renewables will continue to be a growing portion of the mix. Wind, solar and biofuels today represent about 1 percent of the world’s supplies and despite their fast grow, there are expected to still account only for about 4 percent of the supplies in 2040.



And what about nuclear energy?
**Nuclear energy is an important source of electricity in many countries, certainly in the United States, and France in particular. Countries in different parts of the world are taking different positions about nuclear power... certainly post-Fukushima some have modified their nuclear power policy plans.
Germany in particular has decided to shut down their nuclear capacity. So some countries are pulling back, but many others are actively pursuing nuclear power because it is relatively reliable and clean and low-carbon. In our Outlook we anticipate about a doubling of the nuclear capacity worldwide with about half of that growth in China alone, to be joined by several other regions. As the world tries to reduce greenhouse gas emissions we expect nuclear power to be one of those sources of energy that countries turn to to help in that effort.


And fossil fuels?
**Oil, natural gas and coal today represent about 80 percent of the world’s energy supplies, utilized widely to meet a variety of different needs. Oil is the number one source of energy worldwide; over the next 30 years demand for oil will continue to rise by about 25 percent with a lot of that growth targeted to meet transportation needs. Oil is ideal for transportation, widely available, abundant and very energy-dense: for example, four liters of gasoline contain enough energy to run a cell phone for ten years or more.
We see a changing mix of oil products so, as commercial transportation needs grow for trucking, marine activities and aviation, the more of the demand is going to be around diesel and jet fuel. Worldwide, we expect global demand for gasoline to be pretty flat: there will be a lot more cars in the world, but they are going to be much more fuel efficient. Technology has been critical to supplies: we are seeing a huge increase in the available resources that are recoverable now.



And what about the “peak oil”?
**35 years ago when I got into the business, 1.7 trillion barrels of oil were estimated to be recoverable, today estimates are over 5 trillion barrels. Even with a strong oil demand going forward, we still have 65 percent or more oil in the ground still recoverable which will keep providing a very sound foundation for meeting future demand growth. We are now going beyond conventional oil, we’re looking at deepwater resources, tight oil resources, oil sands.
Those three components only represented about 2 percent of supplies in the year 2000, but by 2040 they will be about 25 percent of the world’s oil supplies, from those resources that technology has just really recently unlocked. Natural gas liquids are expanding by about 80 percent and that, too, is going to be gaining share in terms of the overall liquid supply mix. Biofuels continue to grow pretty strongly, we expect that to reach about 4 million barrels a day of oil equivalent in 2040, but still a relatively small share - only about 4 percent or so - of the total liquid supply.



And about natural gas?
**Natural gas is going to be the fastest-growing major source of energy worldwide. We expect production to expand by about 65% to meet a wide variety of consumer needs. Natural gas is a bit unique because it really spans all types of consumer needs, from heating and cooking at homes to all sorts of industrial processes, to power generation, as well as expanding in transportation.
The available gas resource is now about two hundred years supply, about a doubling of the estimates from just 10 or 15 years ago: another example where technology has fundamentally changed the options we have in front of us. It is a less carbon-intensive type of energy so it is going to play an important role as the world tries to reduce the growth of greenhouse gas emissions related to climate risk.
Gas is going to be favored for a wide variety of applications, for example, using natural gas to produce electricity can reduce CO2 emissions by up to 60 percent versus coal. It also fits very well in a power sector with a lot of renewables, like wind and solar, that require some very flexible back-up capacity to meet changing needs. A lot of the growth in natural gas is going to be based on unconventional gas, about 65 percent of the growth in gas supplies worldwide, either shale gas, tight gas or coal bed methane and this development will be driven by North America but it’s going to expand to Asia, Pacific, Russia/Caspian and Europe.


Finally, the coal...

**Coal is the number two source of energy worldwide today. Natural gas is expected to overtake coal by 2025, then the use of coal is going to be slowing and actually declining as the world begins adopting stricter CO2 emission standards. Coal will face pressure from less carbon-intensive fuels - could be natural gas, nuclear and renewables - so it’s likely to be about the same volume in 2040 as it is today.



