A – Energy Transitions B – Coal C – Petroleum D – Natural Gas Topic 4 – Fossil Fuels A – Energy Transitions B – Coal C – Petroleum D – Natural Gas

For personal and classroom use only Conditions of Usage For personal and classroom use only Excludes any other forms of communication such as conference presentations, published reports and papers. No modification and redistribution permitted Cannot be published, in whole or in part, in any form (printed or electronic) and on any media without consent. Citation Dr. Jean-Paul Rodrigue, Dept. of Global Studies & Geography, Hofstra University.

A. Energy Transitions Factors Behind Energy Transitions Peak Oil Energy Markets

1. Factors Behind Energy Transitions Shift from one dominant source of energy to another. Fossil fuels resources remain abundant. Transition linked with three factors: Demand: Growth in the amount of energy used incites finding more abundant energy sources. Price: Function of availability and demand. Higher prices incite finders alternative sources. Technology: Which types of energy forms are harnessed, processed, and delivered to the final consumers as well as where these activities take place. Better technology enables access to a wider variety of energy sources.

1. Factors Behind Energy Transitions Energy Quality Difference in the ability of a unit of energy to produce goods and services for people. One joule of electricity is not the same than one joule of coal. Combination of physical, chemical, technical, economic, environmental and social attributes that are unique to each form of energy.

1. Determinants of Energy Quality Energy Density Quantity of energy contained per unit mass or volume. Power Density Rate of energy production per unit of the earth’s area. Usually expressed in watts per square meter (W/m2). Energy Surplus Difference between energy spent for procurement (extraction, transformation and delivery) and energy provided. Intermittency Time availability of the energy source. Spatial distribution Spatial availability of the energy source Source: adapted from Cutler Cleveland (Lead Author);Peter Saundry (Topic Editor) . "Energy transitions past and future". In: Encyclopedia of Earth. Eds. Cutler J. Cleveland (Washington, D.C.: Environmental Information Coalition, National Council for Science and the Environment). [First published in the Encyclopedia of Earth September 23, 2008; Last revised Date September 23, 2008; Retrieved October 9, 2010 <http://www.eoearth.org/article/Energy_transitions_past_and_future>

1. Evolution of Energy Sources

1. Total World Electricity Generation by Type of Fuel, 2002 Source: IEA 2004 Other Includes: Solar, wind, combustible renewables, geothermal and waste

1. Primary Energy Production by Source, United States, 1750-2009 Source: Energy Information Administration, http://www.eia.gov/emeu/aer/overview.html

1. Global Energy Systems Transition, (% of market) 100 Wood Coal 80 Solids Gases 60 Hydrogen 40 Liquids Source: The Economist, February 10th 2001. 20 Oil Natural Gas 1850 1900 1950 2000 2050 2100 2150

2. Peak Oil Hubbert’s peak Geologist who predicted in the 1950s that oil production in the United States would peak in the early 1970s: US oil production peaked in 1973. Assumption of finite resource. Production starts at zero. Production then rises to a peak which can never be surpassed. Once the peak has been passed, production declines until the resource is depleted. Peak was estimated to be around 2004-2008: One estimate placed it symbolically at Thanksgiving 2005. Kuwait announced around Thanksgiving 2005 that the world’s second largest oil field (Burgan) has reached its peak. As of 2010, peak oil remains unconfirmed.

2. World Annual Oil Production (1900-2009) and Peak Oil (2010) Source: Worldwatch Institute. Data updated with the BP Statistical Review of World Energy.

2. Peak Oil The case for Peak Oil Tar sands Largest oil fields discovered more than 50 years ago. The peak of oil discovery year was 1965. Some large discoveries in the 1970s (Alaska, North Sea), but none since then. The last year when more oil was discovered than consumed was 1980. Tar sands Large supplies, particularly in Canada (Alberta). A bottleneck in extraction and distribution. Require a lot of energy to extract and transform into a usable form.

3. Energy Markets Importance Used to be informal and locally oriented (e.g. wood). The growth in the use of fossil fuels created large and lucrative energy markets: Became national and global. Increasingly capital intensive. Contracts between suppliers and customers: Price, quantity and time of delivery (location). Permitted the emergence of large multinational corporations. Large financial markets: Financing activities such as exploration, exploitation, transportation and refining.

