Fossil Fuels: Climate change and Security of Supply

Fossil Fuels: Climate change and Security of Supply Chalmers Energy Conference January 27 th, 2011 Jan Kjärstad, Dept of Energy and Environment, Chalmers University of Technology

Outline of the presentation Main conclusions Fossil Fuel Resources Oil Gas Coal Implications for Climate Change What about demand? Climate Change mitigation and the role of CCS

Main conclusions fossil fuel markets Chalmers University of Technology Abundance of resources seen from a climate change perspective, coal in particular. It will nevertheless be increasingly difficult to meet baseline demand projections, oil in particular. Cost of producing fossil fuels will rise. Globally, there are few concrete signs that we are moving away from carbon dependency and it will be extremely challenging to meet climate change targets (+ 2 C). Partly due to developed world s unwillingness to face the size of the problem. Partly due to low per capita demand in expanding undeveloped countries coupled with large populations and large domestic coal resources. Concerted global efforts to mitigate climate change has the potential to transform regional/global energy systems

Oil reserves and resources Sufficient to meet baseline demand beyond 2030: Discovered resource base much larger than proven reserves Significant potential to raise recovery factor (RF) Peakers - Several countries that have peaked in production will raise production from current levels. Vast resources of unconventional oil Many prospective basins remain to be explored

Nevertheless Chalmers University of Technology

Depletion of ultimately recoverable conventional oil (Ultimately Recoverable Oil ranging from 3.3 to 3.7 Tbls given by IEA, IHS, CERA, ExxonMobil) 1,080 bbls Sources: IEA WEO 2006-08, EIA, IHS, CERA, ExxonMobil

Adequate Natural Gas Resources Chalmers University of Technology Proven conventional reserves end 2008: ~ 184 Tcm Total proven + estimated reserve growth & undiscovered end 2008: roughly 400 Tcm (IEA WEO 2010). Unconventional: > 900 Tcm (IEA WEO 2010) concerted efforts to appraise reserves and production on all continents FID taken in late 2010 for 2 large-scale CBM LNG plants in Australia Methane hydrates: Vast Consumption 2008: 3.1 Tcm New field discoveries still exceeding production on an annual basis Large discoveries recent years in Australia, Brazil, (Denmark?), China, Egypt, India, off Israel, Myanmar, Turkmenistan and USA (GoM shallow & deepwater) However, 55% of proven reserves located in Iran, Qatar and Russia while Europe s proven conventional reserves amount to roughly 4.8 Tcm including 2 Tcm in Norway. Sources: IEA WEO 2010, Cedigaz 2009, Chalmers Energy Databases

US unconventional gas; a game changer Chalmers University of Technology US Shale gas basins Changing global gas markets Leading to: Shtokman postponed Russia looking to Asia US building LNG export capacity Norway to use gas domestically? Worldwide rush for unconv. gas Sources: EIA Annual Energy Outlook (AEO) 2009, US DOE Shale gas primer, Chalmers Fuel database

Huge Coal Resources Reserves uncertain, ranging from 630*-1,000 Gt Chalmers University of Technology Vast additional resources;19,000 Gt (end 2007, BGR 2008) Consumption 2007: 6.4 Gt Five countries account for 77% of proven reserves and 90% of resources; China, Russia, USA, India and Australia. Future deposits will be located deeper and further inland with declining CV and rising ash and sulphur content rising production costs. Massive expansion of coal based power, foremost in China and India but also in Indonesia, Malaysia, Pakistan, Russia?, South Africa, Thailand, Vietnam. * Based on a coal production cost (FOB or Minemouth) of around US $ 30/ton (Energy Edge 2008)

Coal plants under development in China & India (map refers to data collected between Jan 2007 and Apr 2008 for China and up to Feb 2009 for India) China: ~ 300 GW coal based power added 2004-2008 on a net basis. Raising coal consumption by >750 Mt and CO 2 emissions by ~1.7 Gt*, equivalent to EU s emission reduction to 2020 if 30% reduction! Recent news indicate that another 250-300 GW will be added 2011-15. India: > 125 GW coal based power under development. ~ 35 GW under construction as of February 2009. Legend: Blue approved, black planned, yellow under construction, large yellow UMPP s** under construction, pink on-line Jan 2007-Apr 2008 *7,000 load hours at max ratings, 43% conv eff, 23 PJ/Mt. ** UMPP = Ultra Mega Power Plant Sources China: IEA CCC 2009, 5 main state-owned utilities, Platts, Argus, China s Mining Association, China s Electricity Authority. Sources India: Ministry of Power, NTPC, Platts, Company reports

Fossil fuel reserves, resources and consumption, EJ Sources: BGR (2009), IEA WEO 2008, BP (2009)

Fossil Fuel s CO2 emission potential and global carbon budgets Notice: Based on current conversion eff Sources: BGR (2009), IEA WEO 2008, IPCC (2007), Meinshausen (2009)

However, what about demand? See for instance Future Transport Fuels Published by the EU Commission January 25 th, 2011

Long-term oil demand projections Chalmers University of Technology Sources: BP 2008, IEA WEO 2007 & 2008, IEA ETP 2008

Long-term gas demand projections Chalmers University of Technology Sources: IEA WEO 2007 & 2008, IEA ETP 2008

Long-term coal demand projections Chalmers University of Technology Source: IEA ETP 2008

Climate change mitigation and the role of CCS

Near term (up to 2020) CO 2 mitigation options Raising efficiency in all sectors and on all levels Also raising energy security Renewables Also raising energy security Switching from coal to gas Longer term (in addition to near-term options) Nuclear Carbon Capture and Storage (CCS) Vital on a global level Vital to maintain energy security

