Exxon Mobil (NYSE:XOM) estimates that the development of shale, and other unconventional resource plays by the energy industry, will continue over the next few decades and will account for 30% of global natural gas production by 2040.
Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.
The Outlook for Energy
Exxon Mobil publishes "The Outlook For Energy" at the end of each calendar year and uses this report to outline the company's long term view on energy supply and demand. The company also expanded the report's time horizon to 2040, for the first time. (For related reading, see Peak Oil: What To Do When The Wells Run Dry.)
Natural Gas Supply
Shale and other unconventional formations currently provide 10% of global natural gas production and Exxon Mobil expects this share to triple and reach 30%, by 2040. This production trend began in the United States more than 10 years ago, when Mitchell Energy & Development Corp first applied horizontal drilling and hydraulic fracturing to produce from the Barnett Shale in Texas.
Mitchell Energy & Development Corp was purchased by Devon Energy (NYSE:DVN) in 2001 and the techniques have since been applied to many other formations in North America. Over the next decade, this technology is expected to be used to produce from oil and gas formations outside North America, including Poland and Argentina.
The share of natural gas in the entire energy mix will also grow quickly, increasing at an annual rate of 1.6%, through 2040. This growth rate will lead to natural gas displacing coal by 2025, as the second most popular fuel after oil.
Natural Gas Liquids
Exxon Mobil is also looking for an increase in the supply of natural gas liquids, as many shale and other unconventional formations produce these hydrocarbons along with the natural gas stream.
This explosion in natural gas production in the North America and elsewhere will lead to an increase in Liquefied Natural Gas (LNG) exports by 2040. Exxon Mobil estimates that LNG will supply 15% of all global natural gas demand within thirty years. (For related reading, see Natural Gas Industry: An Investment Guide.)
These trends are part of the reason why some operators are diversifying into natural gas through acquisitions or joint ventures in the United States. BHP Billiton (NYSE:BHP) recently closed on the purchase of Petrohawk Energy in a deal with an enterprise value of $15.1 billion. The company picked up 3.4 Tcfe of proved reserves in the deal and the potential for more, through Petrohawk Energy's undeveloped acreage across the United States.
Other companies are entering joint ventures with more established operators. In Aug., 2011, Noble Energy (NYSE:NBL) signed a multi-billion dollar deal with CONSOL Energy (NYSE:CNX) to jointly develop Marcellus Shale acreage.
The Bottom Line
Exxon Mobil was late to the shale gas party, but is now a firm believer in the future of this commodity. The company looks for natural gas to rapidly increase its share of the overall energy mix over the next thirty years.
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.
Stock AnalysisLearn which Asian countries deliver the most crude oil to market, and discover what companies are the biggest producers in each country.
Stock AnalysisDiscover the top Russian oil companies by production volume and find out more about their domestic and international business operations.
Mutual Funds & ETFsLearn about arbitrage funds and how this type of investment generates profits by taking advantage of price differentials between the cash and futures markets.
Investing NewsWill Ferrari's shares move fast off the line only to sputter later?
Stock AnalysisUnderstand the growth and challenges of the renewable energy market and its success in 2015. Learn about the top three energy stocks to add to a portfolio.
Investing NewsShares of Glencore International, a leading multinational commodities and mining company, jumped by around 15% on London Stock Exchange, after the shares had gained about 71% earlier on the Hong ...
Stock AnalysisUnderstand why energy companies' stock are volatile when oil prices are volatile. Learn about the top five energy companies to buy and hold.
InvestingCommodity prices have been heading lower for more than four years, being the worst performing asset class of 2015 with more losses in cyclical commodities.
Stock AnalysisHere are five stocks that pay safe dividends and should be at least somewhat resilient to a bear market.
InvestingThe further you fall, the harder it is to climb back up. It’s a universal truth that is painfully apparent in the investing world.
When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>