The Quest: Energy & Security
Prepared by Michael Marien
Energy is an engine of global political and economic change, and “the world’s appetite for energy in the years ahead will grow enormously”—a global quest that is truly reshaping our world.
This lengthy volume, by the highly-regarded Pulitzer Prize-winning author of The Prize: The Epic Quest for Oil, Money, and Power (1992), describes the new world of oil production and rising demand, oil and gas supplies, the electric age, carbon emissions and climate change, renewables and efficiency, biofuels, etc. The narrative is very readable, with 1-2 page chapter sub-sections, considerable historical information, numerous anecdotes (perhaps too many), interesting data, two sections of photos, and many forecasts of what is likely.
PART 1: THE NEW WORLD OF OIL
Chapters and sub-sections on the new age of globalization starting in the 1990s, stability in the Middle East, the “quiet revolution” of new technology in the oil industry (expanding the range of the drill bit and recoverable reserves, 3-D seismic mapping, the advent of horizontal drilling, computer-aided design of offshore production platforms), previously closed or restricted countries opened up to investment (enabling Russia to now rival Saudi Arabia in its capacity to produce oil), reconstruction of Russia’s oil industry (from a system organized by central planning to one of large vertically integrated companies), development of Caspian oil and natural gas, development in Kazakhstan (which has the largest single oil field discovered in the world since 1968—the Kashagan field estimated at 13 billion barrels), the remaking of the international oil industry, the Venezuelan petro-state, oil and the Iraq war, the globalization of demand due to growth of China and India, the resulting “demand shock” that hit the world oil market in 2004, the surge in oil prices as an important contributing factor to the economic downturn of 2008 (leading to a downturn in the auto industry), and China’s urbanizing build-out over the next few decades as one of the defining forces for the world economy (between 2000 and 2010, Chinese petroleum consumption more than doubled as its economy expanded at 9-11% per year; sometime around 2020 it could be the world’s largest oil consumer).
• “The industrial countries were still using two-thirds of total oil in 2000. But then came the demand shock that hit the world oil market in 2004. It propelled consumption upward, with…a startling impact on price. It was also a shock of recognition for a new global reality. Between 2000 and 2010, world oil demand grew by 12%. But by now, the split between the developed and the developing world was 50-50.” [p161]
PART II: SECURING THE SUPPLY
Topics include the long history of “peakist” fears about declining supply, future prospects for oil (“The world is clearly not running out of oil. Far from it. The estimates for the world’s total stock of oil keep growing” p239), unconventional oil (deepwater production now at 30% of total world oil, natural gas liquids as the biggest source of nonconventional oil for a long time, deepwater oil below the salt layer in Brazil, Canadian oil sands in Alberta with 175 billion barrels of recoverable oil as only 10% of the total estimate, and “tight oil” locked inside shale and other types of rock as a big new source “not even expected a few years ago”), the dimensions of energy security and limits of “energy independence,” the 28-member nation International Energy Agency as the main mechanism to counter OPEC and deal with disruptions and crises, threats of cyberattack that damages the electric power system, choke points in the oil supply chain (notably the Strait of Hormuz), the situation in the Persian Gulf (Saudi Arabia has about one-fifth of world proven oil reserves, and produced 8.2mbd in 2010, with the capacity to produce 12.5mbd; it is now developing three new mega-projects to add 2.5mbd capacity, and new technologies continue to unlock resources and open up new horizons), Iran’s pursuit of nuclear weapons as a threat to the security of world oil, the global expansion of liquid natural gas (when compressed at -260oF, gas turns into a liquid that takes up only 1/600th of the space), the natural gas revolution instigated by Houston-based George P. Mitchell (leading to hydro-fracking of shale and the “shale gale” beginning in 2007-2008).
