1. Tinker, 2008 QAd3931x Bureau of Economic Geology Jackson 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 COGA Denver, COJuly, 2008

2. Tinker, 2008 QAd3931x 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 Road

3. Tinker, 2008 QAd3931x Websters Online: Myth Main Entry: myth Pronunciation: \ ˈ mith\ 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, allegoryparableallegory 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 2 b: an unfounded or false notion

4. Tinker, 2008 QAd3931x Websters Online: Paradox Main Entry: par·a·dox Pronunciation: \ ˈ per-ə- ˌ däks, ˈ pa-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 decent 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

5. Tinker, 2008 QAd3931x 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

6. Tinker, 2008 QAd3931x 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.

7. Tinker, 2008 QAd3931x 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 Paradoxes

8. Tinker, 2008 QAd3931x 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. Energy Paradoxes

9. Tinker, 2008 QAd3931x Government/Markets Paradox Government policies are needed to enhance free market behavior. Energy Paradoxes

10. Tinker, 2008 QAd3931x Nationalization/Globalization Paradox The US should be energy independent in order to remain a global leader in an interdependent world. Energy Paradoxes

11. Tinker, 2008 QAd3931x Global production of oil and natural gas are peaking and we are running out of fossil energy soon. Myth 8

12. Tinker, 2008 QAd3931x Global Energy We depend upon fossil fuels today. Energy Use (Quadrillion Btu) 020406080100120140160 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

13. Tinker, 2008 QAd3931x Conventional Oil Natural Gas Data from EIA 2007 US Energy Mix Biomass Coal Hydro Uranium Transportation Heat Electricity We depend upon fossil fuels today. US Transportation Energy Demand (2006 Btu) 16407 618 264 4892 2647 1333 611 147 592 688 Light-Duty Vehicles Commercial Light Trucks 1 Buses Freight Trucks Air 3 Water Rail Lubricants Pipeline Fuel Natural Gas Military Use

14. Tinker, 2008 QAd3931x 0 5,000,000 10,000,000 15,000,000 20,000,000 25,000,000 30,000,000 35,000,000 195019551960196519701975198019851990199520002005 Global Annual Production (mbo) World Oil Production (Thousand Barrels) 0.00 200.00 400.00 600.00 800.00 1,000.00 1,200.00 1,400.00 Global Reserves (bbo) World Oil Reserves (Billion Barrels) 15 20 25 30 35 40 R/P Global 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 Price ($2007) Oil Price Average in $/bbl Inflation Adjusted 2007

15. Tinker, 2008 QAd3931x 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

16. Tinker, 2008 QAd3931x Option Time to Initiate Impact (+10 Yrs) (Yrs) (MM bpd) –Enhanced Oil Recovery53 –Heavy Oils / Oil Sands38 –Shale Oil102 –Coal Liquids45 –Gas-To-Liquids32 –Biofuels21 21 after Hirsch et.al, 2005 Options to Conventional Oil

17. Tinker, 2008 QAd3931x One More Option to Conventional Oil… 1 MMBOPD and 1.4 TCFY in 15 years ARI, 2006 Access Restrictions

18. Tinker, 2008 QAd3931x Global Natural Gas Supply and Demand 50 60 70 80 90 100 110 19801981198219831984198519861987198819891990199119921993199419951996199719981999200020012002200320042005 Year Natural Gas (Tcf) *Supply = world natural gas production & Demand =world natural gas consumption. Data: EIA, October 2007 Supply Demand 60 70 R/P (yrs)

19. Tinker, 2008 QAd3931x 0 5,000 10,000 15,000 20,000 25,000 194919541959196419691974197919841989199419992004 Year U.S. Natural Gas Production (Bcf) Total Natural Gas Conventional Gas Difference U.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 19901995200020052010201520202025 Year Annual Natural Gas Production (TCF) Gas Shales Coalbed Methane Tight Gas Unconventionals

20. Tinker, 2008 QAd3931x US Dry Natural Gas Reserves Source: Energy Information Administration (EIA) 0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 195019551960196519701975198019851990199520002005 Reserves (Bcf) Unconventionals Technology and Ideas

21. Tinker, 2008 QAd3931x 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 Realities

22. Tinker, 2008 QAd3931x Myth 2 Renewable energy can reduce dependence on fossil fuels significantly in the next 25 years.

23. Tinker, 2008 QAd3931x QAc9841c Global 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 Percentage of total market Year 1850190019502000 H/C>4 (Natural Gas, Nuclear, All others) H/C<1 (Wood, Coal) H/C~2 (Oil)

24. Tinker, 2008 QAd3931x 1.25% annual demand growth Historical Data: EIA October 2007: Forecasts: Tinker, 2008 0.00 20.00 40.00 60.00 80.00 100.00 120.00 140.00 160.00 180.00 200.00 1980198519901995200020052010201520202025 2030 Global Energy Consumption (quads) Petroleum Natural Gas Coal Hydroelectric Nuclear Biomass, Geothermal, Solar & Wind 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% % Total Consumption 1980198519901995200020052010201520202025 2030 Future Global Trends 0 100 200 300 400 500 600 700 19801985199019952000200520102015202020252030 Global Energy Consumption ( Quads ) Unconventional Gas Unconventionals/Res Growth 1.25% Global Annual Demand Growth 4816 32 2X every 7 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. and The road to an alternate (clean) energy future must be paved with fossil energy.

25. Tinker, 2008 QAd3931x 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 Myth 2 Realities

26. Tinker, 2008 QAd3931x Myth 1 The US can be energy independent in the next 25 years.

27. Tinker, 2008 QAd3931x US Economy and Oil Price NixonClintonBush 2 Bush 1 ReaganCarterFord -4.00 -2.00 0.00 2.00 4.00 6.00 8.00 10.00 19701975198019851990199520002005 Year GDP Growth (% points at annual rates) 0 10 20 30 40 50 60 Oil Domestic Wellhead Price ($) GDP Growth (Percentage points at annual rates) Crude Oil Domestic Wellhead Price ($2000) Data: EIA February 2007 and US department of Commerce

28. Tinker, 2008 QAd3931x 18001855191019652020 Annual Use (Quads) 1 0.1 10 100 Electricitys 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.

29. Tinker, 2008 QAd3931x Conventional Oil Natural Gas Data from EIA 2007 ElectricityElectricity Biomass Coal Hydro Uranium Transportation Heat Imports

30. Tinker, 2008 QAd3931x Electricity 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

31. Tinker, 2008 QAd3931x Global Carbon Emissions 4,000 6,000 8,000 10,000 12,000 1980 19831986 1989 1992 19951998 2001 2004 Annual Anthropogenic CO2 (mmT) NA Africa Europe Eurasia ME Cent & SA Asia & Oceania 2,000 EIA, 2007

32. Tinker, 2008 QAd3931x Year 0.00 0.50 1.00 1.50 2.00 2.50 1981198319851987198919911993199519971999200120032005 GDP ($B2000)/CO2 (MMT) GDP/Carbon Emissions NA Africa Europe Eurasia MECent & 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.

33. Tinker, 2008 QAd3931x 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 dont really work Myth 1 Realities

34. Tinker, 2008 QAd3931x Summary Thoughts The Three E Waltz (Energy, Economy, Environment) is a sensitive dance Oil and natural gas provide nearly 2/3 of the worlds energy We need to be realistic about a carbon constrained world –It is coming, it will take time, it wont be cheap –Everyone needs to play and pay –Research funding and talent are vital –Government, private, academic partnerships