OTC: Definition of energy security is changing

Paula Dittrick
Senior Staff Writer

HOUSTON, May 6 -- The definition of energy security must incorporate social acceptance of technology, availability of diverse energy sources, and environmental sustainability, said speakers May 6 during a panel discussion at the Offshore Technology Conference in Houston.

Robert Fryklund, IHS vice-president of industry relations, said society in general, including the oil and gas industry, is working to figure out how to achieve a balance between energy security and climate security.

"Unfortunately, this puzzle has a couple missing pieces," Fryklund said, "There is a lot that we know, but there is a lot that we don't know. In the corporate world, we ask how much is it going to cost? As individuals, we ask how much more are we going to have to pay at the pump?"

Varied definition
Amy Jaffe of Rice University's Baker Institute, said the concept of energy security varies over time and also varies depending upon where one lives. For instance, Europeans generally are talking about natural gas when they discuss energy security while US citizens generally are talking about gasoline, she said.

"So, different parts of the world are not even talking about same commodity," Jaffe said.

The definition of energy security also changes over time given perceived threats to energy supplies. Current threats include political instability and civil unrest in some producing countries, severe storms, and work stoppages.

"On top of that, we have to worry about a new producer climate. National oil companies feel empowered by oil supply shortages, and this will tempt them to flex their geopolitical muscle," Jaffe said.

Not all types of energy are well received, she added, noting that oil sands are perceived by some as being good for energy security but bad for climate security.

Saying that she does not view energy security and climate security "as two sides of the same coin," Jaffe acknowledged "a growing sense of urgency about climate change and security of supply." New fuel efficiency standards will reduce US oil demand and emphasize greater fuel diversity, she said.

Trade offs will have to be made when determining the future energy mix, she said, adding that she questions whether many people yet realize the ramifications of such decisions.

"If we move to greater use of natural gas, what is that going to mean for US energy security," Jaffe asked. "In a carbon-constrained scenario, LNG becomes quite more dramatic. It makes the US more dependent on imported LNG."

MMS view
Randall Luthi, director of the US Minerals Management Service, said he believes environmental security needs to be considered along with energy security and climate security.

"The price of gasoline is only part of our energy equation," Luthi said. "Without increased domestic production, imports will have to increase."

US energy production must be increased from all sources, including alternative and renewable energy, he said.

"We do have to look at all possibilities: new sources of energy as well as more efficient use of existing sources," Luthi said. "It needs to be a worldwide effort. The US is a key part but other emerging economies need to be a part as well."

Kevin Leahy, Duke Energy managing director climate policy and economics, said climate change will rework the energy supply and distribution system in the US, particularly for transportation fuels.

He believe the electric-generation business is going to drive carbon dioxide prices in a global carbon-trading scenario. He believes power also will drive natural gas prices.

Regarding the future role of hydrocarbons, Leahy said, "I could see where electrons would become the energy carrier for wealthy countries, and liquid fuel would still provide the energy in countries with emerging economies."

Key considerations for expanding the role of clean energy involve more than cost, said Robert LaCount of Cambridge Energy Research Associates. Other factors are scale, reliability, timing, integration, and unintended consequences.

"When we look over the next couple decades, we would recommend keeping our eye on many different aspects" to see how different energy sources develop, LaCount said.

International perspective
Fatih Birol, chief economist for the International Energy Agency, sees a "new world energy order" with some new actors entering and some others leaving.

China and India are transforming global energy markets, Birol said, adding those two countries are expected to contribute almost half of the increase in global energy and 60% of CO₂ emissions by 2030. China's oil imports are expected to reach 13 million b/d in 2030, and car ownership there is forecast to jump to 140 vehicles/1,000 people compared with 20 vehicles/1,000 people today.

"Carbon capture and storage would be good for energy security and climate security, but we are not yet there," Birol said.

Contact Paula Dittrick at paulad@ogjonline.com.