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Alternative Energy Sources Alternative Energy Sources

Delivered on Behalf of:

Bill PykeHilbre Consulting Limited

October 2012

Copyright and all intellectual property rights retained by presenter

Limitations of Fossil Fuels

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OutlineOutline

• Definitions

• Relative Energy Values

• Global Statistics Remaining Reserves

• Costs

• Environmental Impact

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What are Fossil Fuels?What are Fossil Fuels?

Energy sources created by the decomposition of animal and plant life over millions of years and their transformation into hydrocarbon energy sources

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TypesTypes

Solid, Liquids and Gases

• Solids-coals and lignite, bitumen

• Liquids- crude oil, condensates

• Gases- natural gas and gas liquids

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The Global Primary Energy Mix in 2011The Global Primary Energy Mix in 2011

Oil33%

Gas24%

Coal30%

Nuclear5%

Hydro6%

Renewable2%

Source: BP Statistical Review of World Energy, June 2012

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The Global Primary Energy Mix by 2035New Policies ScenarioThe Global Primary Energy Mix by 2035New Policies Scenario

Oil29%

Gas22%

Coal25%

Nuclear8%

Hydro3%

Renewable13%

Source: IEA, WEO November 2011

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OutlineOutline

• Current status, supply, demand, petroleum commodity prices

• Distribution of global oil and gas reserves

• Oil production streams, major trade movements OPEC share and influence

• Future trends: supply, demand, volumes and prices

• The Peak Oil issue

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The IssuesThe Issues

• Fossil Fuels are depleting, limited and

unsustainable in the longer-term

• Limits of Fossil Fuel Reserves and Resources

• Limitations of Production Capabilities

• Cost Implications

• Global Distribution of Remaining Reserves

Energy Security

• Environmental Issues Fossil Fuels Emissions

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LimitationsLimitations

Non-renewable Resource

Crude oil is a non-renewable resource

Fossil fuels take millions of years to develop under extreme conditions

Once they are gone, they can no longer be part of the energy mix

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Limitations of Fossil Fuel TechnologiesLimitations of Fossil Fuel Technologies

• In many areas technologies are becoming more costly

• Fossil fuels-oil, gas, coal used as the key source (>70%) in global electrical power generation

• Emission of pollutants/ greenhouse gases

• Cost of Carbon Sequestration increases costs and prices

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Fossil Fuel Supply; Present & FutureFossil Fuel Supply; Present & Future

• OilIncreasing taxes to host countries-government takeDeepwater resources costsNon-Conventional resourcesRemote Locations

• Natural GasRemote locationsInvestments required for new infrastructure Transportation and tariff costs

• CoalMore imports from remote sourcesSpecification for environmental compliance favours high btu clean coals with

low sulphur, chlorides

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Remaining Proven Global

Fossil Fuel Reserves, 2011

Remaining Proven Global

Fossil Fuel Reserves, 2011

Fossil Fuel % of

Global energy consumption

in 2009

Proven Reserves

109 tonnes

Solid

Coal, Anthracite, Lignite 26% 847

Liquid

Crude Oil, Condensate

Natural Gas Liquids 34% 205

Natural Gas

20% 188

Sources: BP Statistical Review 2012 & IEA, 2011

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Remaining Time

at Current Rates of Consumption

Remaining Time

at Current Rates of Consumption

Fossil Fuel Years

Solid

Coal, Anthracite, Lignite

332

Liquid (Conventional)

Crude Oil, Condensate

Natural Gas Liquids

37

Natural Gas (Conventional) 62

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The Uneven Distribution Of Oil And Gas ReservesThe Uneven Distribution Of Oil And Gas Reserves

North America

Crude oil 73

Natural gas

323

Central & South America

Crude oil 199

Natural gas

285Africa

Crude oil 128

Natural gas 521

Asia

Crude oil 42

Natural gas

574

Distribution of proven reserves of crude oil (billion barrels) and natural gas (trillion cubic feet), 2009

Source: BP Statistical Review of World Energy 2010

Middle East

Crude oil 754

Natural gas 2,690

W. Europe

Crude oil 12

Natural gas

132

E. Europe and Central Asia

Crude oil 125

Natural gas

2,096

= % of crude oil reserves

= % of natural gas reserves

Key

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International Coal TransportationInternational Coal Transportation

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Current and Future Costs of Fossil Fuel SupplyCurrent and Future Costs of Fossil Fuel Supply

• The easy resources have been developed!

