CERA: Alternative energy sources remain hot industry topic

Feb. 26, 2007
Public and government emphasis on renewable and other alternative energy resources was a frequent topic of discussion during the opening session of the annual world energy conference in Houston hosted by Cambridge Energy Research Associates.

Public and government emphasis on renewable and other alternative energy resources was a frequent topic of discussion during the opening session of the annual world energy conference in Houston hosted by Cambridge Energy Research Associates.

Despite popular attention directed at alternative fuels for the future, government policies around the world also need to focus on the development of oil and gas resources that will supply the bulk of all energy needs through 2030, said Rex W. Tillerson, chairman and chief executive officer of ExxonMobil Corp., in a keynote speech Feb. 13 at the CERA meeting.

In another session, John Hofmeister, president of Shell Oil Co., told conference participants, “The public policy opportunity is here and now” to influence US governmental policy on energy over the next 20 years. Hofmeister reminded industry representatives, “In order to make money, you have to do things that don’t make money,” including funding programs to educate the public about how the energy industry works and the factors that influence energy prices.

It does no good for the industry to be “constantly on the defensive with the public and at war with policymakers,” Hofmeister said. As for the issue of global warming, he said, “The public says it’s an issue, policymakers say it’s an issue. So the industry cannot ignore it.”

In a keynote luncheon address, José Sérgio Gabrielli de Azevedo, president and chief executive officer of Brazil’s state-owned Petroleo Brasileiro SA (Petrobras), said his country is a leader in the production of crude from deepwater reservoirs and of ethanol from sugar cane. The last oil boom of the 1970s threatened Brazil’s economy with high oil prices and stimulated oil exploration by Petrobras, primarily in the deep waters off Brazil and in the US sector of the Gulf of Mexico. Brazil expects to increase its oil production to 3.5 million b/d by 2010 and 4.5 million b/d by 2015 from a current level of 2.4 million b/d.

With the world’s largest water supply via its Amazon River basin and half of the world’s sugar cane production, Brazil is the largest producer of ethanol. What’s more, 20% of the new automobiles produced in Brazil have “flex-fuel” capabilities. Ethanol supplies 40% of Brazil’s transportation fuel market, the result of 30 years of investment in that industry. Since cane produces eight times more ethanol than corn, Gabrielli said, there now is no government subsidy to underwrite ethanol production in Brazil as there is in the US.

Petrobras is primarily a buyer of ethanol for blending with the gasoline it produces, but Gabrielli said the company may consider entering biofuels production of ethanol and biodiesel. Technology is developing a “second generation of biofuels” to produce high-quality products, he said.

In a playful slap at the current public and political emphasis on ethanol, Tillerson said there is “not a lot of technology I can add to moonshine.” However, Tillerson said oil industry’s fuel expertise and technology may have more to contribute during “the second or third levels” of development of biofuels, such as cellulosic ethanol made from nonfood portions of plants.

An earlier joint study by US Departments of Agriculture and Energy concluded the nation has enough biomass resources to satisfy a third of US petroleum needs if cellulosic technologies and resources are employed. A separate study by petroleum industry analysts at Simmons & Co. International Inc., Houston, concluded that cellulosic ethanol has the best growth potential for the biofuel market although US production currently is uneconomic.

Meanwhile, Tillerson said, “Driven by growing prosperity in the developing world, global energy demand is projected to be close to 40% higher in the year 2030 than it was last year, reaching close to 325 million b/d on an oil equivalent basis.”

The International Energy Agency in Paris has estimated a total investment of more than $8 trillion in the oil and gas sectors will be necessary over that period. “A large portion of these investments will be required to develop new supplies to simply replace ongoing declines in existing volumes. The rest will be needed for additional supplies to meet the increase in demand,” Tillerson said.

“The ability to meet energy demand today and for the future lies in policies that allow companies to search for, develop, and produce available resources wherever they may be, and to encourage further industry innovation to do so in the most efficient and effective manner,” he said. Moreover, Tillerson said, “The path to energy security does not lie in attempting to insulate domestic economies from the influences of the global marketplace. Instead it lies in open international trade, competitive markets, diversity of supply, and the strengthening of partnerships between producing and consuming nations. To achieve energy security is to achieve collective security among diverse economies and cultures on a global scale.”

Emissions control

Reducing greenhouse emissions from fossil fuels that will furnish the bulk of the world’s energy for decades to come “is every bit as important” as the development of alternative fuels, Tillerson said. “Steps taken at ExxonMobil, for example, since 1999 to improve energy efficiency at our facilities, resulted in carbon dioxide emissions savings of 11 million tonnes in 2005. That’s equivalent to taking 2 million cars off the road,” he said.

He noted that ExxonMobil and other firms collectively contributed $225 million to Stanford University for scientific research into technology breakthroughs to reduce fuel emissions even lower.

“We know our climate is changing, the average temperature of the earth is rising, and greenhouse gas emissions are increasing. We also know that climate remains an extraordinarily complex area of study. While our understanding of the science continues to evolve and improve, there is still much that we do not know and cannot fully recognize in efforts to model and predict future climate system behavior,” Tillerson said.

Therefore, he said, “It is prudent to develop and implement sensible strategies that address these risks while not reducing our ability to progress other global priorities such as economic development, poverty eradication, and public health.”

Tillerson said, “Specific policy tools should be assessed for their likely effectiveness, scale, and costs, as well as their implications for economic growth and quality of life. In that regard, rigorous and informed debate-debate that takes into account the essential role played by energy in advancing social and economic progress-will best support thoughtful policymaking.”

Just as technology has driven the successful progress of the oil and gas industry, Tillerson said, “I am confident that future technology advances will both expand our understanding of the climate system and enable an effective response.”