Our Energy Future It s All about making Choices Brian Frank Presentation - Carleton University March 15, 2010
Cross Industry Market Cap NAGP Revenue Ranking with Fortune 500 $256 B (15 P/E) $205 B (15 P/E) $184 B (28 P/E) $182 B (17 P/E) $178 B (11 P/E) $81 B (21 P/E) $49 B (33 P/E) $25 B (13.5 P/E)
Question/Choice #1 Should Canada follow the US lead on climate change? Should Canada price carbon through cap and trade or taxation? 1 Yes 2 No
Question? Choices # 2 Should Canada Aggressively develop the Canadian oil sands? 1 Yes, via wells and/or mining 2 Yes, but only via wells (SAGD) 3 I m not sure 4 No
Question/Choice #3 Should Canada mandade biofuels. Will large volume biofuels increase the price of food? 1 Yes 2 No 3 It depends on how it s done 4 I m not sure
Question/Choice #4 Should Governments promote the use of natural gas in power generation By extension, should governments discourage coal in power generation and incentivize the retirement of old inefficient plants? 1 Yes 2 No
Energy Policy Objectives Affordable Secure Sustainable
Technology catalysis seismic bioscience materials sub sea transport smart grid efficiency data
Policy breadth of issues 9
Natural Gas Competing Fuels $28 Source: Various, Mar 8/10 $/MMBtu $26 $24 $22 $20 $18 $16 $14 $12 $10 $8 $6 $4 $2 $0 Jan-00 May-00 Sep-00 Jan-01 May-01 Sep-01 Jan-02 May-02 Sep-02 Jan-03 May-03 Sep-03 Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 HH/NYMEX FO NYH #6 1% HO #2 NYH WTI Coal NYMEX (unadj)
Copenhagen and Climate Change
Supply Diversification = Energy Security = energy security
Policy BP s high level positions Efficiency - the low-hanging fruit Cost-effective; available today Role of incentives / mandates Diversity - the fundamental source of security Access to hydrocarbon resources Energy mix all of the above Competition - driving innovation Open markets Stable regulations; transition incentives
BP s approach to a lower carbon future Energy efficiency within BP operations Including the price of carbon in investment decisions Promoting lowest-cost energy pathways e.g. gas for power generation Continued investment in Alternative Energy biofuels wind solar carbon capture and sequestration Investing in research and technology
Alternative Energy disciplined growth US Wind H 2 Power / CCS Solar Biofuels
Oil Sands Mining SAGD
Steam Assisted Gravity Drainage (SAGD)
Biofuels
Biofuels BP activities Blending compliance with current regulations Brazilian sugar cane to ethanol the best biofuels available today Ligno-cellulose to ethanol accelerating development and commercialisation (US) R&D biobutanol (better molecules) sugar to diesel (upgrading molecules) EBI (fundamental and holistic research)
Biofuels Biofuels done badly Clearance of protected land Displacement of food crops Intensive farming No run-off protection Poor HSSE practices Use of child labour Small scale, inefficient plant Coal-fired boiler process energy Increases net GHG emissions Biofuels done well Efficient use of existing or idle land Use of high yielding energy crops Minimise fertilizer use and soil tilling Rain-fed irrigation Renewable processing energy Optimal use of co-products Job creation and social benefits International development Higher energy bio-components Increased energy security / diversity Net GHG reductions
Natural Gas Extensive Global Resource (R/P > 60 years) Competitive cost of supply Increasingly fungible: inter-regional pipelines, LNG Advantaged Fuel Power Generation - efficiency & operational flexibility Heat (Industrial & Residential) Key role in a lower carbon future Only half the CO 2 emissions vs. coal A destination fuel; not just a transition fuel Unconventional gas: shale gas, coal bed methane US now with 50-100 years of recoverable natural gas
New gas plants offer an inexpensive way to reduce carbon - today 180 160 140 2,617 $/ M Wh lb CO2/ M Wh 160 140 160 3000 2500 $/ M Wh 120 100 80 60 40 20 41 1,942 52 52 737 95 71 130 86 100 2000 1500 1000 500 lb CO2/ M Wh - Least Efficient Coal Plant s New Coal New Gas Coal + CCS Gas + CCS Nuclear Onshore Wind Offshore Wind Solar 0 Source: Developed From DOE NETL, EPA EGRID, and Harvard Data
Coal / Gas Price Volatility 100 90 80 Volatility of Natural Gas v Coal Gas Coal 70 $/MWh Fuel Cost 60 50 40 30 20 Source: Department of Energy 10 - Jan- 2005 Jul- 2005 Jan- 2006 Jul- 2006 Jan- 2007 Jul- 2007 Jan- 2008 Jul- 2008 Jan- 2009 Jul- 2009
Natural Gas offers both improved environmental performance and energy security Source: Developed From DOE NETL, EPA EGRID, and EIA Data