The Energy Security Drivers For Alternative Energy Investments

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A presentation by Jeremy Leggett at TBLI CONFERENCE EUROPE 2008.

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  • Energy company BP's Thunder Horse semi-submersible platform is seen in this handout photo. Energy company BP's Thunder Horse semi-submersible platform, located in the Gulf of Mexico, 150 miles (241 km) southeast of New Orleans, is seen in this handout photo taken July 11, 2005, listing after the passing of Hurricane Dennis. The Thunder Horse field is in development and has not begun production of hydrocarbons.
  • Energy company BP's Thunder Horse semi-submersible platform is seen in this handout photo. Energy company BP's Thunder Horse semi-submersible platform, located in the Gulf of Mexico, 150 miles (241 km) southeast of New Orleans, is seen in this handout photo taken July 11, 2005, listing after the passing of Hurricane Dennis. The Thunder Horse field is in development and has not begun production of hydrocarbons.
  • Energy company BP's Thunder Horse semi-submersible platform is seen in this handout photo. Energy company BP's Thunder Horse semi-submersible platform, located in the Gulf of Mexico, 150 miles (241 km) southeast of New Orleans, is seen in this handout photo taken July 11, 2005, listing after the passing of Hurricane Dennis. The Thunder Horse field is in development and has not begun production of hydrocarbons.
  • The United States is almost unique in that the oil rights belong to the landowner, which gave it an exceptional depletion profile. The reserve and reporting practices are also unique.
    There is a very large number of what are treated as small independent fields because of the fragmented ownership. Most of these small fields are intimately related to the large ones. The above plot attributes all discovery to the large fields to give a fairer picture.
    The peaks of discovery and production were in respectively 1930 and 1971.
    A new cycle of discovery is now opening with the deepwater projects in the Gulf of Mexico.
    The United States has supported a dynamic oil industry which explains why it is the most depleted country, now importing more than 60% of its needs on a rising trends. It also explains why access to foreign oil is declared to be a vital national interest to be protected by military means as necessary.
  • The United States is almost unique in that the oil rights belong to the landowner, which gave it an exceptional depletion profile. The reserve and reporting practices are also unique.
    There is a very large number of what are treated as small independent fields because of the fragmented ownership. Most of these small fields are intimately related to the large ones. The above plot attributes all discovery to the large fields to give a fairer picture.
    The peaks of discovery and production were in respectively 1930 and 1971.
    A new cycle of discovery is now opening with the deepwater projects in the Gulf of Mexico.
    The United States has supported a dynamic oil industry which explains why it is the most depleted country, now importing more than 60% of its needs on a rising trends. It also explains why access to foreign oil is declared to be a vital national interest to be protected by military means as necessary.
  • The United States is almost unique in that the oil rights belong to the landowner, which gave it an exceptional depletion profile. The reserve and reporting practices are also unique.
    There is a very large number of what are treated as small independent fields because of the fragmented ownership. Most of these small fields are intimately related to the large ones. The above plot attributes all discovery to the large fields to give a fairer picture.
    The peaks of discovery and production were in respectively 1930 and 1971.
    A new cycle of discovery is now opening with the deepwater projects in the Gulf of Mexico.
    The United States has supported a dynamic oil industry which explains why it is the most depleted country, now importing more than 60% of its needs on a rising trends. It also explains why access to foreign oil is declared to be a vital national interest to be protected by military means as necessary.
  • Discovery reached a peak in the mid 1960s, as now confirmed by no less than ExxonMobil, the World’s largest oil company.
    It has been falling:
    despite a worldwide search, always aimed at the biggest and best prospects;
    despite improved geological knowledge and understanding;
    despite great technological progress;
    despite favourable tax treatment of exploration expense.
    If more could have been found, it would have been. Accordingly, there is no reason to expect the trend to change direction.
    Extrapolating the future trend is straightforward.
  • Discovery reached a peak in the mid 1960s, as now confirmed by no less than ExxonMobil, the World’s largest oil company.
    It has been falling:
    despite a worldwide search, always aimed at the biggest and best prospects;
    despite improved geological knowledge and understanding;
    despite great technological progress;
    despite favourable tax treatment of exploration expense.
    If more could have been found, it would have been. Accordingly, there is no reason to expect the trend to change direction.
    Extrapolating the future trend is straightforward.
  • Discovery reached a peak in the mid 1960s, as now confirmed by no less than ExxonMobil, the World’s largest oil company.
    It has been falling:
    despite a worldwide search, always aimed at the biggest and best prospects;
    despite improved geological knowledge and understanding;
    despite great technological progress;
    despite favourable tax treatment of exploration expense.
    If more could have been found, it would have been. Accordingly, there is no reason to expect the trend to change direction.
    Extrapolating the future trend is straightforward.
  • Energy company BP's Thunder Horse semi-submersible platform is seen in this handout photo. Energy company BP's Thunder Horse semi-submersible platform, located in the Gulf of Mexico, 150 miles (241 km) southeast of New Orleans, is seen in this handout photo taken July 11, 2005, listing after the passing of Hurricane Dennis. The Thunder Horse field is in development and has not begun production of hydrocarbons.
