ABUNDANT FOSSIL FUELS, BUT 'CO2 EMISSIONS POSE RISK TO SOCIETY'

Globe and Mail, 13 December 2006
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SHAWN MCCARTHY 

OTTAWA - Global oil and gas reserves are abundant, and even at lower prices companies could extract them profitably, Exxon Mobil Corp. said yesterday in its latest 25-year outlook.

On a conference call yesterday, Exxon Mobil's Jamie Spellings said energy demand growth will slow as a result of increased efficiency and concerns about global warming, but the company still forecasts total energy consumption will climb by 60 per cent between 2000 and 2030.

Coal, crude oil and natural gas will continue to serve as the inexpensive fuels of choice while alternative sources such as ethanol, wind and solar -- while growing rapidly -- will have only a modest share on the total energy market, according to the company's outlook.

"We expect fossil fuels will remain roughly 80 per cent of total energy demand in 2030," said Mr. Spellings, Exxon's general manager for corporate planning.

As a result, Exxon Mobil expects greenhouse gas emissions to increase dramatically over the next 25 years, despite commitments from most industrialized countries to stabilize emissions and reduce them below 1990 levels. Most of the emissions growth -- like much of the increase in energy demand -- will occur in the developing world, especially in countries such as India and China, he said.

In contrast to the alarms raised by peak oil theorists who argue production is at or near its zenith, the Exxon Mobil executive said there are ample resources around the world. Only one-quarter of the estimated four trillion barrels of crude oil reserves have been extracted, he said.

The key to efficient and cost-effective development, he said, is for global companies to have access to those resources and for the world to continue to trade oil and natural gas freely in an international market place. Analysts have raised concerns about the growing inclination of oil rich countries such as Russia and Venezuela to limit foreign investment, which could slow the development of their oil and gas resources.

Exxon Mobil projected global crude oil production would rise from the current 85 million barrels per day to 115 million barrels in 2030, with oil sands deposits like those in Alberta supplying seven million barrels.

While Exxon Mobil doesn't publish price forecasts, Mr. Spellings said today's high prices, with benchmark light crude hovering around $62 (U.S.) a barrel, are not justified, even by rising extraction costs.

"We don't see today's prices as reflective of the long-term price of oil over the outlook period," he said.

"We know how much it costs to produce, basically, all the oil we see supplying demand in our outlook over the 25 years and we don't think that current prices are reflective of a long-run market clearing price for getting that oil out of the ground," he said.

On natural gas, Exxon Mobil projects demand growth of 1.7 per cent per year worldwide with much of the additional supply coming from liquefied natural gas.

LNG shipments are forecast to grow from 15 billion cubic feet per day -- representing 5 per cent of the market -- in 2000 to 70 billion cubic feet per day, or 15 per cent of the market, in 2030. Major suppliers will be Russia, Australia and the Middle East, though Mr. Spellings said producers need to make major investments in both production and receiving facilities to meet that demand.

Exxon Mobil has long rejected environmentalists' calls for major changes in energy use in order to reduce greenhouse gas emissions. Yesterday, Mr. Spellings acknowledged that global warming represents a threat.

"Rising carbon dioxide emissions from fossil fuel use pose risks for society which could prove significant," he said. But he added that many proposed solutions would be both unduly expensive and ineffective.

"To be effective, we must try to identify the best options to mitigate CO{-2} considering both the cost and the scale of those options," he said. Among the most promising solutions, he said, are clean-coal technologies that capture carbon dioxide from power plants and store it underground.