Bureau of Economic Geology Jackson School of Geosciences The University of Texas at Austin

Tinker, 2008

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Bureau of Economic GeologyJackson School of Geosciences

The University of Texas at Austin

Scott W. Tinker

Global Energy Myths, Realities and Paradoxes

Global Energy Myths, Realities and Paradoxes

RMS-AAPG and COGARMS-AAPG and COGADenver, CODenver, CO July, 2008July, 2008

RMS-AAPG and COGARMS-AAPG and COGADenver, CODenver, CO July, 2008July, 2008

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• Fossil fuels are the bridge to an alternate energy future.

• Alternate energies will take time, technology, and money to scale up.

• The cost to reduce carbon is high; everyone must play and pay or we risk the global economy.

The Global Energy RoadThe Global Energy RoadThe Global Energy RoadThe Global Energy Road

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Webster’s Online: Webster’s Online: MythMythWebster’s Online: Webster’s Online: MythMyth

Main Entry: myth Pronunciation: \ˈmith\ Function: noun Etymology: Greek mythos Date: 1830

1 a: a usually traditional story of ostensibly historical events that serves to unfold part of the world view of a people or explain a practice, belief, or natural phenomenon b: parable, allegory

2 a: a popular belief or tradition that has grown up around something or someone; especially : one embodying the ideals and institutions of a society or segment of society <seduced by the American myth of individualism — Orde Coombs>

2 b: an unfounded or false notion

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Webster’s Online: Webster’s Online: ParadoxParadoxWebster’s Online: Webster’s Online: ParadoxParadox

Main Entry: par·a·dox Pronunciation: \ˈper-ə-ˌdäks, ˈpa-rə-\ Function: noun Etymology: Latin paradoxum, from Greek paradoxon, from neuter of paradoxos contrary to expectation, from para- + dokein to think, seem — more at decent Date: 1540

1: a tenet contrary to received opinion

2 a: a statement that is seemingly contradictory or opposed to common sense and yet is perhaps true

2 b: a self-contradictory statement that at first seems true

2 c: an argument that apparently derives self-contradictory conclusions by valid deduction from acceptable premises

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6. “Big Oil” controls the price of oil and gasoline and makes “obscene” profits.

7. Cutting oil imports will stabilize gasoline prices.

8. Global production of oil and natural gas are “peaking” and we are running out of fossil energy soon.

9. All coal is dirty.

10. The cost of energy increasing.

Ten Energy Myths Ten Energy Myths Ten Energy Myths Ten Energy Myths

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Ten Energy Myths Ten Energy Myths Ten Energy Myths Ten Energy Myths

1. The US can be energy independent in the next 25 years.

2. “Renewable energy” can reduce dependence on fossil fuels significantly in the next 25 years.

3. The economy will adapt easily to a rapid, federally imposed energy transition.

4. Energy efficiency and savings (alone) will solve the problem.

5. There is plenty of low cost (conventional) oil ready to be found.

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Crisis/Policy Paradox

Sound energy policy is necessary to prevent an energy crisis, yet crisis is

seemingly necessary to cause policy to be considered.

Energy ParadoxesEnergy ParadoxesEnergy ParadoxesEnergy Paradoxes

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Economy/Carbon Paradox

Emissions from the combustion of fossil fuels enhance global warming which

harms the economy, yet a healthy economy relies on fossil energy today.

or

The road to an alternate (clean) energy future must be paved with fossil energy.


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Government/Markets Paradox

Government policies are needed to enhance free market behavior.


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Nationalization/Globalization Paradox

The US should be energy independent in order to remain a global leader in an

interdependent world.


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Global production of oil and natural gas are

“peaking” and we are running out of fossil

energy soon.

Myth 8Myth 8Myth 8Myth 8

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Global EnergyGlobal EnergyGlobal EnergyGlobal Energy

We depend upon fossil fuels today.

Energy Use (Quadrillion Btu)

0 20 40 60 80 100 120 140 160

Africa

Canada & Mexico

Middle East

Central & South America

Eurasia

Europe

United States

Asia & Oceania

Quadrillion Btu

Data: EIA, October 2007

Oil

Gas

Coal

Nuclear

All Other

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Conventional Oil

Natural Gas

Data from EIA 2007

US Energy MixUS Energy MixUS Energy MixUS Energy Mix

Biom

assCoal

Hydro

Uranium

Transportation

Heat

Electricity

We depend upon fossil fuels today.

