Cumulative Oil Consumption by the Human Race

1

J. David HughesGeological Survey of Canada

[email protected]

GEOLOGICAL SURVEY OF CANADACALGARY

COMMISSION GÉOLOGIQUE DU CANADACALGARY

Sponsored byThe City of North Vancouver

Greater Vancouver Regional DistrictCapilano College Global Stewardship Program

November 26-27, 2006

Peak Oil and the Future of Energy

- Patterns of Energy Consumption and Production:

Points to be covered:

- Magnitude and Distribution of Remaining Energy Reserves and Resources:- Implications for security of energy supply

- Where does Canada Stand in All This?

- Some thoughts on the way forward: Challenges and Changes for a Sustainable Energy Future

- Forecasts - always arguable and debatable: -“economists vs. geologists”-“geologists vs. geologists”-“optimists vs. pessimists”

- History - what actually happened “Hindsight”

2

0

2000

4000

6000

8000

10000

Mill

ion

Tonn

es O

il Eq

uiva

lent

1965 1970 1975 1980 1985 1990 1995 2000 2005Year

0

2000

4000

6000

8000

10000

Mill

ion

Tonn

es O

il Eq

uiva

lent

1965 1970 1975 1980 1985 1990 1995 2000 2005Year

Asia PacificAfricaMiddle EastFormer Soviet UnionEuropeS. & Cent. AmericaNorth America

World Primary Energy Consumption: 1965-2005By Region By Fuel

151%

218%

292%

93%600%

439%787%

62%

350%87%

91%

(data from BP Statistical Review of World Energy, 2006)

173% increase in WorldConsumption 1965-2005;

2005 increase = 2.7%

Highest growth in 2005 = Asia Pacific 5.8%; Coal 5.0%

Coal

Gas

Oil

NuclearHydro

World Energy Consumption 1990-2030 in Three Economic Cases (EIA, 2006)

0

100

200

300

400

500

600

700

800

900

1990 1995 2000 2005 2010 2015 2020 2025 2030Year

Qua

drill

ion

Btu

High Economic CaseReference Economic CaseLow Economic Case

+40%

+85%

+60%

ForecastsHistory

(History: BP Statistical Review of World Energy, 2006;Forecast: Energy Information Administration International Energy Outlook, 2006)

Projections(2005-2030)

3

0

100

200

300

400

500

600

700

800

Qua

drill

ion

Btu

2003 2008 2013 2018 2023 2028Year

By Fuel

Gas +92%

(data from Energy Information Administration International Energy Outlook, June, 2006)

Hydro/Renewables +91%

0

100

200

300

400

500

600

700

800Q

uadr

illio

n B

tu

2003 2008 2013 2018 2023 2028Year

By Economic Development

Non-OECD Countries +121%(82% of 2006 World Population)

OECD Countries +32%(18% of 2006 World

Population)

Forecast Growth In World Energy Consumption, 2003-2030(EIA, 2006, Reference Economic Case)

72% increase in WorldConsumption (2.0%/year)

Oil +48%

Coal +95%Nuclear +31%

43%

56%

- Hydrocarbons provided 88% of the world’s primary energy in 2005

Summary

- Forecasts suggest that 86.5% of a greatly expanded energy demand will continue to be provided by hydrocarbons in 2030

- Most of the balance of energy supply will be provided by large hydro and nuclear – sources with their own environmental problems

- The Question is: IS THIS SUSTAINABLE?

…… Lets look in more detail at oil, gas and coal

4

- The largest source of energy in the world (36.4% of primary energy consumption in 2005)

OIL

- The ultimate fuel for international trade – easily moved by tanker and pipeline

- Highly subject to Geopolitics – the OPEC cartel has three quarters of remaining reserves and the only remaining spare production capacity – terrorism or natural disasters like Hurricanes Katrina and Rita can cause extreme price volatility

- Alternatives to oil have seen similar price spikes over the past several years (natural gas, coal and uranium)

0

10

20

30

40

50

60

70

80

90

100

Cum

ulat

ive

Con

sum

ptio

n as

Per

cent

age

of T

otal

Con

sum

ed

1860 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000Year

Cumulative Oil Consumption by the Human Race as a Percentage of Total Consumption through Yearend 2005

(Source of data: BP Statistical Review of World Energy, 2006)

1% 19225% 1946

10% 1958

20% 1968

30% 1974

40% 1979

50% 1984

60% 1989

70% 1993

80% 1998

90% 2002

50% of the OILConsumed by the

Human RaceUsed Since 198490% of the OIL

Consumed by theHuman Race

Used Since 1958

1085 Billion barrels

Consum

ed

5

0

10

20

30

40

50

60

70

80

90

Mill

ion

Barr

els p

er D

ay

1965 1970 1975 1980 1985 1990 1995 2000 2005Year

Consumption

Former Soviet UnionOPECNon-OPEC

0

10

20

30

40

50

60

70

80

90M

illio

n Ba

rrel

s per

Day

1965 1970 1975 1980 1985 1990 1995 2000 2005Year

Production

Former Soviet UnionOPECNon-OPEC

World Oil Production and Consumption 1965-2005

F.S.U.14%

Non-OPEC164%

F.S.U.144%

OPEC135%

Non-OPEC182%


164% increaseup 1.3% 2005

over 2004

OPEC 488%

84%

11%

5%

44%

42%

14%

Forecast World Oil Consumption 2003-2030in Three Economic Cases (EIA, 2006)

020406080

100120140160180200220240260280

2003

2005

2007

2009

2011

2013

2015

2017

2019

2021

2023

2025

2027

2029

Year

Qua

drill

ion

Btu


+29%

+71%

+48%


Projections

6

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Perc

enta

ge S

hare

of R

emai

ning

Wor

ld O

il R

eser

ves

1980 1985 1990 1995 2000 2005Year

0

100

200

300

400

500

600

700

800

900

1000

1100

1200

Billi

on B

arre

ls

1980 1985 1990 1995 2000 2005Year

World Conventional Oil and Oil Sands* Reserves 1980-2005


OPE

CN

on-OPE

C

65%75.2%

23%14.6%

12%

10.2%

SaudiArabia

Iraq

IranFormer Soviet Union

Other Non-OPEC

Former Soviet Union

Non-OPEC

OPECKuwait

United Arab EmiratesOther OPEC

Other North AmericaU.S.A.

* Includes Oil Sands Reserves “Under Development”

0

100

200

300

400

500

600

700

800

Bill

ion

Bar

rels

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004Year

ImplicationSome of the422 Gbbl or

113% increasein reported

reserves overthe period may

be spurious

Reserves inflatedby 285 Gbblsor 69% over

five-year periodin 1984-1988

without majornew discoveriesQUOTA WARS


These Countries also Produced 181.6 Billion Barrels over the Period

Oil Reserve Reporting in Selected OPEC Countries, 1980-2005,Representing 88% of 2005 OPEC Reserves and 66% of World Reserves

Saudi Arabia

Venezuela

Kuwait

Iraq

Iran

United Arab Emirates

7

0

10

20

30

40

50

60

70

80

90Y

ears

of P

rodu

ctio

n at

Cur

rent

Rat

es

OPEC Non-OPEC F.S.U. Total World

World Oil Reserve to Production Ratio in Years IncludingOil Sands* and Possibly Spurious post-1984 OPEC Reserves

1990199119921993199419951996199719981999200020012002200320042005

(data from BP Statistical Review of World Energy, 2006)* Includes Oil Sands Reserves “Under Development”

The Growing Gap between Production and Discovery of Regular Conventional Oil (1930-2050)

0

10

20

30

40

50

60

1930 1950 1970 1990 2010 2030 2050Year

Bill

ion

Bar

rels

per

Yea

r Past DiscoveryFuture DiscoveryProduction

Past discoveries have been backdated with revisionsfrom ExxonMobil (2002) to reflect “Reserve Growth”

(from Campbell, personal communication, September 2006)

World Discoveries Peak in 1965

Productionhas ExceededDiscoveriessince 1984

8

WHEN?- Debatable, because of the variables,

World Oil Production Peak

BUT IT IS HIGHLYLIKELY TO HAPPEN

DEPENDS ON:

- ULTIMATE RECOVERABLE RESERVES - a function of:- Mother Nature’s Endowment (total discovered and

undiscovered resources)- Technology and Price (determines economics)- Reserve Appreciation (Growth) in known pools (through

more drilling, better technology and higher prices)

- RATE OF CONSUMPTION - a function of:- Price (controls economic growth and

encourages/discourages conservation)- Infrastructure for production- Depletion rates of producing pools

-70

-60

-50

-40

-30

-20

-10

0

Perc

enta

ge B

elow

Pea

k Pr

oduc

tion

Liby

a 19

70U

SA 1

970

Oth

er M

iddl

e Ea

st 1

970

Ven

ezue

la 1

970

Kuw

ait 1

972

Iran

197

4R

oman

ia 1

977

Indo

nesi

a 19

77Tr

inid

ad &

Tob

ago

1978

Iraq

197

9Br

unei

197

9Tu

nisi

a 19

80Pe

ru 1

982

Cam

eroo

n 19

85O

ther

Eur

ope

& E

uras

ia 1

986

Rus

sian

Fed

erat

ion

1987

Oth

er A

sia

Paci

fic 1

993

Egyp

t 199

3Sy

ria

1995

Gab

on 1

996

Arg

entin

a 19

98U

nite

d K

ingd

om 1

999

Col

ombi

a 19

99U

zbek

ista

n 19

99R

ep. o

f Con

go 1

999

Aus

tral

ia 2

000

Om

an 2

001

Nor

way

200

1Y

emen

200

2O

ther

S. &

C. A

mer

ica

2003

Turk

men

ista

n 20

03V

ietn

am 2

004

Indi

a 20

04M

alay

sia

2004

Den

mar

k 20

04O

ther

Afr

ica

2004

Mex

ico

2004

Can

ada

2004

Country

Year of Peak Production and Percentage 2005 Production is below Peak

20 Countries Peak Since 1995

13 Countries PeakSince 2000

= OPEC Countries

(data from B.P. StatisticalReview of World Energy, 2006)