3. The World’s 20 Largest Corporations by Market Value, 2009 ($US millions) Source: Financial Times Global 500.

The Breaking of Standard Oil (1908) Source: byjess.net

3. West Texas Intermediate, Monthly Nominal Spot Oil Price (1970-2010) Third Oil Shock Second Oil Shock 1 2 Source: Federal Reserve Bank of St. Louis. http://research.stlouisfed.org/fred2/series/OILPRICE/downloaddata?cid=98 A B D First Oil Shock C

3. Major Oil Price Fluctuations Price Change Event Price Change Time Frame Cause Nominal Price Change First Oil Shock October 1973 to March 1974 Yom Kippur War / OPEC oil embargo From $4.31 to $10.11 (+134.5%) Second Oil Shock April 1979 to July 1980 Iranian revolution (1978) / Iran-Iraq war (1980) From $15.85 to $39.50 (+149.2%) Oil counter shock (A) November 1985 to July 1986 OPEC oversupply / Lower demand From $30.81 to $11.57 (-62.4%) First Gulf War (1) July 1990 to November 1990 Iraqi invasion of Kuwait From $18.63 to $32.30 (+73.4%) Asian Financial Crisis (B) January 1997 to December1998 Debt defaults / Non-USD currency devaluations / Reduced demand From $25.17 to $11.28 (-55.1%) "Asian Demand Contagion" (2) January 1999 to September 2000 Rising demand / OPEC output cutbacks From $11.28 to $33.88 (+200.3%) "September 11 Effect" (C) August 2001 to December 2001 Oversupply / American recession From $27.47 to $19.33 (-29.6%) Third Oil Shock December 2003 to June 2008 Peak oil / Rising demand / Monetary debasement / Speculation From $32.15 to $133.95 (+316.6%) Financial Crisis of 2008 (D) July 2008 to February 2009 Collapse of asset bubbles / Demand destruction / Global recession From $133.95 to $39.16 (-70.7%; Dec 2008)

Challenges to energy markets Supply sources: Low diversity of energy sources. Foreign sources. Dependence on oil. Keeping natural resources for future use. Low oil prices instead of an energy policy. Affordability: Economies of scale. Waste involves less profits. Market forces and profit margins. Environmental impacts: Lobbying against environmental legislation.

B. Coal Characteristics Coal Use Challenges

1. Characteristics Nature Formed from decayed swamp plant matter that cannot decompose in the low-oxygen underwater environment. Coal was the major fuel of the early Industrial Revolution. High correlation between the location of coal resources and early industrial centers: The Midlands of Britain. Parts of Wales. Pennsylvania. Silesia (Poland). German Ruhr Valley. Three grades of coal.

1. Characteristics Anthracite (7%) Bituminous (75%) Lignite (18%) Highest grade; over 85% carbon. Most efficient to burn. Lowest sulfur content; the least polluting. The most exploited and most rapidly depleted. Bituminous (75%) Medium grade coal, about 50-75% carbon content. Higher sulfur content and is less fuel-efficient. Most abundant coal in the USA. Lignite (18%) Lowest grade of coal, with about 40% carbon content. Low energy content. Most sulfurous and most polluting.

1. Main Coal Regions of the United States Lignite Powder River Basin (40%) Bituminous Bituminous Source: Wikipedia Lignite

1. Global Coal Production, 2002 (M short tons) Source: US Dept. of Energy, Energy Information Agency. http://www.eia.doe.gov/

2. Coal Use Coal use Thermal coal (about 90% use): Coking coal: Used mainly in power stations to produce high pressure steam, which then drives turbines to generate electricity. Also used to fire cement and lime kilns. Until the middle of the 20th Century used in steam engines (“Steam Coal”). Coking coal: Specific type of metallurgical coal derived from bituminous coal. Used as a source of carbon, for converting a metal ore to metal. Removing the oxygen in the ore by forcing it to combine with the carbon in the coal to form CO2. Used for making iron in blast furnaces (without smoke). New redevelopment of the coal industry: In view of rising energy prices. “Clean Coal” technologies, less ashes but same CO2.

