2019OUTLOOK FOR ENERGYA PERSPECTIVE TO 2040DUAL CHALLENGEP.32019 OUTLOOK FOR ENERGY Visit Subscribe to Follow exxonmobil Follow Outlook for Energy A perspective to 2040 The Dual ChallengeAs energy is essential for human development, society faces a dual challenge toprovide reliable and affordable energy to a growing population, while reducingenvironmental impacts, including the risks of climate change.A significant portion of the world’s population remains energy-deprived, facingliving conditions that would be considered dire by most people in developedcountries. Access to modern energy improves a community’s quality of life; it isclosely correlated to increased life expectancy, reduced poverty and malnutrition,and higher levels of childhood education. As growing populations gain increased access to energy, rising living standards inmany parts of the world will create the largest expansion of the global middle classin history, meaning more demand for homes, transportation, electricity, consumergoods and the energy to power them all. The challenge is to satisfy this growingdemand, while reducing the risks of climate change.Building a perspectiveThe Outlook provides a projection of energy demand through 2040 using theInternational Energy Agency IEA and other credible third-party sources as afoundation. The projection is based on likely trends in technology, policy, consumerpreferences, geopolitics and economic development. While these individual trendsmay vary over time, the snapshot provided by the Outlook can help to uatesociety’s progress toward addressing both aspects of the dual challenge.As these trends evolve, we continue to discuss our approach and conclusions withnumerous stakeholder groups, economists and policy experts. The Outlook teamalso considers various sensitivities and third-party scenarios from peer-reviewedwork to improve our understanding of the energy landscape. Addressing the dual challenge will have ramifications for every nation’s economic,energy security and environmental goals. By sharing our Outlook with the public,we seek to broaden understanding of the world’s energy system and enrich thedialogue on practical, robust solutions.ExxonMobil supports the Paris AgreementThe Paris Agreement1on climate change declared governments’ intentions toreduce greenhouse gas GHG emissions as outlined in each country’s nationallydetermined contribution NDCs. Many states, cities and businesses, includingExxonMobil, expressed support for the aims of the agreement. Our own climatechange risk management strategy is described in ExxonMobil’s Energy marketdemand trends differ for OECD and non-OECDContinued innovation will help OECD economies expand whilereducing their energy demand by about 5 percent and energy-relatedCO2 emissions by nearly 25 percent. In the non-OECD countrieshowever, energy use and emissions will rise along with populationgrowth, increased access to modern energy and improving livingstandards.Global electricity demand rises 60 percentThe trend to further electrify buildings, factories, cars and buses, alongwith smart appliances and greater automation, spurs the need ore electricity everywhere. Solar, wind and natural gas contribute themost to meeting growth in electricity demand.Almost half of the world’s energy is dedicated toindustrial activityNew homes and roads will be constructed and household appliancesproduced as a result of rising population and urbanization. Steel,cement and chemicals are essential materials to satisfy these needswhich, today, are energy-intensive products.Commerce and trade drive transportation energyconsumption up more than 25 percentIncreased on-road efficiency and more electric vehicles will lead to adecline in light-duty vehicle liquid fuel demand. Overall transportationfuel demand growth is driven by increased commercial activity -moving more people and products by bus, rail, plane, truck and marinevessel. Energy-dense, affordable and widely available oil will remainthe predominant transportation fuel.Global energy-related CO2 emissions peak, but remainabove assessed 2oC scenariosIncreased energy efficiency and a shift to lower carbon energy sourceswill help curb CO2 emissions, but not sufficiently to reach a 2oCpathway.2Innovative technology solutions and supportive policies arestill needed to achieve society’s emissions aspirations.Oil and natural gas remain important energy sourcesand require significant investmentOil and natural gas make up about 55 percent of global energy usetoday. By 2040, 10 of the 13 assessed 2oC scenarios project that oiland gas will continue to supply more than 50 percent of global energy.Investment in oil and natural gas is required to replace natural declinefrom existing production and to