energy realities
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ENERGY REALITIES. Karen A. Harbert Executive Vice President Institute for 21 st Century Energy US Chamber of Commerce . The New Energy Reality Energy Security is central to our national and economic security. Demand to increase 50% by 2030 70% in developing world - PowerPoint PPT PresentationTRANSCRIPT
ENERGY REALITIESENERGY REALITIES
Karen A. HarbertKaren A. HarbertExecutive Vice PresidentExecutive Vice President
Institute for 21Institute for 21stst Century Energy Century Energy US Chamber of Commerce US Chamber of Commerce
The New Energy RealityThe New Energy RealityEnergy Security is central to our national and economic Energy Security is central to our national and economic securitysecurity
Demand to increase 50% by 2030Demand to increase 50% by 2030 70% in developing world70% in developing world
Electricity demand to increase 100%Electricity demand to increase 100% 1.6 billion people without electricity1.6 billion people without electricity $26 trillion of new investment by $26 trillion of new investment by
2030 to meet rising demand2030 to meet rising demand Environmental Realities - over 70% Environmental Realities - over 70%
of the current GHG emissions are of the current GHG emissions are energy relatedenergy related
The New Energy RealityThe New Energy RealityEnergy Security is central to our national and economic Energy Security is central to our national and economic securitysecurity
Access to reserves is limitedAccess to reserves is limited 2/3 of world’s reserves becoming 2/3 of world’s reserves becoming
inaccessibleinaccessible Rising importance of NOCsRising importance of NOCs
Own 80% of reservesOwn 80% of reserves Lack of investment in explorationLack of investment in exploration Significant rise in project costsSignificant rise in project costs Resource NationalismResource Nationalism Lack of qualified engineers/skilled laborLack of qualified engineers/skilled labor BANANA SyndromeBANANA Syndrome
Global ChallengesGlobal ChallengesChinaChina China relies on coal for 70% of their energy needs, China relies on coal for 70% of their energy needs,
building approximately one coal-fired plant a weekbuilding approximately one coal-fired plant a week By 2025, they could have 300 million cars on the By 2025, they could have 300 million cars on the
road, compared to 30 million todayroad, compared to 30 million today By 2030, energy-related CO2 emissions from China By 2030, energy-related CO2 emissions from China
are projected to account for 26% of the world total are projected to account for 26% of the world total and 48% of total coal-related emissions worldwideand 48% of total coal-related emissions worldwide
IndiaIndia Oil consumption has increased sixfold over the past Oil consumption has increased sixfold over the past
25 years25 years
GLOBAL ENERGY DEMANDGLOBAL ENERGY DEMAND
World oil production by OPEC/non-OPEC
Production rises to 104 mb/d in 2030, with Middle East OPEC taking the lion’s share of oil market growth as conventional non-OPEC production declines
Source: IEA 2008
0
20
40
60
80
100
120
2000 2007 2015 2030
OPEC - other
OPEC - Middle East
Non-OPEC - non-conventional
Non-OPEC -conventional
OPEC share
mb/
d
38%
40%
42%
44%
46%
48%
50%
52%
0
20
40
60
80
100
120
1990 2000 2010 2020 2030
mb/
d
Natural gas liquids
Non-conventional oil
Crude oil - yet to be developed (inc. EOR) or found
Crude oil - currently producing fields
World oil production by source
64 mb/d of gross capacity needs to be installed between 2007 & 2030 – six times the current capacity of Saudi Arabia – to meet demand growth & offset decline
Source: IEA 2008
Cumulative energy-supply investment 2007-2030
Investment of $26 trillion, or over $1 trillion/year, is needed, but the credit squeeze could delay spending, potentially setting up a supply-crunch once the economy recovers
Power generation
50%
Transmission & distribution
50%Mining
91%
Shipping & ports
9%
Exploration and development
80%
Refining16%
Shipping4%
Exploration & development
61%LNG chain
8%
Transmission & distribution
31%
Power 52%
$13.6 trillion
Oil 24%
$6.3 trillion
Gas21%
$5.5 trillion
Coal 3%
$0.7 trillion
Biofuels <1%
$0.2 trillion
Market SituationMarket SituationMarket fundamentalsMarket fundamentals
Economic growth still boosting demandEconomic growth still boosting demand OPEC production decisions (ex: cuts in production)OPEC production decisions (ex: cuts in production) Moderating non-OPEC production –growthModerating non-OPEC production –growth Stock buildsStock builds
Economic Crisis – Demand uncertaintyEconomic Crisis – Demand uncertainty Credit CrunchCredit Crunch Geopolitical risks Geopolitical risks Dollar FluctuationsDollar Fluctuations
VOLATILITYVOLATILITY
What’s happening at home?
