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NPC: 2007 'Hard Truths' findings, recommendations still apply

Nick Snow
Washington Editor

WASHINGTON, DC, Sept. 18 -- Recommendations and findings in a groundbreaking 2007 report still apply more than a year after they were issued, members of the National Petroleum Council said at their 2008 annual meeting on Sept. 17.

But there also have been some surprises since the council submitted the report, "Facing the Hard Truths About Energy," to US Energy Secretary Samuel W. Bodman in July 2007, they added. Significant domestic onshore natural gas discoveries with production from unconventional formations have reduced the need to proceed with several liquefied natural gas import projects, for instance.

And while much of the US energy workforce is headed toward retirements, enrollments in universities' petroleum engineering departments have doubled in the past two years, noted Rodney F. Nelson, who led the technology task force which helped prepare the original report.

This has created a new problem, a possible shortage of professors and instructors, which may need to be solved by asking recent retirees to step in on an interim basis, he said.

"We also need to reach out more aggressively to high school students before they make decisions about college. They need to become more aware that energy offers productive and rewarding careers," said Andrew Gould, chairman and chief executive of Schlumberger Ltd. and the study team's vice chairman for technology.

'A new energy reality'
Bodman, who requested the report, said that it highlighted the need for the United States to develop a national energy strategy consensus. "We have reached a point where the old paradigm is being replaced by a new energy reality," he said.

Since the NPC issued the Hard Truths report, it has been downloaded more than 1.5 million times from its website, more than 8,200 hard copies have been distributed, more than 10,000 compact discs containing the report and its supporting materials have been distributed, and more than 180 summary presentations have been provided to opinion leaders worldwide, according to Alan Paul, the study team's chairman.

He said that when Bodman asked for an update, the council reconvened key participants to examine reactions to the report and the implications of recent energy outlooks and events on its findings and recommendations.

"Much has happened since the report was issued. Global crude oil and US natural gas prices rose to historic highs and remain volatile. Higher energy costs are beginning to slow demand growth. Above-ground risks such as conflicts, sabotage and resource nationalism are widespread. The focus on carbon management has increased. Several of the Hard Truths demand modifications were addressed in the 2007 Energy Independence and Security Act. And energy has become a high profile topic in the political debate," Paul said.

But the report's key conclusions also have been validated, he continued. Global demand continues to grow significantly, risks to expansion of conventional liquids supplies are increasing and significant additions to unconventional liquids supplies will be needed, exploration and production expenditures have increased dramatically, and growing pressure on cost and availability of project resources is hindering the ability to expand energy production capability, he said.

Fossil fuels' role
The first hard truth is that coal, oil and natural gas will remain indispensable to meeting total projected energy demand growth, said James Burkhard, who was part of the Hard Truths team studying demand. "Updated projections show that fossil fuels will need to provide most of the world's energy supply through 2030," he said.

Donald L. Paul, a former chief technology officer at Chevron Corp. who was part of the Hard Truths study team examining supplies, said that the world is not necessarily running out of energy resources but their discovery and production risks are increasing. "Resource estimates are growing but turning those resources into supplies is a challenge," he said.

Expansion of all energy sources, including unconventional oil and gas, will be required, he continued. Required new capacity will have to come from outside as well as inside the Organization of Petroleum Exporting Countries and from biofuels. "Years are often required to increase production. For the US in particular, access to all resources will be critical," Paul said.

In the area of geopolitics, issues created by revenue transfers, sovereign wealth funds in some producing countries and price subsidies in some consuming nations, and a growing understand of the relationship between food and fuel will need to be addressed, said Frank A. Verrastro, director and senior fellow at the Center for Strategic and International Studies' energy and national security program.

"Growing revenues are bringing new players into the picture who don't necessarily follow the traditional rules," he observed.

Contact Nick Snow at nicks@pennwell.com.


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