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Facing The Hard Truths About Energy A Comprehensive View To 2030 Of Global Oil And Natural Gas New York Energy Forum August 28, 2007 NPC Global Oil and Gas Study 1 Today’s Discussion ● Study Approach ● What We Learned : The Hard Truths ● Recommended Strategies For The U.S. Global Oil and Gas Study NPC 2 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 ? Global Oil and Gas Study NPC 3 Dimensions of the Study Economics Supply Alternative Energies Demand Findings and Strategies Technology Energy Security Environment Global Oil and Gas Study NPC 4 How This Study Is Different Integrated, In-Depth Analysis Diversity of Expertise Technology Assessment • Over 100 studies incorporated to include both public and aggregated proprietary outlooks • Not another forecast of supply, demand or price • 350 participants with backgrounds in all aspects of energy including efficiency, economics, geopolitics, environment • Identified achievable opportunities and likely deployment timing • Looked across the energy spectrum, including both supply and demand Global Oil and Gas Study NPC 5 Technology Assessment Depth • • • • • • • • • • • • • • • 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) Heavy Oil and Bitumen Oil Shale Gas Hydrates Coal to Liquids and Gas Biomass fuels Nuclear Outlook and impact on Oil and Gas demand Transportation Efficiency Other Renewables Time horizons Research budgets Human resources Deployment Global Oil and Gas Study NPC 6 Study Presented to Secretary Bodman NPC membership approved study July 18, 2007, including a press conference ...... Global Oil and Gas Study NPC 7 Press Headlines “Drip Feed - why high oil prices threaten to linger” “Oil and gas industry Back Efficiency ” “Oil Execs Sound Alarm about Fuel Use” “Study Offers Grim World Energy Outlook” "Big Oil Signals Need for Alternative Fuels, Carbon Capture" "NPC Report Comes Up a Dry Hole" "Oil Supplies Won't Meet Demand" "Oil Shale Funding Promoted" Global Oil and Gas Study NPC 8 Press Headlines “Oil Study Pushes Investment in Infrastructure, Technology” “NPC Report: All energy options should be pursued” “Oil Indus Urges Efficiency, New Fuels, CO2 Cost " “Broad effort needed to satiate energy demand " “Major new energy report advocates stronger fuel standards for vehicles” “National Petroleum Council Stresses Urgency” “NPC Offers Sweeping Energy Outlook” “Oil Industry Offers sobering outlook on energy supply “ Global Oil and Gas Study NPC 9 Massive Interest in Report Findings NPC Website download statistics: • Full draft 517,900 • Excerpts of draft 163,400 • Exec. Summary alone 118,700 • Slide Presentation • Total Downloads 52,300 852,300 July 18 viewing statistics: • 300 viewers of presentation/slide show • 673 watched press conference Global Oil and Gas Study NPC 10 What We Learned: The Hard Truths NPC Global Oil and Gas Study 11 The Hard Truth: Demand Coal, oil, and natural gas will remain indispensable to meeting total projected energy demand growth. Global Oil and Gas Study NPC 12 Coal, Oil, and Natural Gas Will Remain Indispensable 1980 2004 288 QUADRILLION BTU 445 QUADRILLION BTU 2030 678 QUADRILLION BTU NATURAL GAS OIL COAL WIND / SOLAR / GEOTHERMAL HYDRO NUCLEAR BIOMASS Source: IEA REFERENCE CASE Global Oil and Gas Study NPC 13 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. Global Oil and Gas Study NPC 14 Large Oil Resource Base 6 UNCONVENTIONAL TRILLION BARRELS - OIL 5 CONVENTIONAL 4 ULTIMATE RECOVERABLE RESOURCE (MEAN) 3 2 1 0 1984 1987 1991 1994 2000 Source: USGS Global Oil and Gas Study NPC 15 Risks Reflected in Range of Production Projections MILLION BARRELS PER DAY – OIL 140 IEA Medium–Term Outlook 120 EIA Ref Case IOC – average 100 Association for Study of Peak Oil (ASPO) 80 60 40 20 0 2000 2010 2020 * Source: NPC Data Warehouse. 