Emerging Market Growth Means Huge Rewards for These Oil Majors
Expanding middle classes across the globe are sure to result in rising demand for oil and other sources of energy, according to an internal study from ExxonMobil . Particularly in emerging geographies such as Africa, growing populations and rising prosperity mean the biggest integrated super-majors have a complex task ahead of them.
ExxonMobil has pegged Africa as a major driver of global energy demand going forward, and if that's true, it won't be the only oil major reaping the rewards of African economic growth.
Global super-majors place their bets
Earlier this year, ExxonMobil provided a great deal of research in a report titled The Outlook for Energy: A View to 2040, in which it outlined how it views the global energy markets over the next three decades. In it, the company made a number of fascinating findings about how it views the world and the ever-evolving energy landscape.
ExxonMobil projects the global population will grow to 9 billion people by 2040, led by growth in Africa and India. Increasing populations will, not surprisingly, result in greater demand for energy, particularly in under-developed regions. Specifically, ExxonMobil cites Africa as a major demand driver, as it, along with other emerging economies, enjoys rising prosperity and millions of new entrants into the middle class. In all, ExxonMobil projects energy demand will rise 65% by 2040 in under-developed economies.
Not surprisingly, ExxonMobil uses its forward-looking industry research to shape its future strategic priorities. The company expects to invest approximately $185 billion in energy projects over the next five years, so clearly ExxonMobil fully intends to maintain its position as a global energy juggernaut.
Africa is a key driver going forward
As previously mentioned, ExxonMobil places great emphasis on Africa as a continent primed for future growth. The company expects Africa's population will grow by 800 million, more than double its growth expectations for India, to nearly 1.79 billion in total. Consequently, Africa should see far-above-average economic growth in the decades ahead. While ExxonMobil pegs global growth in gross domestic product at 2.8% annually through 2040, Africa is expected to grow GDP by 4% annually over the same time frame.
If Exxon's projections materialize, it won't be the only company reaping the rewards. Other oil majors have pinpointed Africa as a key market as well. One such company is France-based Total , which has invested heavily in Africa over the past few years. Africa now accounts for Total's biggest geography in terms of gross capital expenditure and oil and gas production, as well as its second-biggest in terms of number of service stations.
To be exact, Total has more than 7 billion euros in gross capital expenditure plans for Africa, far ahead of its next largest geographical area of investment, which is Europe, at just under 6 billion euros. Furthermore, Total produces 713,000 barrels of oil equivalent per day in Africa.
The story is very much the same for Italian energy behemoth Eni , whose CEO Paolo Scaroni recently stated that Libya could be an oil-producing "paradise." Noting production capabilities of 2 million barrels of oil per day, he believes Libya could be the next Qatar or Kuwait. This enthusiasm is likely why Eni has more operations in Libya than any other oil driller in the world. Indeed, as of Eni's interim 2013 report, almost half its total net acreage, and 55% of its total first-half 2013 hydrocarbon production came from Africa alone.
As you can see, a great deal of research from ExxonMobil suggests that Africa will soon see a population boom and is poised to be a global leader in economic growth. As a resource-rich continent, several integrated energy giants are positioning themselves to be there to answer the call. If Africa truly moves to the forefront of energy demand and production, then ExxonMobil, Total, and Eni likely have prosperous futures ahead.
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Bob Ciura has no position in any stocks mentioned. The Motley Fool recommends Total SA. (ADR). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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