• Future resources will take additional costs to ensure sustainable supply and satisfy supply growth against energy demand

Environmental considerations add to cost burden

Costly technologies for more difficult primary energy sources

Increasing unit labour costs as living standards rise in developing countries

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Fossil Fuel Supply Costs:Present & FutureFossil Fuel Supply Costs:Present & Future• Oil

Increasing taxes to host countries-government takeDeepwater resources costsNon-Conventional resourcesRemote Locations

• Natural GasRemote locationsInvestments required for new infrastructure Transportation and tariff costs

• CoalMore imports from remote sourcesSpecification for environmental compliance favours high btu clean coals

with low sulphur, chlorides

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Cash Needs To Find, Develop And Produce New Oil and Refined

Products

Cash Needs To Find, Develop And Produce New Oil and Refined

Products

• The ‘easy’ oil has been found or depleted

• New reserves will be more capital intensive

• Higher proportion of CAPEX will be required to sustain existing (and declining) production

• New oil likely to be lower viscosity, higher gravity and higher sulphur content

• Upstream Costs for Finding and Developing New Oil (2008-2030) have been estimated at $17.6trillion*

• Downstream Costs (2008-2030) have been estimated at $6 trillion*

* Platts Capital Expenditure Forecast for Global Hydrocarbon Demands through 2030 L.G,Chom, October, 2007

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Oil Industry Estimated Annual Capital Spend to 2030

Sources: IEA, Platts, 2007 (Nominal Costs)

Oil Industry Estimated Annual Capital Spend to 2030

Sources: IEA, Platts, 2007 (Nominal Costs)

0

200

400

600

800

1000

1200

1400

1600

An

nu

al C

AP

EX

$b

illio

n

Downstream

Upstream

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Global Supply

Run-out without new investment

Global Supply

Run-out without new investment

0

10

20

30

40

50

60

70

80

90

2006 2010 2015 2020 2025 2030

Years

mil

lio

n b

arr

els

/da

y

Existing Non-OPEC

Existing OPEC

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Global Supply

Where Will New Oil Production Come From?

Global Supply

Where Will New Oil Production Come From?

0

20

40

60

80

100

120

2010 2015 2020 2025 2030

Years

mil

lio

n b

arre

ls/d

ay

New

Existing Non-OPEC

Existing OPEC

Where is the ‘new’ oil coming from?

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Future Global Crude Oil Supply To Meet Demand

Source: IEA, World Energy Outlook, November, 2011

Oil production rises to 99mb/d by 2035

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World Unconventional Liquids Production, 2005-2030 (million barrels per day oil equivalent)World Unconventional Liquids Production, 2005-2030 (million barrels per day oil equivalent)

Source: EIA , International Energy Outlook, 2007

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New Sources of Crude Oil Supply in this DecadeNew Sources of Crude Oil Supply in this Decade

Country Additional production

Mmb/d

Comments

Iraq +5.4 Field refurbishments, new developments

Saudi Arabia +4.0 Empty quarter, new developments and discoveries

Brazil +3.2 Santos basin

Kazakhstan +1.8 Kashagan

Ghana + 2.0 Deepwater developments

Uganda +1.0 New discoveries, developments

U.S Light, tight oil +1.4 Bakken, Niobrara

TOTAL +18.8

Source: IEA WEO, November 2011 and personal communications

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• 27 billion tonnes carbon released each year

• Emissions have increased at 2% per year

• In 2011 95% emissions due to fossil fuels

• Oil produces 40% more emissions per unit of energy than gas, and coal 80%

Global Emissions

26170

220

270

320

370

420

200000400000600000Time (YBP)

CO

2 (p

pm

)

Vostok Ice CoreDome Concordia

Carbon Dioxide LevelsCarbon Dioxide Levels

0

Muana Loa ReadingsCO2 Levels Since 1958

310330350370

10203040

CO

2 (

pp

m)

0

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Worldwide Carbon EmissionsWorldwide Carbon EmissionsC

arb

on

(10

9 m

etri

c to

ns)

0

1

2

3

4

5

6

7

8

1750 1800 1850 1900 1950 2000Year

OilOilTotalTotal

Natural GasNatural GasCoalCoal

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Global Carbon Emissions by SectorGlobal Carbon Emissions by Sector

Deforestation18%

Fugitive Emissions

1%

Power Generation

24%

Transportation18%

Industry15%

Agriculture14%

other Fuel Combustion

10%

World Resources Institute, 2006 et al

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Transport Carbon Emissions by Sector

note: 18% of all Global Emissions

Transport Carbon Emissions by Sector

note: 18% of all Global Emissions

Aviation9%

Shipping22%

Rail2%

Heavy Road Vehicles

27%

Light Road Vehicles

40%

World Resources Institute, 2006 et al

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Conclusions (1)Conclusions (1)

• The era of cheap oil is over

• 75% of major oilfields are now in decline

• Global consumption of 30bn barrels/year are not being replaced at the same rate. Unsustainable!

• Future global oil supply is under pressure from increasing global demand