The tank is emptying! Our lives are highly dependent on fossil fuels It seems supply will soon fail to meet demand – prices are rising ….
International Energy Association : “ There are three problems: Geology Investment Policy of main producers These, taken together, make the future of oil very difficult ” Fatih Birol Chief Economist
Our Endowment of Oil Argument continues over volume of initial oil resources and associated reserves (the part of resources that is economically recoverable) –Uncertainties due to limited data, secrecy, lack of standard calculation methods –Some believe major discoveries still to be made –Some believe technology will increase recovery factors
Doubts over World Reserves …. RESERVES AS REPORTED BY: –Oil and Gas Journal –World Oil –BP –BGR –AGIP
…. and more doubts! …. Reserves Claimed (billion barrels) Competing for production quotas?
…. and more doubts still! 0 10 20 30 40 50 60 70 80 19501960197019801990200020102020 Discovery Gb PastP95MeanP5 -
Maturity of World’s Producers 21 countries produce over 85% of world’s oil 6 are clearly declining 6 are flat/volatile, near decline 6 could grow but have non- technical/political limits 3 have potential for some increase
Is a Production Increase Possible? The arguments ‘for’: –New major discoveries –“Reserves to Production Ratio” (R/P) is being maintained despite offtake rising –Better technology will increase recovery efficiency
The R/P Placebo Field rate declines after ~ 50% of reserves produced Total rate not constant, declines ~ 4% /year. After 40 years rate is ~ 20% of original
Effects of New Technology Little indication that recovery efficiency is increasing in established fields. Main benefits in coping with unexpected problems and in finding small accumulations
Control of Reserves and Production Region % of Comments World ReservesProduction OPEC7343Restricted FSU2316Close to peak RoW1441Mostly in decline From Ray Leonard, KEC Huge change from 40 years ago, when ‘Seven Sisters’ ruled the international oil world
Exploration and Investment Policy: 1. (Western) Independent Companies Limited geographical opportunities Harsh economic terms Unstable price projections have resulted in Falling Production Restricted exploration/development funding
Exploration and Investment Policy 2. OPEC and National Companies Saudi production capacity will grow to 12.5 mmbd from current 11.3 mmbd by end-2009 BUT King Abdullah (April 2008) : When there was some new oil found I said ‘No, leave it in the ground. With grace from god, our children will need it’
Supply/Demand and Consumer Prices About 50% of world population have been shielded from increases in oil prices Malaysia uses 7.5% of GDP for subsidies Indonesia uses 4% China, India, Vietnam, …….. In 2007 Saudi reduced petrol prices by 25% BUT….
Supply/Demand and Consumer Prices … in much of the rest of the world Governments increase consumer prices
Initial Response to Tighter Supply Many industries starting to feel effect: Agriculture Fertilizer usage pattern changes Ethanol emphasis causing disruption Airlines Routes and staff cut, planes grounded Automobiles Sales declining, smaller cars, fewer miles Electricity Generation Black-outs, price increases
Why we need fertilizers! World arable land area has increased by only 13% since 1960 despite 120% increase in population since then
Fertilizer Problems Farm Productivity increases are essential Arable land area only up by 13% since 1960 - despite 120% increase in population Ammonia (Haber process) uses 33 mscf/ton Costs have near tripled in one year, supply insufficient for 40% world population’s food New interest in cow manure, Chilean guano!