  • Energy company BP's Thunder Horse semi-submersible platform is seen in this handout photo. Energy company BP's Thunder Horse semi-submersible platform, located in the Gulf of Mexico, 150 miles (241 km) southeast of New Orleans, is seen in this handout photo taken July 11, 2005, listing after the passing of Hurricane Dennis. The Thunder Horse field is in development and has not begun production of hydrocarbons.
  • Energy company BP's Thunder Horse semi-submersible platform is seen in this handout photo. Energy company BP's Thunder Horse semi-submersible platform, located in the Gulf of Mexico, 150 miles (241 km) southeast of New Orleans, is seen in this handout photo taken July 11, 2005, listing after the passing of Hurricane Dennis. The Thunder Horse field is in development and has not begun production of hydrocarbons.
  • http://www.usgs.gov/aboutusgs/
    (Source Ref. B1)
    Colin Campbell obtained his doctorate in geology from Oxford University in 1958 and has worked since as a petroleum geologist with companies including BP, Texaco, Fina and Amoco. He was Exploration Manager for Aran Energy, Dublin, in 1978-9. More recently he has been a consultant to the Norwegian and Bulgarian Governments, and to Shell and Esso. In 1998, he and a colleague, Jean H. Laherrère, were largely responsible for convincing the International Energy Agency that the world’s output of conventional oil would peak within the following decade. He is the author of two books and numerous papers on oil depletion and has lectured and broadcast widely. He lives in Ballydehob, Co. Cork.
  • Energy company BP's Thunder Horse semi-submersible platform is seen in this handout photo. Energy company BP's Thunder Horse semi-submersible platform, located in the Gulf of Mexico, 150 miles (241 km) southeast of New Orleans, is seen in this handout photo taken July 11, 2005, listing after the passing of Hurricane Dennis. The Thunder Horse field is in development and has not begun production of hydrocarbons.
  • Energy company BP's Thunder Horse semi-submersible platform is seen in this handout photo. Energy company BP's Thunder Horse semi-submersible platform, located in the Gulf of Mexico, 150 miles (241 km) southeast of New Orleans, is seen in this handout photo taken July 11, 2005, listing after the passing of Hurricane Dennis. The Thunder Horse field is in development and has not begun production of hydrocarbons.
  • Energy company BP's Thunder Horse semi-submersible platform is seen in this handout photo. Energy company BP's Thunder Horse semi-submersible platform, located in the Gulf of Mexico, 150 miles (241 km) southeast of New Orleans, is seen in this handout photo taken July 11, 2005, listing after the passing of Hurricane Dennis. The Thunder Horse field is in development and has not begun production of hydrocarbons.
  • Energy company BP's Thunder Horse semi-submersible platform is seen in this handout photo. Energy company BP's Thunder Horse semi-submersible platform, located in the Gulf of Mexico, 150 miles (241 km) southeast of New Orleans, is seen in this handout photo taken July 11, 2005, listing after the passing of Hurricane Dennis. The Thunder Horse field is in development and has not begun production of hydrocarbons.
  • Energy company BP's Thunder Horse semi-submersible platform is seen in this handout photo. Energy company BP's Thunder Horse semi-submersible platform, located in the Gulf of Mexico, 150 miles (241 km) southeast of New Orleans, is seen in this handout photo taken July 11, 2005, listing after the passing of Hurricane Dennis. The Thunder Horse field is in development and has not begun production of hydrocarbons.
  • The Energy Security Drivers For Alternative Energy Investments

    1. 1. The energy security drivers for alternative investments Jeremy Leggett
    2. 2. We are living through a triple crunch Credit …the credit crunch Carbon …the climate crunch Oil …the energy crunch
    3. 3. October 29th 2008 The first multi-company attempt to sound an alarm bell on premature peak oil www.peakoiltaskforce.net
    4. 4. US-48 0 5 10 15 20 25 30 1930 1950 1970 1990 2010 2030 2050 DiscoveryGb 0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000 Productionkb/d Production billionsofbarrels Source: ASPO USA 48 production versus discovery
    5. 5. US-48 0 5 10 15 20 25 30 1930 1950 1970 1990 2010 2030 2050 Discovery 0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000 Productionkb/d Production Source: ASPO billionsofbarrels USA 48 production versus discovery
    6. 6. US-48 North Sea oil production Source: Oil Drum Europe
    7. 7. 0 10 20 30 40 50 60 1930 1950 1970 1990 2010 2030 2050 billionsofbarrels Past discovery Future discoveryPast production ? Expectation of future production Concerns: • Collapsing giant- field discovery • Collapsing giant field production • Flow rates fall from 2013 Global production versus discovery
    8. 8. -4000 -2000 0 2000 4000 6000 8000 10000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 total 3 month Slip 0.9 4.5% Depletion Net Source: ITPOES 2008 Flow rates versus depletion Total Net 4.5% depletion 3 month slip 0.9 10 8 6 4 2 0 -2 -4 mbd