85% of oil and gas has been off limits Just from the OCS, we could fuel 80 million cars for 35 years Just from the OCS, we could fuel 80 million cars for 35 years
and heat 60 million homes for 100 yearsand heat 60 million homes for 100 years No nuclear plants built in 30 years New coal fired power plants stalled New LNG import terminals cancelled Transmission lines in litigation Intermittent subsidies for renewables
UNPREDICTABLE INVESTMENT ENVIRONMENT
Growing Support for Oil ExplorationGrowing Support for Oil Exploration
75% support increased exploration 75% support increased exploration to reduce our dependence on to reduce our dependence on foreign oil; 77% of independents foreign oil; 77% of independents and 66% of Democrats (July Fox and 66% of Democrats (July Fox News Poll)News Poll)
73% favor more exploration (June 73% favor more exploration (June CNN)CNN)
68% (June LA Times)68% (June LA Times)
Administration Action FridayAdministration Action Friday
MMS Draft Proposed 5 year Lease Plan MMS Draft Proposed 5 year Lease Plan Announcement FridayAnnouncement Friday
1) Entire Eastern Coast; 1) Entire Eastern Coast; 2) Areas off the coast of Northern AND Southern 2) Areas off the coast of Northern AND Southern
California; California; 3) An area in the Eastern Gulf 75 south of FL; and 3) An area in the Eastern Gulf 75 south of FL; and 4) Various areas in AK not already available for lease.4) Various areas in AK not already available for lease.
HOWEVER, BUFFER UNCLEARHOWEVER, BUFFER UNCLEAR
Obama Campaign Energy Plan Enact a Windfall Profits Tax to Provide a $1,000
Emergency Energy Rebate to American Families Use it or Lose it $150 billion on clean energy R&D Establish a low carbon national fuel standard and
mandate 60 billion gallons of advanced biofuels to be phased into our fuel supply by 2030
Increase CAFE Standards and Mandate all new vehicles are flex fuel
Mandate 10 percent of electricity from renewable sources by 2012, and 25 percent by 2025
Implement an economy-wide cap-and-trade program to reduce greenhouse gas emissions 80 percent by 2050.
Obama Evolving Energy Plan Qualified support for more domestic
exploration IF part of a comprehensive plan Qualified support for nuclear – only if it is safe Different messages on coal STIMULUS
Amount for energy unclear Green jobs – green federal workforce Renewable tax incentives refundable Double renewable energy in three years Smart Grid Federal government building retrofits Weatherization assistance
Cap and Trade
DEALINGS WITH CONGRESS
Public Views on Climate Change The public views climate change as a serious
problem but not as a planetary emergency. Public believes energy security more important
than addressing climate change. Technology can solve climate change. Public not willing to make great personal
sacrifices. Public wants a joint cooperative effort between
government, business and the citizens to solve the challenge.
U.S. politics: Administration and Congressional approaches are in flux.
Obama’s Team
Carol Browner, White House Coordinator for Energy and Climate Policy
Larry Summers, Director of National Economic Council
General Jim Jones, Director of National Security Council
Steve Chu, Secretary of Energy Ken Salazar, Secretary of Interior Ray LaHood, Secretary of Transportation Lisa Jackson, Administrator of EPA Hillary Clinton, Secretary of State USDA, Commerce, CEQ, FERC, NRC, Defense
U.S. Energy Strategy-More RealismU.S. Energy Strategy-More Realism
Increase domestic oil and gas Recognize role for nuclear and clean coal New alternative transportation fuels that
do not conflict with rising food demands Sustainable policy on renewables Modernize our infrastructure Exert authority to get beyond NOPE
syndrome (less burdensome regulation) Invest in our technology solutions and our
intellectual foundation for innovation
Road AheadRoad Ahead Huge Public Expectations for next Huge Public Expectations for next
PresidentPresident Growing desire to capitalize on American Growing desire to capitalize on American
resources, create American jobsresources, create American jobs Energy Policy had become a Political Energy Policy had become a Political
Football – is it the new Economic Football – is it the new Economic Football?Football?
Public needs better informed debatePublic needs better informed debate You need certainty to unlock projects and You need certainty to unlock projects and
capitalcapital Role of private sector vs. public sectorRole of private sector vs. public sector Challenges will grow internationally – will Challenges will grow internationally – will
the US counter shift in power? the US counter shift in power?