2030 Global Oil and Gas Study NPC 16 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. Global Oil and Gas Study NPC 17 Contribution of Unconventional Liquids 15 MILLION BARRELS PER DAY Global Production 12 9 6 Oil Sands / Bitumen 3 Biofuels 0 2005 2010 2015 2020 2025 2030 Source: Data From EIA 2007 Reference. Global Oil and Gas Study NPC 18 Massive Infrastructure Investments Required CTL COAL UPGRADING REFINING CONV. OIL ● BLENDING UNCONV. OIL OTHER MFG. LIQUID FUEL MFG BIOMASS Supply GTL NUCLEAR LNG Demand RENEWABLES REGAS STORAGE POWER GEN. COAL GAS NATURAL GAS GAS PROCESSING DISTRIBUTION Global Oil and Gas Study NPC 19 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. Global Oil and Gas Study NPC 20 Global Oil Trade 2000 2030 EXPANDING FLOW TRENDS Global Oil and Gas Study NPC 21 Global LNG Trade 2000 2030 EXPANDING FLOW TRENDS Global Oil and Gas Study NPC 22 U.S. Historical Supply and Demand Trends MILIION BARRLES PER DAY 30 U.S. FUELS DEMAND GLOBAL TRADE (NET IMPORTS) 15 U.S. FUEL SUPPLIES 0 1973 1980 1985 1990 Source: EIA Reference Case / NPC Global Oil and Gas study survey. NPC 23 1995 2000 2005 Global Oil and Gas Study 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. Global Oil and Gas Study NPC 24 U.S. Human Resources Challenge OVER HALF OF THE WORKFORCE ELIGIBLE TO RETIRE IN NEXT 10 YEARS % OF U.S. WORKFORCE 25 AGE DISTRIBUTION 20 15 10 5 0 20 25 30 35 40 45 50 55 60 65 70 AGE Source: U.S. Dept of Labor. Global Oil and Gas Study NPC 25 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. Global Oil and Gas Study NPC 26 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 Global Oil and Gas Study NPC 27 Technology NPC Global Oil and Gas Study 28 DRAFT Do Not Cite or Quote Technology Pipeline is Robust • Industry spends $6B+ on Oil and Gas related R&D • Achieved many dramatic technology advances • Much more to come from “Technology Pipeline” – Improved exploration tools – Increased recovery methods • Alternative energy R&D investment increased to $3B Global Oil and Gas Study NPC 29 There Is No Single Easy Solution DRAFT Do Not Cite or Quote • Technology “Concept-to-widespread-adoption” is ~16 years • When Government enables development, technology follows • DOE oil and gas related technology spend decreasing • Impacting U.S. lower 48 and universities Global Oil and Gas Study NPC 30 Efficiency Technology Opportunities DRAFT Do Not Cite or Quote • Efficiency significant in supply and demand balance • Continued role for government standards – e.g., refrigeration efficiency • Transportation fuel forecasts do not capture cross sector efficiency gains • e.g., light duty vehicle to rail shift • Additional auto efficiency improvements possible • Implementation depends upon consumer and government actions Global Oil and Gas Study NPC 31 Efficiency Technology Historic Trends DRAFT Do Not Cite or Quote 30 U.S. NEW VEHICLE MPG CAR 25 COMBINED 20 TRUCK 15 10 1970 1980 1990 2000 2010 MODEL YEAR Global Oil and Gas Study NPC 32 Efficiency Gains Eroded by Weight and Horsepower DRAFT Do Not Cite or Quote 200 4,000 150 HORSEPOWER WEIGHT 3,000 100 2,000 50 1970 1980 1990 2000 U.S. NEW CAR HORSEPOWER U.S. NEW CAR WEIGHT, LBS. 5,000 2010 MODEL YEAR Global Oil and Gas Study NPC 33 Parallel Studies NPC Global Oil and Gas Study 34 DRAFT Do Not Cite or Quote Parallel Studies • Most studies address one or two of key oil and natural gas concerns ECONOMY ENVIRONMENT SECURITY • Balanced energy strategies found at intersection of three circles. Global Oil and Gas Study NPC 35 General Agreement on Policy Objectives DRAFT Do Not Cite or Quote • Encourage Market Solutions • Increase Energy Efficiency • Ensure Access to Supplies • Encourage Fuel Diversity • Reduce Price and Supply