CERAWeek: Technology, gas key to fossil fuels future

March 1, 2010
Improving technologies and massive natural gas reserves—especially shale gas plays—will assure fossil fuels remain the dominant energy source for decades, industry speakers told CERAWeek, hosted by IHS Cambridge Energy Research Associates.

Improving technologies and massive natural gas reserves—especially shale gas plays—will assure fossil fuels remain the dominant energy source for decades, industry speakers told CERAWeek, hosted by IHS Cambridge Energy Research Associates.

Andy Inglis, chief executive of exploration and production at BP PLC, said advances in seismic technology and drilling techniques have allowed oil companies to maintain "our frontier spirit" by exploring in deeper water.

"We are looking for oil and gas in evermore testing conditions," Inglis said on Mar. 9.

For instance, BP's giant Tiber discovery in the Gulf of Mexico Lower Tertiary deepwater is one of the world's deepest wells. The well was drilled to a total depth of 35,055 ft on Keathley Canyon Block 102 and found oil in multiple Lower Tertiary (Paleogene) reservoirs (OGJ, Sept. 7, 2009, Newsletter).

Khalid Al-Falih, Saudi Aramco's chief executive officer and president, Aramco expects to drill deepwater wells for the first time in the Red Sea during 2012.

He later told reporters the deepwater exploration would be for both oil and gas.

'Hydrocarbon deniers'

Jim Mulva, ConocoPhillips chief executive officer, noted that gas historically has lagged oil in importance as a fossil fuel, but that gas is growing in importance.

"Carbon-based fuels, through in cleaner forms, must keep carrying the load. Renewables just cannot ramp up fast enough to replace them," Mulva said. "Let's consider what gas can mean for the future. The real future, not the pipe dreams of the hydrocarbon deniers."

He forecast gas could help achieve US and world energy supply security, provide consumers with affordable energy, drive economic prosperity and continued job creation, and help reduce greenhouse gas emissions.

"Natural gas will remain a leading base load for power generation and heating source, due to its cleanliness, abundance, and reasonable cost," Mulva said. "Through its flexible reserve capacity, when the wind dies or the skies are cloudy, gas will backstop wind and solar power."

Coal will remain an essential energy source, Mulva said, forecasting coal will be used in more advanced way, such as being converted into gas or liquid fuels.

ConocoPhillips also is in the early stages of researching methane hydrates. "Up to 700,000 tcf of methane hydrates lie beneath the ocean floor and the Arctic," he said.

Mulva emphasized that the US government needs to set coordinated policies on energy and climate, saying this would encourage development of all energy sources and establish a continuous regulatory framework, regardless of who is in office.

"Currently, the US government strongly supports renewable energy," Mulva said." Unfortunately, it also proposes higher taxes on the natural gas industry and is tightening resource access. Perhaps it has not yet learned that if you tax something, you get less of it—less supply security, fewer jobs, and lower reinvestment."

Upon questioning during a news conference, Mulva said, "Gas is more than a bridge fuel."

Earlier in the day, US Energy Secretary Steven Chu said gas can be used as a transition to other fuels, such as wind and solar, while helping lower US dependence on oil and coal.

About 62% of oil used in the US is imported. "It will take many decades to transition from foreign oil," he said.

Aramco's investments

Aramco's Falih called upon industry to concurrently invest in conventional and alternate energy sources, saying he was "very optimistic" about long-term prospects for renewables.

"The pace of their development and deployment does remain an open question, in part because their growth will start from such a small base of supplies," Falih noted.

Saudi Arabia wants to be a global leader not only in petroleum but in energy in general, he said. Aramco and others within Saudi Arabia are investing in solar energy.

He also foresees more technological advances in fossil fuels.

"I believe none of us will see fossil fuels meeting less than 70% of total demand in our lifetimes," Falih said. Aramco is building its capacity, both upstream and downstream, in Saudi Arabia and elsewhere.

During the last 5 years, Aramco spent over $62 billion in capital expenditures primarily to increase the company's oil production capacity to 12 million b/d.

Plans call for Aramco to invest $90 billion in the next 5 years "with an increasing proportion of that directed to gas…. That is in addition to the recent and upcoming capital investments by our downstream joint ventures, which will add another $80 billion to the total over that time."

Gas today accounts for less than 50% of the Saudi Arabia's energy consumption, he said.

Saudi Arabia wants to increase the country's gas production capacity and also its gas consumption, he said, adding this would make more crude oil available for export.

Falih said the industry worldwide needs to increase investments to help fulfill growing energy demand.

"We think there is room for plenty of players in the oil industry, and Saudi Arabia still accounts for only about 10% of global oil production. That leaves 90% of the load for others to shoulder, even as that load increases to some 105 million b/d of demand by 2030."

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