The Future for Energy – Focus on Alt ti F lAlternative Fuels · Title: Microsoft PowerPoint -...

The Future for Energy – Focus on Alt ti F lAlternative Fuels

Andrew Pincott, Partner, Energy IndustryM h 2008March 2008

Copyright © 2008 Accenture. All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture.

Introduction1. Context of the world we are in

2. Impacts on Supply and

3. Role of alternative fuelsSupply and

Demandalternative fuels

World Oil Demand by Region - 2006 vs. 2030

40.0

45.020062030

mmbpd

Energtical

14.8 4.6 4.0 2.7 1.8 0.70.3

-

5.0

10.0

15.0

20.0

25.0

30.0

35.0

Asia Pacific Middle East NorthAmerica

LatinAmerica

Africa Europe Eurasia

Kuwait

gy IndustryGeo-

Polit

i

LeverageRespo

nd

Manage

World Oil Supply by Region - 2006 vs. 2030

-2.6 -3.510.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0 20062030

mmbpd

Macro-Economic12.0 6.7 4.5 4.1 0.2

-10.0

-5.0

0.0

5.0

Total MiddleEast

TotalEurasia

Total Africa Total LatinAmerica

Total AsiaPacif ic

TotalEurope

Total NorthAmerica

1Copyright © 2008 Accenture All Rights Reserved.

Th ld i h iThe world is changing…

Economic and political power is becoming increasingly dispersed between developed andbetween developed and emerging countries…

There will be multiple centres of gravity that will The rise of the now define and shape the future of the world…

The rise of the multi polar world


The future context…what’s different?

•Rising energy demand to be met

•Economic interdependency

•Multi polar world

•Continued dominance of

•Security of supply

•Climate change

interdependencyhydrocarbons

•Lighter global product slatey pp y

Kuwait

•Rising cost of capital and talentManageKuwait

Macro-Economic

Manage


•Political interference

•Oil dependency

•Domestic fuel demand

• Intense media scrutiny

The geopolitical landscape

• Growing energy insecurity with increased l b l t th tglobal terror threats

• Climate change concern gains momentum and responsesresponses

• Increased political volatility in energy producing nationsproducing nations

• Rise of Multi-polar world • Sophistication of stakeholder activism• Sophistication of stakeholder activism


9/11: Attacks in US

• US-Iran conflict?Al Qaeda attacks

Invasion of Iraq

Electric ThinkCaron sale

• US-China trade war?

• Formation of stable Palestinian state?

• Civil war in Pakistan?

The macro economic landscape

• Dispersion of economic power

• Both economic liberalisation and regulation

St i i t d d• Stronger economic interdependency

• Globalisation and dispersion of innovationp

• Geographic specialisation

• Multi directional capital flows


9/11 and fear of global slump

•China becomes world’s largest economy?US sub prime crisis •Wave of protectionist legislation?

China’s GDP growth over

10% per year

•Global recession?

The energy landscape

Demand:• Asia Pacific dominates:15 million

World Oil Demand by Region - 2006 vs. 2030

35 0

40.0

45.020062030

mmbpd

barrels per day of additional demand in 2030

• The key driver for oil demand is transportation

10.0

15.0

20.0

25.0

30.0

35.0

Supply:• The Middle East plays the pivotal

14.8 4.6 4.0 2.7 1.8 0.70.3

-

5.0

Asia Pacif ic Middle East NorthAmerica

LatinAmerica

Africa Europe Eurasia

p y prole in supplying additional oil to meet market demand

• As the divergence between the oil-producing and oil-consuming

i i t ifi l b l il t d

World Oil Supply by Region - 2006 vs. 2030

25.0

30.0

35.0

40.0

45.0 20062030

mmbpd

regions intensifies, global oil trade flows are magnified along with security of supply concerns

12.0 6.7 4.5 4.1 0.2

-2.6 -3.5

0.0

5.0

10.0

15.0

20.0

25.0


-10.0

-5.0 Total MiddleEast

TotalEurasia

Total Africa Total LatinAmerica

Total AsiaPacif ic

TotalEurope

Total NorthAmerica

Source: CERA, Accenture analysis

The energy landscape

• Alternative energy gains attractiveness and gy gpace

• Players battle to strengthen position and• Players battle to strengthen position and accessU d t d h t• Unprecedented shortage

• A structural, upward cost shift


Chavez nationalises

Orinoco •China exceeds US as location of highest primary energy demand?

Oil at $147 per barrel

•Successor to Kyoto protocol signed?Conoco and Phillips merge

Oil at $30 per barrel

•Non OPEC supply declines? •50% Europeans driving hybrid cars?