Volatility • Strengthen Energy Infrastructure • Develop New Energy Technologies • Protect the Environment Global Oil and Gas Study NPC 36 Five Core U.S. Strategies NPC Global Oil and Gas Study 37 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 Global Oil and Gas Study NPC 38 Moderate Demand Growth Improve U.S. car and light truck fuel economy standards at the maximum rate possible by applying economic, available technology. Global Oil and Gas Study NPC 39 Expand and Diversify Supply Reduce declines in U.S. conventional oil and natural gas production. Increase access for new energy development. Global Oil and Gas Study NPC 40 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 Global Oil and Gas Study NPC 41 Promote Global and U.S. Energy Security Integrate energy policy into trade, economic, environmental, security, and foreign policies. Global Oil and Gas Study NPC 42 Promote Global and U.S. Energy Security Continue to develop the international energy marketplace by expanding the energy dialog with major producing and consuming nations. Global Oil and Gas Study NPC 43 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. Global Oil and Gas Study NPC 44 Promote Global and U.S. Energy Security Assist and encourage global adoption of energy efficiency technologies through technology transfer programs. Global Oil and Gas Study NPC 45 Reinforce Capabilities to Meet New Challenges Rebuild U.S. science and engineering capabilities. Create research and development opportunities. Global Oil and Gas Study NPC 46 Reinforce Capabilities to Meet New Challenges Improve the quality of energy data and information. Develop a comprehensive forecast of U.S. infrastructure requirements. Global Oil and Gas Study NPC 47 Actions to Address Carbon Constraints Develop legal and regulatory framework to enable carbon capture and sequestration. Global Oil and Gas Study NPC 48 Actions to Address Carbon Constraints As options are considered to reduce CO2 emissions: • Provide effective global framework for carbon management • Establish transparent, predictable, economywide cost for CO2 emissions Global Oil and Gas Study NPC 49 Summary NPC Global Oil and Gas Study 50 There Is No Single, Easy Solution • All Five Strategies Must Be Addressed Together • Global Cooperation Required • Begin Now And Plan For Sustained Commitment Global Oil and Gas Study NPC 51 All Strategies Are Essential MILLION BARRELS PER DAY 30 U.S. LIQUID FUELS DEMAND 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 Global Oil and Gas Study NPC 52 Thank you for listening to this presentation of the NPC Report: “Facing the Hard Truths About Energy” For information, please refer to the NPC Website for a complete list of available resources: www.npc.org NPC Global Oil and Gas Study 53 Most Studies Provide Data or Recommendations National Commission on Energy Policy American Enterprise Institute Energy Security Leadership Council Intergovernmental Panel on Climate Change Business Roundtable Energy Task Force Stern Review Report National Association of Manufacturers Global Roundtable on Climate Change Council on Foreign Relations World Energy Technology Outlook – 2050 2000-2050 North American Transportation Energy Futures Alliance for Energy and Economic Growth UN Foundation (Scientific Expert Group) World Energy Council / US Energy Association CNA – National Security and the Threat of Climate Change IEA World Energy Outlook 2006 MIT – The Future of Coal in a CarbonConstrained World US Commerce Department US DOE/EIA International Energy Annual 2006 EPRINC – Ethanol and US Energy Security ExxonMobil Outlook for Energy U.S. Climate Action Partnership NETL Oil Peaking Study Energy Charter – Oil & Gas Pricing Study US Government Accountability Office Global Oil and Gas Study NPC 54