Home / F+L Magazine / Amidst the energy transition, oil & gas to continue powering the world
Amidst the energy transition, oil and gas to continue powering the world

Amidst the energy transition, oil & gas to continue powering the world

The energy landscape is undergoing a seismic shift. With the global population projected to reach 10 billion by 2050, the demand for energy is set to soar. Amidst this backdrop, the ExxonMobil Global Outlook - Our view to 2050, published in August 2023, underscores the enduring significance of oil and gas. Despite the meteoric rise of renewables, ExxonMobil predicts that by mid-century, oil and natural gas will still cater to over half of the world's energy needs.

While the energy transition is afoot, the path remains uncertain. The tug-of-war between economic growth, environmental protection, and burgeoning population complicates the journey. ExxonMobil's report, rooted in its strategies and investments, offers a glimpse into the energy matrix of 2050.

The earth’s population reached 8 billion on November 15, 2022, according to data from the United Nations. By 2050, the population is projected to reach almost 10 billion. Global energy demand will continue to expand alongside this startling growth and economic development.

ExxonMobil Global Outlook - Our view to 2050 provides the company’s latest view of demand and supply dynamics through to 2050 and is based on modelling work completed in 2022 and early 2023. 

ExxonMobil expects 15% more energy will be required by 2050 to satisfy the needs of 10 billion inhabitants and a global economy that is expected to double in size. Raising the living standards in the developing world accounts for almost all energy growth during the forecast period. Access to abundant, affordable energy is critical to improving living standards and economic prosperity.

The energy transition is a complex and evolving process.  There is a plethora of company outlooks that endeavour to predict future energy scenarios. Often these reports reflect an individual company’s perspectives on how they plan to navigate the transition—while meeting global energy demand and addressing environmental concerns. Nevertheless, all these stargazing companies agree that the current scale and timetable of the energy transition are inadequate to mitigate climate change and achieve society’s goal of net zero emissions by 2050.  

Most outlooks map potential pathways by looking at hypothetical outcomes and working backwards to determine the steps necessary to achieve them. They are “what if” type scenarios. The ExxonMobil Global Outlook is a projection that the company says is shaped by its specific strategies, assets and investment priorities. The outlook places a clear stake in the ground on where the global transition stands in 2050.

ExxonMobil, which can trace its oil manufacturing roots to the 1866 Vacuum Oil Company, emphasised the significant contributions of oil and gas to the global energy mix. The report stressed that the utility of oil and natural gas remains unmatched in fulfilling the world’s energy needs due to its energy density, portability, availability and affordability.

While acknowledging the need to address emissions, The outlook noted that oil and gas will remain essential sources of energy, even in 2050. More than half of the world’s energy needs (54%) will continue to be satisfied by oil and natural gas by the middle of the century, according to ExxonMobil’s projections. The report also predicted a 20% increase in natural gas use by 2050, due to its lower emissions profile and reliability in electricity generation, hydrogen production and heating.

Amidst the energy transition, oil and gas to continue powering the world
Photo courtesy of ExxonMobil

ExxonMobil called for sustained investments in oil and natural gas to support this enduring demand, the company noting that production will naturally decline by five to seven percent per year without further outlay. Significant declines in oil consumption are anticipated in personal transportation, due to the rapid adoption of electric vehicles and improved fuel efficiency in traditional vehicles. However, oil remains prevalent in heavy-duty transport like shipping, long-haul trucking and aviation, and in industrial processes, says ExxonMobil. 

British multinational oil and gas company, bp, shares a similar sentiment on the fate of fossil fuels. The bp Energy Outlook, which was updated in July 2023, details three possible scenarios. A New Momentum scenario captures the broad trajectory along which the global energy system is currently travelling, and Accelerated and Net Zero modelling assumes a significant tightening in climate policies.

Oil consumption in New Momentum remains close to 100 million barrels per day (Mb/d) through much of this decade, before gradually falling to around 75 Mb/d by 2050. In the more aggressive scenarios, oil demand sits between 70-80 Mb/d in 2035 and reaches 40 Mb/d in Accelerated and 20 Mb/d in Net Zero in 2050. The overall share of fossil fuels in primary energy will be between 55% and 20% by 2050, across the three scenarios.

In the International Energy Agency’s (IEA) World Energy Outlook 2022 the Stated Policies Scenario (STEPS) show the trajectory implied by today’s policy settings. STEPS indicates that the share of fossil fuels in the global energy mix falls below 75% in 2030 and remains just above 60% by 2050.

The biggest change in the world’s energy mix by the middle of the century, according to the ExxonMobil Global Outlook, is a five-fold expansion in solar and wind energy, alongside significant reductions in coal. Currently, wind and solar supply 2% of the earth’s energy supply. The outlook projects they will reach 11% by 2050. Coal will be displaced by lower-emission sources of electricity production such as renewables and natural gas. The outlook also noted the importance of biofuels, carbon capture and storage, hydrogen, and nuclear energy.

bp’s outlook demonstrates a 15-fold increase in installed wind and solar capacity in its Accelerated and Net Zero scenarios and a nine-fold increase in New Momentum. The share of renewables in global primary energy is expected to increase to between 35% and 65%, depending on the chosen scenario. Renewables accounted for around 10% in 2019.

ExxonMobil’s report highlights a decoupling of energy production and emissions. Despite the growth in energy, the outlook anticipates a 25% decline in the world’s energy-related carbon dioxide (CO2) emissions in 2050. This contrasts with the 10% increase witnessed over the past decade. Energy-related carbon emissions reach 34 billion metric tons (Gt) in the current decade, before declining to 25 Gt in 2050.

In the IEA’s STEPS scenario, the peak of global energy‐related CO2 emissions is reached in 2025 at 37 Gt, falling to 32 Gt by 2050. These numbers are associated with a 2.5°C rise in global average temperatures by 2100, insufficient to alleviate the severe impacts of a changing climate. In the IEA’s Announced Pledges Scenario (APS), which assumes aspirational targets announced by governments are achieved in full, emissions decline to 12 Gt by 2050.

To maintain global temperature rises to less than 2°C the world needs to dramatically scale up lower-emission technologies. However, ExxonMobil stressed that fossil fuels remain the “most effective way to produce the massive amounts of energy needed to create and support the manufacturing, commercial transportation, and industrial sectors that drive modern economies.” The outlook advocated an approach to technology where governments avoid picking winners and losers.

The ExxonMobil Global Outlook highlights three scalable technologies it believes hold significant promise for hard-to-decarbonise sectors: carbon capture and storage, where CO2 emissions are captured and permanently stored deep underground, hydrogen and biofuels.  The outlook noted that low-carbon hydrogen can be produced by converting natural gas into hydrogen and (captured) CO2.  Biofuels offer a “drop-in” substitute for fossil fuels, with particular application in commercial transportation. Biofuels are a low-carbon alternative as CO2 absorbed during the growing process is released into the atmosphere, says ExxonMobil.

Three key drivers are essential to continue progress on the energy transition, says ExxonMobil. Policy support from governments acts as a catalyst for low-carbon solutions, and we will not achieve global climate goals without significant advances in technology to reduce costs, they say. The outlook highlighted a recent position by IEA that only two of the 55 technologies needed to reach net-zero emissions by 2050 are “on track.” Finally, the outlook stressed the importance of market-driven solutions to incentivise emission reductions, noting that governments cannot pay in perpetuity to avoid emissions.