63% of 2005Production was from Countries Past Peak

9

0

5

10

15

20

25

30

35

Bill

ion

barr

els

per

yea

r

1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050Year

Campell's 2006 Hydrocarbon Liquids Production and Forecast 1930-2050

Natural Gas Liquids Peak 2030Polar Oil Peak 2030Deep Water Oil Peak 2011Heavy Oil Peak 2030Other Peak 2004Russia Peak 1987Middle East Gulf Peak 2005Europe Peak 2000US 48 P k 1970

Combined LiquidsPeak 2010

(89 MMbbls/day)

(C.J.Campbell, personal communication, September, 2006)

EIA Projections (Oct 2005):2004 – 82.5 MMbbls/day2005 – 83.6 MMbbls/day2006 – 85.4 MMbbls/day

0

5000

10000

15000

20000

25000

30000

35000

Tho

usan

d B

arre

ls p

er D

ay

OPECProduction 4Q

2002

OPEC SurplusCapacity 4Q

2002

OPECProduction

August 2006

OPEC SurplusCapacity

August 2006

OPEC's Production plus Surplus Capacity December 2002 versus August 2006

Other LiquidsIraqVenezuelaUAESaudi ArabiaQatarNigeriaLibya Kuwait Iran Indonesia Algeria

(Data from U.S. Energy Information Administration, 2003 and September, 2006)

6.3 MMbbls/day

28.4 MMbbls/day

34.08 MMbbls/day

~1.45 MMbbls/day

10

Published Estimates of Conventional World Oil Ultimate Recovery

0 0.5 1 1.5 2 2.5 3 3.5 4Trillions of Barrels

USGS 5% 2000USGS Mean 2000USGS 95% 2000Campbell 1995Masters 1994Campbell 1992Bookout 1989Masters 1987Martin 1984Nehring 1982Halbouty 1981Meyerhoff 1979Nehring 1978Nelson 1977Folinsbee 1976Adams & Kirby 1975Linden 1973Moody 1972Moody 1970Shell 1968Weeks 1959MacNaughton 1953Weeks 1948Pratt 1942

Source: USGS and Colin Campbell

(from Wood, USGS, 2000)

Consensus Estimate~2000 Gigabarrels

Which USGS estimate to believe?

0

10

20

30

40

50

60

70

80

1930 1950 1970 1990 2010 2030

Gb

Past DiscoveryFuture DiscoveryUSGS F95USGS MeanUSGS F5

(from Campbell et al, 2005)

Future discoveryRates for the

EIA’s ReferenceCase Forecast

Campbell’s (2005) Estimate of Future Discovery Ratesgiven USGS P5, P50 and P95 estimates

11

0

20000

40000

60000

80000

100000

120000

140000O

il Pr

oduc

tion

(tho

usan

d ba

rrel

s per

day

)

1860 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070

Year

Forecast of World Peak Oil Production Using EIA Methodology Assuming USGS (2000) P50 Ultimate Recoverable of 3003 Billion Barrels and 1.4%

Yearly Growth in Consumption

History

(Source of data: BP Statistical Review of World Energy, 2006; Wood, USGS, 2000; EIA IEO, 2006)

EIA (2006) Reference CaseGrowth in Consumption

Forecast

EIA (2005) reference forecast to 2030

Implication

EIA forecast peak – 2040(P50 - 82% consumed)

>20 Years

Assumptions:Ultimate Recoverable 3 Trillion barrels

2018 – 50% Consumed

93% of all oil consumed on Earthhas been consumed since 1950

10 Year R/P Decline

0

20

40

60

80

100

120

140

Mill

ion

barr

els p

er D

ay

2003 2008 2013 2018 2023 2028Year

Consumption

0

20

40

60

80

100

120

140

Mill

ion

barr

els

per

Day

2003 2008 2013 2018 2023 2028Year

ProductionUnconventionalNon-OECDOECDOPEC

OECD -7%

OPEC +43%

Non-OECD +67%

Unconventional +539%

OECD +23%(18% of 2006 Population)

Non-OECD +84%(82% of 2006 Population)

EIA World Oil Production and Consumption Forecast 2003-2030(Reference Economic Case)


Range of Peak Productionestimates of Duncan,

Laherrere, Campbell, Bakhtiari,Ivanhoe, Deffeyes and others

48% increase1.4%/year

61%51%

12

00.5

11.5

2

2.53

3.5

1970 1975 1980 1985 1990 1995 20000

0.20.40.60.8

11.21.41.6

1969 1974 1979 1984 1989 1994 19990

0.20.40.60.8

11.21.41.61.8

1949 1957 1965 1973 1981 1989 1997

0

0.1

0.2

0.3

0.4

0.5

0.6

1975 1979 1983 1987 1991 1995 19990

0.1

0.2

0.3

0.4

0.5

1986 1989 1992 1995 1998 20010

0.1

0.2

0.3

0.4

0.5

0.6

1986 1989 1992 1995 1998 2001

PeakAt 42%Produced

PeakAt 47%Produced

PeakAt 42%Produced

PeakAt 30%Produced

PeakAt 45%Produced

PeakAt 50%Produced

Mill

ion

Bar

rels

per

Day

Somotlar, Russia Romashkino, Russia Prudhoe Bay, Alaska

Forties, United Kingdom Oseberg, Norway Gullfaks, Norway

Peaking Profiles of Giant and Super Giant Fields at 30-50%of Total Production Suggests Peaking of World Production at82% of Ultimate Recoverable Consumed is Wishful Thinking

Year(data from Simmons, “The Saudi Arabia Oil Miracle”, February, 2004)

1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Year of Peak Production

Ivanhoe 1997Edwards 1997

IEA WEO 1998USGS Magoon 1999

Campbell 1999Bartlett 2000

EIA USGS P50 2000*USGS P50 2000USGS P95 2000Laherrere 2000Campbell 2001

Duncan 2001Deffeyes 2001

Smith 2002Nemesis 2002

Laherrere 2002Laherrere 2003Bakhtiari 2004Campbell 2004Deffeyes 2005

Campbell 2005Campbell 2006

(Source Bentley, 2002; Wood, USGS, 2000;*EIA IEO, 2006, reference case demand growthof 1.4%/year and USGS P50 2000 estimate and peaking at World R/P of 10 years; Oil and Gas Journal, 2004; and others)

Post 1997 Estimates of the Time of Peak World Oil Production

ConsensusPeak 2010

AssumingSymmetrical Peak

Based onUSGS 2000

UltimateRecoverableP50 and P95

EstimatesPeak at 82% of Ultimate Recoverable Consumed

Includes Non-Conventional Oil

13

01234

1965 1975 1985 1995 2005

Year

Canada

01234

1965 1975 1985 1995 2005

Year

Mexico

0

5

10

15

20

1965 1975 1985 1995 2005

Year

U.S.A.

North American Oil Consumption and Movements: 1965-2005

Production(down 40%from Peak)

Net Imports(67% of 2005consumption)


Peak1970

Consumption(up 79%)

Mill

ion

Bar

rels

per

Day

Consumption up 555%Consumption up 101%

Net Exports

Net Exports

Production(up 231%)

Production(up 938%)

0

5

10

15

20

25

30

35

40

45

50

Yea

rs o

f Pro

duct

ion

at C

urre

nt R

ates

U.S.A. Canada Mexico North America

North America Reserve to Production Ratio in Years Including Oil Sands* 1990-2005

1990199119921993199419951996199719981999200020012002200320042005

(data from BP Statistical Review of World Energy, 2006)* Includes Oil Sands Reserves “Under Development”

14

0

500

1000

1500

2000

2500

3000

Tho

usan

d ba

rrel

s pe

r D

ay

1985

/07

1987

/07

1989

/07

1991

/07

1993

/07

1995

/07

1997

/07

1999

/07

2001

/07

2003

/07

Month

Liquids ProductionPentanes PlusCondensateBitumenSyntheticMedium and LightHeavy

0

500

1000

1500

2000

2500

3000

Tho

usan

d ba

rrel

s pe

r D

ay

1985

/07

1987

/07

1989

/07

1991

/07

1993

/07

1995

/07

1997

/07

1999

/07

2001

/07

2003

/07

Month

Crude Imports

Canadian Oil Production and Imports 1985-2005(12 month centered moving average)

(data from Statistics Canada, October, 2005)

Imports up 226%Production up 59%

0

200

400

600

800

1000

1200

1400

1600

1800

Thou

sand

bar

rels

per

Day

1985 1988 1991 1994 1997 2000 2003

Year

Crude Imports

0

200

400

600

800

1000

1200

1400

1600

1800

Thou

sand

bar

rels

per

Day

1985 1988 1991 1994 1997 2000 2003

Year

Total Exports

Imports up 226%Exports offset

by Imports

Net Exports

Exports up245%

Canadian Oil Imports and Exports 1985-2005

(data from Statistics Canada, October, 2005, and BP Statistical Review of World Energy, 2005)

15

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8M

illio

n B

arre

ls p

er D

ay

2000 2003 2006 2009 2012 2015 2018 2021 2024Year

Supply Push Scenario

Eastern Canada

WCSB Condensate

WCSB Conventional Heavy

WCSB Conventional Light

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2000 2003 2006 2009 2012 2015 2018 2021 2024Year

Techno-Vert Scenario

Canada Scenarios of Oil Production Excluding Oil Sands (NEB, 2003)

Peak 2006 Peak 2005

(data from National Energy Board, July, 2003)

- The Oil Sands cannot significantly offset declines in world production because of the lead times and capital investment required. Massive expansions in the Oil Sands and Venezuelan Orinoco extra-heavy oil belt could increase combined production from 1.74 million barrels per day at present to as much as six million barrels per day by 2025, which is only 5% of EIA forecast World Demand in 2025.

Yes, But We’ve Got theOIL SANDS – More Oil than Saudi Arabia!

(1CERI report 2003)

- Oil from the oil sands is very energy intensive – Forecast four- to five-fold growth to 2025 will require between 1.6 and 2.3 bcf/day of natural gas, which is approximately equivalent to the planned maximum capacity of the MacKenzie Valley pipeline of 1.9 bcf/day, or about one-fifth of forecast Canadian domestic consumption.

- Expansion of capacity is limited by natural gas supply and natural gas price, which could destroy economics if there are shortfalls in supply, barring widespread application of non-thermal processes, or switching to alternative fuels.

- Expansion of capacity is limited by water supply (1need average of 1-2 barrels of make-up water for every barrel of oil, depending on recovery method and technology), let alone future expansion unless technologies to reduce water consumption and/or further recycle water can be employed.

