Technology and abundant gas extending the fossil fuel era
Published: Mar 13, 2010 23:40 Updated: Mar 13, 2010 23:40
It was a star studded attraction, with the movers and shakers of the energy world almost on their annual pilgrimage - the CERAWeek - at the Hilton Americas-Houston downtown. And with Houston the "ecosystem for the world's energy," there could be no better place for the august gathering.
With roughly 2,200 in attendance, the IHS Cambridge Energy Research Associate's annual energy forum, held under the title, "Energy: Building a New Future," reflected the renewed optimism in the global scenario. Yet it also suggested the uncertainty that exists. While the worst of the recession may be over, and this indeed is open to debate, yet one certainty exists - what's ahead for the industry is unlikely to look anything like the past.
A debate on the future role of fossil fuel in the energy mix of tomorrow seems intensifying. And the growing divide was too apparent at the downtown Hilton Americas too. The fault lines were in open, with the energy world clearly split into distinct camps.
On one hand was the industry, underlining with all the might in its possession, that fossil fuel will continue to be the dominant energy source for decades to come and that improving technology and abundant natural gas supplies hold the potential to extend that life further.
On the other hand, though vastly outnumbered, was the Nobel laureate, the professor turned US Energy Secretary Steven Chu, reiterating that US must accelerate efforts to wean itself from oil in what will amount to a "new industrial revolution," or risk losing the clean technology race to other countries and doing further damage to the environment. "Time is running out, and the train is leaving the station," Chu said. And while talking of alternatives, the clean energy, Chu said he's excited about the prospects for solar energy in sun-drenched Saudi Arabia.
And industry leaders were definitely not comfortable with the onslaught. And they had their own reasons. While still cautious about the scale of global economic recovery, they also kept fretting about policy changes in the US and elsewhere that they fear is favoring renewable - wind power and biofuels - over oil and natural gas. And this carried huge implications too.
"It worries me that there seems to be an assumption taking root in some quarters that we are going to somehow fundamentally transform the face of energy overnight," said Khalid Al-Falih, CEO of Saudi Aramco. "The focus on alternatives should not be to the detriment of conventional investment," he insisted and yes, had a point.
Al-Falih went on to warn of the danger of "green bubbles" forming in the alternative energy sector, stressing the need to maintain spending on oil and fossil fuels even while developing promising renewable resources. "Making the use of oil cleaner and greener should be at the top of the petroleum industry's agenda," he conceded. "We should pursue this avenue alongside work to develop the most promising renewable sources, because I do not believe this is an 'either-or' choice, but rather a complimentary approach."
And that is the point that needs to be re-emphasized. Renewable are to compliment the fossil fuel in the overall energy mix - and not replace them. "I don't think any of us will see, at any time in our lives, fossil fuels meeting less than 70 percent of total energy demand," he underlined.
While fossil fuels' percentage of total energy output can be expected to decline, most agree, the volume of energy produced from them can be expected to rise as world energy demand doubles over the next 40 years, he said. By one estimate, global oil demand - now at about 85 million barrels a day - is expected to jump to 105 million barrels a day by 2030, Al-Falih noted.
Many others presenters agreed. ConocoPhillips' Chief Executive Officer Jim Mulva drew applause from the crowd when he blasted "hydrocarbon deniers" for questioning the potential of natural gas to meet future US energy needs.
Whatever the case, he termed the call for the world to move quickly away from fossil fuels as unrealistic, emphasizing, "we know that oil and gas and coal, there's not going to be an alternative to them for decades to come."
Mulva's point was well taken. Washington policymakers are too focused on promoting alternative fuels at the expense of conventional ones, especially natural gas, most industry leaders felt. "Let natural gas compete equally," he said in an interview. "We need to do a great deal more research and development before we look at commercializing alternative fuels."
While supporting developing alternative fuels, Mulva though acknowledged that they will play a role in meeting future energy demand, yet stressing natural gas is "nature's gift to the people of the world."
And with the emerging role of gas, in meeting the emerging gaping holes, investment in the sector is crucial. Despite the hiccups, the industry is moving ahead. Saudi Aramco is hiking its upstream spending by nearly 50 percent to $90 billion over the next five years from the previous period, with a growing share spent on gas.
"Over the next five years, we expect to invest another $90 billion, with an increasing proportion of that direct to gas as we roughly double our gas capacity over a 10-year period," Al-Falih told the gathering. The company spent over $62 billion in the previous five years in order to increase capacity to 12 million bpd.
And in the meantime, the natural gas shale boom in North America has more than doubled discovered gas resources and can supply more than a century of consumption at current rates. As recently as 2007, it was widely thought that natural gas was in tight supply and the US would need to import gas, said Daniel Yergin, chairman of IHS CERA. But a long-lasting "shale gale" has squashed that outlook, he stressed.
This ongoing debate may not have not deeply impacted the investment sentiments - yet the lingering uncertainties are definitely not a good omen which one can't help underlining at this stage.
Comments
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Mar 16, 2010 11:59
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