Global Energy 2010: Emerging Trends, Changing Landscapes, … · 2011-10-13 · Global Energy 2010:...
Transcript of Global Energy 2010: Emerging Trends, Changing Landscapes, … · 2011-10-13 · Global Energy 2010:...
Global Energy 2010: Emerging Trends, Changing Landscapes, Uncertain Times Frank Verrastro
Senior Vice President and Program Director
Energy & National Security
February 3, 2010
www.csis.org |
US Energy Snapshot
70% Energy Self Sufficient
Largest natural gas producer
3rd largest oil producer
Largest global reserves of coal, but….
Transport sector tied to petroleum based fuels,
Oil imports still problematic
Need to improve efficiency and promote cleaner alternatives but transformation will take time, technology and dollars
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Basic Tenets of Obama E&E Policies
- Reduce/Reverse Trend of Rising Imports
- Improve Balance of Payments Outflow for Energy
- Address the Threat of Climate Change by promoting Efficiency & Renewables; Decouple GDP from Fossil Fuel Use (System Reset)
- Promote New Tech “Green” Jobs
- Address Changing Geopolitical Landscape
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Security & Foreign Policy Objectives
Promotes/Supports
Sustainable
Environment
DefensibleNatural
GasOil
Energy Efficiency
Nuclear
Renewable
Energy
Coal
Economic Objectives
Environmental Objectives
Policy Model
Affordable/Accessible
Supports
Economic Growth & Employment
Environmentally
Benign
Low/no
emissions
Reliable and Secure
Carbon Capture
and
Storage
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Key Features of the Changing Energy LandscapeKey Features of the Changing Energy Landscape
� Continued but uneven demand growth – driven by population & GDP
growth, and living standards, particularly in emerging economies;
� Concern over concentration of conventional resources, reliability of
delivery systems and wealth transfers (2007-08 experience);
� “Peak Oil” concerns more a function of “Above Ground” issues than
resource endowment;
� New Players Emerging with new agendas, business models, leverage and
alliances – New Rules/Institutions?
� Impact of the Economic Crisis, Price Volatility & Regulatory Uncertainty;
� Projected Impacts of Climate Change & Carbon Constraints as Game
Changers;
� Broader issue of the “Commons,” Transnational Threats
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Global Energy Consumption
Source: EIA/IEO 2008
Source: EIA/IEO 2009
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Energy Demand: Driven by Emerging Economies
Source: EIA/IEO 2009
OECD
Non-OECD
241
231
278
400
U.S.
China
100
74
114
156
World Marketed Energy Use
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Developing World is Still Dependent on Fossil Fuels
Source: EIA/IEO 2008
Source: EIA/IEO 2009
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Growth in oil demand is also projected to come from the developing world
-2 0 2 4 6 8 10
China
Middle East
India
Other Asia
Latin America
E. Europe/Eurasia
Africa
OECD North America
OECD Europe
OECD Pacific
mb/d
Source: IEA, WEO 2008
Global Oil Demand Growth, 2006-2030
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Source: IEA Monthly Oil Market Report
Seasonality of Demand
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Beyond Peak Oil: Global resource endowment is enormous, but conventional distribution is uneven and unconventionals
have environmental challenges
11CONVENTIONAL RESOURCES
UNCONVENTIONAL RESOURCES
AGGREGATE DEMAND,
2006-2030Source: Based on 2008 proved reserves (BP Stat
Review) and 2006-2030 demand trends (EIA)
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Non-OPEC Oil Production Looks Flat
Source: EIA, STEO December 2009
(change from previous year)
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OPEC Surplus Production Capacity
Source: EIA STEO December2009, Bloomberg, IEA OMR
Algeria Angola
Iran
Kuwait
Libya
Qatar
Saudi Arabia
UAE
Surplus Capacity, by Country
Total Current (est.): 5.1 mmb/d
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Natural decline rates of oil and gas fields will require massive investment to replace and expand supply
14
Source: CSIS, EIA
Conventional OPEC
Conventional non OPEC
Unconventional and biofuels
Global Liquids (Oil and Biofuels) Replacement
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Massive investments are needed to replace, maintain, improve, and expand the energy system – but when, how and by whom
will $ be spent?
