Organization of                    Clean Energy:
American States                    Meeting the Energy
                   ...
Latin American Share of Oil World Reserves
 Latin American oil reserves are becoming increasingly important
              ...
Net Oil Availability

        Latin America
                                               Mbpd
        Russia

        As...
Gas Rich Region with limited infrastructure
 Proven Reserves as of January 1, 2005
                                       ...
PRODUCTION X DEMAND X REFINING CAPACITY: REACHING SELF-SUFFICIENCY
Production/             1955   1960   1965   1970     1...
Business Plan 2007-2011 - Total Production – Oil, NGL’s and Natural Gas

        Thousand boed                            ...
Brazil is the 1st country to reap benefits from Ethanol
      Original drivers were energy security and economic attractiv...
Quais seriam os motivos do diferencial de produtividade brasileira ?


              Greater production cost reduction    ...
Como se distribui a Oferta Mundial de Energia ?
 • World Energy Consumption reached 7,639 Mtoe in 2004;

 • According to t...
Mas esta estrutura gera externalidades negativas
• Fossil fuels usage increases global temperature, generating urban pollu...
O Etanol contribui para a redução do aquecimento global
•Biofuels usage can reduce CO2 emissions at a 5:1 rate;

•Besides ...
Bio-fuel usage in OECD Countries will benefit LA
                                  Global warming, energy security and/or ...
Cenário para a demanda
• A strong increase in the demand for ethanol is expected;
• This amount of future consume may be l...
The potential to expand world production is enormous

  North and
                                                        ...
A PROMISING MARKET
               Potential demand        Ethanol
 Country                                                ...
Ethanol Logistics System in Brazil

                                                                 Ethanol collection,
 ...
US Ethanol
                                                    producers are
                                             ...
Diferenças de produtividade na cana de açúcar
              •Availability of lands, water and low labor cost also benefit ...
Diferenças de produtividade na cana de açúcar

• 33% of the world’s internal renewable water resources are concentrated in...
Increasing Efficiency in Raw Material Use
                   Raw Material                                            Energ...
Principal Conclusions, Hurdles and Challenges



                               • Latin America is in a privileged positio...
Principal Conclusions, Hurdles and Challenges




                               But the main hurdles
                    ...
Main Obstacles to Greater Integration

                                        • Oil sector has different impact on
      ...
New Frontiers for Ethanol Development
  • Ethanol can be used in place of gasoline, as a substitute for additives
  (lead,...
Organization of                    Clean Energy:
American States                    Meeting the Energy
                   ...
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Clean Energy: Meeting the energy challenges of the 21st Century

