NPC studies crucial to long-term US strategy, White House says

Nick Snow
OGJ Washington Editor

WASHINGTON, DC, Sept. 14 -- Two studies under way by the National Petroleum Council will be crucial to developing a long-term energy, environmental, and economic strategy for the US, Obama administration officials told council members at the group’s Sept. 14 meeting.

US Sec. of Energy Steven Chu asked the council on Sept. 16, 2009, to evaluate new transportation fuel prospects through 2030, and to consider North American conventional and unconventional energy fuels and ways they can be responsibly developed.

Energy choices matter not only in terms of climate impacts, but also in competition for resources, US Deputy Energy Sec. Daniel B. Poneman told NPC nearly a year later. “We must work together to build an energy future which relies on clean domestic sources,” he maintained. “This transition will not happen overnight. We recognize this. We need to make sure we use our fossil resources wisely and safely.”

Changing the national energy paradigm will require “your technology, your global leadership skills, and your ability to quickly and effectively deploy resources,” he said in remarks apparently directed to the council’s oil and gas industry members. NPC has expanded to include representatives from US states, environmental organizations, and energy consuming industries, he noted.

Poneman said the administration is addressing the question of future fuels already by funding biofuels plant construction and vehicle battery research and development, as well as providing Ford Motor Co. $500 million to study ways to make the internal combustion engine more efficient.

‘Tremendous potential’
NPC’s North American energy resources study can help identify needs and expand insights for policymakers, he indicated. “We see a tremendous potential for natural gas to contribute, particularly with the growing discussions about shale gas resources,” Poneman said.

Energy unquestionably is a key element of the Obama administration’s long-term economic strategy, observed Michael B.G. Froman, a deputy assistant to the president and deputy national security advisor for international economic affairs. “We need to take advantage of shale gas opportunities, crack the code on economic development of alternatives, and use fossil fuels better by developing clean coal and other technologies,” he said.

The administration recognizes that it is impossible to develop an effective global climate change response without firm commitments from other major economies, and it has taken that message to G20 meetings and the global climate change conference in Copenhagen, Froman continued. “We anticipate a long and deep relationship with China, and are looking particularly at its energy investments and their possible effects,” he said.

Poneman said that technology transfer issues initially will need to be addressed among governments to stimulate commercial activity. “When we have conversations with our counterparts in China and India, that is always a part of the discussion,” he said, adding that establishing the sanctity of contracts is a key early consideration.

Traditional resources clearly will continue to play an important part, Froman said. “Reliable supplies of oil and gas are critical to our energy strategy, and to this country’s economic recovery,” he declared.

Future fuels study
Marathon Oil Corp. Chief Executive Clarence P. Cazalot Jr., who is chairman of NPC’s future transportation fuels study, said that 225 professionals are working on the complex and multifaceted effort. The stakes are high since the nation’s economic future will require efficient and inexpensive transportation, he continued. “Our intent is that the final product be clear and credible,” he said.

Linda A. Capuano, Marathon’s vice-president of emerging technology and chairwoman of the study’s coordinating subcommittee, said Chu’s original request was to address fuel demand, supply, infrastructure, and technology, and advise on policy options for integrating new fuels and vehicles into the marketplace.

The secretary asked an additional question in an Apr. 30 letter to the future fuels transportation committee about actions government and industry could take to stimulate technological advances and market conditions needed to reduce life-cycle greenhouse gas emissions in US transportation from 2005 levels by 50% by 2050 while enhancing domestic energy security and economic prosperity.

Capuano said the committee started by meeting with the chairmen of the committees that developed NPC’s “Hard Truths” report a few years ago to formulate guiding principles, which include a diverse set of participants to maximize points of view and acceptance of the study’s findings. Consensus-based leadership will be promoted, she added, but it won’t require unanimous agreement: “An 80% acceptance will allow minority opinions to be expressed.”

The committee will examine facts before it addresses environmental, economic, and security policies, she indicated. Communications and outreach will be emphasized throughout the study “so we can bring in more ideas and broaden the debate,” she said. Members also will coordinate with their counterparts on NPC’s resource appraisal and development study, Capuano said.

Resource evaluation
This second NPC study committee will assess the North American conventional and unconventional oil and gas resource base’s productive capacity through 2035, explain technology’s role in making these resources producible, describe US gas demand through 2035 and ways in which it can reduce GHG emissions throughout the economy, and outline industry operating practices and technologies to minimize environmental impacts, according to D. Clay Bretches, the resource study committee’s coordinating subcommittee chairman and Anadarko Petroleum Corp’s vice president of minerals and marketing.

The committee will provide Chu with recommendations for prudently developing North American oil and gas resources to reflect the Obama administration’s objectives of reducing GHG emissions, protecting the environment, sustaining economic growth and competitiveness, and promoting energy security, he continued. “We will not develop policy recommendations nor delve into policy issues until all the facts are on the table,” said Bretches.

He said efforts will be coordinated with the transportation fuels study with the examination of natural gas transportation demand, a high-level overview of oil demand, and infrastructure needed to bring unconventional supplies to refineries or the city-gate. The fuels study will address gas-to-liquids, upgrading, refining, and downstream infrastructure, he said.

Bretches said that the two studies have different completion targets, with the resource study due to be finished by the end of 2011’s first quarter and the transportation fuels study scheduled to be done six months later. The fuels study will need to provide the resources study its ranges of power demand for electric vehicles and gas demand for natural gas vehicles in time for inclusion in the resource study’s findings, he said.

The committee’s chairman, Anadarko Chief Executive James T. Hackett, said the committee also intends to address issues raised by the Macondo well blowout, rig explosion, and crude oil spill in the Gulf of Mexico. “Deepwater exploration and production was not prominently on our screen initially,” he said. “It is now.”

Officials of both committees emphasized that their work is in its early stages. “We are very pleased with the way both studies are progressing,” said DOE’s Poneman.

Contact Nick Snow at nicks@pennwell.com.

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