Power
generation
50%
Transmission
& distribution
50%Mining
91%
Shipping &
ports
9%
Exploration and
development
80%
Refining
16%
Shipping
4%
Exploration &
development
61%LNG chain
8%
Transmission
& distribution
31%
Power52%
$13.6 trillion
Oil24%
$6.3 trillion
Gas21%
$5.5 trillion
Coal3%
$0.7 trillion
Biofuels
<1%
$0.2 trillion
Sources: IEA WEO 2008
Required Investments, 2007-2030Total: $26.1 trillion
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15 of the Top 20 Largest Oil Companies are NOCs;NOCs control 80-90% of conventional oil and gas reserves;
Will play an increasing role in managing resources going forward6 %6 %
11 %
77 %
Sources: PFC Energy, HFHS
International Oil Companies
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Supply Chain Risks are Accumulating
Russia:Policy
Russia:Policy
US: Climate Policy, access, storms
US: Climate Policy, access, storms
Caspian:Transit
Security
Caspian:Transit
Security
Europe:Gas
Supplies
Europe:Gas
SuppliesIran:
Nuclear Ambition
Iran:Nuclear
AmbitionIraq: Instability
Iraq: Instability
Nigeria:Civil Unrest
Nigeria:Civil Unrest
Latin America:Resource
Nationalism
Latin America:Resource
Nationalism
N-Korea:Nuclear
Ambition
N-Korea:Nuclear
Ambition
Canada: climate policy
Canada: climate policy
China:Demand increase
China:Demand increase
Aden, Malacca: Piracy
Aden, Malacca: Piracy
Pakistan:Political Turmoil
Pakistan:Political Turmoil
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Additional Considerations
• Downturn in economic growth means lower energy consumption,
reduced prices and lower GHG emissions – for how long?
• But lower prices also mean reduced supply and investment
• Regulatory uncertainty can freeze needed investment
• Climate action requires scalable technologies that largely do not exist
today
• Emphasis on renewables and efficiency is laudable but won’t solve the
problem anytime soon
• Conventional system must remain robust during the transition – which
is decades long
• New global alliances may fundamentally restructure markets
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The Shape of the Economic Recovery Matters
-4
-2
0
2
4
6
8
10
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015An
nu
al G
DP
Gro
wth
(%
)
Emerging and Developing Economies
World
Advanced Economies
Source: IMF data, 2000-2009
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The Impact of Climate Change The Impact of Climate Change
& Carbon Constraints& Carbon Constraints
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Climate Change as a Game Changer
• Affects supply & demand
• Alters fuels choices, increases prices
• In the extreme, raises security concerns
• New investment & technologies applied on a global scale
• Concept of “Sustainable Development” challenges traditional view of economic prosperity
• Requires long-term global policy solutions and trade-off balances
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Food
Water
Ecosystems
ExtremeWeather
Warming
Risk of Irreversibleor Abrupt Changes
Falling crop yields in developing regions first, then developed regions later
Mountain glaciersdisappear; Decreasedwater in some areas
Many more areas sufferfrom low water availability
Sea level risethreatens major cities
Rising numbers of species extinctions
Rising intensity of storms, wildfires, droughts, floods, heatwaves
Rising risk of dangerous positive feedbacks,Rapid SLR and collapse of Atlantic conveyor
Extensive damage to coral reefs
Today
E3G, Adapted from Stern 2006
450ppm
550ppm
650ppm
750ppm
850ppm
950ppm
Assessing Risk
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What does a “Low Carbon Revolution” Look Like?
“Scale of economic transformation on par with
industrial revolution but must be achieved within one third of
the timeframe.”~McKinsey Global Institute
“US$45 trillion between now and 2050”
~ IEA, Technology Prospectus
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But Recent Studies indicate….
� Even if we are successful at Reducing GHG Emissions from peak, the impacts of higher concentrations and temperatures will be with us for centuries
� There is increasing concern that achieving a 450 ppm level will not guarantee stemming temperature rise to 2-3 degrees
� 350 may be the new 450 so “front end” action is needed
� Technology solutions limited at global scale until post-2020
� Achieving 450 level requires reduction of 48 Gigatonnes by 2050
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Build 130 new (1GW) nuclear power plants in lieu
of new coal-fired power plants without CO2
capture and storage
CO2 CaptureIn Forestry
Nuclear
Coal-Fired Generation
Improved Efficiency
Double fuel efficiency; Deploy 290 million new cars at
40mpg rather than 20mpg
Build 320 new zero-emission 500MW coal-fired power
plants in lieu of coal-fired plants without CO2 capture
and storage (none exist now)
Convert 100 million acres of barren area to new forest
(equiv of Spain, 2.5 times the size of Washington
state)
Technology Each option would save one gigatonne of CO2 per year
Source: DOE Climate Change Technology Program,
http://www.climatetechnology.gov/stratplan/final/index.htm 25
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Climate Change as a Threat Multiplier
Water Scarcity Demography Crop Decline Hunger Coastal RisksRecent Conflicts
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A schematic overview of inter-relationships between adaptation, mitigation and impacts.
Cost o
f Mitig
ation
Cost
of Im
pac
ts
Cost of Adaptation
AllMitigation
No Action All Adaptationmore
more
less
less
less
more
What is Optimal?
There Will Be Costs
The Questions: How We Choose to Pay, Who Will Pay, How will the $ be spent?