Thank you kjan@chalmers.se

Backup Chalmers University of Technology

Smaller fields Supply More difficult fields (deep, deepwater, Arctic) More unconventional Larger part from critical countries The recession (IEA May 2009): Projects deferred indefinitely/cancelled Oct/08-April/09: 2 mmbls/d Projects delayed by at least 18 months: 4.2 mmbls/d Nevertheless as of October 2010 OPEC s effective spare capacity (excl Iraq, Nigeria, Venezuela) amounted to 5.6 mmbls/d Speculative but: Iraq and Venezuela to add 12 mmbls/d to current production capacity by 2020

Conclusions Oil Sufficient resource base Above ground factors holding back E&P Chalmers University of Technology Iran, Iraq, Kuwait, Mexico, Russia, Venezuela, (Saudi Arabia), US OCS, Norway Production cost will increase Smaller fields, deeper fields, deeper water depths, more unconventional, Arctic resources Undulating plateau or peak followed by rapid decline? Undulating plateau struggling to meet demand However, what about demand? Transition to NGV s, hybrids, electric vehicles, hydrogen? Climate Change Mitigation?

Proven reserves vs discovered resource base (oil + gas) Gorgon project: US$ 37 billion LNG project Main gas fields discovered 1999-2001 Comprising more than 1,000 bcm gas reserves Resources transferred to reserves in 2009 (env.m approval and 90% of gas sold) Western majors: Shell, BP, ExxonMobil, ChevronTexaco, ConocoPhillips. Russian majors: Lukoil, Rosneft, TNK-BP all Russian reserves audited by Miller & Lentz/DeGolyer & MacNaughton. Gazprom s resource base refers to Russian A+B+C1 reserves Sources: IOC s press releases and investor presentations

4 Norwegian oil fields Raising the recovery factor - I Chalmers University of Technology Weyburn field Canada USA: Production, reserves & discoveries 1977-2007 + 20 mmbls + 60 mmbls + 120 mmbls Reserves: 260 mmbls * PDO: Plan for Development and Operation. Sources: NPD (Norway), EIA 2007 annual reserves report

Raising the recovery factor - II Chalmers University of Technology Reserves in 72 giant fields in the Middle East and North Africa AAPG December 2003: 411 bbls (URR) IHS/IEA November 2005: 718 bbls (2P) Example Ghawar field US GAO 1976: 61.5 bbls URR IHS/IEA 2005: 147 bbls 2P (cum prod end 2005-61 bbls) Example Rumaila field Iraq, 66 bbls in place Severely ill-managed under Saddam regime URR AAPG 2003: 22 bbls 2P IHS/IEA 2005: 24 bbls URR BP 2010: 29 bbls + further potential CO2 EOR in USA (ARI 2010): Total technical ( current best practice ) potential: 85 bbls Oil price US $ 70/bl, delivered CO2-cost US $ 15/ton: 48 bbls commercial Sources: IEA WEO 2005, AAPG 2003 Giant fields of the decade 1990-99, Simmons 2005, BP strategy presentation London, March 2010, Advanced Resources International (ARI) March 2010 White Paper

Peakers Chalmers University of Technology

Source: BP 2010 Statistical Review When/what is Peak country level? Chalmers University of Technology Peak does NOT automatically mean immediate and continuous decline

Aggregated production Peakers 1965-2008 (mmbls/d) (OBSERVE: Iran and Iraq not included) Source: BP Statistical Review, 2009 edition

Future production peakers? Chalmers University of Technology What happened in 2009? USA: +7.0% Colombia: +12.2% Peru: +21.0% Russia: +1.5% Oman: +7.4% Congo: +10.0% Egypt: +2.1% All others (BIG6 and the other 8 listed countries) down but? Sources: Past production BP 2009, 2010 Forecasts: EIA AEO 2010 (USA), IEA WEO 2008 (all others)

Unconventional Oil Vast resources IEA WEO 2010 NOT including oil shales: ~ 5,000 bbls in place ~ 1,900 bbls URR Proven reserves Canada + Venezuela only: 170 + 60 bbls Technically recoverable oil in the Orinoco basin 380-652 bbls (USGS October 2009) January 2011 Venezuela claimed proven oil reserves of 297 bbls Possible production capacity additions: Venezuela s heavy oil production to be raised by 2.4 mmbls/d by 2017 negotiations ongoing. Canada + 0.9 mmbls/d under construction and another 4.5 mmbls/d proposed Oil shale ~ 3,500 bbls of which > 1,000 bbls technically recoverable Sources: IEA WEO 2010, USGS 2009

Undiscovered oil and gas Prospective basins (Areas not accurate) USGS CARA-study 10 most interesting basins Mean resource estimate: Iraq: Identified prospects in yellow 121 bbls liquids 45 Tcm gas BP & Rosneft 5 most interesting sub- /pre-salt basins Sources: Chalmers Energy Databases, BP, USGS, IHS

Peak supply & Peak demand 90 Mb/d 79 Mb/d Source: Deutsche Bank, F.I.T.T. Research October 2009

Coal basins in China, Russia and North America (resources in addition to reserves, as of year-end 2007) Sources: USGS, BGR 2009 Russia Reserves: 162 Gt Resources: 3,942 Gt China Reserves: 192 Gt Resources: 4,827 Gt Canada Reserves: 6.6 Gt Resources: 192 Gt Alberta Gvmt: 2,000 6,200 Gt? USA Reserves: 263 Gt Resources: 7,857 Gt

Coal demand 1980-2009 China, India, USA and RoW CAGR China 2000-09: 11.0% CAGR Globally 2000-09: 4.4% Source: IEA Coal information 2010 with 2009 data