US Transportation Energy Demand (2006 Btu)

16407

618

264

4892

2647

1333

611

147

592

688Light-Duty Vehicles

Commercial Light Trucks 1

Buses

Freight Trucks

Air 3

Water

Rail

Lubricants

Pipeline Fuel Natural Gas

Military Use

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0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

Glo

bal

An

nu

al P

rod

uct

ion

(m

bo

)

World Oil Production (Thousand Barrels)

0.00

200.00

400.00

600.00

800.00

1,000.00

1,200.00

1,400.00

Glo

bal

Res

erv

es (

bb

o)

World Oil Reserves (Billion Barrels)

15

2025

30

35

40

R/P

Global Reserves and ProductionGlobal Reserves and ProductionGlobal Reserves and ProductionGlobal Reserves and Production

Source: 1980-2007 Energy Information Administration As of January 2008 (www.eia.doe.gov/pub/international/iealf/crudeoilreserves.xls ), 1950-1980 OPEC (http://www.opec.org/library/)

$0.00$10.00$20.00$30.00$40.00$50.00$60.00$70.00$80.00$90.00

$100.00

Oil

Pri

ce (

$20

07)

Oil Price Average in $/bbl Inflation Adjusted 2007

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M

ExxonMobil, 2005. http://www.exxonmobil.com/Corporate/Citizenship/Corp_citizenship_energy_outlook.asp

The Conventional Oil “Wedge”

~35 MMBD new demand

If China and India grow from 1 B/P/Y today to 5 B/P/Y by 2030, it will create 48 MMBD

of new demand

Unconventionals

Plus EOR

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Option Time to Initiate Impact (+10 Yrs)

(Yrs) (MM bpd)

– Enhanced Oil Recovery 5 3– Heavy Oils / Oil Sands 3 8– Shale Oil 10 2– Coal Liquids 4 5– Gas-To-Liquids 3 2– Biofuels 2 1

21after Hirsch et.al, 2005

Options to Conventional Oil Options to Conventional Oil Options to Conventional Oil Options to Conventional Oil

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One More Option to Conventional Oil… One More Option to Conventional Oil… One More Option to Conventional Oil… One More Option to Conventional Oil…

1 MMBOPD and 1.4 TCFY in 15 years

ARI, 2006

Access Restrictions

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Global Natural Gas Supply and DemandGlobal Natural Gas Supply and DemandGlobal Natural Gas Supply and DemandGlobal Natural Gas Supply and Demand

50

60

70

80

90

100

110

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

Year

Nat

ura

l G

as (

Tcf

)

*Supply = world natural gas production & Demand =world natural gas consumption.

Data: EIA, October 2007

SupplyDemand

60

70

R/P (yrs)

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0

5,000

10,000

15,000

20,000

25,000

1949 1954 1959 1964 1969 1974 1979 1984 1989 1994 1999 2004

Year

U.S

. N

atu

ral

Gas

Pro

du

ctio

n (

Bcf

)

Total Natural Gas

Conventional Gas

Difference

U.S. Natural Gas ProductionU.S. Natural Gas ProductionU.S. Natural Gas ProductionU.S. Natural Gas Production

Conventionals: EIA (1949-1990) and NPC (1991-2015)Unconventionals: 1970-1988 data from GRI, 1999. Updated data from 1989-2005 is from EIA, 2007

0

1

2

3

4

5

6

7

8

9

10

1990 1995 2000 2005 2010 2015 2020 2025Year

An

nu

al

Na

tura

l G

as

Pro

du

cti

on

(T

CF

)

Gas Shales

Coalbed Methane

Tight Gas

Unconventionals

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US Dry Natural Gas ReservesUS Dry Natural Gas ReservesUS Dry Natural Gas ReservesUS Dry Natural Gas Reserves

Source: Energy Information Administration (EIA)

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

Res

erve

s (B

cf)

Unconventionals

Technology and Ideas

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•Easy to produce (but hard to find!) conventional oil will plateau and then decline; i.e. the conventional oil “plateau”

•Global natural gas production is a few decades away from a plateau

•Easy to find (but hard to produce!) unconventional oil and natural gas are playing a growing role (function of environmental policy, economics and technology)

•Fossil fuel resources combined (oil, natural gas and coal) could provide over two hundred years at current consumption rates

Myth 8 RealitiesMyth 8 RealitiesMyth 8 RealitiesMyth 8 Realities

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“Renewable energy” can reduce dependence on

fossil fuels significantly in the next 25 years.

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QAc9841c

Global Energy ConsumptionGlobal Energy ConsumptionGlobal Energy ConsumptionGlobal Energy Consumption

U.S. Data: Annual Energy Review 1999 (EIA, 2000)World Data: International Energy Annual 1999 (EIA, 2000)

100

80

60

40

20

0

Per

cen

tag

e o

f to

tal

mar

ket

Year

1850 1900 1950 2000

H/C>4 (Natural Gas, Nuclear, All others)

H/C<1 (Wood, Coal)

H/C~2 (Oil)