- Expansion of bitumen export capacity may also be limited by projected shortfalls of condensate/light crude diluent for blending which are forecast to occur in the 2004-2006 timeframe (National Energy Board, 2003), requiring other alternatives such as synthetic crude or conventional light oil.

16

10 Km

Current Developments are Already on aMassive Scale Let Alone Quadrupiling Production

0

0.5

1

1.5

2

2.5

3

3.5

4

2000 2003 2006 2009 2012 2015 2018 2021 2024Year

Techno-Vert ScenarioOil Sands In SituOil Sands MiningEastern CanadaWCSB CondensateWCSB HeavyWCSB Light

0

0.5

1

1.5

2

2.5

3

3.5

4

Mill

ion

Bar

rels

per

Day

2000 2003 2006 2009 2012 2015 2018 2021 2024Year


Canada Scenarios of Oil Production Including Oil Sands (NEB, 2003)


Oil Sands2000-2025

+400%

Oil Sands2000-2025

+330%

In Situ +285%

Mining +503%

3.1% of EIA forecast 2025 World demand

In Situ +252%

Mining +400%

17

0

2

4

6

8

10

12

2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029Year

Mill

ion

Bar

rels

per

Day

Central and South America Africa Middle East Asia OECD Europe Other North America United States

9.7% of forecast 2030 World Oil Consumption

(data from Energy Information Administration, International Energy Outlook, June, 2006)

Canada +350%

South and Central America (mainly Venezuela) +360%

Overall Growth2003-2030 +539%

EIA World Unconventional Oil Production Forecast 2003-2030(Reference Economic Case, 2006) – includes Biodiesel, Ethanol,

Coal-to-liquids, Gas-to-liquids, Oil sands, Extra Heavy Oil and Oil shale

Asia +950%

United States +650%

SAIC / MISI(from Hirsh et al, 2005)

Hirsh et al, 2005

18

"Old" Con

ventio

nal Oil

"New" C

onve

ntional

Oil

Heavy

Oil

Extra H

eavy

Oil

Gas to

Liquids

Tar San

ds

Coal L

iquefacti

on

Biodies

el

Ethanol

Shale

Oil

Biodies

el

Ethanol

Source

Energy Profit Ratio for Liquid Hydrocarbons

Ene

rgy

Ret

urn

onE

nerg

y In

vest

ed

High

Low

EnergySource

(EROEI > 1)

EnergySink

(EROEI < 1)

Increasing Energy Input

(biodiesel, ethanol from University of MinnesotaProceedings of National Academy of Sciences

July, 2006, and Pimentel and Patzek, 2005,Nat Resources Research (Vol. 14:1, 65-76))

Universityof Minnesota

Pimenteland Patzek

In P

lace

Res

ourc

es

Oil Shale Oil Sands Heavy Oil,EnhancedRecovery

Light Oil,PrimaryRecovery

Energy Profit Ratio versus In Place Oil Resources(Energy Return on Energy Invested)

Energy Profit (EROEI > 1)

Energy Sink (EROEI < 1)

The Issue is Not Resources – its Deliverability – How FastCan These Resources be Converted into Supply in theFace of Growing Demand?, and at What Cost? We arenot running out of OIL – there will be oil in 100 millionyears - it just won’t be recoverable at an Energy Profit

19

- The third largest source of energy in the world after oil and coal (23.5% of primary energy consumption in 2005)

GAS

- Largely landlocked when it comes to international trade, unlike oil and coal –6.9% of World consumption (6.7 Tcf) was moved by Liquefied Natural Gas (LNG) in 2005

- Natural Gas is difficult to store by comparison to Oil and Coal (approximately 3.2 Tcf of “working” storage in the U.S. or 50 days of U.S. Supply) - North America is a Continental gas market- about 2.9% of North American (ie. U.S.A.) consumption was moved as LNG in 2005

- LNG entails an energy loss of between 15 and 30% for liquefaction, transportation and regasification, as LNG must be cooled to –165 degrees Celsius for movement by ship, with attendant greenhouse gas emissions

- LNG is subject to Geopolitics as three-quarters of remaining natural gas reserves are located in the Former Soviet Union and the Middle East, as well as the NIMBY syndrome in locating new receiving terminals in North America because of perceived dangers by the general public

0

50

100

150

200

250

Billi

on c

ubic

feet

per

Day

1970 1975 1980 1985 1990 1995 2000 2005Year

0

50

100

150

200

250

Billi

on c

ubic

feet

per

Day

1970 1975 1980 1985 1990 1995 2000 2005Year

Asia PacificAfricaMiddle EastFormer Soviet UnionEuropeS. & Cent. AmericaNorth America

World Gas Production and Consumption: 1970-2005Production Consumption

15%

2220%

1389%

311%

191% 671%

12%


5167%

606%363%

219%

1419%

2527%

168% increase in Consumptionup 2.3% 2005 over 2004

20

Forecast World Gas Consumption 2003-2030in Three Economic Cases (EIA, 2006)

020406080

100120140160180200220240

2003

2005

2007

2009

2011

2013

2015

2017

2019

2021

2023

2025

2027

2029

Year

Qua

drill

ion

Btu


+67%

+120%

+92%


Projections

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Perc

enta

ge o

f Rem

aini

ng R

eser

ves

1980 1983 1986 1989 1992 1995 1998 2001 2004Year

0

1000

2000

3000

4000

5000

6000

7000

Tri

llion

Cub

ic F

eet

1980 1983 1986 1989 1992 1995 1998 2001 2004Year

World Gas Reserves: 1980-2005


Middle East

FormerSoviet Union

AfricaAsia Pacific

S. & C. AmericaEurope

North America

FormerSoviet Union

Middle East

Asia Pacific

AfricaEurope

S. & C. AmericaNorth America

29%

38%

40%

32%

4%12%

21

0

20

40

60

80

100

120Y

ears

of P

rodu

ctio

n at

Cur

rent

Rat

es

North America Europe Rest of World Total World

World Natural Gas Reserve to Production Ratio in Years1990-2005

1990199119921993199419951996199719981999200020012002200320042005


0

5

10

15

20

25

Bill

ion

barr

els

per

yea

r

1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050Year

Campell's 2006 Gas Production and Forecast 1930-2050

Unconventional GasConventional Gas

Peak/PlateauConventional Gas

2025


Peak of All Gas2045

22

0

10

20

30

40

50

60B

illio

n ba

rrel

s pe

r y

ear

1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050Year

Campell's 2006 Total Hydrocarbon Production and Forecast 1930-2050

Unconventional GasGas Peak/Plateau 2025Natural Gas Liquids Peak 2030Polar Oil Peak 2030Deep Water Oil Peak 2011Heavy Oil Peak 2030Other Peak 2004Russia Peak 1987Middle East Gulf Peak 2005Europe Peak 2000US-48 Peak 1970

Total HydrocarbonPeak 2010


Liquids Peak 2010

0

10

20

30

40

50

60

70

Bill

ion

cubi

c fe

et p

er D

ay

1985 1990 1995 2000 2005

Year

United States

05

101520

Bill

ion

cubi

c fe

et p

er D

ay

1985 1990 1995 2000 2005

Year

Canada

Exports

Consumption

North American Gas Production and Movements: 1985-2005


Total Consumption

Imports

Production

Canada: 121% increase inProduction 1985-2005;Production down 1.3%

since 2002

51%

PeakProduction

2001

PeakProduction

2002

23

0

10

20

30

40

50

60

70

80Y

ears

of P

rodu

ctio

n at

Cur

rent

Rat

es

U.S.A. Canada Mexico North America

North America Natural Gas Reserve to Production Ratio in Years 1990-2005

1990199119921993199419951996199719981999200020012002200320042005


63%

24%

13%

CONSUMED

PROVENRESERVES(9.4 years)

RESOURCES(4.9 years)

15%

8%

77%

PROVENRESERVES(9.4 years)RESOURCES

(4.9 years)HOPED FOR:

UNDISCOVEREDRESOURCES

(46.9 years)

Canada’s Remaining Discovered and Undiscovered ConventionalMarketable Natural Gas Resources According to NEB (2006)Estimates including Lifetime assuming 2005 Production Rates

Discovered ResourcesRemaining Discovered

and Undiscovered Resources(Resource estimates from National Energy Board, March, 2006, Report 2006-A, as at December 31, 2004;

2004 Proven Reserves from CAPP, 2006; 2005 Production from Statistics Canada, 2006)

24

50

51

52

53

54

55

56

57

58

59

60

61

62

63

64

65

66

Res

erve

s (T

cf)

1996 1998 2000 2002 2004Year

0123456789

1011121314151617

Prod

uctio

n (b

cf/d

ay)

1996 1998 2000 2002 2004

Year

0

2000

4000

6000

8000

10000

12000

14000

16000

Num

ber

of G

as W

ells

Dri

lled

1996 1998 2000 2002 2004Year

Canada’s Exploration Treadmill – more and more drillingto find less and less gas

(Drilling Statistics: Canadian Association of Petroleum Producers;Marketable Production: Statistics Canada; Remaining Reserves: Canadian Association of Petroleum Producers)

Wells Drilled Production Reserves

2005 Estimated

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

MM

cf/d

ay

2001 2005 2009 2013 2017 2021 2025Year


0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

MM

cf/d

ay

2001 2005 2009 2013 2017 2021 2025Year


WCSB Solution WCSB Existing Gas WCSB Additions Sable

NEB, July, 2003, Deliverability Scenarios from Existing Gas Sources

Peak 2001 Peak 2001

25

Annual Canadian Marketable Natural Gas Production by Month January 1991 - July 2006

(12 month centered moving average)

3.5

4

4.5

5

5.5

6

6.5

Jan-91

Jan-92

Jan-93

Jan-94

Jan-95

Jan-96

Jan-97

Jan-98

Jan-99

Jan-00

Jan-01

Jan-02

Jan-03

Jan-04

Jan-05

Jan-06

Month

Tri

llion

cub

ic fe

et p

er Y

ear

(Source of data Statistics Canada, October, 2006)

GrowthDecline/

StagnationPeak/

Plateau

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

MM

cf/d

ay

2001 2005 2009 2013 2017 2021 2025Year


WCSB Solution WCSB Non-Associated WCSB AdditionsSable Newfoundland PanukeMackenzie NS Offshore BC OffshoreLNG Imports NB LNG Imports Quebec

