NPC report: All energy options should be pursued

Aug. 6, 2007
Every option, from developing unconventional fossil fuel resources to pursuing renewable and other alternatives, will need to be pursued if the world expects to meet its growing energy demand through 2030, the National Petroleum Council concluded in a recent study.

Every option, from developing unconventional fossil fuel resources to pursuing renewable and other alternatives, will need to be pursued if the world expects to meet its growing energy demand through 2030, the National Petroleum Council concluded in a recent study.

“We don’t have the option of saying that anything is off the table. We simply need to do everything we can,” NPC Chairman and former ExxonMobil Corp. Chief Executive Officer Lee R. Raymond told reporters following the council’s July 18 meeting, where the study was approved and relayed to US Sec. of Energy Samuel W. Bodman, who had requested it.

Formally titled “Facing the Hard Truths about Energy,” the report broke new ground by involving more than 350 participants, 65% from outside the oil and gas industry, in more than 2 years of discussions and examinations that produced wide-ranging results. It said that the hard truths the US and world must face about energy in the next 25 years are:

  • Coal, oil, and natural gas will remain indispensable to meeting total projected demand growth.
  • The world is not running out of energy resources, “but there are accumulating risks to continued expansion of oil and natural gas production from the conventional sources relied upon historically,” which pose significant challenges.
  • Expansion of all economic energy sources, including coal, nuclear, biomass, other renewable resources, and unconventional oil and gas, will be required to mitigate these risks. “Each of these sources faces significant challenges including safety, environmental, political, or economic hurdles, and imposes infrastructure requirements for development and delivery,” the report said.
  • The concept of “energy independence” should be replaced by one of energy security that can be enhanced by moderating demand, expanding and diversifying domestic supplies, and strengthening global trade and investment.
  • A majority of the US energy workforce, including skilled scientists and engineers, is eligible to retire in the next decade. It will need to be replenished and trained.
  • Policies aimed at curbing carbon dioxide emissions will alter the energy mix, increase energy-related costs, and require reductions in demand growth.

The results impressed several NPC members. “I personally think this is the most important work the council has done in the last 50 years and probably the next 50 years as well. It’s not a slogan, but a strategy to be examined and embraced by policymakers,” said Ray L. Hunt, chief executive officer of Hunt Oil Co. and chairman of the council’s nominating committee. Hunt did not directly participate.

“It’s the most comprehensive study I’ve seen,” Daniel H. Yergin, chairman of Cambridge Energy Research Group and the council’s vice-chairman for demand, told OGJ. He cited Section D of the recommendations, which looked at meeting challenges in forecasting, science, and engineering, research and data collection, and carbon constraints. “When the supply task group finished looking at more than 100 different forecasts, the importance of assumptions in reaching conclusions was apparent,” Yergin said.

Yergin and another NPC member, Deutsche Bank AG Chief Energy Economist Adam E. Sieminski, separately said it was striking that the study moved beyond previous NPC efforts by including energy efficiency for the first time.

Sieminski said efforts by the Alliance to Save Energy were largely responsible. “At first, there was polite listening. Then, as the task group began to examine supply and demand conclusions that were emerging from its own work, they began to take energy efficiency more seriously. Finally, they began to examine how to formulate policies that included it,” he told OGJ.

Open and transparent

John J. Hamre, president and chief executive officer of the Center for Strategic & International Studies in Washington, DC, and the council’s vice-chairman for geopolitics and policy, said NPC’s efforts to get views outside the oil and gas industry for the study were significant. “The industry in this town has a reputation of being secretive. This study was the most open and transparent of any I’ve participated in. Arguments were advanced, and minds were changed,” he said.

Not every group was satisfied. US Reps. Roscoe Bartlett (R-Md.) and Tom Udall (D-NM), cofounders and cochairmen of the House Peak Oil Caucus, said on July 17 the NPC’s report minimizes, rather than faces, hard truths about energy.

“I can’t understand why they’re upset. They obviously had an impact,” one oil and gas industry official told OGJ. “This report goes farther in saying that resources aren’t infinite than any I’ve seen from the NPC, although it doesn’t say we’re in immediate danger of running out.”

The study used data from the US Energy Information Administration and other prominent forecasters and analysts, input from groups such as the Association for the Study of Peak Oil and Gas, and information from proprietary sources that provided insights into investment decisions that could affect unconventional and alternative sources, according to Donald L. Paul, vice-president and chief technology officer at Chevron Corp. and chairman of the study’s supply task group.

“Gas is much less developed than oil, but some features emerged. One is that we should be able to meet demand through 2030, but it will consume about 50% of supply. Another is that pipelines, tankers, and other transportation elements will need to expand significantly. Some say that the need for new infrastructure overall points to as much as $20 trillion of new investments that will be needed,” he indicated.

Paul said to expand and diversify supplies, declines in conventional production will have to be reduced (including output from marginal oil wells), access to resources will need to increase, and long-term production will need to be diversified. “The good news is that the US has unique and substantial alternative resources, particularly in biomass and coal,” he said.

No ‘silver bullet’

Paul Parker, executive vice-president of the Center for Resource Management in Salt Lake City, suggested that developing tar sands, oil shale, and other unconventional fossil fuel resources domestically will require major investments and careful consideration of environmental consequences.

“There’s not a silver bullet. Often, there’s a sense that biofuels and conservation will do the job by themselves. They have a lot of public and environmental groups’ support which is not present for unconventional resources,” he told OGJ.

Bodman praised the study. “My interest in what you’ve produced will not end with this meeting. These are hard facts that require us to make wise choices,” he said.

Deputy US Sec. of Energy J. Clay Sell said President George W. Bush ultimately will determine how much of the study will become part of federal energy policy.

“We remain in contact with members of Congress and continue to believe that energy legislation represents one of the best bipartisan opportunities. This report presents hard truths that we’ve been reluctant to take on the past two decades but very much need to,” he said.

Raymond, whose term as NPC chairman was extended at the meeting, said his and the council’s main task now is to distribute the report as widely as possible. “The phone’s been ringing off the hook. A lot of people would like to learn more about what’s in this report. We intend to respond to every one of them,” he told OGJ.