• “Peak oil theory may seem new; in fact, it has been around for a long time… The peak may be the
best-known image of future supply. But there is another, more appropriate way to visualize the course of supply: as a plateau. The world has decades of further production growth before flattening out into a plateau—perhaps sometime around midcentury—at which time a more gradual decline will begin.” [pp227-228]
• “The world has produced about 1 trillion barrels of oil since the start of the industry in the 19th century. Currently, it is thought that there are at least 5 trillion barrels of petroleum resources, of which 1.4 trillion is sufficiently developed and technically and economically accessible to count as proved plus probable reserves. Based on current and prospective plans, it appears the world liquid production capacity should grow from about 93mbd in 2010 to about 110mbd by 2030.” [p239]
• “With the passage of time, the unconventionals become, in all their variety, one of the pillars of the world’s future petroleum supply. And they help explain why the plateau continues to recede into the horizon.” [p241]
• “In 2000 shale was just 1% of [US] natural gas supply. By 2011 it was 25%, and within two decades it could reach 50%. The shale gas transformed the US natural gas market. Perennial shortage gave way to substantial surplus.” [p329]
• “The shale gale had not only taken almost the entire natural industry by surprise; it also sent people back to the geological maps. Very large potential supplies of shale gas have been identified in the traditional energy areas of Canada… Altogether the base of recoverable shale gas outside North America could be larger than all global conventional natural gas discovered to date. But only a portion is likely to be developed. Even so, the next several years are surely to see a substantial addition to the world’s supply of natural gas.” [p332]
• “Natural gas is a fuel of the future. World consumption has tripled over the last 30 years, and demand could grow another 50% over the next two decades. Its share of the total energy market is also growing. World consumption on an energy-equivalent basis was only 45% that of oil; today it is about 70%.” [pp340-341]
PART III. THE ELECTRIC AGE
Covers electricity as the underpinning of modern civilization, electrification of the US in the 1930s, General Electric’s “Live Better Electrically” campaign in the 1950s and 1960s spurred by Ronald Reagan, development of nuclear energy, California’s power crisis in 2000 (exposing the dangers of misdesigned regulation), growing consumption and questions of fuel choice, coal and carbon capture (it will take 15 years or more to get to the point where CCS starts to become commercial; meanwhile, the innovation imperative for clean coal will be very strong), nuclear power after Fukushima Daiichi in March 2011 (“’nuclear renaissance’ is not a term likely to be heard in the years immediately ahead,” but many countries will still choose to include nuclear power in their energy mix).
• “Electricity consumption, both worldwide and in the US, has doubled since 1980. It is expected, on a global basis, to about double again by 2030…. The cost for building the new capacity to accommodate this growth between now and 2030 is currently estimated at $14 trillion—and is rising. But that expansion is what will be required to support what could be by then a $130 trillion world economy.” [p396]
• “In the US, electricity consumption is expected to rise at about 1.4% per year…over 20 years, it means an absolute growth in demand of about a third. That is equivalent to about 150 new nuclear reactors or almost 300 new standard-size coal-fired plants. And every single new facility means a choice over fuels—and a wrangle over what to do.” [p397]
• “When it is all added up on a global basis, a triumvirate of sources—coal, nuclear, and natural gas—will remain dominant at least for another two decades. As one looks further out in the years ahead, however, renewables grow, and the mix becomes less clear—and much more subject to contention.” [pp399-400]
• “The arrival of unconventional natural gas portends low prices and abundant supplies for many decades or even a century or more. What is also different from a decade ago is that there now exists an urgency to find lower-carbon solutions. Natural gas has also gained a new role—as the enabler of renewables, which are not always available when one wants them, or needs them most. Gas-fired generation would swing into action when the wind dies down and the sun doesn’t shine. For all these reasons, it is virtually inevitable that an increasing share of power generation will be fueled by natural gas.” [p415]
PART IV. CLIMATE AND CARBON
Discusses the rise of carbon in the atmosphere due to growing population and rising incomes, the history of thinking about global warming (starting with Svante Arrhenius in 1894), growing concern about risks of rising carbon, the broadened scientific base for understanding climate (enabled by satellites and computing power), the impact of James Hansen on the greenhouse debate, formation of the IPCC in 1988, the Rio Earth Summit in 1992, the debate over carbon markets, battles at Kyoto, the 1996 Stern Review in the UK, India and China (India produces only about 5% of the world’s CO2, compared with China’s 23%), the failed Copenhagen climate conference in late 2009, and the extreme weather worldwide in 2010.
