Exxon Mobil predicts surge in electricity from nuclear & natural gas at the expense of coal

Natural gas and nuclear power could help meet a surging demand for electricity across the globe over the next three decades as growing environmental concerns and costs start to price coal out of the market, Exxon Mobil predicted today.

The Irving, Texas-based oil giant’s forecast came as part of its closely watched long-range outlook for global energy supply and demand through 2040.

The world will need 85 percent more electricity by 2040 over the power it used in 2020, noted William Colton, Exxon Mobil’s vice president of corporate strategic planning, who led the analysis.

While coal is a big part of the electricity mix today — and it still will be a major power source in developing countries for years to come — utilities will increasingly turn to other options as climate change policies spur a transition to nuclear power, natural gas and renewable sources that don’t emit as many greenhouse gases. All told, Exxon Mobil predicts coal use will drop 33 percent by 2025 over 2010 demand.

“Coal is very much pushed back by environmental considerations,” Colton said. “Nuclear is limited by public acceptance. Wind and solar are limited both by costs and the practicalities of growing (them).”

“This provides a tremendous opening for natural gas a source of generating electric power,” Colton added.

New technologies, including horizontal drilling and hydraulic fracturing, are allowing energy companies to extract oil and natural gas from previously inaccessible dense rock formations across North America. The new abundance already has shifted the economics of natural gas, blunting coal’s price advantage.

That dynamic will change even more, Exxon Mobil said, as greenhouse gas regulations create an implied cost on the carbon dioxide emissions produced by burning fossil fuels of up to $80 per ton in 2040.

While Exxon Mobil does not support a carbon tax, the company does back it as the best option if policymakers advance plans to put a price on greenhouse gas emissions.

“If policy makers are going to adopt a measure — a regime to effect or put in place a cost on the use of carbon across the economy — our economists and most economists would support a revenue-neutral economy wide carbon tax as the most efficient way of putting a cost on the use of carbon,” said vice president of public and government affairs Kenneth Cohen.

The idea of a carbon price has drawn attention as a way to raise government revenues and avert the “fiscal cliff.”

But Cohen rejected a carbon tax imposed solely to raise revenue. “If the policy objective is to raise revenue, it’s not on the table,” he said, insisting that a better way to send dollars to federal coffers would be to open up more public lands and waters for drilling.

Even under the current trajectory, Exxon Mobil expects North America to become a net exporter of energy by 2025, with natural gas leading the way and the continent producing more oil than it uses by 2030.

Some of that energy would come from Canada, including bitumen harvested from the oil sands around Alberta.

Exxon Mobil’s export prediction dovetails with recent forecasts by the Energy Information Administration and other groups.

The Obama administration is currently weighing whether to allow more companies to export natural gas harvested in the United States, amid concerns that could cause domestic prices to climb. In some Asian and European markets, natural gas sells for three to five times what it commands in the United States, though analysts generally anticipate relatively modest price increases domestically.

Even with expanded exports of liquefied natural gas, Colton said, he doesn’t anticipate big changes in the very regional pricing of the commodity. LNG exports may allow some markets to “approach parity,” he said, “but that’s very much a long-term prospect.”

The company also anticipates growing interest in natural gas to power cars and trucks, but Colton stressed that the biggest gains are likely among commercial fleets and long-haul trucking. It’s relatively easy for fleets —  such as garbage and delivery trucks — to switch to natural gas, as they return to the same station nightly and don’t require huge range. And fueling stations for long-haul trucks powered by natural gas can be concentrated around the nation’s interstates, rather than installed all over the country, making that change easier.