Download On the Road to Energy Security

ENERGY REALITIES
Karen A. Harbert
Executive Vice President
Institute for 21st 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
 Electricity demand to increase 100%
 1.6 billion people without electricity
 $26 trillion of new investment by 2030
to meet rising demand
 Environmental Realities - over 70% of
the current GHG emissions are energy
related
The New Energy Reality
Energy Security is central to our national and economic
security
 Access to reserves is limited
 2/3 of world’s reserves becoming inaccessible
 Rising importance of NOCs
 Own 80% of reserves
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Lack of investment in exploration
Significant rise in project costs
Resource Nationalism
Lack of qualified engineers/skilled labor
BANANA Syndrome
Global Challenges
China
 China relies on coal for 70% of their energy needs,
building approximately one coal-fired plant a week
 By 2025, they could have 300 million cars on the
road, compared to 30 million today
 By 2030, energy-related CO2 emissions from China
are projected to account for 26% of the world total
and 48% of total coal-related emissions worldwide
India
 Oil consumption has increased sixfold over the past
25 years
GLOBAL ENERGY DEMAND
mb/d
World oil production by OPEC/non-OPEC
120
52%
100
50%
OPEC - other
OPEC - Middle East
48%
80
46%
Non-OPEC - nonconventional
44%
Non-OPEC conventional
42%
OPEC share
60
40
20
40%
0
38%
2000
2007
2015
2030
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
mb/d
World oil production by source
120
Natural gas liquids
Non-conventional oil
100
Crude oil - yet to be
developed (inc. EOR)
or found
80
Crude oil - currently
producing fields
60
40
20
0
1990
2000
2010
2020
2030
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
Coal
3%
$0.7 trillion
Transmission
& distribution
50%
Power
Oil
Gas
52%
$13.6 trillion
24%
$6.3 trillion
21%
$5.5 trillion
Shipping
4%
Refining
16%
Power
generation
50%
Exploration and
development
80%
Transmission
& distribution
31%
LNG chain
8%
Biofuels
<1%
$0.2 trillion
Shipping &
ports
9%
Exploration &
development
61%
Mining
91%
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
Market Situation
Market fundamentals
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Economic growth still boosting demand
OPEC production decisions (ex: cuts in production)
Moderating non-OPEC production –growth
Stock builds
Economic Crisis – Demand uncertainty
Credit Crunch
Geopolitical risks
Dollar Fluctuations
VOLATILITY
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 and 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
Growing Support for Oil Exploration
 75% support increased exploration to
reduce our dependence on foreign oil;
77% of independents and 66% of
Democrats (July Fox News Poll)
 73% favor more exploration (June CNN)
 68% (June LA Times)
Administration Action Friday
 MMS Draft Proposed 5 year Lease Plan
Announcement Friday
 1) Entire Eastern Coast;
 2) Areas off the coast of Northern AND Southern
California;
 3) An area in the Eastern Gulf 75 south of FL; and
 4) Various areas in AK not already available for lease.
HOWEVER, 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
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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 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 Ahead
 Huge Public Expectations for next President
 Growing desire to capitalize on American
resources, create American jobs
 Energy Policy had become a Political Football
– is it the new Economic Football?
 Public needs better informed debate
 You need certainty to unlock projects and
capital
 Role of private sector vs. public sector
 Challenges will grow internationally – will the
US counter shift in power?