NEB, July, 2003, Deliverability Scenarios from Existingand Proposed Conventional Gas Sources

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

MM

cf/d

ay

2001 2005 2009 2013 2017 2021 2025Year


Peak 2001 Peak 2001

26

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000M

Mcf

/day

2001 2005 2009 2013 2017 2021 2025Year


WCSB Solution WCSB Non-Associated WCSB AdditionsSable Newfoundland PanukeMackenzie NS Offshore BC OffshoreLNG Imports NB LNG Imports Quebec CBM

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

MM

cf/d

ay2001 2005 2009 2013 2017 2021 2025

Year


NEB, July, 2003, Deliverability Scenarios from Existingand Proposed Conventional Gas Sources Including Coalbed Methane

CBM

CBM

Peak 2010 Peak 2015

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

Tri

llion

Cub

ic F

eet p

er Y

ear

1997 1999 2001 2003Year

U.S. Coalbed Methane Production

ColoradoNew MexicoAlabamaOther States

New MexicoPeak 1997

ColoradoPeak – Plateau

2002 - 2004

Other States Peak 2003

65%

of U

.S. C

BM

Pro

duct

ion

(Source of data Energy Information Administration, 2006; National Energy Board, July, 2003)

8.5% of U.S. Production16 Tcf recovered to date

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

Tri

llion

Cub

ic F

eet p

er Y

ear

2003 2007 2011 2015 2019 2023Year

NEB Canadian CBM Production Scenarios

Supply-Push - 11.8 Tcf by 2025Techno-Vert - 19.5 Tcf by 2025

23% of Canadian production

Actual Coalbed Methane Production in the U.S. 1997-2004 Comparedto NEB Coalbed Methane Production Scenarios 2003-2025

AlabamaPeak 1998

We areHere

27

0

2000

4000

6000

8000

10000

12000

MM

cf/d

ay2002 2006 2010 2014 2018 2022

Year


0

2000

4000

6000

8000

10000

12000

MM

cf/d

ay

2002 2006 2010 2014 2018 2022Year



53% growth in domesticconsumption 2002-2025

53% growth in domesticconsumption 2002-2025

NEB, 2003, Canadian Domestic Natural Gas DemandScenarios by Sector, 2002-2025

Industrial

ElectricityResidentialCommercialOther

Industrial

ElectricityResidentialCommercial

Other

+343%2002-2025

+200%2002-202523%

16%

0

2

4

6

8

10

12

14

16

18

20

22

24

26

28

30

Tri

llion

Cub

ic F

eet/Y

ear

1997 1998 1999 2000 2001 2002 2003 2004 2005

Year

Electric PowerResidentialCommercialGas Production/DeliveryIndustrial

-16.8%

-22.2%Demand Destruction

Due to Price

-2.9%

U.S. Gas Consumption by Sector, 1997-2005

(data from Energy Information Administration, 2006)

Overall Decline-3.4% 1997-2005

-4.5%

+42.6%Due to Major Capacity Expansion

Peak Consumption 2000

28

0

5

10

15

20

25

30T

rilli

on c

ubic

feet

per

yea

r_

2005 2010 2015 2020 2025 2030Year

U.S. Natural Gas Supply Forecast by Source 2005-2030(Energy Information Administration)

Lower 48 - Onshore

Canada Imports

Liquefied NaturalGas +580%

Lower 48Production

Up 9.5%2005-2014

Lower 48Production

Declines 1.5%2014-2024

(data from Energy Information Administration Annual Energy Outlook, 2006)

24.9 Tcf

Supply Peaks at 26.5 Tcf15% Total Growthfrom 2005-2030

Lower 48 - Offshore

Alaska

16

17

18

19

20

Tri

llion

Cub

ic F

eet p

er Y

ear

1993 1995 1997 1999 2001 2003 2005Year

U.S. Dry Gas Production1993-2005

(data from U.S. Energy Information Administration, April, 2006)

2014 EIA Forecast

0

5000

10000

15000

20000

25000

30000

Num

ber

of S

ucce

ssfu

l Gas

Wel

ls D

rille

d

1993 1995 1997 1999 2001 2003 2005Year

U.S. Gas Wells Drilled1993-2005

The U.S. Gas Exploration Treadmill

ProductionPeak

July 2001

29

0

1

2

3

4

5

6

7

8

9

Tcf/Y

ear

2005 2008 2011 2014 2017 2020 2023

Year


0

1

2

3

4

5

6

7

8

9Tc

f/Yea

r

2005 2008 2011 2014 2017 2020 2023Year


(data from National Energy Board, July, 2003,and EIA Annual Energy Outlook, 2006)

Shortfall

Net Available for Exports

Domestic Consumption

Total ForecastDomestic Production

Requirement:Domestic Demand

Plus ForecastEIA Exports

Canadian Shortfalls in Gas Supply Given Domestic Production Scenariosand Forecast EIA (AEO 2006) Reference U.S. Import Requirements

Note: Forecast Canadian LNG Imports areExcluded from Domestic Production

1.1 TcfNet Available for Exports

Domestic Consumption

Total ForecastDomestic Production

0

5

10

15

20

25

30

35

Tcf/Y

ear

2005 2009 2013 2017 2021 2025Year


Liquefied Natural GasCanada ShortfallCanada ImportsAlaskaLower 48

(data from Energy Information AdministrationAnnual Energy Outlook, 2006, and National Energy Board, July, 2003)

0

5

10

15

20

25

30

35

Tcf/Y

ear

2005 2009 2013 2017 2021 2025Year


Liquefied Natural GasCanada ImportsAlaskaLower 48

4.1

Tcf(

15.6

%)

U.S. Supply with Canadian Imports and Shortfalls Given NEB, 2003, SupplyScenarios and EIA (2006) Reference Case Supply Scenario

LiquefiedNatural Gas

Canada

Lower 48Production

Lower 48Production

Canada

Shortfall


5.2

Tcf(

19.7

%)

Alaska Alaska

30

17.5

18

18.5

19

19.5

20Tr

illio

n cu

bic

feet

/Yea

r

Jan-93

Jan-94

Jan-95

Jan-96

Jan-97

Jan-98

Jan-99

Jan-00

Jan-01

Jan-02

Jan-03

Jan-04

Jan-05

Jan-06

Month

U.S. Annual Dry Gas Production Rate by Month January1993 - June 2006 (centered 12 month moving average)

(Data from Energy Information Administration, September, 2006; Forecast from EIA Annual Energy Outlook, 2006)

Growth 1.1%/Year

Peak July 2001EIA 2014Forecast

Decline1.7%/Year

Down7.6%

LowestLevelSinceJuly1993

0

5

10

15

20

25

30

35

Tcf/Y

ear

2005 2009 2013 2017 2021 2025Year


Liquefied Natural GasU.S. ShortfallCanada ImportsAlaskaLower 48

(data from Energy Information AdministrationAnnual Energy Outlook, 2006, and National Energy Board, July, 2003)

10 T

cf(3

7.6%

)

U.S. Supply with Canadian Imports and Shortfalls Given NEB, 2003, SupplyScenarios and EIA Reference Case Supply Scenario with

1.5% Yearly Decline in Lower 48 Production

Alaska


U.S. Shortfall

0

5

10

15

20

25

30

35

Tcf/Y

ear

2005 2009 2013 2017 2021 2025Year


Liquefied Natural GasCanada ShortfallU.S. ShortfallCanada ImportsAlaskaLower 48

1.5% YEARLY DECLINEin Lower 48 Production

Canada


11.1

Tcf

(41.

8%)

U.S. ShortfallCanada

Alaska

1.5% YEARLY DECLINEin Lower 48 Production

Alaska

31

- IMPLICATIONS – If supply and demand forecasts are to be believed, there appear to be serious supply shortfalls in Continental natural gas coming – Canada is unlikely to be able to fill the supply gap

FUTURE OUTLOOK:

- SOLUTIONS - probably involve a portfolio of options:

- LNG – already factored into existing forecasts; GEOPOLITICAL + NIMBY IMPLICATIONS

- Unconventional Gas - already factored into existing forecasts in a big way

- Fuel Switching – to oil or coal – capacity quite limited without new capital investment

- Destroy Demand – move gas intensive industries offshore (fertilizer and petrochemical plants) -this is already happening; GEOPOLITICAL IMPLICATIONS

- Conservation and Efficiency

LNG Logistics- Production = $US .50-$1.00/mcf- Liquefaction = $US .80-$1.00/mcf

- Shipping = $US .50-$1.45/mcf- Receiving = $US .24-$.40/mcf- TOTAL = $US 2.04-$3.85/mcf

(U.S. 2005 Imports priced at $US 5.72-$7.44/mcf)(1Reimer, Freeport LNG, 2003; EIA November, 2005)

OPERATING COSTS (FREEPORT, TEXAS1):

32

0

0.4

0.8

1.2

1.6

2

2.4T

rilli

on c

ubic

feet

per

Yea

r

Indon

esia

Mala

ysiaQata

r

Algeria

Australi

a

Trinida

d & T

obag

o

Nigeria

OmanBru

neiUAE

Egypt

USALibya

Producers

0

0.4

0.8

1.2

1.6

2

2.4

Tri

llion

cub

ic fe

et p

er Y

ear

Japan

South K

oreaSpa

inUSA

Franc

e

Taiwan

India

Turkey

Belgium

Italy

Portug

al

Puerto R

ico UKGree

ce

Dominica

n Rep

ublic

ConsumersTotal = 6.67 Tcf

LNG Producers and Consumers in 2005


Producers Consumers

COVERING PROJECTED U.S. SHORTFALLS OF 4-11 TCF/YEAR WITH LNG WOULD REQUIRE NEARLY DOUBLING TO TRIPLING THE WORLD’S PRESENT LNG CAPACITY (the U.S. will also be in competition with many other countries for LNG supplies). EXPANSION OF NORTH AMERICAN LNG CAPACITY TO 11 TCF/YEAR WOULD REQUIRE ON THE ORDER OF:

LNG Logistics

- 200 New 3bcf capacity LNG Tankers- 30 New 1bcf/day North America-based receiving terminals- 56 New Foreign-based 200 bcf/year liquefaction trains- Capital investment in the order of $US100-200 Billion- Time to Build Total Capacity = 10-20+ Years - OVERCOMING THE NIMBY SYNDROME IN LOCATING

