Facing The Hard Truths About Energy

A Comprehensive View To 2030

Of Global Oil And Natural Gas

CSIS Presentation
August 1, 2007

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 The Secretary’s Suggested Questions

● What does the future hold for global oil and natural
gas supply ?

● Can incremental oil and gas supplies be brought

on-line, on time, and at a reasonable price to meet
future demand without jeopardizing economic
growth ?

● What oil and gas supply and / or demand-side

strategies does the Council recommend the U.S.
pursue to ensure greater economic stability and
prosperity ?
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 Study Leadership
National Petroleum Council
Chairman – Lee Raymond
Gov’t Cochair – Samuel Bodman

Global Committee
Chair – Lee Raymond
Gov’t Cochair – Clay Sell
Vice Chairs
– Andrew Gould – John Hamre
– David O’Reilly – Daniel Yergin

Coordinating Subcommittee
Chair – Alan Kelly
Gov’t Cochair – Jim Slutz

Demand Task Group Technology Task Group

Chair – James Burkhard Chair – Rod Nelson
Gov’t Cochair – Paul Holtberg Gov’t Cochair – Guido DeHoratiis

Supply Task Group Geopolitics and Policy Task Group

Chair – Donald Paul Chair – Frank Verrastro
Gov’t Cochair – Nancy Johnson Gov’t Cochair – David Pumphrey

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 Dimensions of the Study

Economics
Supply Demand

Findings
and
Alternative Strategies
Technology
Energies

Energy
Environment
Security

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 How This Study Is Different

• Over 100 studies incorporated to include both

Integrated, public and aggregated proprietary outlooks
In-Depth Analysis
• Not another forecast of supply, demand or price

• 350 participants with backgrounds

Diversity of
in all aspects of energy including efficiency,
Expertise
economics, geopolitics, environment

• Identified achievable opportunities and

Technology likely deployment timing
Assessment
• Looked across the energy spectrum, including
both supply and demand
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 How This Study is Different

65% participants
NGOs
from outside of oil ACADEMIA/
and gas industry PROFESSIONAL
SOCIETIES GOVERNMENTS

CONSULTANTS/
FINANCIAL

OTHER
INDUSTRIES OIL AND GAS
INDUSTRY

350 + participants, plus input from 1000 + others

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 What We Learned:
The Hard Truths

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 The Hard Truth: Demand

Most forecasts project global energy demand growth

to increase by 50-60%, mainly as a result of
population growth and improved living standards;

Coal, oil, and natural gas will remain indispensable

to meeting total projected energy demand.

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 Range of Projections Point to Growing Demand

TOTAL ENERGY
900
QUADRILLION BTU PEr YEAR

600

EIA HIGH
300 EIA REF
IEA REF
IEA ALT POLICY
IEA LOW
0

1980 1990 2000 2010 2020 2030

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 Global Demand Outlooks – Fossil Fuels
Average of projections for each fuel
250
Average annual % growth
225 1980-2005 2005-2030
OIL
Oil 1.1 1.2
QUADRILLION BTUs PER YEAR

200 Gas 2.7 1.8

Coal 1.9 2.0

175 COAL

150
GAS
125

100

75

50

25
1980 1990 2000 2010 2020 2030
Source: NPC Global Oil and Gas study survey.

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Coal, Oil, and Natural Gas Will Remain Indispensable

1980 2004 2030

288 QUADRILLION BTU 445 QUADRILLION BTU 678 QUADRILLION BTU

NATURAL
GAS

OIL

COAL

WIND / SOLAR / GEOTHERMAL

HYDRO
NUCLEAR
BIOMASS
Source: IEA REFERENCE CASE
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 Global CO2 Emissions Projections

60
EIA HIGH ECONOMIC
BILLIONS OF METRIC TONS PER YEAR

GROWTH CASE
50

40 RANGE OF
PROJECTIONS

30

20 IEA ALTERNATIVE
HISTORICAL POLICY CASE

10

0
1980 1990 2000 2010 2020 2030
Source: NPC Global Oil and Gas study survey.

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 Demand Task Group Observations

Survey of projections indicates:

• Income and population are prime drivers of demand
• US energy efficiency improvement is equal to
or less than in the past in most projections
• CO2 emissions closely related to anticipated energy
use
• Fossil fuels to remain the largest energy source
• Asia’s share of global demand rises ~10% by 2030

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Demand Task Group Observations (continued)

Survey of projections also indicates:

• Transportation is largest component of oil demand
growth in US and world
• Nuclear energy has smaller share of energy mix in all
but one projection
• Energy intensities of US and global economies decline
• Global per capita energy consumption increases
• US per capita energy consumption projected to
remain highest in the world

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 The Hard Truth: Supply

The world is not running out of energy resources, but

there are accumulating risks to continuing expansion of oil

and natural gas production from the conventional sources

relied upon historically. These risks create significant

challenges to meeting projected total energy demand.