Last but not least, energy efficiency. Will the energy of the future really be measured in negawatts?
**The biggest so called source of energy is energy efficiency, which is not particularly a new phenomenon. Economies worldwide became more efficient in energy use: going back decades, even a couple of hundred years, technologies advanced fairly dramatically because people have always tried to do things more efficiently, that’s just human nature. Our knowledge continues to expand, certainly technologies are advancing more quickly and there’s growing interest in boosting efficiency in energy use. To some extent we see a shift in how economies are evolving, oftentimes value can be created in a less energy intensive way than it was historically.
A lot of factors are contributing to a more efficient use of energy and we expect the pace of these efficiency gains to be faster in the future. Capturing these efficiency gains is important to make sure that people have reliable and affordable energy over time. For example, cars worldwide today require about ten liters of fuel per a hundred kilometers travel, but by 2040 we expect they’ll only be requiring about 5 liters. Huge gains in efficiency may come through car technology advances - hybrid cars gaining share versus conventional cars - and that’s going to be one of the big contributors to how quickly demand grows to meet transportation needs worldwide.



What do you think will be the main breakthroughs in technology? What will be the role of specific research in the next 20 to 25 years? What sector will benefit most from that?
**Certainly that’s a very speculative area. We continue to monitor technologies in all different types of energy, specifically in the oil and gas business. I would say we’ve seen some breakthroughs not just in technology per se but in how technologies have been combined to effectively unlock more and more natural resources. We continue to monitor battery technologies closely, and the ability to develop large-scale and low-cost batteries could be a breakthrough one day. We keep seeing some gains in this area but we don’t see the kinds of gains occurring in the next 2 to 3 decades that are going to make wide scale battery deployment possible as part of solutions for people’s needs, but we keep watching it closely.
We have seen progress in some of the renewable technologies, for example solar costs have come down. I’m not sure I’d call it a breakthrough; it is kind of an evolution in the process. At this point in time we’re not seeing any breakthroughs and we expect solar will continue to be a fairly high cost alternative over the next couple of decades.
Potential for hydrogen fuel cells continues to be an area of interest, we’ve studied it for quite a while now and we continue to watch it but it is still a challenge in the marketplace and a lot of existing technologies continue to improve, so it’s oftentimes difficult for a technology that’s not commercial today to become commercial and then scale up rapidly.
In terms of R&D, I am awfully impressed by just how many people and how many types of technologies are being looked at. Our own research focuses quite a bit on the oil and gas development and we’re seeing tremendous advances not just in our ability to develop resources but actually in our ability to identify and find resources placed thousands of feet below the surface of the earth and see how to develop them economically, most efficiently, safely and responsibly from an environmental perspective. It’s not really energy-related technology per se but the way our economies operate today. A lot of those technologies are computer communication-driven which requires changes in how business operate, a lot of that depends on electricity supplies, therefore the growing demand for electricity is a very important part of the overall energy story.



Are there any clear differences between your 2014 Outlook for Energy and its previous issues, especially in relation to the forecasts and/or studies carried out in the years before the crisis?
**We actually looked at that ourselves pretty hard. In the last ten years or so we’ve seen some significant changes in the world that keep rippling through the energy landscape today, like China’s rapid development: their economy grew very strongly, 10 percent per year for a number of years, which had a tremendous impact on their energy demand but also a kind of ripple effect across the world.
Continuing advances in the governments’ energy and environmental policies have had an effect on the energy landscape. For example, governments across the world will continue to be driven to pursuing efficiency gains. The economic recession was another big shock to the energy system; we’ve seen a shifting in terms of where demand is growing around the world. The mature economies of the OECD countries will continue to grow their economies but they’ll be doing it with about the same amount of energy that they have today.

















All the growth in the energy demand worldwide is basically shifting to developing countries, like China and India; demand has been centered around North America and Europe, it is increasingly going to be centered around Asia Pacific. The other change relates to supplies and, in particular, the amount of resources that technology has unlocked. To me that’s the biggest change we’ve seen on the supply side of energy in the last 20 to 30 years, and it’s opening up tremendous options to help meet people’s growing needs for energy worldwide. When you look at that 35 percent increase in energy demand and two billion more people around the world, it is important to keep our options open in terms of the types of energy that might be available, to make sure that energy is reliable and affordable. We don’t think that any energy option should be foreclosed, the possibility to pursue all options is very important to ensure that people have access to energy to improve their lives, that our economies can grow, that the economy in one region is going to be competitive with other regions. In a global economy all those things are going to be important to help people advance.

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