  1. 1. Organization of Clean Energy: American States Meeting the Energy Challenges of the José Sergio Gabrielli de Azevedo CEO and President 21st Century June, 2007
  2. 2. Latin American Share of Oil World Reserves Latin American oil reserves are becoming increasingly important 1984 1994 2004 R/P* = 26,77 R/P* = 41,78 R/P* = 41,84 4,8% 8,0% 8,5% 5,0% 3,8% 3,5% 8,8% 5,1% 13,4% 9,4% 6,4% 7,6% 56,5% 65,1% 61,8% 7,9% 11,7% 12,7% Total Total Total 762 billion barrels 1.017 billion barrels 1.188 billion barrels Middle East Europe & Eurasia Africa North America Pacific Asia Latin America In 20 years, Latin America proven reserves increased from 36.6 billion barrels (1984) to 101 billion. Source: BP Statistical Review of World Energy * Reserves/Production Latin America (years) 2
  3. 3. Net Oil Availability Latin America Mbpd Russia Asia United States OECD(- Mexico) Projected growth in oil production and demand suggests balance and independence of supply from politically unstable regions Source: Internacional Energy Agency Reference Scenario Includes Bitumen and non-conventionals, including synthetic oils. 3
  4. 4. Gas Rich Region with limited infrastructure Proven Reserves as of January 1, 2005 4.3 T m3 Ample gas reserves will allow for: 0.55 T m3 152 Tcf ::: Regional growth in consumption 19.4 Tcf 0.41 T m3 substituting some demand for oil 14.5 Tcf Venezuela Trinidad ::: Higher exports of liquids Mexico 0.33 T m3 Brazil 11.7 Tcf Perú 0.74 T m3 0.74 T m3 26.1 Tcf But: ::: Will require increasing energy 2005 Gas Bolivia 0.50 T m3 integration and Proven Reserves 26.1 Tcf 17.7Tcf World: ::: Substantial investments in 179,8 T m3 South and Central Argentina infrastructure covering great America: distances and environmentally 7,02 T m3 sensitive regions Source: Cambridge Energy Research Associates. 4
  5. 5. PRODUCTION X DEMAND X REFINING CAPACITY: REACHING SELF-SUFFICIENCY Production/ 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2006 2011F Consumption (%) 3,0 30,5 28,4 32,2 19,5 16,7 56,2 55,3 49,3 70,4 97,6 112,1 Brazil: first major market to shift from import dependency to self sufficiency since first oil from Proj. 2500 North Sea in 1971 began to shift european balance 2000 Production THOUSAND BPD Consumption 1500 Refining 1000 500 0 1954 1960 1970 1980 1990 2000 2006 2011
  6. 6. Business Plan 2007-2011 - Total Production – Oil, NGL’s and Natural Gas Thousand boed 7.5% p.a. 4,556 278 Total Investment: US$ 87.1 billion in 2007-2011 7.8% p.a. 742 3,493 (US$ 49.3 billion in E&P) • Heavy8oil production technology 1 5 2,403 development will expand LA 4 383 72 reserve 2,217 growth5 possibilities; 5 1 , 2.036 2,020 101 85 94 96 133 • Successful Doha Round Negotiations 161 168 163 289 are essential to permit greater 250 265 274 trade of agricultural commodities and 2. 812 increase agricultural productivity 2. 374 1. 540 1. 493 1. 684 1. 880 considering comparative advantages; • Technological breakthroughs in enzyme technology for the use of 2003 2004 2005 Target a M et 2006 Lignocelluloses biomass e 2015 BTL; Targete2011 M ta M and Forecast t a 2011 2015 Ól e o + L G NBrazils i l Oil + NGL B r a • ás N a t u r aprogress in regional G Further l B r a s i l Natural Gas Brazil Ól e o + L G NInternationalo n a l Oil + NGL I n t e r n a c i integration. G ás N a t u r a l Natural a c i o n a l International I n t e r n Gas
  7. 7. Brazil is the 1st country to reap benefits from Ethanol Original drivers were energy security and economic attractiveness; Alcohol Exports Today environmental benefits are also considered. 2005 End of regulation 1999 FFV 160000 Beginning of the sector deregulation 140000 120000 PROÁLCOOL Alcohol Vehicles 10000 80000 60000 1000 BEP 40000 20000 Accumulated effective economy: CNG Source: MME, BEN 2006 1 Billion boe ~US$ 52 bi 0 ETHANOL GASOLINE 1972 1976 1980 1984 1988 1992 1996 2000 2004 During this period, ethanol utilization saved 644 million ton. of CO2 emission
  8. 8. Quais seriam os motivos do diferencial de produtividade brasileira ? Greater production cost reduction Ethanol Engine Relative Performance* when compared to gasoline. 140 132,4% 120 110,0% 103,3% 110,0% 100 20 80 60 18 40 20 16 0 Power 14 Consumption Gasoline 100% Gasohol 22% Ethanol 100% US$/GJ 2002 12 10 8 6 4 2 1980 1985 1990 1995 2002 0 Ethanol prices in Brazil Rotterdam regular gasoline price Source: Goldemberg 2004 *Source: Volkswagen (Brazil) - Presentation prepared for review within The Warren Centre for Advanced Engineering at Sydney University