NEW TERMINALS- ACCEPTING THE GEOPOLITICAL IMPLICATIONS

OF DEPENDENCY ON OFFSHORE SUPPLY SOURCES

33

(8.3 bcf/d)

(14.55 bcf/d)

(2.61 bcf/d)

(3.1 bcf/d)

(2.6 bcf/d)

(26.97 bcf/d)

(5.835 bcf/d)

Total = 63.965 bcf/d

Cancelled Terminals-Cheniere LNG, Brownsville, TX-Cheniere LNG, Pinto Island, AL-Fairwinds LNG, Harpswell, ME

-Hope Island LNG, ME-Humbolt Bay LNG, Eureka, CA-Mare Island LNG, Vallejo, CA

-Navy Homeport LNG, Mobile, AL-NJ Energy Bridge, Belmar, NJ

-Ormond Beach LNG, CA-Radio Island LNG, NC

-Tampa LNG, Tampa, FL-Tijuana Energy Center, Tijuana, MX

-Offshore Shell Gulf Landing, LA-Pearl Crossing ExxonMobil, GOM

Southern Offshore Crystal Energy, CA

Category 4 and 5 Hurricanes in the Gulf of Mexicoare becoming an increasing Risk for Oil and Gas

Production and Delivery Systems(Few platforms can withstand Category 4 Hurricanes)

34

Power Dissipation Index of Hurricanes versusSea Surface Temperature 1940-2010

(from Kerry Emanuel (Nature, Vol. 436/4, Aug. 2005)

0

2

4

6

8

10

12

14

16

18

20

2000 2005 2010 2015 2020 2025Year

Num

ber

of T

erm

inal

s

Balanced CaseReactive CaseLow Sensitivity Case

Available Receiving Terminals

Maximum 9 NewTerminals by 2025

0

10

20

30

40

50

2005 2008 2011 2014 2017 2020 2023Year

Bill

ion

cubi

c fe

et p

er D

ay

Flat1.5%/year decline3%/year decline

(data from National Petroleum Council 2003; supply gap based on Energy Information Administration,Annual Energy Outlook 2006 forecasts and National Energy Board 2003 Supply Push scenario for Canada)

Supply Gap with Different Lower-48 Production Scenarios

LNG Supply Forecasts of U.S. National PetroleumCouncil (September, 2003) versus Requirement Scenarios

-3%

-1.5%

Flat

Low Sensitivity

ReactiveBalanced

35

"Old" Con

ventio

nal Gas

"New" C

onve

ntional

Gas

Impo

rted LNG

Tight G

as

Coalbed

Meth

ane

Coal G

asific

ation

Shale

Gas

Gas Hyd

rates

(so f

ar)

Compr

essed

Hyd

roge

n

Liquid Hyd

roge

n

Source

Energy Profit Ratio for Natural Gas and Alternatives

Ene

rgy

Ret

urn

onE

nerg

y In

vest

ed

High

Low

EnergySource

(EROEI > 1)

EnergySink

(EROEI < 1)

Increasing Energy Input

In P

lace

Res

ourc

es

Shale Gas Coalbed Methane Tight Gas Conventional Gas

Energy Profit Ratio versus In Place Gas Resources(Energy Return on Energy Invested)

Energy Profit (EROEI > 1)

Energy Sink (EROEI < 1)

As with Oil, the Issue is Not Resources – its Deliverability– GAS resources with a low EROEI tend to produce at

much lower rates and have a vastProportion of their in place resources that will

never be recoverable (ie. Energy Sinks)

36

- Two-thirds of the world’s remaining hydrocarbon energy

COAL- 27.8% of the world’s primary energy consumption in 2005 – second only to OIL – Projected by EIA to be fastest growing fuel through 2030

- Used for electricity generation (more so than any other fuel), primary heat and in the steel industry

- Lowest cost heat source: $0.84-$3.00US/gigajoule versus $9.52US/gigajoule for gas and $9.69US/gigajoule for oil

- Double the carbon footprint of gas using conventional technology –with advanced “clean coal” technologies the carbon footprint can be reduced almost to that of gas (but costs $$$)

- Fastest growing hydrocarbon fuel source: consumption has grown 23% since yearend 2001 (5.0% in 2005)

0

500

1000

1500

2000

2500

3000

1981 1985 1989 1993 1997 2001 2005

Year

Consumption

0

500

1000

1500

2000

2500

3000

Mill

ion

tonn

es o

il eq

uiva

lent

19811985 19891993 1997 2001 2005Year

Production

Asia PacificAfricaMiddle EastF.S.U.EuropeS. & C. AmericaNorth America

World Coal Production and Consumption: 1981-2005

233%

82%

-51%

-36%

27%


222%

79%-45%

-26%

42%

World Consumption up 23% (1.1%/year)


Worldwide CoalConsumption has Increased by 23% since 2001

52% increase in Productionup 5.2% 2005 over 2004

37

Forecast World Coal Consumption 2003-2030 in Three Economic Cases (EIA, 2006)

020406080

100120140160180200220240

2003

2005

2007

2009

2011

2013

2015

2017

2019

2021

2023

2025

2027

2029

Year

Qua

drill

ion

Btu


+66%

+131%

+95%


Projections

Consumption in 2005

Oil41%

Gas 27%

Coal32%


Remaining Reservesby Energy Content

Coal59%

Oil22%

Gas 19%

World Hydrocarbon Consumption in 2005Versus Remaining Hydrocarbon Energy Reserves

By Energy Content

38

0

1000

2000

3000

4000

5000

6000

7000

8000E

xajo

ules

NorthAmerica

S. & C.America

Europe FormerSovietUnion

MiddleEast

Africa AsiaPacific

Region

World Remaining Recoverable Hydrocarbon Reserves by Energy Content (2005)

CoalGasOil


0

1

2

3

4

5

6

7

8

9

10

US

Dol

lars

per

Gig

ajou

le

Hydrocarbon Fuel Type

Price of Hydrocarbons per Gigajoule in 2005

Mine Mouth SubbituminousCoal @ $14.00 US/tonneU.S. Domestic BituminousCoal @ $50.00 US/tonneExport Thermal Coal @$83.00 US/tonneNatural Gas @ $10.00 US/mcf

Oil @ $60.00 US/bbl Oil$9.69/Gj

Gas$9.52/Gj

ExportThermal

Coal$3/Gj

Mine MouthSubbituminousCoal $0.84/Gj

DomesticBituminous

Coal $1.82/Gj

39

Energy Content in Recoverable Remaining Ultimate Potential of Hydrocarbons in Alberta (in exajoules)

Coal682 billion tons

13,633 EJ86%

Crude Oil5 billion bbls

32.5 EJ0.2%

Crude Bitumen311.5 billion bbls

2121.6 EJ13%

Natural Gas94 Tcf92.4 EJ0.6%

(data from Alberta Energy and Utilities Board, 2003)

- Availability of reliable electricity defines our modern civilization

ELECTRICITY

- Electricity in essence cannot be stored in bulk – it must be generated on demand

- We convert hydrocarbons to electricity at an energy penalty of from 30 to 70%

- Electricity is transmitted to points of use with losses depending on transmission distance – IT IS NOT A WORLD TRADABLE COMMODITY

40

0

1000

2000

3000

4000

5000

Tera

wat

t-ho

urs

1990 1992 1994 1996 1998 2000 2002 2004Year

North America

MexicoCanadaUSA

0

5000

10000

15000

20000

Tera

wat

t-ho

urs

1990 1993 1996 1999 2002 2005Year

World

Asia PacificAfricaMiddle EastFormer Soviet UnionEuropeS. &. C. AmericaNorth America

Generation of Electricity: 1990-2005


143%

-19%

30%

87%

34%

33%

23%

90%

68%



149%

Forecast World Electricity Consumption 2003-2025 in Three Economic Cases (EIA, 2006)

0

4000

8000

12000

16000

20000

24000

28000

32000

36000

2003

2005

2007

2009

2011

2013

2015

2017

2019

2021

2023

2025

2027

2029

Year

Ter

awat

t-ho

urs


+73%

+138%

+104%


Projections

41

Forecast World Electricity Generation by Fuel 2003-2030 (Reference Case EIA 2006)

0

50

100

150

200

250

300

2003

2005

2007

2009

2011

2013

2015

2017

2019

2021

2023

2025

2027

2029

Year

Qua

drill

ion

Btu


MarketShare

Oil +50%

Natural Gas +116%

Coal +84%

Hydro/Renewables +94%

Nuclear +31%18.1%

16.2%

40.9%

18.6%6.2%

19.4%

11.7%

41.5%

22.2%

6.2%

81% Growth 2003-2030

0

1000

2000

3000

4000

5000

6000

Ter

awat

t Hou

rs

2005 2010 2015 2020 2025 2030Year

RenewablesNuclearPetroleumGasCoal

Coal +59%

Gas +24%

Nuclear +12%Renewables +48%

41% totalincrease

2005-2030

Forecast U.S. Electricity Generation by Fuel Type 2005-2030(EIA Annual Energy Outlook, 2006, Reference Economic Case)

(data from Energy Information Administration Annual Energy Outlook, 2006)

58%

15%

16%

9%

42

0

200

400

600

800

1000

1200

Ter

awat

t Hou

rs

2000 2003 2006 2009 2012 2015 2018 2021 2024Year


RenewablesNatural GasOilOrimulsionCoalNuclearHydro

0

200

400

600

800

1000

1200

Ter

awat

t Hou

rs

2000 2003 2006 2009 2012 2015 2018 2021 2024Year


RenewablesNatural GasOilOrimulsionCoalNuclearHydro

Canadian Electricity Generation Scenarios by Fuel, 2000-2025


19.3%

61.3%

42%

421%

18.6%

98.3%

1%

274%

644%

52.4% totalincrease

2002-2025

50.6% totalincrease

2002-2025

Implementation Times and Other ConsiderationsFor New Electricity Infrastructure

VERYHIGH

HIGH -VERYHIGH

MOD-HIGHLOW-MOD

Capital Cost

6-10+5-12+5-7+1-2+Time to startup

(years)

VERY LOW2

VERY LOW1

MOD(now)LOW(future)

LOWEnvironmental Footprint

VERYLOW

VERYLOW

LOWVERYHIGH

Fuel Cost

HYDRONUCLEARCOALGASFACTOR

1 If the as yet unsolved problem of waste disposal is not considered2 If the environmental costs of flooding river valleys, siltation

and ecosystem impacts are not considered

43

GasCoalNuclearWindOther

1998-2005 – 236 Gwatts 2006-2015 – 95 Gwatts

GAS

GAS

COAL

WIND

North American Generating Capacity ExpansionBy Fuel (1998-2015)

(data from National Electricity Reliability Council, October, 2006)

Total Expansion 331 Gwatts or ~30%

THERE IS A DISCONNECT BETWEEN WORLD OIL RESERVESAND FORECAST OIL CONSUMPTION:

Implications for Sustainability - OIL

- World Oil Production could peak in the 2008-2012 timeframe (consensus) – even the Optimist’s Reference Case says 2018 if peak symmetrical or 2040 if peak at 82% of Ultimate Recoverable Conventional Oil consumed.