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1.25% annual demand growth

Historical Data: EIA October 2007: Forecasts: Tinker, 2008

0.0020.0040.0060.0080.00

100.00120.00140.00160.00180.00200.00

1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030Glo

bal

En

erg

y C

on

sum

pti

on

(q

uad

s)Petroleum

Natural Gas

Coal

Hydroelectric Nuclear

Biomass, Geothermal, Solar & Wind

0%5%

10%15%20%25%30%35%40%45%50%

% T

ota

l C

on

su

mp

tio

n

1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030

Future Global TrendsFuture Global TrendsFuture Global TrendsFuture Global Trends

0

100

200

300

400

500

600

700

1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030

Glo

bal

En

erg

y C

on

su

mp

tio

n (

Qu

ad

s)

Unconventional Gas

Unconventionals/Res Growth

1.25% Global Annual Demand Growth

4 8 16 322X

every7 yrs

91% 87% 80%

Sound energy policy is necessary to prevent an energy crisis, yet crisis is seemingly necessary to cause (poor)

policy to be considered.

andThe road to an alternate (clean) energy

future must be paved with fossil energy.

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•Energy is not “renewable”

•One of the great challenges of alternate energy is scale

•Energy transitions take time and are expensive

•Oil is beginning to plateau

•Disruptive breakthroughs in electricity storage and transmission are needed to facilitate alternate energy


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The US can be energy independent in the

next 25 years.

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US Economy and Oil PriceUS Economy and Oil PriceUS Economy and Oil PriceUS Economy and Oil Price

Nixon Clinton Bush 2 Bush 1 ReaganCarterFord

-4.00

-2.00

0.00

2.00

4.00

6.00

8.00

10.00

1970 1975 1980 1985 1990 1995 2000 2005

Year

GD

P G

row

th (

% p

oint

s at

ann

ual r

ates

)

0

10

20

30

40

50

60

Oil

Do

mes

tic

Wel

lhea

d P

rice

($)

GDP Growth (Percentage points at annual rates)

Crude Oil Domestic Wellhead Price ($2000)

Data: EIA February 2007 and US department of Commerce

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1800 1855 1910 1965 2020

An

nua

l Use

(Q

uad

s)

1

0.1

10

100

Electricity’s RoleElectricity’s RoleElectricity’s RoleElectricity’s Role

Total Energy

After Huber and Mills, 2005. Data: EIA, Annual Review, 2003. US Census Bureau, Historical Statistics of the US Colonial Ties to 1970

Energy used to produce electricity

45Q

Electricity will play an ever greater role in the energy

end use mix.

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Conventional Oil

Natural Gas

Data from EIA 2007

ElectricityElectricityElectricityElectricity

Biom

assCoal

Hydro

Uranium

Transportation

Heat

Imports

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Electricity OptionsElectricity OptionsElectricity OptionsElectricity Options• Natural Gas

– Abundant, reliable, price volatility, and cleaner

– Challenges: Global deliverability (LNG) and Access

• Coal– Abundant, reliable, cheap and dirty

– Challenge: Sequestration (IGCC w/CCS), financing, public perception

• Nuclear– Abundant, reliable, moderate price and cleaner

– Challenges: Waste disposal, security, public perception

• Renewables– Cleaner, less reliable and more expensive

– Challenge: Capacity impacts cost and reliability

• Efficiency– Fuel, lighting, electronics, insulation

– Challenge: Rebound effect

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Global Carbon EmissionsGlobal Carbon EmissionsGlobal Carbon EmissionsGlobal Carbon Emissions

4,000

6,000

8,000

10,000

12,000

1980

1983

1986

1989

1992

1995

1998

2001

2004

An

nu

al

An

thro

po

ge

nic

CO

2 (

mm

T)

NA AfricaEuropeEurasia

ME

Cent & SAAsia & Oceania

2,000

EIA, 2007

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Year

0.00

0.50

1.00

1.50

2.00

2.50

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

GD

P (

$B20

00)/

CO

2 (M

MT

)

GDP/Carbon EmissionsGDP/Carbon EmissionsGDP/Carbon EmissionsGDP/Carbon Emissions

NA Africa

Europe

Eurasia

ME Cent & SA

Asia & Oceania

Emissions from the combustion of fossil fuels enhance global warming which

harms the economy, yet a healthy economy relies on fossil energy today.

and

Government policies are needed to enhance free market behavior.

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•The world is “flattening;” resource interdependence is becoming the norm

•Independence requires realistic, scalable alternatives, which take time and are very expensive ($ trillions)

•Concerns about climate and security have placed the public sights squarely on fossil energy, especially coal and oil

•Energy and economies are inextricably linked and mandated transitions don’t really work


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Summary ThoughtsSummary ThoughtsSummary ThoughtsSummary Thoughts

•The Three E Waltz (Energy, Economy, Environment) is a sensitive dance

•Oil and natural gas provide nearly 2/3 of the world’s energy

•We need to be realistic about a carbon constrained world

– It is coming, it will take time, it won’t be cheap

– Everyone needs to play and pay

– Research funding and talent are vital

– Government, private, academic partnerships

Bureau of Economic Geology Jackson School of Geosciences The University of Texas at Austin

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