Melanie Kenderdine US Department of Energy

UN Student Energy Summit June 19, 2014

1

Energy Security, Natural Gas, Climate Change: A US Perspective

2

Challenge: Global Energy Consumption 2030

Source: Lawrence Livermore National Laboratory, John Ziagos

680 quads/yr.

Annual per Capita Electricity Consumption

3

“The world will need to consume four times

as much energy by 2100 to raise the

standard of living in developing

nations to that of those in

developed nations.”

Without Policy With Policy

Analysis of Climate Policy Targets Under Uncertainty, Prinn, et al 2009 4

It’s later – and more serious -- than we think

Changes in Precipitation (%) in the 21st century

Source: IPCC, 2007 5

Life Cycle Water Consumption for Electricity Production (gal H2O/MWh)

6

7

894

543

456

347

286

72

54

45

37

19

15

10

7.5

2.4

Biodiesel/corn

Electricity/biomass

Ethanol/cellulose

Ethanol/corn

Ethanol/sugar cane

Wind

Hydropower

Petroleum

Solar Photovoltaic

Natural Gas

Solar Thermal

Coal

Geothermal

Nuclear

Land Use Intensity per Unit of Energy by Energy Source (Km2/TW-hr/year)

McDonald, et al, Energy Sprawl or Energy Efficiency: Climate Policy Impacts on Natural Habitat for the United States of America, 2009 Funded by the Nature Conservancy

Sources: EIA, Richard Newell Presentation, 2010

8

Barnett Shale: 13,5000 Wells Drilled in 12 Years

9

Population Density & European

Shale Development

Source: EIA, World Shale Resources , 2011

Poland Shale Basins

Marcellus/Pennsylvania

e i

Poland Population Density

10

In the US, This is Where the “Money” Is!

G-7 Leaders: Energy Security at the Center of Collective Agenda

The use of energy supplies as a means of political coercion or as a threat to security is unacceptable.

The crisis in Ukraine makes plain that energy security must be at the centre of our collective agenda…”

We will ask the IEA…to present by the end of 2014 options for individual and collective actions of the G-7 in the field of gas security

We will…promote a more integrated Liquefied Natural Gas (LNG) market, including through new supplies, the development of transport …and further promotion of flexible gas markets…

11 Excerpt, THE BRUSSELS G-7 SUMMIT DECLARATION, June 5, 2014

Energy Security

G-7 Rome Initiative: Energy Security for the 21st Century

Flexible, transparent and competitive energy markets, including gas markets, should be developed.

Energy fuels, sources and routes should be diversified and development of indigenous sources of energy supply should be encouraged.

Infrastructure modernization will improve energy system resilience. Promoting supply and demand policies will help withstand systemic shocks

Reducing our greenhouse gas emissions and accelerating the transition to a low carbon economy are key contributors to enduring energy security.

Energy efficiency in demand and supply, and demand response management should be enhanced.

Deployment of clean and sustainable energy technologies and continued investment in research and innovation should be promoted.

12 Adapted from Joint Statement, Rome G7 Initiative for Energy Security, May, 2014

Market Development

Resilience

Diversification

Innovation

Competitiveness

Climate Change

Climate Change

Competitiveness

Climate Change

Competitiveness

Energy Equity

Source: Eurogas

c

89 83

80 60

60 59

59 57

56 37

29 24

24 100 100

100 100

Gas Supplied by Russia % of Total Consumption, 2012

Russian gas Non-Russian gas 13

Energy Security

Diversification

Lowering Energy Intensity Can Enhance Energy Security in Countries w/High Russian Imports

14 Source: IEA

Intensity: 2012, USD base, toe/thousand, intensity numbers are rounded

0.08 0.08 0.08 0.09 0.13 0.14 0.15 0.16 0.17 0.18 0.19 0.2 0.2 0.2

0.3

0.4

0.8 Country % Gas Russian Imports Energy Intensity Czech. Rep 57 .20 Estonia 100 .30 Hungary 80 .19 Lithuania 100 .17 Poland 59 .20 Slovakia 83 .18 Bulgaria 89 .40 Romania 24 .20 Ukraine 60 .80

OECD avg.

