Exxon Mobil (NYSE: XOM) released its annual outlook report today, predicting revolutionary things for the future of U.S. energy.
According to the company, natural gas is the place to look.
Exxon made itself prominent in the U.S. oil and gas boom once it really began to take off. In 2009 the company purchased XTO Energy for $31 billion. This past September, it offered Denbury Resources (NYSE: DNR) $1.6 billion for its Bakken Shale properties in North Dakota.
Like its rivals Chevron Corp. (NYSE: CVX) and Royal Dutch Shell (NYSE: RDS.A), Exxon is focused on natural gas. It's applied for permission to export LNG overseas, though so far the only approved terminal in the U.S. is Cheniere Energy's (NYSE: LNG) Sabine Pass facility.
But it predicts its focus will pay off soon. By 2025, North America will become a net exporter of oil and gas, the report said.
The exports will come mainly from the growth of oil and gas production in the U.S. and Canada. While the U.S. won't likely be a net exporter of crude on its own, it will greatly increase production and reduce consumption.
And the U.S. will also be a major exporter of natural gas by 2025. The resource will overtake coal as the most used fuel for electricity and the second most used fuel overall.
In fact, the entire future of energy has already begun a major shift that will really be visible by 2025 – or perhaps even 2020. In that year, the IEA predicted earlier this fall, the U.S. will surpass Saudi Arabia to become the world's largest oil producer.
Oil demand will grow around 1 percent each year, mostly pushed by heavy trucks. Demand will grow more slowly for oil for passenger vehicles, which will improve in efficiency and also make way for other types of cars – hybrids in particular, the Washington Post reports.
The average fuel economy for a passenger vehicle will jump to 47 percent by 2040 from 27 percent today.
Energy demand will continue to grow worldwide, jumping 35 percent between 2010 and 2040, but growth will be from developing nations and will happen more slowly due to improvements in energy efficiency.
It will plateau, meanwhile, for developed nations.
From the Wall Street Journal:
Developed regions like the U.S., Canada and Europe will see their demand flat or declining as they become more efficient, the company said. By 2040 developed nations are expected to generate 80% more economic output than in 2010 but use the same amount of energy, [Exxon vice president of corporate strategic planning] Mr. [Bill] Colton said.
Even renewable power – a recently neglected form of power generation – will show growth while coal use declines. Energy from wind, solar, and biofuels will grow at a 5.8 percent annual rate, though they will only support 3 percent of energy demand by 2040.
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A major problem holding back shale development right now is a lack of infrastructure. In both North Dakota's Bakken and Texas' Permian Basin, a lack of pipelines is causing a glut in oil and gas. North Dakota has railway infrastructure to help in the meantime, but the backup in Texas has severely depressed oil prices.
Projects are underway, however, to fix the problem. A number of Permian Basin pipelines are scheduled for completion in 2014, and after several years analysts expect the price spreads to fix themselves.
The U.S. has a future in energy production. And when production grows while demand remains virtually flat, independence could be in our future.
That's all for now,
Energy & Capital's modern energy guru, Brianna digs deep into the industry with accurate and insightful updates into the biggest energy companies and events. She stays up to date with the latest market moves and industry finds, bringing readers a unique view of current energy trends. For more on Brianna, see her editor's page.
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