- OPEC has most of what’s left and could become the dominant oil supplier before the end of the decade, but will need to rapidly expand its production capacity which could be problematic.

- Industrialized countries will be in competition with rapidly growing consumers in the Developing World over a finite supply, with attendant impacts on economic growth due to oil price (which will shape the world oil production profile at peak).

- Even with a four- or five-fold expansion of production from the Oil Sands, Canada will be a small player in World Oil Supply (about 3% of forecast 2025 World Demand with net export capacity of about 1% of forecast 2025 World Demand).

- Supply from Unconventional Oil is unlikely to compensate for the decline in Conventional Oil Production. Unconventional liquids production including biodiesel, ethanol, coal-to-liquids, gas-to-liquids, oil sands and oil shale is forecast to meet less than 10% of 2030 World demand.

44

THERE IS A DISCONNECT BETWEEN NORTH AMERICAN GAS DELIVERABILITY AND FORECAST CONSUMPTION:

Implications for Sustainability - GAS

- Several existing producing areas in North America are in or near decline.

- Higher cost frontier and offshore conventional production and non-conventional production from coalbed methane, tight gas and shale gas likely cannot forestall the declines in conventional production for long and cannot provide for forecast aggressive domestic demand and export growth, unless as-yet-unproven windfalls result from hydrates, coalbed methane, shale gas etc.

- The United States will require between 16 and 42% of projected demand to be met by offshore sources by 2025, depending on the success of the development of non-conventional gas in the U.S. and Canada, the pace of new conventional development in Canada, the realization (or lack thereof) of optimistic supply additions in the U.S., and the development of LNG import capacity in the U.S. and Canada.

- Solutions include conservation/efficiency, LNG imports, (which would mean large investments in new infrastructure), demand destruction, (move intensive fertilizer/petrochemical industries offshore), additional non-conventional gas and fuel switching.

- The North America Electric Reliability Council (NERC, October, 2006) indicates 224 gigawatts of new gas-fired generation was completed in 1998-2005 and forecasts new gas-fired supply growth of 43 gigawatts through 2012 (25% NA gas-fired grid expansion 1998-2012)

Implications for Sustainability - ELECTRICITY

- Electricity generation accounted for 24.3% of U.S. gas consumption in 2005 (EIA, 2006) and is expected to account for 28% in 2020 (EIA, 2006)

- Forecast shortfalls in supply of natural gas could jeopardize future availability of a secure electricity supply unless new supplies can be secured

- Renewable energy - biomass, wind and photovoltaics must be emphasized but will realistically only provide a relatively small incremental supply (eg. Wind represents about 0.5% of Canada’s generating capacity at present).

- Nuclear is limited by capital cost, public perceptions and environmental impact (Waste storage at Yucca Mtn. will cost $US50billion+ to build and will be completely filled with U.S. wastes since the beginning of the Atomic Age). The EIA (2006) forecasts only modest growth in world electricity generation from nuclear through 2030 (31%) with declines thereafter – this translates into a reduction in market share. The EIA AEO 2006 reference economic case indicates only 12% growth in U.S. nuclear capacity through 2030. - Large Hydro is limited by lack of available sites and environmental costs

45

- Two-thirds of World’s remaining hydrocarbon energy (90% of North America’s)

Implications for Sustainability - COAL

- Lowest cost hydrocarbon energy - cost is 9% to 32% that of gas and oil at $US10/mcf and $US60/bbl, but double the carbon footprint of gas with old technologies

- New more efficient utilization technologies, with reduced GHG emissions, are the key to expanded coal use:

- Higher Efficiency Generation new existing technologies can raise thermal efficiency from 32% to 45% with a corresponding reduction in GHG emissions of 30%, but they are expensive (SCPC, IGCC) – expected future improvements in efficiency to 50% (2010) and 60% (2020) (Vision 21 USDOE).ITS HAPPENING – eg. NIEDERAUSSEM 3900 MWATT GERMAN PLANT @ 43.2% EFFICIENCY; VATTENFALL OXYFUEL PILOT IN GERMANY- Petrochemicals from Coal (POLYGENERATION) – gasification, liquefaction,

in situ gasification for deep coal utilization

- Hydrogen from coal (competes with H2 from natural gas @ $4.00US/mcf –China produces 5 Mt of H2/year from coal for fertilizers) or in conjunction with electricity generation (IGCC, ZECA - higher cost)

- “Zero Emission” utilization through CO2 sequestration in coal seams, depleted oil and gas reservoirs and saline aquifers

- Hydrogen is an ENERGY CARRIER not an ENERGY SOURCE

HYDROGENThe Silver Bullet?

- Because of energy losses in production of hydrogen from hydrocarbons or electrolysis, a “Hydrogen Economy” could actually exacerbate the greenhouse gas emission and Global Warming Problem, if hydrogen cannot be generated exclusively from renewable sources (conversion from gas loses 30% and from electolysis 28% (not including the losses from hydrocarbons to electricity – a further 30-70%))

- Hydrogen is largely created from hydrocarbons or electrolysis, each of which can be used directly without the energy conversion losses to hydrogen

- The stock brokers have already figured it out - witness “Hydrogen’s non-future” published in the Financial Post of April 3, 2004, based on BMO Nesbitt Burns analysis of the Hydrogen Economy

46

0

2

4

6

8

10

12

14

0 1 2 3 4 5 6 7 8 9 10Energy Density by Volume (KWh/litre)

Ene

rgy

Den

sity

by

Wei

ght (

KW

h/kg

)

GasolineDiesel

Propane

MethanolNatural Gas@ 25Mpa*

Liquid H2 @ -253C*

H2 Gas @ 25Mpa*

BatteriesLead, Lithium*

Metal Hydride

Energy Density of Hydrogen in ComparisonWith Other Energy Carriers

*Includes Weight of Containment Vessel (data from Dr. Werner Zittel et al, 1996)

World Primary Energy Shares - 1850 to 2100Given Oil and Gas Supply Limitations

Source - World Coal Institute

47

The Last Piece of the Energy Sustainability Puzzle:

POPULATION GROWTHand

ASPIRATIONS OF GROWTH IN ENERGY CONSUMPTION

IN THE DEVELOPING WORLD

0

1

2

3

4

5

6

7

8

9

Ton

nes

Oil

Equ

ival

ent p

er C

apita

Canad

aU.S.

A.Aus

tralia

Sout

h Kor

eaJa

pan

Britain

F.S.U.

Wor

ld Ave

rage

Brazil

China

Indo

nesia

India

Pakist

anBan

glade

sh

Region

Primary Per Capita Energy Consumption of Selected Countries in 2001

14.4% ofWorld Population

48.4% ofWorld Population

(data from BP Statistical Review of World Energy, 2002, and United Nations World Database, 2002)

There is a Great Inequity in Energy Consumption Worldwide

48

0

1000

2000

3000

4000

5000

6000M

illio

n T

onne

s Oil

Equ

ival

ent

1965 1969 1973 1977 1981 1985 1989 1993 1997 2001Year

Industrialized World (excluding F.S.U.)

Hydro Nuclear Coal Gas Oil

0

500

1000

1500

2000

2500

3000

3500

1965 1969 1973 1977 1981 1985 1989 1993 1997 2001

Year

Developing World

Hydro Nuclear Coal Gas Oil

Primary Energy Consumption by Economic Development: 1965-2001

Increase of 467.6% or 72.3 mtoe/year

Increase of 87.2%or 64.9 mtoe/year

(data from BP Statistical Review of World Energy, 2002, and United Nations World Database, 2002)

5.23 Tonnes Oil Equivalent/Person0.96 Billion People

0.65 Tonnes Oil Equivalent/Person4.88 Billion People

59%More

0

200

400

600

800

1000

1200

1400

1600

Mill

ions

of P

eopl

e

1965 1975 1985 1995 2005 2015 2025

Year

Population

0

0.5

1

1.5

2

2.5

Tons

Oil

Equi

vale

nt

1965 1975 1985 1995 2005 2015 2025

Year

Per Capita Consumption

0

500

1000

1500

2000

2500

3000

3500

Mill

ion

Ton

s Oil

Equ

ival

ent

1965 1975 1985 1995 2005 2015 2025

Year

Total Energy Consumption

(Consumption History: BP Statistical Review of World Energy, 2006; Population History and Forecast: United StatesCensus Bureau, 2006; Consumption Forecast: Energy Information Administration World Energy Outlook, June, 2006)

China Population and Energy ConsumptionHistory and Forecasts (1965-2030)

History+83%

Forecast+12%

History+367%

Forecast+92%

History+752%

Forecast+115%

49

0

200

400

600

800

1000

1200

1400

Mill

ion

Tonn

es O

il Eq

uiva

lent

1981 1984 1987 1990 1993 1996 1999 2002Year

HydroNuclearCoalGasOil

0

200

400

600

800

1000

1200

1400M

illio

n To

nnes

Oil

Equi

vale

nt

1981 1984 1987 1990 1993 1996 1999 2002Year

HydroNuclearCoalGasOil

CHINA: The World’s Number 2 Consumer of EnergyPrimary Energy Production and Consumption by Fuel: 1981-2004

Production Consumption

264%

208%

415%

219%

72%


Coal

OilOil

Coal

415%

Average 8.1%/year growth in Production over the period - up 12.1% 2004 over 2003

Average 9.6%/year growth in Consumption over the period - up 15.1% 2004 over 2003

