How to sell green energy in an era of abundant gas and oil

Share:

Since the middle of the last decade, well before the worldwide run-up in fuel prices during 2008, it has been widely believed that we are entering a new era of scarcity in carbon-based fuels such as oil and natural gas.

Such concerns are not new, having first become prevalent in the 1970s. But a rather quiet revolution is taking place on both fronts, leading to a new era of abundance that may prove as problematic as scarcity.

US production

The United States, long an international symbol of profligate energy consumption, with a thirsty appetite for imported oil and gas, is, according to a recent Bloomberg News report, on track to achieve energy self-sufficiency by 2020.

US crude oil production has increased 25% since 2008, and may rise another 10% in 2012. US natural gas production is rising even faster. Reflecting this new-found surplus, the wellhead price of US natural gas has dropped by half since peaking in 2008.

At the same time, the efficiency of US vehicles has steadily increased, and more increases are in store in the wake of the 2011 gasoline efficiency standards passed by the US Congress, which mandates an average of at least 49.6 miles per gallon for cars and light trucks by 2025 (standards that however commendable are still lower than those mandated in Europe by 2025, and are typically based on out-of-date fleet data).

All of these trends are moving the US towards energy independence, or even to being a net exporter of energy in five to ten years. New York Times columnist Thomas Friedman suggests the US might join OPEC.

Canada

Canada’s unique Athabasca tar sands represent another part of the evolving energy picture. The sands are now a huge source of oil, once both technologically inaccessible and uneconomic.

Estimates of total extractable reserves are now on the scale of global petrol reserves using fracking-like techniques, as discussed below.

TransCanada’s Keystone pipeline proposal has become a hot-button 2012 US election issue, especially in the states through which it would/will run.

The perceived environmental cost of exploiting the tar sands and of fracking also threatens to roil Canadian federal politics.

Australia

Australia is also in the midst of a major expansion in energy exports, mostly with its expanding coal reserves but increasingly with off-shore gas as well. The dollar value of its coal exports increased by one third from 2006 to 2010 and continues to accelerate.

In 2008, Australia’s top coal export destinations were Japan (47%), Korea (15%), the EU (10%), Taiwan (10%) and India (10%).

Australia’s environmental and energy politics are entwined in a complicated dance, with the carbon tax to be introduced on July 1.

BRIC nations

Russia, Brazil, India and China, often referred to as the BRIC nations, will play a key role in the future. China has significantly expanded its own production, and plans to further boost its coal production, to 4.1 billion tones per year, by 2015.

Likewise, Brazil’s development of its massive new off-shore oil and gas fields may well dwarf its impressive ethanol production. While Russia’s pernicious control of European oil and gas supplies is lessened, it has its own huge resources to further exploit (and little other in the way of reliable non-military exports).

India faces a significant energy challenge, because of its current reliance on imported fossil fuels, but solar energy has great potential there.

At the same time, the recent re-entry of Iraq as a major oil producer for the first time in several decades has had a significant role in depressing world oil prices.

Iraq is already producing as much as Iran, and optimistic estimates suggest the country’s output may triple in the next decade. Even a (more realistic) doubling will significantly change the OPEC picture.

In a far cry from predictions of natural gas shortages just a few years ago, proven reserves listed in the CIA World Factbook now total some 200 trillion cubic meters worldwide, with the largest reserves in Russia, Iran, Qatar, Saudia Arabia, the US and Turkmenistan.

Even these estimates will likely have to be revised upward, given recent discoveries in Turkmenistan, Mozambique, and sizable sources off the coast of Israel, among others.

That said, proven resource estimation is a decidedly tricky matter, even when performed by third parties with no dog in the fight.

Fracking

One of the most significant game changers has been the expansion of “hydraulic fracturing,” more commonly known as “fracking“.

This scheme employs a highly-pressurised fluid to propagate fractures in rock layers and thus release petroleum and/or natural gas for extraction.

The expansion of fracking is a major factor in the recent rise of US natural gas production, and the scheme is now rapidly being deployed worldwide.

British ministers initially gave the green light to fracking. But last month they backtracked on this plan, in part from reports of mini-earthquakes resulting from the procedure (but at 1.5 and 2.3 on the Richter scale, was it good science reporting to call them earthquakes?).

The French parliament voted on June 1 to outright ban the technique, the first nation to do so. Given France’s nuclear-power infrastructure, they have a quite different energy perspective.

Earlier this month, the New York Times editorialised that energy companies worldwide that develop natural gas resources, using fracking or otherwise, would do well to follow the “Golden Rules for a Golden Age of Gas” recently proposed by the Paris-based International Energy Agency:

1) Measure and disclose operational data, and engage with local communities

2) Watch where you drill, choosing sites to minimise potential impacts on local community

3) Isolate wells and prevent leaks, by following strict rules on design and construction

The continuing need for green energy

These developments are a decidedly mixed blessing. They allay fears that the world is on the verge of a potentially serious and divisive international battle over declining energy stocks.

But plentiful carbon-based fuel and falling world energy prices are the last things needed in global efforts to convince the public of the continuing need to develop truly green energy sources such as solar and wind power.

In the US, scepticism of anthropogenic (human-induced) global warming, or even the fact of global warming, remains strong and, paradoxically, appears to be increasing.

In a Gallup Poll in March, only 52% of Americans agreed that the effects of global warming are now evident, down from 61% in 2009.

A 2011 poll showed Canadians have roughly the same views as Americans. Similarly, scepticism of global warming is on the rise in Great Britain.

Meanwhile, the scientific case for anthropogenic global warming is more compelling than ever. The latest temperature data released by NASA continues to show average worldwide temperatures significantly above long-term normals, with 2011 one of the ten warmest years on record.

A recently-published Nature Climate Change article concludes that observed changes in ocean temperatures can only be explained by anthropogenic causes.

The latest summary report from the Intergovernmental Panel on Climate change (IPCC) delicately emphasises that “effective risk management” involves a “portfolio of actions to reduce and transfer risk”.

Where to now?

It is clear to us that these new energy resources are going to be developed and used — the genie is not going to be put back into the bottle at this point.

The question is how to manage these resources for optimal usage in the short-term, while at the same time ensuring long-term environmental risks (which are routinely underestimated by the energy industry and overestimated by environmental activists) are properly managed and accounted for.

The best way to handle such matters is through appropriate government regulation — the type of regulation the political right ridicules but is essential in the real world.

Indeed, the current polarisation of the political debate on such matters, particularly when scientific knowledge is disparaged, must be ended, and a reasonable middle ground must be established.

All of this underscores the continuing difficulties faced in a world that more than ever before relies on scientifically-informed public policy, but is plagued with widespread scientific ignorance and rampant innumeracy.

It is serious enough that this educational deficit threatens the future prosperity of numerous first-world economies.

In the case of climate change, this educational deficit threatens the very existence of our species.

Tags:

Leave your comment