• “Whatever the debates over science and policy, the elevation of climate change and the effort to regulate CO2 are transforming energy policy and markets, stimulating investment, and starting a torrent of technological research. All this is giving a great new boost to the drive for greater energy efficiency, low-carbon, or even carbon-free energy—and for the rebirth of renewables.” [p520]
PART V. NEW ENERGIES
Topics include President Carter’s 1979 goal of 20% of US energy from solar by 2000 (yet in 2009, wind, solar, and geothermal were <1.5% of total US energy supply), accelerating growth of renewables in the US after 2004, China’s embrace of renewables (China has become the biggest market for wind in the world and the largest exporter of solar cells; yet wind and solar, although growing fast, may together only account for 5% of China’s electricity generation in 2020), venture capitalists and energy, solar cells (in many ways, the purest idea for renewable technologies—a basic system that can easily go on the roof of a house), the solar potential in Europe and especially North America, wind power as the fastest-growing source of renewable energy worldwide (it has increased tenfold in the US in the past decade, but is still only 2% of total US electricity generation), the potential of wind in the US and worldwide (maps showing average wind speed), China’s plans to build several “Three Gorges of wind” that will far outstrip its controversial mega-hydro project, the new offshore frontier of wind technology (although costs are two to three times that of onshore wind), efficiency gains as the “fifth fuel”, the Chinese slogan Jieneng Jianpai (“Save Energy! Cut Emissions!”) as a pillar for economic development and a ubiquitous slogan in public places (China seeks to quadruple the economy from 2000 to 2020, while restraining energy demand to a doubling), the global spread of air conditioning (despite conservation, US residential energy consumption is 40% higher than in the 1970s and commercial building consumption has almost doubled), Japan as the global pace-setter for optimizing energy use, smart meters for energy use.
• “If a transition to renewables is really made on a large scale, it will rival the importance of the world’s transition to reliance on oil in the 20th century, whether seen from a geopolitical or economic or environmental perspective. However, it will likely be a long road. Historically, energy transitions have occurred over many decades. Thus, even with rapid growth, renewables in 2030 are likely to still be far from being a dominant energy resource.” [p547]
PART VI. ROAD TO THE FUTURE
Discusses the potential for biofuels (transition from 20C “Hydrocarbon Man” to 21C “Carbohydrate Man” if biofuels take significant market share from oil-based fuels in the next few decades), the making of the ethanol boom (Brazil has the potential to take the lead in a very large global export market, yet it now produces about five times as much oil as it does ethanol), the rebirth of interest in cellulosic ethanol (the raw material is cheap, but costs of processing are still high), algae as a potential biofuel source (a basic challenge is to find the most productive strains and to maintain the stability of the algae population at commercial scale), higher fuel efficiency in automobiles, electric vehicles (one of China’s seven strategic sectors for economic development, bolstered with significant subsidies), the major challenges of fuel cells that convert hydrogen, the challenges of natural gas vehicles (e.g., creating a fueling infrastructure).
• “Generating electricity with natural gas and then using it to fuel a vehicle could prove more cost-effective than burning the natural gas directly in the vehicle.” [p708]
• “One way or the other, oil’s almost total domination over transportation will either be whittled away or more drastically reduced. Cars will certainly get more efficient. It seems pretty certain that electricity will play a bigger role in transportation, either in hybrids or all-electric vehicles… Moreover, surprises in the quest for a clean, secure form of transportation may well happen.” [p709]
• “Where does this leave oil and the internal combustion engine? Probably in an assured position of dominance at least for the next two decades.” [p710]
CONCLUSION. A GREAT REVOLUTION
We are in the early stages in a transition of the energy mix, or at least a remixing. It is also a transition to a more energy-lean world that operates at a much higher level of energy efficiency. Biofuels will likely have a growing presence. Energy efficiency remains a top priority for a growing world economy, and “sustainability is now a fundamental value of society.”
• “By 2030 overall global energy consumption may be 35 or 40% greater than it is today. The mix will probably not be too different from what it is today. Hydrocarbons will likely be between 75 and 80% of the overall supply… It is really after 2030 that the energy system could start to look quite different.” [p715]
• “There are many parts to the quest. But fundamental to it, and underpinning everything else, is the search for knowledge, which advances technology and promotes innovation.” [p716]
• “The globalization of demand may be shaping tomorrow’s needs. But it is accompanied by a globalization of innovation… There is no assurance on timing for the innovation that will make a difference. There is no guarantee that the investment at the scale needed will be made in a timely way, or that government policies will be wisely implemented…the risks of conflict, crisis, and disruption are inherent. Things can go seriously wrong, with dire consequences.” [p717]
Obviously a monumental work, with a balanced and fair-minded description of what is likely for energy in the coming decades, especially valuable for the chapters on unconventional oil and the recent and unexpected “shale gale.” For contrast, consider Al Gore’s Our Choice (Rodale, Nov 2009, 416p; www.ourchoicethebook.com; GFB Book of the Month for April 2010), which explains what is still desirable and feasible, as concerns promoting renewables and efficiency. The big change since Gore’s book is new technology for better and worse to enhance discovery and recovery of oil and especially shale gas, which may delay somewhat Yergin’s “Great Revolution” transition in the energy mix.