  9. 9. Como se distribui a Oferta Mundial de Energia ? • World Energy Consumption reached 7,639 Mtoe in 2004; • According to the International Energy Agency estimates, it will reach 11,664 Mtoe in 2030, which means an increase of 1,8% p.a.; •Oil, Coal, Gas and Nuclear Energy, which are non renewable energies, are responsible for over 85% of total world supply; Non-Renewables 35 2004 13% 25 Shares (%) 21 Renewables 87% 10 6 2 1 Oil Coal Gas Nuclear Biomass and Hydro Other Waste Renew ables Source: World Energy Outlook 2006
  10. 10. Mas esta estrutura gera externalidades negativas • Fossil fuels usage increases global temperature, generating urban pollution. During the last 20 years, 25% of CO2 emissions were caused by fossil fuels usage in transportation activities. 27.044 Million Metric Tons of Carbon Dioxide 2004 9.605 6.887 4.653 5.912 4.707 2.551 2.004 1.041 1.320 987 China World Total Asia & Oceania Europe Region/Country Eurasia Africa United States Middle East North America South America Central & 224% 170% 167% ∆% 2004/1980 85% 67% 48% 27% 24% China Oceania United Africa & South World Middle Total States America America Central Asia & East North Source: Energy Information Administration, 2004
  11. 11. O Etanol contribui para a redução do aquecimento global •Biofuels usage can reduce CO2 emissions at a 5:1 rate; •Besides being a cleaner source of energy, sugar cane ethanol produces 8,3 more energy than the fossil energy used in its production process. Ethanol usage in Brazil has decreased the emission of Greenhouse Effect Gases at 13% (1994 data); •Sugar-cane is the most productive among ethanol raw materials and the production of ethanol has limited affect on food supply. Energetic balance - Ethanol Ethanol Productivity 10 7000 6000 8 5000 liters per hectar 6 4000 Energetic ratio 4 3000 2000 2 1000 0 0 sugar-cane sugar- sugar-cane corn - USA wheat - EU Sugar Wheat Beet- Corn - Brazil beet- EU - India cane root Source: World Watch Institute
  12. 12. Bio-fuel usage in OECD Countries will benefit LA Global warming, energy security and/or cost effectiveness are encouraging renewable fuels with two principle initiatives ethanol and biodiesel. Both can be produced and consumed in Latin America advantageously US$/ Liter of Ethanol (Without taxes) Sugar-cane - 0,22 Brazil Ethanol gasoline additive or substitute Corn - USA 0,30 • US – (2007 State of the Union) target of 136.5 billion liters by 2017 (target of 20% of current gasoline 0,33 Corn - Canada consumption to be substituted by ethanol by 2017 and cost efficient by 2012); • US – (2006 State of the Union) target of 30% of current Cereals - EU 0,45 gasoline consumption to be substituted by ethanol by 2030 and cost efficient by 2012; • Japan 3% ethanol for gasoline mixture by 2010; Sugar - beet - 0,53 • China pilot programs and fiscal incentives for use of EU ethanol. 12
  13. 13. Cenário para a demanda • A strong increase in the demand for ethanol is expected; • This amount of future consume may be levered if new countries adhere the compulsive blend with ethanol. Strong Increase in Demand Renewable Fuels Standard Ethanol Global Demand (Million liters/Year) MTBE Substitution Clean Air Act Lead Substitution Source: F.O. LICHT, 2004
  14. 14. The potential to expand world production is enormous North and Europe Central America Brazil 37% 35% 9.8% South America Asia 38% 16.2% Current Market Distribution of World Consumption Ethanol global market is 46.5 Billions Liters Ethanol as a Fuel is 30.6 Billions Liters, or 67% of total ethanol production Today the ethanol consumption is 2,6% of gasoline MKT Increasing ethanol to 10% of gasoline will represent 118 Billions Lt 14
  15. 15. A PROMISING MARKET Potential demand Ethanol Country Comment (Billion liters) addition Potential demand considering 3% ethanol addition to Japan 1.7 3% the gasoline formula Expected demand in 2012, according with the US 16.8 - Renewables Fuels Law Potential demand considering 10% ethanol addition China 4.5 10% to the gasoline formula Potential demand considering 5% ethanol addition to EU 7.4 5% the gasoline formula in 2011 India ? 5% Percentage approved only in some regions Potential demand considering 5% ethanol addition to Thailand 0.7 5% the gasoline formula Total: 31.1 billion liters •Only in the US, a 5.7% addition of ethanol the gasoline would translate into a consumption of 30 billion liters of ethanol per year. Souce: EIA/DOE; Comissão Européia; FO Licht; Copersucar
