Fueling ambition: the road ahead
J. Stephen Simon ’67, ExxonMobil senior executive, highlights the role technology will play in meeting the world’s future energy demands By Romi Herron
11/8/2006 - J. Stephen Simon ’67, director and senior vice president for ExxonMobil, says about 2.4 billion people worldwide still use wood and dung for their energy needs.
But that figure is changing every day.
As developing countries continue to grow economically, so too will their needs for other energy sources, and technology will determine how those demands are met, said Simon during a Nov. 6 visit to the Kellogg School. He spoke to dozens of faculty, students and staff during his presentation, titled, “The Outlook for Energy: A View to 2030.”
Simon, who, in addition to his Kellogg MBA, holds a bachelor’s degree in civil engineering from Duke University and has held several senior leadership roles at ExxonMobil prior to his current role, explained that population and economic growth drive energy demand, while increased efficiencies also affect outcomes. Looking ahead, ExxonMobil anticipates that about 80 percent of energy demand by the year 2030 will be attributed to developing countries, where, “fossil fuels (liquids, gas and coal) would provide an improvement for quality of living, health and impact on the environment,” Simon noted. “Those fossil fuels will continue to be the predominant source of energy for decades to come.”
Additionally, Simon commented that the global economy is expected to grow at 2.7 percent per year, more than doubling in size to approximately $71 trillion by 2030. Specifically, the Kellogg alum said expanding economies of China, India, Indonesia and Malaysia will grow annually at more than 5 percent. That in turn will be a key driver of growing world energy demand, which is predicted to grow on average 1.6 percent per year, from about 205 million barrels per day of oil equivalent (MBDOE) in 2000 to nearly 335 MBDOE in 2030.
ExxonMobil and its affiliated companies conduct business in more than 200 countries and territories. The corporation, ranked the largest in the world this year by Fortune magazine, offers fuels, lubricants and petroleum products under the ExxonMobil, Exxon and Mobil brands in the U.S. In addition, the company searches for new sites of resources and ways to obtain higher yields.
“Increased efficiency will be increasingly important to balance supply and demand,” said Simon, who serves on the Kellogg Alumni Advisory Board. Advances such as hybrid vehicles will continue to offset some energy demands, he added, a technology that is particularly beneficial since more automobiles are arriving in developing markets, including China, he said. In those regions, the light duty vehicle fleet, consisting of passenger cars and light duty trucks, is expected to present the most growth, and as a result, more demand for fuel.
“Significant breakthroughs in technology will be needed to meet the demand of liquid supply,” Simon said. Meanwhile, some advances are already enabling the energy company to access previously untapped resources.
For instance, he said, advanced reservoir imaging and extended reach drilling enables ExxonMobil to drill one mile below surface and six miles horizontally with precise accuracy for use in the Arctic, and technology also fosters ExxonMobil’s upgrading of tar-like material into synthetic crude.
As demand increases, considerations for challenges in processing resources include the cost of production against the scale at which the resource will impact the demand, Simon noted.
As an example, he said U.S. corn ethanol in 2005 met 2 percent of the domestic gasoline needs, but it consumed 13 percent of the corn supply.
“You already have competition between energy and food requirements,” Simon said, emphasizing again that technology will lead to more efficiencies and improve processing and procurement of energy resources. “We are counting on continued advancements and technology, some of which we can’t possibly imagine, to meet future energy requirements. The resources are there but we will need to access them.”
The Kellogg Energy Management Club, which sponsored Simon’s appearance, is a student-run professional organization dedicated to developing and broadening the Kellogg community’s interest in the energy industry. The EMC provides both learning and networking opportunities through a variety of forums, emphasizing the diversity of careers available in the industry.
Jeffrey K. Uhrig ’07, an EMC coordinator, called Simon’s presentation invaluable.
“The future of energy will be one of the most important issues facing business leaders. A truly global commodity, energy issues will continue to test international relationships, fuel growth in developing countries, and drive social debates ranging from environmental concerns to oil company profits.”
He said that Simon’s presentation offered Kellogg students a solid foundation to understand resource allocation within the context of energy challenges today.