meet future demand under allassessed 2oC scenarios.P.5V Subscribe Followexxonmobil F OUTLOOK FOR ENERGY4 Key takeaways6 Fundamentals10 Demand13 Transportation18 Residential and commercial20 Industrial24 Electricity and power generation28 Supply30 Liquids32 Natural gas37 Emissions40 Pursuing a 2oC pathway47 Energy matters48 Data55 GlossaryCONTENTSP.62019 OUTLOOK FOR ENERGY V Subscribe Followexxonmobil F progress is intrinsically related to energy. Access to safe, reliable and affordable energy is a critical enabler of higher living standards, including a longer and healthier life. Today asignificant portion of the global population still faces serious challenges in accessing energy on a daily basis, negatively impacting health and preventing many from fully realizing theirpotential. The challenges become even greater considering that by 2040 the global population is projected to grow to 9.2 billion from 7.5 billion today. Improving access to energy and a growing global economy will lead to better economic opportunities, higher incomes and improved living conditions for many. As countries move up thehuman development index, the improving living standards are associated with increased energy use. Today, almost 50 percent of the global population lives in countries that rank low tomedium on the U.N.’s human development index. Advancing development for nearly half the world’s population creates the potential for significant global energy growth.Energy is essential for society’s progress. Economic expansion and improving access to energy enable longer, moreproductive lives for the growing global population. FUNDAMENTALSneed to add bubnle size ispopulationSource U.N. Human Development Reports 2018, World Bank DataBank 2019, EM analysesTHE SIZE OF THE CIRCLES DEPICTSRELATIVE SIZE OF POPULATIONU.N. 2017 HumanDevelopment Index2015LOWMEDIUMHIGHVERYHIGH10 100 10002015 Energy Demand per Capita 1000 BTU/person/dayBANGLADESH INDIA UNITED STATES ICELANDYEMEN SPAINMEXICONIGERIA CHINAEGYPTAccess to safe, reliable and affordable energy is a critical enabler of higher living standards, including a longer and healthier life. Today a ing their y will lead t omes and impr . As countries move up the gy use. Today, almost 50 percent of the global population lives in countries that rank low to medium on the UN’s human development index. Advancing development for nearly half the world’s population creates the potential for significant global energy growth.U.N. 2017DeS P.7V Subscribe Followexxonmobil F OUTLOOK FOR ENERGY | FUNDAMENTALS160120804002000 2010 2020 2030 2040World GDP doublesTrillions of 2010 dollars50403020100OECD Non-OECDEuropeUnitedStatesChinaAfricaIndia1.8CAGR4.1CAGRNon-OECD leads growthTrillions of 2010 dollars GDP 2017-2040OECDNon-OECD By 2040, the global population will reach 9.2 billion people, up from 7.5 billiontoday; India will soon surpass China as the most populous nation, but the mostprofound growth is in Africa Significant increases in prime working-age population in Africa, India and other AsiaPacific AP non-OECD countries contribute to the energy needs of these regions The rising youth population in Africa and maturing populations in the OECD andChina will also influence the future of the global economy and energy demand These demographic trends impact global energy markets with geographic shifts inwhere and how energy is produced, transported and used Economic expansion is a key driver of energy demand. World GDP is projectedto nearly double from 2017 to 2040 with the non-OECD growing at more thantwice the rate of the OECD By 2040, the non-OECD countries will account for about half of global GDP, upfrom about a third today. China and India’s combined growth is nearly the sameas the OECD The widespread non-OECD economic expansion suggests continued robustdemand for energy in these economies GDP for the OECD countries grows at a slower pace but from a much higherbase than the non-OECD countries.Other Other Other APnon-OECD2.52.01.51.00.50.0World demographics continue to shiftBillions of peopleAge0 - 14Age 15 - 64Age 6525 4017GLOBAL FUNDAMENTALS PROJECTIONSOECD China India Other Asia PacificNon-OECDAfrica Rest of WorldP.8V Subscribe Followexxonmobil F OUTLOOK FOR ENERGY | FUNDAMENTALS60402002000 2010 2020 2030 204065432102015 2030Middle class almost doublesChina World India Other Asia Pacific Non-OECD Latin AmericaEuropeAsia PacificNorth AmericaAfrica/Middle EastGlobal middle class – billions of people Access to modern energy enables economic progress and improves quality oflife. As income grows, it enables a family to own a home, purchase labor-savingappliances, pursue an education, travel and obtain needed medical treatment As GDP grows faster than population around the