An onshore natural gas pipeline being built in Mon State. Pic: SMART Technical Services

WASHINGTON, United States – It started with a simple question by Samuel Bodman, the US energy secretary: What does the future hold for supplies of oil and natural gas?

The query was made in October 2005 in a one-page letter sent to Lee Raymond, the former chairman of Exxon Mobil and head of the National Petroleum Council, a US advisory group representing the oil industry.

After nearly two years, Raymond has finally delivered his answer: Because the world’s population is growing and living standards are rising worldwide, energy consumption globally is expected to rise by more than 50 percent over the next 25 years. But finding supplies to match that growth is going to be increasingly difficult and will require huge new investments in coming decades.

The support for that conclusion is a 476-page study titled “Facing the Hard Truths About Energy” that involved 350 participants, suggestions from more than 1000 people, submissions by 19 foreign governments from Australia to Saudi Arabia, and dozens of subcommittees.

Some of the recommendations made by the petroleum council probably far exceed what the administration of President George W Bush was expecting: for example, calling for a nationwide standard to manage carbon emissions and taking steps to moderate consumption.

The report, made public in Washington in mid July, was billed as one of the most comprehensive analyses of the global energy challenge in decades. It also provides a sobering picture of the energy problem facing the United States and the world.

The council report warns of “accumulating risks” to energy production, including rising geopolitical barriers, inflation in costs, dwindling numbers of petroleum engineers and growing constraints on carbon dioxide emissions. Although it does not say so explicitly, the subtext of the council’s study suggests that high energy prices might be here to stay.

The study’s release comes as frustrations grow over high energy costs. Congress is debating a proposal to bolster the development of alternative fuels and increase vehicle fuel efficiency.

Unlike the Bush administration’s energy task force, which was led by Vice President Dick Cheney in 2001 and fought efforts to disclose the people it consulted, the petroleum council’s study makes no secret of who participated in its effort.

The list of contributors to the petroleum council’s report is a roster of top industry leaders and consultants, including senior executives from Exxon and Chevron. But the council also enlisted the help of private research centres, academic institutions, banks, government agencies and environmental groups like Resources for the Future and the Alliance to Save Energy.

“The study really reflects the zeitgeist,” said Daniel Yergin, the chairman of Cambridge Energy Research Associates and an energy consultant who participated in the study.

Still, some of the report’s conclusions hardly seem surprising, given the authors. For example, it dismisses predictions from so-called peak oil theorists that the world’s oil deposits are on the decline; quite the contrary, the industry view is that the world’s resources remain abundant.

“Fortunately, the world is not running out of energy resources,” the report says in a 40-page summary. “Coal, oil and natural gas will remain indispensable to meeting total projected energy demand growth.”

But while the council called for expanding and diversifying traditional energy supplies - oil and gas, coal and nuclear power – it also backs the development of alternative fuels, including biofuels.

“There is no quick fix,” Raymond, formerly of Exxon, said July 18. “To assume that we have the option of not pursuing one of the sources of energy is a fake choice.”

Strikingly, the report’s first recommendation calls for the US government to moderate energy demand by increasing vehicle fuel economy standards, the main sources of growth in oil demand around the world, and improve energy efficiency in buildings and homes.

“The world will need better energy efficiency and all economic, environmentally responsible energy sources available to support and sustain future growth,” the report said.

Kateri Callahan, president of the Alliance to Save Energy, who helped write the report, said: “It is not the expected voice calling for demand moderation and the increase of energy efficiency. They are being honest about the situation.

“But everyone recognises it is going to take more than just moderating demand, or increasing efficiency, or increasing alternative supplies, but it is going to take all these things. And we cannot afford to wait.”

Perhaps the biggest surprise is that Raymond, who was well known for his scepticism about global warming when he was chairman of Exxon Mobil, has given his support to a study that says oil companies and governments need to address carbon emissions and offers some suggestions for how carbon dioxide can be trapped in underground reservoirs.

The report says the government should “provide an effective, global framework for carbon management, including the establishment of a transparent, predictable, economy-wide cost for carbon dioxide.”

Bodman, who attended the July 18 presentation, said: “These are hard facts and hard facts require us to plan for hard choices, now and in the future.”
Clay Sell, US deputy secretary of energy, said the administration would consider the report’s recommendations but made no commitment to following any of them. The administration has resisted tackling carbon emissions, saying any mechanism that would create a cost for carbon emissions would be too costly for the economy.

Oil prices have risen sharply in recent years as the growth in demand, mainly from China and the United States, has outpaced production. The result has been a very tight global market, with little spare capacity to bring online.

– International Herald Tribune