Competitiveness

Climate Change

US Potential Contribution to Global LNG Supplies*

15

Sources: IGU World LNG Report, 2014 , DOE Office of Fossil Energy

Qatar LNGexports

US Volumes Europe LNGimports

WorldwideLNG

consumption

10.30 9.27 4.38

31.59

*Qatar and worldwide volumes are bcf/day in 2013. US volumes are for

approved or conditionally approved export permits as of 5/14

US conditionally-approved export volumes are almost equal to those of Qatar, the world’s largest LNG

exporter

Market Development

52 44

63

7

38 36

66

28 17

33

51

4

23 22

48

18

LNG Regasification Utilization Rates by Country, 2012/2013 (% utilization)

2012 2013

Numbers in parenthesis are 2013 capacity in mmt/a (1mmt = 47.6 bcf)

2013: Disconnected from crude prices

Because of large Asian/ European LNG price spreads, LNG cargoes are moving to Asia. Utilization rates of European regasification facilities have dramatically declined.

Benchmark Natural Gas Prices: U.S., Europe, Asia, 2013, forecasts to 2030

$16.87

$16.72

$12.82

$5.49

2013

2030

16

39% decline 62% decline

24% decline

19% decline

Brent: $16.87

Asian Term: $14.80

Eur. Spot: $10.59

Henry Hub: $3.61

2013: Tracking Crude

Importance of Regional LNG Pricing to Global Destinations of LNG Supplies

Shut down of nuclear reactors post- Fukushima has increased competition for fossil fuels worldwide.

Market Development

Source: International Gas Union

A mild winter that reduced household heating demand A decline in coal-fired electricity generation, due largely to historically low natural gas prices Reduced gasoline demand

17 Source: EIA Website

US CO2 emissions lowest in 20 years

Coal to Gas Fuel Substitution Benefits, contd.

Climate Change

18

PM on the Quadrennial Energy Review

“Affordable, clean, and secure energy and energy services are essential for improving U.S. economic productivity, enhancing our quality of life, protecting our environment, and ensuring our Nation's security. Achieving these goals requires a comprehensive and integrated energy strategy resulting from interagency dialogue and active engagement of external stakeholders. To help the Federal Government better meet this responsibility, I am directing the undertaking of a Quadrennial Energy Review.”

President Barack Obama January 9, 2014

Draft / Pre-Decisional / Not for Distribution 19

Near and Long-term Infrastructure Vulnerabilities Are Growing

Climate Change: weather related power outages have increased from

5-20 each year in the mid-1990s to 50-100 per year in the last five years.

Cyber-security: 53% of all cyber-attacks from October 2012 to May

2013 were on energy installations.

Physical Threats: There were three highly visible attacks on grid

infrastructure in 2013. Supply chains for key components of grid infrastructure are not robust.

Interdependencies: The interdependencies of the

electric and fuel infrastructures seen in Superstorm Sandy greatly complicated the response and recovery.

Supply/demand Shifts: The lack of pipeline

infrastructures for associated gas in the Bakken has resulted in large-scale flaring of this gas, in amount sufficient to be seen from space.

Recent Events Illustrate U.S. Energy Sector Vulnerability to Climatic Conditions

Cooling water intake or discharge too hot: Shutdown and reduced generation from power plants

Water restrictions due to drought: Limiting shale gas and power production

Wildfires: Damaged transmission lines

Lower water levels: Reduced hydropower

Lower river levels: Restricted barge transportation of coal and petroleum products

Intense storms: Disrupted power generation, distribution and oil and gas operations

Flooding: Impacts on inland power plants

20 Source: U.S. DOE (2013), U.S. Energy Sector Vulnerabilities to Climate Change and Extreme Weather.

Supply/Infrastructure Geography Changing Rapidly

2010 Crude Oil by Train Loading (red) and Offloading (blue)

Facilities

2013 Crude Oil by Train Loading (red) and Offloading (blue)

Facilities

Source: Final SEIS, Keystone XL Project; Chapter 1.4, Market Analysis.

22

Growth in Oil Transport by Rail