Asia Pacific is the growth area for energy

 To see the future of energy, follow the money.

Energy follows GDP, says Peter Coleman, Vice President, Americas, ExxonMobil Production Company.

 “Energy is a fundamental part of economic growth and the two are inextricably linked,” he says. “By 2030, Asia Pacific will have the highest GDP of any region in the world. The U.S. will grow but not at the pace that it has over the past 25 years; Europe will slow as they work through financial issues; the big growth is Asia Pacific, and it’s burdened by Japan as their growth will be negligible.”

By extension, the big energy growth area is Asia Pacific. The region will account for two-thirds of global energy demand growth by 2030. North American and European demand will remain essentially flat due to gains in energy efficiency.

 “Asia Pacific does not have efficiency flow yet—they’re still building energy infrastructure, and not necessarily energy-efficient infrastructure,” he says. “Coal will be a major part of the growth, but oil and gas will increase as well. We need to expand all economic fuel sources to meet growing energy demand through 2030.”
 

Historically, the U.S. has been the largest energy user in the world at about 100 quadrillion BTUs per year. Today, Asia Pacific is the largest user at double the use of the U.S.

“By 2030, Asia Pacific will be by far the largest user at 300 quadrillion BTUs,” he says. “This should be an opener for the industry.”

The growth will be driven by power generation and by far the greatest contributor will be coal. However, Asia Pacific total BTU use of oil and gas will
mirror that of the U.S.

China’s drive for power generation is starting to affect the regional economies and suppliers around China.

“That will affect our industry, particularly with the build-up of activities in Australia,” he says. “We’re vying for the same resources as the mining industry in Australia, which is the largest supplier of coal into China.”

Oil and Gas

 Global oil demand is expected to reach 90 million barrels per day by 2030. While he says that non-OPEC crude will continue to be essential, the big question is OPEC.

“OPEC should be supplying about 28 million barrels a day and will need to grow to 37 million by 2030,” he says. “The reality is that OPEC has found it difficult to grow over the past 10 to 15 years.”

 The industry also will reach a better gas supply and demand balance. Natural gas usage in the U.S. and Europe will be identical at over 60 bcf a day in demand, and Asia Pacific will be over 100 bcf a day.

“In the U.S., the big wedge of growth will be unconventional,” says Coleman. “In the conventional mix there’s the Alaska gas pipeline, but overall there’s not a rosy forecast for conventional.”

LNG imports are the unknown, he says. Demand for LNG is currently about 175 million tons per year, and by 2030 it will be 430-plus million tons.

 “We have capacity to take in about 10 bcf per day, but we took in 1.5—the LNG went to Europe,” he says. “In Asia Pacific, gas usage was fairly small in the overall energy mix, but the area will consume a large portion of total LNG supply.” 

Business environment

 ExxonMobil is positioned to get through a number of business cycles, says Coleman.

“We’re an open weather sailor and we make course corrections from time to time, but we’re sailing a big ship and can’t make lots of short course corrections,” he says. “Some competitors are re-evaluating their near-term business plans and are getting out of certain sectors—we’ll see if these bets are the right ones.”

Financial markets are stabilizing but in a way that a flight to quality is more evident, he says. The pace of economic recovery is uncertain, particularly in the U.S. as recovery is happening on a state-by-state basis.

“The supply and demand balance is linked to economic recovery,” he says. “The recovery will be in two phases—a liquids recovery and slower gas-based recovery.”

 In the meantime, ExxonMobil is committed to spending about $125 billion in capital investments over the next five years. About 22 percent will be spent in Canada and about 15 percent in the U.S.

 “The U.S. spend is principally onshore, though the current spending does not include the XTO acquisition,” he says. “North America remains attractive to us and I think it will attract us more and more, but it will come down to opportunities.”