Changes in Farm Output? Energy Input Required (KWh/d) VEGAN Diet NORMAL ' Diet ComponentsEnergyComponentsEnergy Vegetables3.0Vegetables1.5 Milk/Cheese1.5 Eggs1.0 Meat8.0 Total 3.0 Total 12.0 Reduced energy availability will force human dietary changes? Source: McKay, “Sustainable Energy – without the hot air’
Changes in Farm Output - Vegetable Initial drive for corn ethanol has passed Breakthrough in processing of cellulosic material will come Research into growth/processing of other oil-source crops (switch grass, jatropha, ….) will bring new opportunities
Changes in Farming Methods Conservation Tillage – or ‘No Till’ Reduce soil erosion Cut labour costs by 40% Cut fuel costs by 75% Reduce capex up to 50% Increasing in Americas, Australia; only 6% globally Return to horse power on small farms
Evaluating Alternative Energy Sources Must consider Technical Readiness, Scaling Financial Viability Energy Return Environmental Impact Longevity
Energy return: A Vital Criterion Source: C.A.S. Hall, C. Cleveland
Filling Medium-term Energy Gap Clear that economic supply from ‘sustainables’ will be too small to fill short to medium-term gap Only candidates to fill gap in this period Unconventional Fossil Fuels Oil from Shale or Tar Sands Gas-to-Liquids, Coal-to-Liquids Coal – with CCS Natural Gas Nuclear - but contributions needed from all sources!
Liquid Energy: Tar Sands Huge resource in Canada, Venezuela (resource 2-3 times world oil resource) ; also Russia, Middle East Recover oil by mining/retorting or in situ heating Huge water (3-10 bbl/bbl) and gas (1 mscf/bbl) demands and cost inflation, environmental concerns (water and spent sand) slowing development Targets will not be met; long term possibility
Liquid Energy: Oil ‘Shales’ Marls with particles of immature hydrocarbons Trillions of barrels in west US, NE Australia, Brazil, China Recover oil by mining/retorting or heating in situ Environmental problems: water demand (3 bbl/bbl) and disposal, shale disposal (2 ton/bbl), high CO2 Commercial tests: Exxon (1980s), Queensland (2001), Estonia; now by Shell and others in Colorado At best, a long term solution
Liquid Energy: Gas-to-Liquids Direct Process: energy intensive and difficult to control – no commercial application yet Complex Indirect Process: converts CH4 to syngas, then to longer-chain HCs. Used for strategic reasons (S. Africa) or stranded gas (NZ, Malaysia) New Exxon plant built in Qatar but plans for others dropped in favour of LNG exports Long term potential if gas supply allows
Liquid Energy: Coal-to-Liquids Potential Established process; S. Africa uses since 1955, now source for 30% of its petrol/diesel Rising coal prices, x3 in year, impact economics Environmental problems: water use (10 bbl/bbl), CO2 output (50 lb/gal. v 27 lb/gal. for refinery) CCS could reduce CO2 output (to 20 lb/gal) Potential source, if CCS developed
Other possible liquid HC sources Biofuels First generation Sugar, starch, vegetable oils Limited by competition with food usage Second generation Cellulosic, non-food Awaits technical breakthrough Third generation Biodegradable fuels from algae Good medium term potential?
A Plant in your Tank? Algae produce 30 x energy/area of other crops. Grow on marginal land, saline water Long running pilot in US until 1996; limited operations now in New Zealand and US Need to find strain with high oil/mass ratio, fast growing and easy to harvest Trials involve both open systems (sewage ponds) and closed (polytubing and CO2)
Adding it all up: Energy supply shortages (and high prices) inevitable. Will start soon, last for at very least a decade Major long term changes to our way of life will be forced on us: Transport Housing - size and location Leisure Agriculture and Food Population Size
“OK, it’s agreed – we announce that to do nothing is not an option and then we wait and see how things pan out” from ‘Private Eye’
Greenhouse Gas, Emissions / Person from D.McKay, Sustainable Energy – without the Hot Air
PowerPower / Unit Land Area Source (W / m 2 ) Wind - offshore 3 Tidal Pools 3 Tidal Streams50 Solar PV Panels 5 Plants 0.5 Concentrating Solar - deserts15 Ocean thermal 5 To make a difference, renewable facilities must be country-sized Renewables are Diffuse Source: D.McKay, ‘Sustainable Energy – Without the Hot Air’