The world is addicted to oil…and its love affair with transportation will continue…

Source: FT Martin Wolf


Source: FT Martin Wolf

New consumers - transportation will be the key driver of oil demand to 2030

• Transportation global 50

60

Global Oil Demand by Sector (mm b/d)

demand…rise to nearly 60 million b/d over next 2 decades

10

20

30

40ResidentialCommercial

Industrial

Transportation

Electricity

• Bulk of demand …gasoline and diesel

0

10

2004 2010 2015 2020 2025 2030

Global Oil Demand by Region (mm b/d)…gasoline and diesel

• China’s transport fuel demand quadruples 3

3.5

4

Global Oil Demand by Region (mm b/d)

from 2005 to 2030…vehicle fleet grows by 230m to 270m in 2030

0 5

1

1.5

2

2.5

9Copyright © 2008 Accenture All Rights Reserved.Source – IEA and EIA

0

0.5

NA Eur Pac Rus Ch Ind ME Afr LA ROW

The Downstream PictureThe Downstream Picture is Changing….

Crude feedstocks… heavier 32

3334

1

1.1Non-Opec Crude Quality

heavier303132

1 2 3 4 5 60.8

0.9

2000 2001 2002 2003 2004 2005Specific Gravity (left) Sulfur Content (right)y ( ) ( g )

10

12

14mb/d Cumulative Additions by Refinery Type*

Refineries… greater complexity 4

6

8

10

complexity

-4

-2

0

2


1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12

Hydrocracking Coking VisbreakingCatalytic Cracking Hydrosk/Lubes CDU Capacity Growth

*: Includes re-classification of refineries to more complex type, following installation of upgrading capacity

And transportation is one of the reasons the world is not on course to achieve athe world is not on course to achieve a sustainable energy future…

Petroleum supplies 95% of the total energy used by world transportworld transport.

Transport was responsible for 23% of world energy-related GHG emissions with about three quarters coming from road vehiclesvehicles.

Over the past decade, transport’s GHG emissions have increased at a faster rate than any other energy using sector

11Copyright © 2008 Accenture All Rights Reserved.Source:Working Group III Report "Mitigation of Climate Change" 2007

Strategies around the Wedge…


…our link with Alternative Fuels…

1. Reducing the loads (weight, rolling and air resistance and accessory loads) on the vehicleaccessory loads) on the vehicle, thus reducing the work needed to operate it

2. Increasing the efficiency of converting the fuel energy to work, by improving drive train efficiency

d t i land recapturing energy losses

3. Changing to a less carbon-intensive fuel

4. Reducing emissions of non-CO2 GHGs from vehicle exhaust


Fuel Economy will improve…


Fuel economy and GHG emission standards

The technology for pure electric t t ti d i t i i t i dtransportation drive trains is maturing and new products like the Think City is already commercially available…

History

• Norwegian entrepreneurs bought company in 2006 after Ford and others had invested heavily in

Think City

after Ford and others had invested heavily in development and production facilities but experienced heavy losses since 1999

• Now backed by clean tech investment players like DFJ Element RockPort Capital Partners and HazelDFJ Element, RockPort Capital Partners and Hazel Capital LLP

• New model launched November 2007, on sale now

S i i• 100% electrical drivetrain, zero CO2 emission

• High energy density Zebra battery, based on SodiumNickelChloride chemistry

Strategic impact

• Made from 16% recycled materials and is 95% recyclable

• Steel frame with plastic chassis

• 2 +2 seats, 3 doors

• Top speed 100 kph

• Three times as energy efficient as traditional combustion engines

• New business model based on lease of battery to avoid costly replacement


• 180 km maximum range

• 10 hrs charge time, 230 VAC

y p

• In London, Think Cars are exempt from congestion charge and in Italy open to zero emission city zones

…new fuels will emerge…its not just an ethanol future…


Development is needed in someDevelopment is needed in some areas to create a truly global biofuels industry

RegulationFeedstock Consumers

Di t ib tiDistribution -Oil

CompaniesOEMs

High performance in a global and competitive

biofuels industry

Financial MarketsInfrastructure TechnologyMarkets

On track“Watch”, as it continues to evolveC h ll h d d ffi i k


Current challenges are the ones needed to create an efficient marketFuture challenge/ wild card

Technology currently supports the development of biofuels as the dominant palternative fuel, but it is competing with game changers

SupportingStretching • 40% improvements in

sugar cane and corn• Significant cooperation and

investment into 3rd Gen Biofuels Game

Competing

1st

Generation Biofuels

sugar cane and corn yields since the 80’s • Technologies such as Artificial

Photosynthesis, Algae Biodiesel & Synthetic Biology

• Different science and players

Game Changing 3rd Generation Biofuels

Incremental Introduction of 2nd

• 16 plants by 2010, capacity of over 1.1 bn litres

• US target 5.5bln litres by

• LCFS California - with plug-in hybrids widely available ~2010

• Projects to build electric` charging spots at parking locations and battery Electric

Generation Biofuels

Di i

g y2015

• OEMs fuel cell activity

spots at parking locations and battery exchange stations (EdF, Project Better Place)

