The energy security drivers
for alternative investments
Jeremy Leggett
We are living through a triple crunch
Credit …the credit crunch
Carbon …the climate crunch
Oil …the energy crunch
October 29th 2008
The first multi-company attempt to sound an
alarm bell on premature peak oil
www.peakoiltaskforce.net
US-48
0
5
10
15
20
25
30
1930 1950 1970 1990 2010 2030 2050
Dis
cove
ry G
b
010002000300040005000600070008000900010000
Prod
uctio
n kb
/d
Productionbilli
ons
of b
arre
ls
Source: ASPO
USA 48 production versus discovery
US-48
0
5
10
15
20
25
30
1930 1950 1970 1990 2010 2030 2050
Dis
cove
ry
010002000300040005000600070008000900010000
Prod
uctio
n kb
/d
Production
Source: ASPO
billi
ons
of b
arre
ls USA 48 production versus discovery
US-48
North Sea oil production
Source: Oil Drum Europe
0
10
20
30
40
50
60
1930 1950 1970 1990 2010 2030 2050
billi
ons
of b
arre
ls
Past discovery Future discovery Past production
?
Expectation of future production
Concerns:
• Collapsing giant-field discovery
• Collapsing giant field production
• Flow rates fall from 2013
Global production versus discovery
-4000
-2000
0
2000
4000
6000
8000
10000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
total 3 month S lip 0.9 4.5% Depletion Net
Source: ITPOES 2008
Flow rates versus depletion
Total
Net
4.5% depletion
3 month slip
0.9
10
8
6
4
2
0
-2
-4
mbd
0
10
20
30
40
50
60
1930 1950 1970 1990 2010 2030 2050
billi
ons
of b
arre
ls
Past discovery Future discovery Past production
?
Expectation of future production
• Lead times average 6-7 yrs
• EOR only slows production drop
• Phantom reserves
Global production versus discovery Concerns:
• Collapsing giant-field discovery
• Collapsing giant field production
• Flow rates fall from 2013
Real Discovery Trend
0
10
20
30
40
50
60
1930 1950 1970 1990 2010 2030 2050
Past discovery Future discovery Past production
Expectation of future production
Future production
billi
ons
of b
arre
lsGlobal production versus discovery
Source: ASPO
0
10
20
30
40
50
1930 1950 1970 1990 2010 2030 2050
Pro
duct
ion,
Gbo
e/a
Non-con Gas
Gas
NGLs
Polar Oil
Deep Water
Heavy
Regular
Concerns:
• Investment shortfall
bill
ion
ba
rrel
sGlobal production of oil and gas
0
20
40
60
80
100
120
140
160
S eries 1
S eries 2
Oil price160
140
120
100
80
60
40
20
2004 200720062005 2008
Marginal cost tar sands production$Marginal cost offshore Angola production
Falling real investment in exploration
1999-2006
0
10
20
30
40
50
1930 1950 1970 1990 2010 2030 2050
Pro
duct
ion,
Gbo
e/a
Non-con Gas
Gas
NGLs
Polar Oil
Deep Water
Heavy
Regular
• State of aged infrastructure
• Tar sand flow rates too low
• CTL flow rates too low
• GTL flow rates too low
• Absence of oil shale technology
• Gas needed for power
• Age skew and skills shortage
bill
ion
ba
rrel
sGlobal production of oil and gas Concerns:
• Investment shortfall
0
10
20
30
40
50
1930 1950 1970 1990 2010 2030 2050
Pro
duct
ion,
Gbo
e/a
Non-con Gas
Gas
NGLs
Polar Oil
Deep Water
Heavy
Regular
Source: ASPO
bill
ion
ba
rre
lsGlobal production of oil and gas
75000
80000
85000
90000
95000
100000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Thou
sand
b/d
C rude s upply D emand (1.6% /yr)
Supply versus demand
Source: ITPOES 2008
mbd
100
95
90
85
80
75
Gulf of Mexico• Russia
• Saudi Arabia
• Iraq
• Iran
• Kuwait
Key countries
Gulf of Mexico• Russia
• 5 months of falling production
• ex-government officials and current Lukoil officials say they are past peak
Key countries
“I keep no secret from you that, when there were some new fields, I told them ‘no, leave it in the ground, with grace from God, our children need it’.”
King Abdullah, 2008
• Saudi Arabia
• Former head of E&P says they are near peak
• Plan to get 20 GW electric power in next 5 years ….mostly from oil
Gulf of Mexico• Iraq
• ….IOC concerted entry doubtful without a Petroleum Law agreed
Key countries
• Kuwait
• government admitted in 2007 that they have less than half the “proved” reserves quoted for years now
• parliament believes they should use what remains at home
• Iran
• the highest domestic growth rate in the world ….so fast analysts say it will threaten export potential soon
Who to believe?
oil
gas
gas
oil
“as long as the music is playing, you’ve got to
get up and dance.
We’re still dancing.”
• ..\y My Pictures\untitled.bmp
Dubai 1990
• ..\y My Pictures\untitled.bmp
Dubai 2007
No combination of non-fossil technologies will be able quickly to close the post peak-oil energy gap
31003100
Oil 35%79
Coal 25.3%
Gas 20.7%
Nuclear 6.3%
Combustible renewables and waste
10%
Hydro 2.2%
Wind, geothermal, solar, etc 0.5%
Source: IEA
Gulf of Mexico
UK Government
strategic energy review press release 4 February 2002
“We could achieve a virtually zero carbon energy system in the long term …this is technologically
and economically feasible …”
“….solar energy alone could meet world energy demand using less than 1% of land now under crops and pasture…”
The potency of low carbon technologies
15% above current EU consumption
The ultimate resource potential of renewables in a world of 10 billion people
Source: Shell Energy Scenarios 2001
“Oil fields have a declining curve – you find one, it peaks and starts downhill, you’ve got to find another one to replace it. It drives you crazy! With wind, there’s no decline.”
T. Boone Pickens
South Yorkshire Housing Association
McDonough and Partners
FT, 21st Oct 2006
Mobilisation rates
Climate change policy response scenario
Peak oil “descent” scenario
Peak oil “collapse” scenario
End goal for replacement of oil use
Within 42 years
Within < 20 years
Within < 10 years
Annual rates of oil replacement with respect to 2008
2.38% c. 5% >10%
Source: ITPOES 2008
N
um
bers
Time
The Law of the Few
The Stickiness Factor
The Power of Context
“Look at the world around you. It seems like an immovable, implacable place. It is not. With the slightest push – in just the right place – it can be tipped.” Malcolm Gladwell
TIPPING POINT
The “seeing is believing” effect
Join us
• UK ITPOES will continue its work
…net energy next
• Industry stakeholder engagement is needed in other countries
• Investor leadership is needed in the “green new deal”
1989 - 1997 1998 - 2005
Thank you
www.solarcentury.com
www.solar-aid.org