    9. 9. 0 10 20 30 40 50 60 1930 1950 1970 1990 2010 2030 2050 billionsofbarrels Past discovery Future discoveryPast production ? Expectation of future production • Lead times average 6-7 yrs • EOR only slows production drop • Phantom reserves Global production versus discovery Concerns: • Collapsing giant- field discovery • Collapsing giant field production • Flow rates fall from 2013
    10. 10. Real Discovery Trend 0 10 20 30 40 50 60 1930 1950 1970 1990 2010 2030 2050 Past discovery Future discoveryPast production Expectation of future production Future production billionsofbarrels Global production versus discovery Source: ASPO
    11. 11. 0 10 20 30 40 50 1930 1950 1970 1990 2010 2030 2050 Production,Gboe/a Non-con Gas Gas NGLs Polar Oil Deep Water Heavy Regular Concerns: • Investment shortfall billionbarrels Global production of oil and gas
    12. 12. 0 20 40 60 80 100 120 140 160 Oil price 160 140 120 100 80 60 40 20 2004 200720062005 2008 Marginal cost tar sands production $ Marginal cost offshore Angola production Falling real investment in exploration 1999-2006
    13. 13. 0 10 20 30 40 50 1930 1950 1970 1990 2010 2030 2050 Production,Gboe/a Non-con Gas Gas NGLs Polar Oil Deep Water Heavy Regular • State of aged infrastructure • Tar sand flow rates too low • CTL flow rates too low • GTL flow rates too low • Absence of oil shale technology • Gas needed for power • Age skew and skills shortage billionbarrels Global production of oil and gas Concerns: • Investment shortfall
    14. 14. 0 10 20 30 40 50 1930 1950 1970 1990 2010 2030 2050 Production,Gboe/a Non-con Gas Gas NGLs Polar Oil Deep Water Heavy Regular Source: ASPO billionbarrels Global production of oil and gas
    15. 15. 75000 80000 85000 90000 95000 100000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Thousandb/d C rude supply Demand (1.6%/yr) Supply versus demand Source: ITPOES 2008 mbd 100 95 90 85 80 75
    16. 16. Gulf of Mexico• Russia • Saudi Arabia • Iraq • Iran • Kuwait Key countries
    17. 17. Gulf of Mexico• Russia • 5 months of falling production • ex-government officials and current Lukoil officials say they are past peak Key countries “I keep no secret from you that, when there were some new fields, I told them ‘no, leave it in the ground, with grace from God, our children need it’.” King Abdullah, 2008 • Saudi Arabia • Former head of E&P says they are near peak • Plan to get 20 GW electric power in next 5 years ….mostly from oil
    18. 18. Gulf of Mexico• Iraq • ….IOC concerted entry doubtful without a Petroleum Law agreed Key countries • Kuwait • government admitted in 2007 that they have less than half the “proved” reserves quoted for years now • parliament believes they should use what remains at home • Iran • the highest domestic growth rate in the world ….so fast analysts say it will threaten export potential soon
    19. 19. Who to believe? oil gas gas oil
    20. 20. “as long as the music is playing, you’ve got to get up and dance. We’re still dancing.”
    21. 21. • ..y My Picturesuntitled.bmp Dubai 1990
    22. 22. • ..y My Picturesuntitled.bmp Dubai 2007
    23. 23. No combination of non-fossil technologies will be able quickly to close the post peak-oil energy gap 31003100 Oil 35%79 Coal 25.3% Gas 20.7% Nuclear 6.3% Combustible renewables and waste 10% Hydro 2.2% Wind, geothermal, solar, etc 0.5% Source: IEA
    24. 24. Gulf of Mexico
    25. 25. UK Government strategic energy review press release 4 February 2002 “We could achieve a virtually zero carbon energy system in the long term …this is technologically and economically feasible …” “….solar energy alone could meet world energy demand using less than 1% of land now under crops and pasture…” The potency of low carbon technologies
    26. 26. 15% above current EU consumption The ultimate resource potential of renewables in a world of 10 billion people Source: Shell Energy Scenarios 2001
    27. 27. “Oil fields have a declining curve – you find one, it peaks and starts downhill, you’ve got to find another one to replace it. It drives you crazy! With wind, there’s no decline.” T. Boone Pickens
    28. 28. South Yorkshire Housing Association
    29. 29. McDonough and Partners
    30. 30. FT, 21st Oct 2006
    31. 31. Mobilisation rates Climate change policy response scenario Peak oil “descent” scenario Peak oil “collapse” scenario End goal for replacement of oil use Within 42 years Within < 20 years Within < 10 years Annual rates of oil replacement with respect to 2008 2.38% c. 5% >10% Source: ITPOES 2008
    32. 32. Numbers Time The Law of the Few The Stickiness Factor The Power of Context “Look at the world around you. It seems like an immovable, implacable place. It is not. With the slightest push – in just the right place – it can be tipped.” Malcolm Gladwell TIPPING POINT The “seeing is believing” effect
    33. 33. Join us • UK ITPOES will continue its work …net energy next • Industry stakeholder engagement is needed in other countries • Investor leadership is needed in the “green new deal”
    34. 34. 1989 - 1997 1998 - 2005
    35. 35. Thank you jeremy.leggett@solarcentury.com www.solarcentury.com www.solar-aid.org

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