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Wednesday, May 13, 2009

Ten Inconvenient Truths on Oil & Gas

Chis Nelder, who I have quoted before has compiled this list about the oil industry. I am much more optimistic, only because the resources have been found to advance all technologies simultaneously and they are visibly paying of. I have never seen such a flood of breakthroughs and the transition time from discovery to commercial product is visibly dropping. Governments are barely involved except to cater to some preferred constituent.

Everyone accepts that we are exiting the oil energy protocol and we are doing this now before it bites us again.

Things that I spoke about a year ago in the face of little enthusiasm are now trumpeted on the front page. Plenty of work had been progressing behind the scenes and the 2008 oil jolt and the credit collapse flushed all that work out into the media spotlight.

If EEStor is successful, then the conversion will be abrupt. If not, we are still going to get to the same place within a few short years.
Multiple nuclear protocols are been now tried on and our coverage has revealed just now fast that sector will be able to ramp up.

If fusion energy is to work, we are now going to find out soon. If it works, then all grid energy will convert to fusion energy just as fast as it can be imagined since every other method will be more costly

Ten Inconvenient Truths

Allow me then to stake out a bit of middle ground, based on what I believe to be the objective facts, in an effort to bring the parties together and perhaps make some actual progress on the policy front.

1. We have extracted nearly all of the world's easy, cheap oil and gas, and now we're getting down to the difficult, expensive stuff. The largest untapped resources that remain are in extreme places like deepwater and the Arctic, and marginal formations like shale. As a result, global oil production has for all intents and purposes peaked. Natural gas production will also peak in 10 to 15 years. Neither technology nor high prices will change that. Therefore we must begin to replace those fuels with renewables, and use what remains much more efficiently, with the expectation that most of the world's oil and gas will be gone by the end of this century.

2. Drilling for oil and gas drilling in the OCS and ANWR must and will be done; our need for those fuels is simply too great to pass them up. An additional 2-3 mbpd will put a dent in the roughly 12 mbpd we now import, but if we drill for it now, it won't come to market for 10 years or more. By that time, it probably won't even compensate for the depletion of conventional oil in North America, nor will it do much to reduce prices. But it will be crucially necessary, and producing it won't make an ugly mess of the environment.

3. Renewables are clearly the long-term answer, as is an all-electric infrastructure that runs on its clean power. However, it will likely take over 30 years for renewables to ramp up from a less than 2% share of primary energy today to 20% or more. They probably won't even be able to fill the gap created by the decline of fossil fuels. Oil and gas currently provide about 58% of the world's primary energy, and they will remain our primary fuels for a long time to come.

4. It will take many decades to reconfigure out transportation systems to run on electricity. It will take decades to fix our wasteful, leaky built environment so that it doesn't need as much energy to begin with. None of the solutions will come quickly or easily.

5. Neither renewables nor fossil fuels nor nuclear power alone can bring "energy independence." Indeed, if independence means isolating ourselves from the rest of the world's energy commerce, it might not even be desirable.

6. We must pursue all sources of energy immediately and aggressively if we hope to meet our future needs, and pitting one against another is counterproductive.

7. Nuclear power will not grow significantly in the next several decades, as nearly all of the existing reactors will need to be decommissioned within the next 20 years, and a new generation of reactors must be built to replace them. After we do that, a renaissance for next-generation nuclear energy may be a possibility but it will only happen after we have confronted the crises of peak oil and peak gas. It may produce no net reduction in emissions at all.

8. It is quite possible that even our best efforts on all fronts will not achieve the carbon emission targets we have set. Climate change must be confronted via a unified policy on emissions and energy supply, which is to say that in our zeal to control emissions, we take care not to squelch the production of the oil and gas that constitutes the majority of our energy supply, at least until we have something to replace it. To do so could have unintended and paradoxical consequences, like impeding the manufacture of renewable energy devices, and contributing to tight supply situations that once again cause fossil fuel prices to skyrocket and further damage the economy. Rather than emphasizing the uncertainty on climate change data, and fomenting fear about the cost of mitigation, all sides must come together in a depoliticized dialogue strictly based on neutral scientific analysis.

9. We should use accurate and unbiased models of the future growth and decline curves of all forms of energy for policymaking—models based on historical data, not faith. If the data says we're likely to recover another 1.2 trillion barrels of oil worldwide and no more, then we should not assume that future drilling and technological progress will somehow turn that into 3 trillion barrels of recoverable oil.

10. Carbon emissions will soon come with a price. Drilling the remaining prospects for oil and gas will be expensive: From the decision to invest until first oil is produced, it can take 10 years and $100 million dollars to drill the first well in a new deepwater resource, using rigs that cost $1 million a day to run, and the production platform can cost as much as $5 billion. Deploying thousands of wind turbines and square miles of solar will be expensive, slow, and difficult. Replacing millions of inefficient internal combustion engine vehicles with electric and plug-in hybrids will be expensive. Rebuilding the nation's rail system will be hugely expensive. In short, the good ol' days of cheap electricity and gasoline are likely gone forever, and all the solutions going forward will be expensive.

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