Deficit 3.2MMbbls/day

AsiaFlu

1980 1983 1986 1989 1992 1995 1998 2001 2004

S u rp lu s-3.5

-3

-2.5

-2

-1.5

-1

-0.5

0

0.5

1

1.5

Mill

ion

Bar

rels

per

Day

Year

SurplusDeficit


2005 Deficit 3.36 MMbbls/day(2005 DEFICIT = 4.1% OF WORLD CONSUMPTION)

48% ofDemand

CHINA’s Oil Production Surplus and Deficit 1980-2005

2005 Consumption up 3.2%2005 Production up 4.2%1996-2005 average consumption up 7.6%/year1996-2005 average production up 1.97%/year

50

0

200

400

600

800

1000

1200

1400

1600M

illio

ns o

f Peo

ple

1965 1975 1985 1995 2005 2015 2025

Year

Population

0

0.1

0.2

0.3

0.4

0.5

0.6

Tons

Oil

Equi

vale

nt

1965 1975 1985 1995 2005 2015 2025

Year


0

100

200

300

400

500

600

700

800

Mill

ion

Tons

Oil

Equi

vale

nt

1965 1975 1985 1995 2005 2015 2025

Year



India Population and Energy ConsumptionHistory and Forecasts (1965-2030)

History+121%

Forecast+40%

History+231%

Forecast+44%

History+632%

Forecast+102%

1980 1985 1990 1995 2000 20050

0.5

1

1.5

2

2.5

Mill

ion

Bar

rels

per

Day

Year(data from BP Statistical Review of World Energy, 2006)

2006 Imports = 1.7 MMbbls/day(2.0% OF WORLDCONSUMPTION) 69% of

Demand

INDIA’s Oil Production and Imports 1980-2005

2005 Consumption down -3.4%2005 Production down -3.9%1996-2005 average production down -0.23%/year1996-2005 average consumption up 4.7%/year

Imports

Production

51

0

200

400

600

800

1000

1200

1400M

illio

ns o

f Peo

ple

1965 1975 1985 1995 2005 2015 2025

Year

Population

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

Tons

Oil

Equi

vale

nt

1965 1975 1985 1995 2005 2015 2025

Year


0

200

400

600

800

1000

1200

1400

Mill

ion

Ton

s Oil

Equ

ival

ent

1965 1975 1985 1995 2005 2015 2025

Year



Non-OECD-Asia Outside of China and India Population andEnergy Consumption History and Forecasts (1965-2030)

History+128%

Forecast+37%

History+349%

Forecast+58%

History+922%

Forecast+116%

0

200

400

600

800

1000

1200

1400

1600

19651985200520250

200

400

600

800

1000

1200

1400

1600

19651985200520250

200

400

600

800

1000

1200

1400

1600

19651985200520250

200

400

600

800

1000

1200

1400

1600

19651985200520250

200

400

600

800

1000

1200

1400

1600

19651985200520250

200

400

600

800

1000

1200

1400

1600

1965198520052025

HistoryForecast

(United States Bureau of Census, November, 2006)

United States Canada OECD-Europe China India Other-Asia

Population Growth – History and Forecast (1965-2030)Industrialized Developing

Mill

ions

of P

eopl

e

52

0

1

2

3

4

5

6

7

8

9

10

11

12

1965 1985 2005 20250

1

2

3

4

5

6

7

8

9

10

11

12

1965 1985 2005 2025

(United States Bureau of Census, November, 2006; BP Statistical Review of World Energy, 2006; EIA International Energy Outlook, June, 2006)


Per Capita Consumption – History and Forecast (1965-2030)Industrialized Developing

Ton

s Oil

Equ

ival

ent p

er p

erso

n

0

1

2

3

4

5

6

7

8

9

10

11

12

1965 1985 2005 20250

1

2

3

4

5

6

7

8

9

10

11

12

1965 1985 2005 20250

1

2

3

4

5

6

7

8

9

10

11

12

1965 1985 2005 20250

1

2

3

4

5

6

7

8

9

10

11

12

1965 1985 2005 2025

HistoryForecast

0

500

1000

1500

2000

2500

3000

3500

19651985200520250

500

1000

1500

2000

2500

3000

3500

19651985200520250

500

1000

1500

2000

2500

3000

3500

19651985200520250

500

1000

1500

2000

2500

3000

3500

19651985200520250

500

1000

1500

2000

2500

3000

3500

1965198520052025


Total Consumption – History and Forecast (1965-2030)Industrialized Developing

Mill

ion

Ton

s Oil

Equ

ival

ent

(BP Statistical Review of World Energy, 2006; EIA International Energy Outlook, June, 2006)

0

500

1000

1500

2000

2500

3000

3500

1965198520052025

HistoryForecast

53

0

1

2

3

4

5

6

7

8

9

10

Billi

ons o

f Peo

ple

1950 1970 1990 2010 2030 2050

Year

0

0.5

1

1.5

2

2.5

% I

ncre

ase

per

Yea

r

1950 1970 1990 2010 2030

Year

0

10

20

30

40

50

60

70

80

90

Mill

ions

of P

eopl

e In

crea

se p

er Y

ear

1950 1970 1990 2010 2030

Year

(U.S. Bureau of Census, 2005; Hirsch, 2005;Globe and Mail February 17, 2006; Vancouver Sun, July 22, 2006; National Post September 16, 2006)

World Population Increase 1950-2050

Total Population Percentage Increase Net Increase/Year

Motor Vehicles800 million

Motor Vehicles(70 million newVehicles built

in 2005)

Motor Vehicles>5%/year

(U.S.A.240 million;China 200634 million

+20% in 2005)

Trends in Energy Investment for Food Production(The Hydrocarbons We Eat)

Ene

rgy

Inpu

t per

Uni

t of F

ood

Ene

rgy

Out

put 20

10

5

2

1

.5

.2

.1

Loss

Prof

it

.05

.02

Indu

stia

lized

Dev

elop

ing

(Adapted from Science, April 19, 1974)

54

The Way Forward• Business as usual is not a sustainable option – the

ultimate resource potential of oil and gas is arguable but we are definitely dealing with a finite resource - the implication of this is that we are running out of the CHEAP OIL that fueled the rapid growth in per capita consumption and lifestyle of the last century. Production from crude bitumen resources is not scalable to offset declines in conventional production.

• GAS availability in North America is highly correlated with electricity reliability and cost -replacement of declining low-cost conventional gas and meeting future demand growth with higher cost conventional and non-conventional supplies represents an EXTREME CHALLENGE and, even if it is doable, likely means much higher-cost electricity and higher costs for all other gas uses. LNG imports face infrastructure limitations, siting and Geopolitical obstacles which will likely limit LNG’s ability to fill the supply gap. Banking on windfalls from as-yet-unproven hydrates, CBM, shale gas etc. could prove dangerous if the required production levels are not realized.

• The first step is to recognize the problem, and begin making the changes and creating the infrastructure that will be required for transit to a more sustainable energy future

• The most cost-effective approach is energy conservation- reduce consumption on all levels

The Way Forward

• A longer term vision is required than the lifespan of a typical government – THERE IS NO SILVER BULLET – all options must be objectively assessed and deployed as incrementalcontributions to a solution

• A sustainable energy future is not out of reach – but we have to be thinking in the 10-20+ year timeframe to develop the infrastructure for alternatives as well as technologies and incentives to reduce consumption

55

Public Awareness Is Crucial as it Empowers Governments to Take the Long-Term View Required to Implement Solutions

Media coverage of some of these issues is becoming an almost daily occurrence, but there is still much denial

National PostOctober 2, 2004National Post

October 2, 2004

June, 2004June, 2005

August, 2005

September, 2005(released March, 2006)

U.S. Army

Awareness is Rising

“The Army operates in a domestic and world energy situation that is highly uncertain”

“Future availability of customary energy sources is problematic-world petroleum production is nearing its peak”

“The earth’s endowment of natural resources are depleting at an alarming rate-exponentially faster than the biosphere’s ability to

replenish them”“Current energy policies and consumption practices are not

sustainable. They clearly limit and potentially eliminate options for future generations”

“As the Earth’s population swells-competition for finite resources will increase…conservation is ‘...the best path to follow’”

U.S. Army Corps of Engineers (March 14, 2006)

“…disproportionate [U.S.] consumption of energy relative to globalconsumption causes loss of the world’s good will and provides a

context for potential military conflicts…”

56

Awareness is RisingJim Buckee, CEO of Talisman Energy (May 4, 2005):

IEA World Energy Outlook 2006 (November 7, 2006):

Conservation and energy efficiency are the "most important" ways to reduce oil demand

Questioned whether the world will ever be able to produce 90 million barrels a day

“… the energy future we are facing today, based on projections of current trends, is dirty, insecure and

expensive”“Strong policy action is needed to move the world onto a

more sustainable energy path”

Awareness is Rising

“…the World is on the verge of a break point that couldcome before the end of the decade…”

“…there is no quick technology fix to save us fromthe inevitable, at least in the next five to ten years…”

“…only Government has the power and the tools to pushus to a new energy path…Free market forces are not

strong enough to catalyze rapid change in energybecause it takes so much capital”

“What the World needs is rapid change. There has tobe a push from Nations”

Peter Tertzakian, Chief Economist ARC Financial CorpAuthor “A THOUSAND BARRELS A SECOND”

(February 13, 2006):

57

But Denial Runs Deep

“Personally, its always been my dream to have a humongous ecological footprint”

“Bigger house, bigger car, wood-burning fireplace.”

“When the World Wildlife Foundation gives you crap about your ecological footprint …

… Its saying ‘stop living’”

“Al Gore is the new darling of the movement. Don’t knowif they’re liars, or just dumb, or suffer a pathological

sense of self-importance”

“Dunno. Don’t care. But I can’t take them seriously –Neither should you.”