Choices Must Be Made in Context of Balancing “E3” Goals of
• Energy Security
• Economy
• Environment
Source: Holdridge, M.L. Parry
Balancing Costs of Impacts, Mitigation, and AdaptationBalancing Costs of Impacts, Mitigation, and Adaptation
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Recognized Challenges – But How to Respond?
• Must transform the way we produce, deliver and consume energy
• Energy efficiency is key, but investments often have a long termpayout, so focus on information and incentives
• Renewables are increasingly competitive, but intermittency and grid connection problems remain; they also are unable to replace conventional fuels at scale anytime soon
• Preservation of role for coal requires solution on carbon capture and storage, but CCS not demonstrated on commercial scale, requires new infrastructure and is likely not a long term solution
• Nuclear energy requires large up front capital investment and faces safety, waste and proliferation concerns – management on global scale is key
• During transition, we must ensure the viability of conventional fuel system
• Must engage internationally, both to solve climate change and tomaintain relationships with important partners that offer energysupplies and security
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So, Now for the Good News:
…same as saving a
barrel of oil on the Beltway
Saving a Barrel of Oil in Bangkok or Beijing…
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Plenty of Opportunity for Improving Energy Intensity
10,508 11,367 13,08618,646 19,825
28,686
73,032
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
North
America
Western
Europe
Africa Asia &
Oceania
Central &
South
America
Middle
East
Eastern
Europe &
FSU
En
erg
y In
ten
sit
y, 1000 B
TU
/$ o
f G
DP
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Changing the Trajectory of Energy Growth in Non-OECD is Crucial to Our Future
0
50
100
150
200
250
300
350
400
450
0 5 10 15 20 25 30 35 40
GDP/Capita (Thousand $)
En
erg
y C
on
su
mp
tio
n, M
MB
TU
/Cap
ita
USA
China
Russia
Japan
Germany
India
Canada
France
UK
Brazil
S. Korea
Italy
Mexico
Ukraine
Spain
Iran
Australia
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What could the 21What could the 21stst Century Energy Network look like?Century Energy Network look like?
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The Natural Gas Dilemma
Global gas demand to grow, especially in a carbon
constrained world; 40% cleaner than coal but not emission
free
Conventional supply sources become more concentrated
geographically
Concentration can affect leverage, supply and prices,
geopolitics, etc.
Delivery System Under Greater Stress
Price rise + increased import dependence recreates balance
of payments concerns
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What’s New?: Substantial growth in U.S. natural gas production through 2030 led by unconventionals…
History Projections
Associated/Dissolved
Non-associated Offshore
Nonassociated
Onshore Conventional
Onshore Unconventional
Alaska
trillion cubic feet
Source: EIA Annual Energy Outlook 2009
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Conventional vs. Continuous Resources
Source: USGS
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Game-Changing Potential: Estimates of US Shale Gas Resources
EIA Annual Energy Outlook 2009: 267 tcf undiscovered technically
recoverable shale gas resources (mean)• Based on 2007 U.S. Geological Survey assessment and 2006 Mineral
Management Service data
Navigant Consulting Inc. 2008: 274 tcf undiscovered technically
recoverable shale gas resources (mean)• Based on aggregated data from numerous studies
Navigant Producer Reports 2008: up to 842 tcf undiscovered technically
recoverable shale gas resources (max reported)• Ascertained by Navigant in 2008 study (accounts for Marcellus and Haynesville)
Potential Gas Committee 2009: 616 tcf undiscovered technically
recoverable shale gas resources (mean) • Estimated total U.S. gas resources of 2,074 tcf (mean undiscovered tech
recoverable + reserves)
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The Magnificent 7 – No. American Shale Gas
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Shale Resources and Natural Gas Pipeline Network
Source: R Hefner
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Implications of Global Shale Gas Exploitation
• Development of US shale formations would free up LNG for use elsewhere
• Significant shale prospects likely in China, Turkey, Australia and Europe
• Development of indigenous gas sources, coupled with LNG, efficiency, renewables and interconnects could reduce EU reliance on Russian gas
• Increased gas use to displace coal reduces GHG emissions
• Global gas surplus could revamp price/contract structures
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BUT …realizing the full promise of shale resources is not a certainty and US domestic policy is important!
Technical/Economic Challenges
• All shales are not alike; application of drilling/reservoir fracturing
technology & operational experience matters
• Steep decline rates require ongoing investment and drilling; and repeated
fracturing
• Up front investment (lease acreage and pilot wells) not insignificant vs.
cost basis relative to commodity price/value
Environmental/Regulatory/Societal Challenges
• Uncertain regulation (fracturing, HOH, land use, permits),
“industrialization” of areas unfamiliar with development plans and
associated impacts; scale of water use/disposal are challenging
• Location, location, location – shale resources are, at times, proximate to
and distant from delivery infrastructure and demand centers – both
present problems