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 Large Oil Resource Base

6
UNCONVENTIONAL

5 CONVENTIONAL
TRILLION BARRELS - OIL

4
ULTIMATE RECOVERABLE RESOURCE (MEAN)

0
1984 1987 1991 1994 2000

Source: USGS
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 Oil Resource Concentration

ILLUSTRATIVE PROJECTION UNCONVENTIONAL CONVENTIONAL

Source USGS
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 All Sources of Energy Will Be Needed

800
WIND / SOLAR / GEOTHERMAL / HYDRO
QUADRILLION BTU PER YEAR

NUCLEAR
BIOMASS

Coal
400

Gas

Liquids

0
1980 2004 2030

Source: IEA REFERENCE CASE

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Risks Reflected in Range of Production Projections

140

120 IEA Medium–Term Outlook EIA Ref Case

MILLION BARRELS PER DAY – OIL

IOC – average
100

Association for
80 Study of Peak Oil
(ASPO)
60

40

20

0
2000 2010 2020 2030

* Source: NPC Data Warehouse.

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 The Hard Truth: Energy Sources

To mitigate these risks, expansion of all economic energy

sources will be required, including coal, nuclear, biomass,

other renewables, and unconventional oil and natural gas.

Each of these sources faces significant challenges

including safety, environmental, political, or economic

hurdles, and imposes infrastructure requirements for

development and delivery.

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 Contribution of Unconventional Liquids
15

Global Production
MILLION BARRELS PER DAY

12

9 q uids
To -Li
-
Gas -Liquids
a l- To
6 Co
H e a vy Oil
Extra

3 Oil Sands / Bitumen

Biofuels
0
2005 2010 2015 2020 2025 2030

Source: Data From EIA 2007 Reference.

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 Massive Infrastructure Investments Required

COAL CTL
UNCONV. LIQUID
UPGRADING
OIL FUEL

BLENDING
OTHER
REFINING
MFG.
CONV.
OIL

● MFG
BIOMASS

Supply GTL RENEWABLES Demand

NUCLEAR POWER
LNG REGAS GEN.
COAL
STORAGE

GAS
NATURAL
GAS
GAS DISTRIBUTION
PROCESSING

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 The Hard Truth: Energy Security
"Energy Independence" should not be confused with

strengthening energy security. The concept of energy

independence is not realistic in the foreseeable future,

whereas U.S. energy security can be enhanced by

moderating demand, expanding and diversifying domestic

energy supplies, and strengthening global energy trade

and investment. There can be no U.S. energy security

without global energy security.

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 Evolving Energy World

• Continued growth in global energy demand – increasingly

from developing and emerging economies;
• Changing global energy map shows increased geographic
concentration farther from major consumption centers;
• Resource endowment is enormous, but “Above Ground”
issues present heightened & accumulating investment
risks;
• Evolving market features new players with new agendas,
new alliances and leverage; may require new tools and
policy approaches;
• Projected impacts of climate change and carbon
constraints are potential game changers
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 Consumption in Developing World

2005 2030
7%
207 Quad Btu 404 Quad Btu
3%
8% 31%
2%
33%

33%
35%
24%

Liquids Hydro/Renewables
24%
Coal
Source: EIA/IEO 2007
Nuclear Natural Gas

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 ... And Energy Demand Growth Follows

History Projections
500
QUADRILLION BTU PER YEAR

400

300

200

100

0
1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030

OECD Non-OECD
Source: EIA 2007
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 Global Oil Trade

2000 2030

EXPANDING FLOW TRENDS

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 Global LNG Trade

2000 2030

EXPANDING FLOW TRENDS

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 Supply Vulnerability Zones

Bosporus
Bosporus
Strait
Strait of
of Hormuz
Hormuz
Suez
Suez Canal
Canal // Sumed
Sumed
Panama Strait
Strait of
of
Panama Canal
Canal Red
Red Sea
Sea Malacca
Malacca

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 New Considerations for Investment Decisions
New “Above Ground” Challenges for Industry
• Role of new geopolitical alliances?
• Importance of supply reliability and price predictability
• Increased environmental sensitivity
• Global transformation - transitioning from bipolar world to
multipolar world with rules as yet unwritten
• Power shift to areas with strategic commodities & rise in
resource nationalism
• Human rights, distributive wealth, energy equity issues
• Terrorism – Threats to facilities and transit choke points
• Political Hostility to American Foreign Policy