Ian Robinson, Editorial Writer, Calgary Sun, Nov. 5, 2006

• Senior Executive, Dow Chemical, New Orleans, March 17, 2005:Letter to George Bush signed by many concerned industrial representatives included two top priorities on energy security:

- Conservation and Efficiency (in ALL Sectors)- Fuel Diversity: Renewables, Clean Coal, Coal Gasification,

Nuclear

Some of the Smartest Commentson Energy Sustainability I’ve Heard Lately

• Senior Energy Executive on using Gas to Produce and Refine the Oil Sands:Using gas to produce and refine the oil sands is akin “… to turning gold into lead…”

• Dow Canada CEO on gas use for electricity/oil sands:Utilizing Gas for low value uses like electricity generation and oil sands as opposed to high value uses such as petrochemicals is like “…lighting candles with one hundred dollar bills…”

58

- U.S. Vice President Dick Cheney on Conservation:“Conservation may be a sign of personal virtue, but it is not a sufficient basis for a sound, comprehensive energy policy”

Some of the Other Commentson Energy Sustainability I’ve Heard Lately

- U.S. Energy Bill:- Tax break of $3,150 for buying a hybrid vehicle.- Tax break of $25,000 for buying a Hummer or SUV greater than 3 tons, as long as it is used for business, with write off of all remaining costs over 6 years.

- Oregon State Government “We’re losing revenue on gas taxes because of people buying hybrid vehicles”“We’ll put a GPS system on all vehicles and tax people on how many miles they drive, not how much gas they consume”

- U.S. President George Bush at Rio Summit and later reiterated:“The American way of life in not negotiable”

Is This the Shape of Things to Come?

Gas Station Lineup, South China, August 17, 2005

59

- MOST PROBABLY NOT – Present Global Energy Demand Forecasts are likely to prove to be Unsustainable unless they

are revised sharply downward

Can Energy Supply Meet ForecastWorld Demand?

- The Energy Sustainability Issue will certainly affect us and will profoundly impact our Children and Grand Children,

unless Global proactive actions are taken (SOON)

- The Energy Sustainability Issue may Trump the Global Warming /Environmental Degradation Issue with respect to short term Socio-Economic impact, although both are on the

radar in the near term - Solutions to both Issues have common components (eg.

Conservation, Efficiency, Technology, Alternatives), hence mitigating one issue can help mitigate the other

ENERGY CONSUMPTION CANNOT EXCEED ENERGY SUPPLY

Despite the Proponents of Infinite Growthand the Ability of the Markets and Technology

to Overcome all Obstacles there is OneSupreme Overriding Principle:

Therefore the reality of FINITE nonrenewable energy resources will force a transition to a

sustainable energy future. The Only Question Is:

HOW WILL THIS TRANSITION OCCUR?

60

THE PROBLEM

Aggressive demand growth in the past and forecast in the future

Built mainly on non-renewable energy sources

CONSUMING THE EARTH’S CAPITAL AND ITS INTEREST

THE SOLUTIONRadically Reduced Demand – how to do it?

Supplied mainly by renewable energy sources

LIVING ON THE EARTH’S INTEREST AND PUTTINGSOMETHING IN THE BANK FOR PAST TRANSGRESSIONS

But also by alternative higher value uses of non-renewables

- RENEWABLE ENERGY SOURCES such as wind, photovoltaics, run of stream hydro, tidal power, solar thermal and biomass are EXTREMELY UNLIKELY to fill the hydrocarbon gap if we insist on maintaining our current levels of consumption (let alone increasing them).

SOLUTIONS

- MORE EFFICIENT AND SUSTAINABLE COMMUNITIES:

- The ABSOLUTE FIRST PRIORITY is to reduce energy consumption as much as possible. This requires a crash program through:

- Radically enhanced building codes – R2000+++- Mass Transit as a viable option- Incentives for efficient appliances and heating- Increased densities- Design for local access to consumer requirements- Enabling pedestrian, biking and car pool transport

61

- IMPLEMENT LOW COST OR REVENUE NEUTRAL READJUSTMENTS THAT ENCOURAGE A REDUCTION IN ENERGY CONSUMPTION:

SOLUTIONS

- Reintroduce lower speed limits – this worked in the 1970’s

- Mandate much higher average mileage requirements for the vehicle fleet

- Implement user fees for car travel in downtown areas that are served by public transit (this has worked well in many places in Europe, where per capita energy consumption is half of that in the U.S. and Canada)

- STOP building and widening roads to accommodate ever more traffic – instead reinvest these funds to improve public transit

- LIVING LOCALLY:

SOLUTIONS

- Encourage and nurture the development of LOCALLY GROWN FOOD and LOCAL MANUFACTURE of required commodities in order to minimize long distance transport.

-The INTERNET represents an absolutely unprecedented opportunity to reduce commuting as well as to access World Markets. BROADBAND INTERNET expanded to all rural and suburban communities can ensure the viability of dispersed,more sustainable communities.

62

SOLUTIONS-MORE EFFICIENT VEHICLES:

- BOTTOM LINE: Replacing half of the U.S. ground vehicle fleet with hybrid and more efficient vehicles would cost $3.8 Trillion and consume 5.6 billion barrels of oil equivalent energy to build. Even with a crash program implementation it would take 8-10 Years. Yearly savings of 25% of current fuel use would be 3.3 billion barrels.

(vehicle numbers, proportion of fuel consumption and average lifespan from Hirsch, 2005)

0 15000 30000 45000 60000 75000 90000

E n e rg y S a v in g s-1900

-1400

-900

-400

100

600

1100

Gal

lons

of O

il E

quiv

alen

t Ene

rgy

Miles Driven

Energy SavingsEnergy Deficit

(energy for vehicle construction from Savinar/Ruppert, September, 2005)

AnswerApproximately

65000 miles

EnergyRequiredTo Build

How far must a Hybrid Car be Driven before it SavesMore Energy than it took to Build It?

Comparison of Hybrid at 50 mpg with existingVehicle at 20 mpg

63

SOLUTIONS-MORE EFFICIENT VEHICLES (continued):

MESSAGE:- Reducing transportation requirements is likely to have a much more immediate impact than replacing the vehicle fleet with hybrids and maintaining existing transportation habits.

- The existing vehicle fleet represents a tremendous amount of embodied energy in its construction that would require a similarexpenditure of energy to replace.

- IDEALLY we need to do both: replace vehicles at the end of their practical lifespan with the most efficient vehicles available ANDreduce transportation requirements as much as possible.

SOLUTIONS- BULK COMMODITY TRANSPORT:

-TRAINS instead of TRUCKS– trains are 3.4 times as efficient in moving

goods than trucks

- SHIPS instead of TRUCKS– ships are 8.7 times as efficient in moving

goods than trucks

- SHIPS, TRAINS and TRUCKS instead of PLANES– ships, trains and trucks are much more efficient in

moving goods than planes(data from U.S. Dept. of Transportation and Canadian Shipowners Association, 2006)

64

- WIND, unfortunately, cannot exceed about 20% of the grid as it is intermittent and must therefore be backed up by a (usually) nonrenewable energy supply (wind is 0.5% of Canada’s capacity at present). Also requires proximity of high quality sites to load centres.

SOLUTIONS

- BIOMASS can be used in a highly efficient manner given present technology but realistically represents only a small incremental contribution to current consumption levels (The Energy Profit Ratio of Biomass MUST also be considered – what is the net energy returned after all energy inputs are accounted for?).

-Implement RENEWABLES such as WIND, BIOMASS and PHOTOVOLTAICS to the maximum extent possible:

SOLUTIONS- PHOTOVOLTAICS are also limited by the intermittent nature of the sun and the storage problems if batteries are used. They are optimally suited to residential applications because of their low power intensity but they are expensive. TRUE NET METERING with TIME OF USE PRICING in grid intertie applications CAN RADICALLY IMPROVE THE ECONOMICS OF PV and has been implemented in several States. Generators of PV electricity can “run the meter backwards” obtaining the retail price at the time of the sale (typically during peak load when the price is highest). This not only improves the economics of PV, it reduces peak load and therefore the need to build new large scale fossil fueled generation by utilities.

-Implement RENEWABLES (continued):

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- NONRENEWABLES ALTERNATIVE USE: Remaining fuels should be used for their highest value contribution to society:

SOLUTIONS

- CONSERVE NATURAL GAS used for electricity generation and as a low grade heat source through substitution by renewables, distributed generation with CHP, clean coal technologies, coal gasification, coal-to-liquids, and, if economical, nuclear – for example, ethane extracted from raw natural gas and turned into polyethylene increases its value by a factor of 12, into packaging products by 20, and by upgrading to building materials by a factor of 58 (Dr. Ramachandran, President DOW Canada, June, 2005) . - Implement expansion of alternative oil and gas substitutes including COAL-TO-LIQUIDS (commercially viable at $30-$35/bbl), COAL GASIFICATION, GAS-TO-LIQUIDS and LNG technology (but, as with oil sands, takes many years and $$$ for infrastructure and has a low EROEI).

SOLUTIONS

- Expansion of the VENEZUELA ORINOCO EXTRA HEAVY OIL BELT is also inevitable but must be done with maximum efforts to minimize energy inputs and environmental impacts.

- FORGET HYDROGEN as a major contributor to transportation and distributed generation unless there are major improvements in fuel cell technology (10-20x in cost; 5x in lifetime; 2x in efficiency) as well as in storage technology, and the ability to generate hydrogen from renewable sources.

- Continued expansion of the OIL SANDS is inevitable but must employ technologies that utilize alternatives to natural gas for energy input and minimize environmental impacts including water consumption (but, as noted, takes many years and $$$ for infrastructure and therefore will be a small part of the solution and also has a low EROEI).

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IMPLEMENTING MANY OFTHESE SOLUTIONS (ESPECIALLY

CONSERVATION AND EFFICIENCY)GOING FORWARD IS NOT OPTIONAL

ENERGY CONSUMPTION CANNOTEXCEED ENERGY SUPPLY

MOTHER NATURE WILL TAKE CAREOF THE PROBLEM

BUT UNLESS WE ARE PROACTIVEWE MAY NOT LIKE THE SOLUTION

“…a Lower-Impact Society is the MostImpossible Scenario for Our Future…

…Except for all otherConceivable Scenarios”

Jared Diamond (2005) from his best-seller “Collapse”

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Food per capita

Industrial output

per capitaPollution

Death rate

Birth rate

Resources

Population

212000900

(adapted from Hamblin, 1970)

20001900 2100This could be the Price of an Unsustainable Energy Future

Limits to Growth:Did the Club of Rome have a Point?

Or…Will Technology and Forward Thinking

Come to the Rescue?

Thank you

Contact Coordinates:Dave Hughes

dhughes @ nrcan.gc.ca403 292-7117

Documents

Cumulative Oil Consumption by the Human Race