2. Coal Consumption, 1965-2009 (in millions of tons of oil equivalent) Source: BP Statistical Review of World Energy

2. Coal as % of Energy Use and Electricity Generation, 1998 Source: Worldwatch Institute.

2. Coal Costs per Ton (USD), Selected Markets Source: BP Statistical Review of World Energy

Disadvantages of coal use 3. Challenges Advantages of coal use Easily combustible. Easy to store and transport. Relatively inexpensive. Wide availability of sources. Technologically simpler to use for energy generation. Disadvantages of coal use Non-renewable resource. Combustion by-products (e.g. SO2 and sooth). Coal mining is generally environmentally damaging.

C. Petroleum The Economic Importance of Petroleum Oil Reserves The Geopolitics of Petroleum

1. The Economic Importance of Petroleum Nature Formation of oil deposits (biotic perspective): Decay under pressure of billions of microscopic plants in sedimentary rocks. “Oil window”; 7,000 to 15,000 feet. Created over the last 600 million years. A-biotic perspective. Exploration of new sources of petroleum: Related to the geologic history of an area. Located in sedimentary basins. About 90% of all petroleum resources have been discovered. Production vs. consumption: Geographical differences. Contributed to the political problems linked with oil supply.

1. The Economic Importance of Petroleum Use Transportation: The share of transportation has increased in the total oil consumption. Accounts for more the 55% of the oil used. In the US, this share is 70%. Limited possibility at substitution. Other uses (30%): Lubricant. Plastics. Fertilizers. Choice of an energy source: Depend on a number of utility factors. Favoring the usage of fossil fuels, notably petroleum.

1. Petroleum Production and Consumption, 2002 (M barrels per day) Source: Energy Information Agency. Source: International Energy Agency, http://www.iea.org

1. World Oil Consumption, 1965-2009 (1000s of barrels per day) Source: BP Statistical Review of World Energy

1. Factors of Oil Dependency Occurrence Localized large deposits (decades) Transportability Liquid that can be easily transported. Economies of scale Energy content High mass / energy released ratio Reliability Continuous supply; geopolitically unstable Storability Easily stored Flexibility Many uses (petrochemical industry; plastics) Safety Relatively safe; some risks (transport) Environment Little wastes, CO2 emissions Price Relatively low costs

2. Oil Reserves “Scarce Abundance” The world oil production is currently running at capacity: Limited opportunities to expand production. 20% of the world’s output comes from 14 fields. Ghawar: The world’s largest oil field; been on production since 1951. Produces approximately 4.5 million barrels of oil per day. 55 to 60% of Saudi Arabia’s production. Expected to decline sharply (use of water injection). Could be 90% depleted. OPEC countries may have overstated their reserves: Production quotas are based upon estimated reserves. The larger the reserves, the more an OPEC country can export. In the 1980s, most OPEC reserves doubled “on paper”. Extraction continues while reserves remain the same(?).

2. Proven Oil Reserves, 1980-2009 (thousand million barrels) Source: BP Statistical Review of World Energy.

2. Cost of Finding Oil, 1981-2006 Source: Form EIA-28, “Financial Reporting System.”

2. The World’s Largest Oil Fields, 2005 Output (MBD) % of national output Status Ghawar (Saudi Arabia) 4.5 40% Possibly declining Cantarell (Mexico) 2.0 (1.7; 2007, 1.04; 2008) 60% Declining Burgan (Kuwait) 1.7 68% DaQing (China) 1.0 Source: "Mexico's Oil Output May Decline Sharply," by David Luhnow, wsj.com, Feb 9, 2006

2. Oil Production of Some Declining Regions, 1973-2009 Source: EIA, Table 11.1b. Penmex Statistical Yearbook 2009, http://www.pemex.com/. North Sea is Norway and the UK.

2. Major Crude Oil Reserves, 2009 (Thousand Million Barrels) Source: BP Statistical Review of World Energy

2. Estimated Oil Reserves, Selected OPEC Countries, 1980-1991 (billions of barrels) Source: US Energy Information Agency, International Energy Annual Report

2. Remaining Proven Oil Reserves for “Middle Eastern Five” According to Major Assessors, 2005 Sources: [1] O&GJ, Dec. 19, 2005 (for Jan. 1, 2006). [2] BP, June 2005 (through end of 2004). [3] ASPO Newsletter #62, February 2006. [4] February 2006.