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 Broad Examination of Technology Themes

• Technology Development
• Personnel Issues: The Big Crew Change
• Carbon Management
• Conventional Resources (includes EOR and Arctic)
• Exploration Technology
• Deepwater Technology
• Unconventional Gas (including Coal and Shale gas) ¾ Time horizons
¾ Research budgets
• Heavy Oil and Bitumen
¾ Human resources
• Oil Shale ¾ Deployment
• Gas Hydrates
• Coal to Liquids and Gas
• Biomass fuels
• Nuclear Outlook and impact on Oil and Gas demand
• Transportation Efficiency
• Other Renewables
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 The Hard Truth: Workforce

A majority of the U.S. energy sector workforce, including

skilled scientists and engineers, is eligible to retire within

the next decade. The workforce must be replenished

and trained.

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 U.S. Human Resources Challenge

OVER HALF OF THE WORKFORCE ELIGIBLE

TO RETIRE IN NEXT 10 YEARS
25

AGE DISTRIBUTION
% OF U.S. WORKFORCE

20

15

10

0
20 25 30 35 40 45 50 55 60 65 70

AGE
Source: U.S. Dept of Labor.

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 The Hard Truth: Carbon Emissions

Policies aimed at curbing carbon dioxide emissions will

alter the energy mix, increase energy-related costs, and

require reductions in demand growth.

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CO2 Emission Limits Will Alter Energy Strategies

Growing concern that climate is warming and CO2

concentrations in the atmosphere play a role.

The challenge of significantly reducing CO2 emissions

is unprecedented and will require:
• Global, broad actions on multiple fronts
• Long time horizons
• Major additional investments

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 Five Core U.S. Strategies

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 The Five Core U.S. Strategies

• Moderate Demand By Increasing Energy Efficiency

• Expand And Diversify U.S. Energy Supply

• Strengthen Global And U.S. Energy Security

• Reinforce Capabilities To Meet New Challenges

• Address Carbon Constraints

There Is No Single, Easy Solution

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 Moderate Demand Growth

Improve U.S. car and light truck fuel economy

standards at the maximum rate possible by applying

economic, available technology.

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 Expand and Diversify Supply

Reduce declines in U.S. conventional oil and natural

gas production.

Increase access for new energy development.

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 Expand and Diversify Supply

Diversify long-term energy production

• Accelerate development of energy from biomass

• Enable the long-term environmental viability of

coal for power, fuel, and feedstock

• Expand domestic nuclear capability

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 Promote Global and U.S. Energy Security

Integrate energy policy into trade, economic,

environmental, security and foreign policies.

Continue to develop the international energy

marketplace by expanding dialogue with major
producers and consuming nations.

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 Promote Global and U.S. Energy Security

Promote an effective global energy marketplace by

sustaining and intensifying efforts to encourage
global adoption of transparent, market-based
approaches.

Assist and encourage global adoption of energy

efficiency technologies through technology transfer
programs.

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Reinforce Capabilities to Meet New Challenges

Rebuild U.S. science and engineering capabilities.

Create research and development opportunities.

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Reinforce Capabilities to Meet New Challenges

Improve the quality of energy data and information.

Develop a comprehensive forecast of U.S.

infrastructure requirements.

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 Actions to Address Carbon Constraints

Develop legal and regulatory framework to enable

carbon capture and sequestration.

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 Actions to Address Carbon Constraints

As options are considered to reduce CO2

emissions:

• Provide effective global framework for carbon

management

• Establish transparent, predictable, economy-

wide cost for CO2 emissions

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 Summary

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 There Is No Single, Easy Solution

• All Five Strategies Must Be Addressed Together

• Global Cooperation Required

• Begin Now And Plan For Sustained Commitment

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 All Strategies Are Essential

30
U.S. LIQUID FUELS DEMAND
MILLION BARRELS PER DAY

MODERATE

GLOBAL TRADE
(NET IMPORTS)
15
EXPAND & DIVERSIFY

U.S. LIQUID FUELS

2000 2010 YEAR 2020 2030

Source: EIA Reference Case / NPC Global Oil and Gas study survey.
Illustrative View
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For additional information or to register comments
in connection with the NPC report:
“Facing the Hard Truths About Energy”

please refer to the NPC Website for a complete list

of available resources:
http:www.npc.org
Send your follow-up questions and comments to:
comments@npc.org
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