Diversity of Future Biofuels Pathways

• Multiple Biofuels technology pathways are at various stages of development

• “ExxonMobil is currently pursuing ground breaking research in hydrogen generation…that overcomes challenges faced by alternative approaches”

Competition from Hydrogen


p(eg. butanol)

approaches• 10+ years away; estimated US$ 500k

to adapt one pump station

Governments are beginning to address the long term issues from climate change…

Bali – UNFCCC meeting to discuss post Kyoto legislationCurrent UK target of

UK government proposal to raise 2050 target to 80% reduction

German renewables target of 45% by 2030

California – 60%

g60% GHG reduction by 2050

reduction

Oregon – 75% GHG reduction by 2050

J T t f 50% GHGgreenhouse gas reduction by 2050

APEC* calls for

Kansas department of environment rejects

l t

Virginia – 30% GHG reduction by 2030

Japan– Target of 50% GHG reduction by 2050

EU target of 20% EU target of 20%

APEC* calls for a post-Kyoto international agreement that ‘strengthens, broadens and Argentina adopts a

l i i

power plant proposals on basis of CO2 (2007)

Florida – 80% GHG reduction by 2050

U ta get o 0% renewables by 2020

Australia – targets

emissions reduction by 2020

deepens the current arrangements’

voluntary emission reduction target of 2 to 10% below baseline forecasts for the Kyoto period

19Copyright © 2008 Accenture All Rights Reserved.• Selection of current and proposed legislation on greenhouse gas targets

*APEC – Asia Pacific Economic Cooperation

Australia targets under discussion

…..businesses are taking a more prominent role on climate change….

Guiding regulation• Business leaders globally lobby

policymakers to include climate change legislation into markets and trade1 Policy Recommendations

• Voluntary targets on car efficiency in Europe (ACEA)

• Growth of voluntary carbon markets in

1. Long-term, stable international emissions market for power and industry• Growth of voluntary carbon markets in

the USA 2. Minimum efficiency requirements for buildings and transport

New consumer offerings• Carbon neutral businesses

R bl l t i it t iff

3. International systems for agriculture and deforestation


• Renewable electricity tariffs 4. Mechanisms to drive key technologies down the learning curve

Source: 1. Combat climate change, Nov 2007

…and consumers recognise transportation as a significant contributor to CO2 emission increases

“What are, according to you, the 3 most important reasons for the atmospheric carbon emissions increase?”

33%

Major energy usersindustries (e.g.

29%

33%

Transportation (carsplanes trucks railways

ships)

( gchemicals mining

refining etc.)

30%

40%

50%

11%

19%

Energy use in

Electricity generation(coal and gas plants)

Deforestation

10%

20%

3%

3%

Energy use in thehome

(Residential/domestic)

gycommercial buildings(commercial officesshops hospitals etc.)

0%

ajor

ene

rgy

user

snd

ustr

ies

nspo

rtat

ion

fore

stat

ion

Elec

tric

ityge

nera

tion

ergy

use

inom

mer

cial

build

ings

ergy

use

inhe

hom

e

Agr

icul

ture

2%Agriculture (use of

machines andchemicals fertilizers)

Ranking based on first mention

Ma in

Tran Def

Ene

co b

Ene t A

North America Japan / Australia Higher proportion than in the other regions


Europe Emerging Countries Lower proportion than in the other regions

% First mentionSource: Accenture Global Consumer Survey on climate change, October 2007 - 7,500 respondents from 17 countries

3 Recent Ages of3 Recent Ages of Transportation Fuels

1980’s 1990’s 2000+1980’s 1990’s 2000+Differentiated Fuels

Rise of Diesel Alternative FuelsWorld Product Demand 1980-2006 Fuels

Middle Distillates


New players in the transportation fuels are changing the competitive dynamics of fuel retailing

Main-grade

Premium 1st Gen Bio 2nd Gen Bio GtL CNG/ Auto LPG

Electric Hydrogen 3rd Gen Bio

In 10 years

IOC

NOC

Independ.(PE/Banks)

Agri-business

Farmer-coop

Automotive/OEMs

R t ilRetailers

Chemicals

Utilities


Govt/Public

New players in the transportation fuels are changing the competitive dynamics of fuel retailing

Main-grade

Premium 1st Gen Bio 2nd Gen Bio GtL CNG/ Auto LPG

Electric Hydrogen 3rd Gen Bio

In 10 years

IOC

NOC

More sophisticated consumersIndepend.(PE/Banks)

More sophisticated consumersMore government involvementM i l tilit d i k

Agri-business

More price volatility and riskMore alliances, partnering

Farmer-coop

Automotive/OEMs

R t il

More pressure on product portfolio/pipeline

Changing infrastructureRetailers

Chemicals

UtilitiesDifferent competitive landscape

Changing infrastructure


Govt/Public

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