2. Global Oil Reserves, 2003

2. Export Land Theory Source: Adapted from an example displayed on Wikipedia. http://en.wikipedia.org/wiki/Export_Land_Model

2. Crude Oil Production and Consumption, China, 1980-2009 (in 1,000 of barrels per day) Source: BP Statistical Review of World Energy.

2. Petroleum Production, Consumption and Imports, United States, 1949-2009 Source: US Energy Information Agency, International Energy Annual Report.

3. The Geopolitics of Petroleum The Seven Sisters Petroleum has for long been the object of geopolitical confrontations. The ability to fix the price and the production of oil was first established in 1928 by the Achnacarry Agreements. Between the “seven sisters” forming an oil oligopoly. Major oil multinationals (Exxon, Texaco, British Petroleum, Shell, Gulf, Standard Oil and Mobil Oil). Invested massively in extraction infrastructures, especially in the Middle East. Several producing countries, most of them in the Third World, wanted to have a more important share of the incomes of this lucrative market.

3. The Geopolitics of Petroleum OPEC Venezuela, Iran, Iraq, Saudi Arabia and Kuwait founded the Organization of Petroleum Exporting Countries (OPEC) in 1960 at the Baghdad conference. Several other oil-producing nations joined thereafter the organization: Qatar (1961), Indonesia (1962), Libya (1969), Algeria (1970), Nigeria (1971), Ecuador (1973-1992, left the organization in order to avoid production quotas), The United Arab Emirates (1973) and Gabon (1973-1994). From its foundation until the beginning of the 1970s, OPEC was unable to increase oil prices. Production was very important in non-member countries. Difficulty of OPEC members to agree on a common policy.

3. OPEC Members and Countries with more than 10 Billion Barrels of Oil Reserves

3. Major Oil Flows and Chokepoints, 2005-6 Source: Adapted from The International Tankers Owners Pollution Federation Limited & Energy Information Administration, World Oil Transit Chokepoints.

3. The Geopolitics of Petroleum A perfect storm? Booming oil prices after 2004. Prior oil spikes linked with short lived geopolitical events. The situation has changed at the beginning of the 21st century. A production issue: Petroleum extraction appears to be running at capacity. Demand, especially new consumers (China), is going up. A distribution issue: Limited additional tanker and pipeline capacity. A refining issue: Limited additional refining capacity. No refineries were built in the US since 1974.

3. United States Strategic Petroleum Reserves, 1977-2009 Source: US Department of Energy, Energy Information Administration, International Energy Annual Report http://www.eia.doe.gov/

D. Natural Gas Nature and Use Availability and Distribution

1. Nature and Use Natural gas formation Composition Thermogenic: converted organic material into natural gas due to high pressure. Deeper window than oil. Biogenic: transformation by microorganisms. Composition Composed primarily of methane and other light hydrocarbons. Mixture of 50 to 90% by volume of methane, propane and butane. “Dry” and “wet” (methane content); “sweet” and “sour” (sulfur content). Usually found in association with oil: Formation of oil is likely to have natural gas as a by-product. Often a layer over the petroleum.

1. Nature and Use Use Mostly used for energy generation. Previously, it was often wasted - burned off. It is now more frequently conserved and used. Considered the cleanest fossil fuel to use. The major problem is transporting natural gas, which requires pipelines. Gas turbine technology enables to use natural gas to produce electricity more cheaply than using coal.

2. Availability and Distribution Reserves Substantial reserves likely to satisfy energy needs for the next 100 years. High level of concentration: 45% of the world’s reserves are in Russia and Iran. Regional concentration of gas resources is more diverse: As opposed to oil. Only 36% of the reserves are in the Middle East.

2. Proved Reserves of Natural Gas, 2009

2. Global Natural Gas Reserves, 2003

Liquefied natural gas (LNG) Growth of the global demand has created needs to move natural gas over long distances. Liquid form of natural gas; easier to transport. Cryogenic process (-256oF): gas loses 610 times its volume. Value chain: Extraction. Liquefaction. Shipping. Storage and re-gasification.