globe, average personalincomes rise everywhere, albeit with significant country and regional variations By 2040, China GDP per capita is expected to triple and be at about 75 percentof the OECD Over the Outlook period, India per capita GDP level is likely to grow even fasterthan China, but remaining below the global average. Africa only achieves anaverage 50 percent increase Even though the average income in the non-OECD countries remains lowerthan in the OECD, there is already a burgeoning middle class that can affordmore than the basic necessities of food and shelter. The Brookings Institutionforesees continued rapid growth of the global middle class, with billions morepeople rising out of poverty by 2030 Asia Pacific represents the largest growth, with India and China each expectedto have more than 1 billion middle-class citizens by 2030 The expanding middle class means billions of people will aim to improve theirliving conditions and access to energy is a critical enabler for these aspirationsSource The Brookings Institution - Global Economy companies choose naturalgas and electricity for their versatility, convenience and lower direct emissions Coal is expected to continue to play a role in steel and cement manufacturing but its usedeclines as nations and businesses strive to reduce their environmental impact Shifting to lower-carbon fuels holds the industrial sector’s 2040 direct emissions atabout the same level as 2017 even as energy demand increases by around 15 percentWorld – quadrillion BTUs17‘00 40Asphalt/Lubes/SpecialtiesChemicalfeedstockIndustrialfuelOilNaturalgasElectricity/Mkt heatCoalOther The industrial sector provides more than a billion jobs for people who work to feed, clothe,shelter and improve the lives of people around the world Rising population and prosperity trigger demand for modern cities, medical equipment,mobility and home appliances that underpin the need for steel, cement and chemicals In 2017, the industrial sector used about half the world’s electricity and nearly as muchprimary energy as the transportation and residential/commercial sectors combined Increased options for consumers to ‘reduce, reuse, recycle’ and manufacturers’ efforts toimprove industrial processes and efficiency can conserve fuel and mitigate emissions Heavy industry steel, cement, metals and manufacturing and chemicals plastics, fertilizerand other chemical products are expected to account for 85 percent of growth to 2040World – quadrillion BTUsGrowth 17-40ChemicalsHeavy industryEnergy industryAgricultureAsphalt/Lubes/SpecialtiesINDUSTRIAL PROJECTIONSIndustrial sector energy supports economic progressP.22V Subscribe Followexxonmobil F OUTLOOK FOR ENERGY | DEMAND8765432102000 2010 2020 2030 20401050-5-10-15Heavy industry transitions toward cleaner fuelsNatural gas OilBiomass/Other CoalElectricity/Market heat Manufacturing tends to gravitate toward regions with access to abundant, affordableenergy, an able workforce and balanced policies Each region’s fuel mix differs based upon its unique blend of manufacturingactivity and the relative availability and cost of its energy sources Electricity use is expected to grow; it is ideal for motors, robotics and process controls Natural gas is expected to give a competitive edge to resource-rich areas of Africa,the Middle East and Latin America; it also helps China manage its air quality Coal’s use declines in the OECD and China but doubles in coal-producing India andthe rest of Asia because of coal’s abundance and affordability relative to other fuels 2017-2040 change in quadrillion BTUs Heavy industry energy intensity measures the amount of energy used in heavyindustry and manufacturing per dollar of overall economic activity GDP Producing more value with less energy has a positive impact - economically andenvironmentally - for manufacturing companies and countries OECD nations have lower energy intensity due to their service-based economiesand predominance of higher-value, energy-efficient industries Chinas intensity spiked as it invested in infrastructure and heavy industry; recently itsintensity has been improving rapidly as its economy matures and efficiency increases Optimizing energy use via advances in technology, processes and logistics can helpcompanies remain competitive and contribute to gains in global energy-intensity Thousand BTUs per dollar of GDPHeavy industry energy intensity improvesChinaOECDIndiaOther APnon-OECDRest of WorldOECD China India Other APnon-OECDRest of WorldINDUSTRIAL HEAVY INDUSTRY PROJECTIONSP.23V Subscribe Followexxonmobil F OUTLOOK FOR ENERGY | DEMAND7060504030201002000 2010 2020 2030 2040World – quadrillion BTUsChemicals production relies on oil and natural gas17Consumer demand boosts chemicals energy