  16. 16. Ethanol Logistics System in Brazil Ethanol collection, storage and distribution centers are spread out Large scale marine terminals improve through producing efficiency and consuming regions Large storage capacity necessary to regulate supply Primary Base Secondary Base Pipelines reduce Collection Centers transport costs; improve Inland Navigation energy efficiency Railways Road Multi product pipelines
  17. 17. US Ethanol producers are concentrated in upper mid-west with little or no integration with oil ETHANOL HIDRATED facilities DISTRIBUTION AVOID REGIONALIZATION • While most oil and product pipelines run from the south to northeast, north or southwest; • Shipment in the Pacific will have a comparative advantage in supplying California.
  18. 18. Diferenças de produtividade na cana de açúcar •Availability of lands, water and low labor cost also benefit production in Central and South America. Latin America has the largest potential arable land per capita and only uses 13,9% of it. Sugar-Cane Productivity Potential Arable Land % of Potential Arable Land Yeld per Hectar actually in use (1.000 ha per capita) 72,41 73 71,13 2,2 61,4 67,77 69,34 55,6 1,7 48,6 1000 Kg/Ha 0,6 13,9 0,2 Asia USA Central South Brazil Asia and Europe North Latin Asia and Europe North Latin America America Pacific America America Pacific America America World Average Source: FAO
  19. 19. Diferenças de produtividade na cana de açúcar • 33% of the world’s internal renewable water resources are concentrated in Central and Latin America; Annual water use by sector Internal renewable water resources Latin America and Brazil Caribbean (m³ per capita – 1997) 18% 9% 35000 33.097 19% 30000 27.673 21% 61% 73% 25000 20000 World 15000 20% 10000 6.984 9% 5000 71% 0 World Latin America and Brazil Caribbean Agriculture Domestic Industrial Source: FAO
  20. 20. Increasing Efficiency in Raw Material Use Raw Material Energy output / energy input Wheat 1.2 Corn 1.3 – 1.8 Sugar Beet 1.9 Sugar Cane (under Brazilian Production Condictions) 8.3 Tomorrow Potential ethanol production would grow by more than 100% based on Lignocelluloses Biomass technology Molasses yields only 85 l of ethanol, 1 metric ton of sugar cane But Cane bagasse yields 185 L of ethanol Base calculation 20
  21. 21. Principal Conclusions, Hurdles and Challenges • Latin America is in a privileged position as regards oil reserves, and energy independence; • Prospects for the use of natural gas are encouraging and should contribute to increase availability of liquid fossil fuel exports but integration and financial issues are a main concern; • Land, water and human resource availability and bio-diversity put Central and South America and Caribbean in a privileged position to use and supply OECD countries with renewable fuels, further liberating liquid fossil fuels for export. 21
  22. 22. Principal Conclusions, Hurdles and Challenges But the main hurdles and challenges are: • Successful Doha Round Negotiations are essential to permit greater trade of agricultural commodities and increase agricultural productivity considering comparative advantages; • Technological breakthroughs in enzyme technology for the use of Lignocelluloses biomass; • Further progress in regional integration. 22
  23. 23. Main Obstacles to Greater Integration • Oil sector has different impact on each economy that affects fiscal, balance of trade, and pricing policies; • Different social and economic realities and historical origins; • Changing legal environments; • Financing for infrastructure; • Lack of strategic coordination; • Need for institutional reforms; • Need to coordinate different energy models: competitive markets and public services; • Localized supply disruptions. 23
  24. 24. New Frontiers for Ethanol Development • Ethanol can be used in place of gasoline, as a substitute for additives (lead, MTBE), particularly important in Central America, or for export; • CAFTA-DR countries may export to the USA up to 7% of US consumption without countervailing duties (54 cents per gallon); • Export by the Pacific Coast to California avoids problem with US logistics. New Initiatives • IDB will offer a different set of services, such as financing, to exporting countries like Costa Rica and El Salvador; • Costa Rica adopts pilot program for using up to 10% ethanol in gasoline; • El Salvador has plans to regulate ethanol content in domestic gasoline; • Honduras announces that it can be self-sufficient in ethanol; • Venezuela uses ethanol as a substitute for lead.
  25. 25. Organization of Clean Energy: American States Meeting the Energy Challenges of the José Sergio Gabrielli de Azevedo CEO and President 21st Century June, 2007

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