Industry voices sound off on energy

From scientists to engineers and from energy companies to nonprofit foundations, energy security and environmental sustainability have become linked concerns for individuals across the industry.

Rapid economic growth, particularly in China and India, has accelerated the growing demand for oil and the need for new and diversified energy sources, as conventional oil can no longer be projected to meet rising demand. On top of this, both scientific and political consensus rank climate change as a critical challenge requiring large and immediate action.

While the world oil market poses a much more difficult political terrain, the challenge of global climate change already has one critical success factor: the impetus to act on the part of the American people.

That healthy activism is backed by strong governmental support, with the 2005 Energy Policy Act introduced by President Bush in August of 2005, representing the first significant step towards greater energy security. Not since President Jimmy Carter’s days has such sweeping energy legislation been introduced to the nation.

The Renewable Fuel Standard (RFS) was established as part of the Energy Policy Act to encourage the development and use of renewable fuels. The more recent Twenty in Ten Program, which calls for the US to reduce gasoline usage by 20 percent in the next 10 years, sets a goal for the RFS to be at 35 billion gallons of renewable and alternative fuels in 2017 to displace 15 percent of projected annual gasoline usage.

With a national impetus and a comprehensive energy bill, our nation has demonstrated measurable progress in strengthening energy security but continuous investments need to made to identify new methods for producing biofuels and expanding the use of clean coal technology, solar and wind energy, safe nuclear power, and so on.

Among the panel, there was a general consensus that there are no ‘silver bullets’ but that there needs to be a full court press on all available technologies. A number of technological pathways to pursue were cited – everything from solar technology to nuclear power to plug-in hybrids, with water-splitting mentioned by Dr Ernest Moniz of MIT as the Holy Grail. Yet the panel acknowledged that it would take a few decades for any technology to get appreciable market share, and with time and scale working against each other, diversity of supply is the most necessary solution.

Federal initiatives have made some recent advances in technology and plans are in the works to increase renewable and alternative fuels to strengthen energy diversity within the transportation sector, increase supply of oil alternatives and double the capacity of the strategic petroleum reserve.

While Presidential leadership is obviously a key component in facing global climate change and the energy crisis, a comprehensive political response is required and the public is needed to help sustain discipline in the political system. “I would suggest that what we need to do politically in this country – we need to strengthen the network of leadership in this country, in the business community, in the NGO community and in the academic community that are interested and knowledgeable about this intersection of energy and environment,” Dr Phil Sharp of Resources for the Future stressed.

The more complex political environment has to do with the shift of oil wealth and the implications of the larger geopolitical backdrop being shaped by the global competition at hand. With a new crop of oil players being hailed as the ‘New Seven Sisters’, the world has witnessed a major shift of power as the wealth of oil reserves now belongs to the developing nations rather than the developed nations.

Today big names like Exxon only claim three to four percent and Chevron two percent of the world’s oil reserves – while the largest chunk lies with national oil companies in developing countries. According to the International Energy Agency, approximately 90 percent of new supplies will come from developing countries in the next 40 years.

What’s of even greater concern is the imbalance between the rate of some individual nation’s energy exporting and energy producing. For example, China, similar to the US, is a significant energy producer but their energy needs exceed their domestic production.

Amid the strikingly new economic dynamics existing today, many countries are also using oil reserves as a political tool and not investing at the level they should be. Russia was just one country of many mentioned where reinvestment is under par. Arguably one of the largest energy exporters in the world, in light of its increasing energy consumption within its economy, Russia is not investing to the extent it could be and has made it difficult for foreigners to invest.

Peter Robertson of Chevron cited these less-than-desired investment levels by resource-rich countries as one of his top concerns. “The problem for all of us is a lot of producing companies either have plenty of money and don’t need to invest anymore, or for many political reasons, don’t welcome foreign investment or invest themselves,” Robertson says. “My biggest concern is really more of the politics drive the investment in the country and lack of investment in the country leads to less to go around in the world and increases this competition.”

One exception to the rule is Saudi Arabia who is investing significant amounts on its own. Saudi Aramco is already labeled the world’s largest and most sophisticated oil company, owning approximately 25 percent of world’s oil reserves and is currently working on increasing production capacity.

Ultimately, the newly delegated ‘Seven Sisters’ – Saudi Aramco (Saudi Arabia), JSC Gazprom (Russia), CNPC (China), NIOC (Iran), PDVSA (Venezuela), Petrobras (Brazil) and Petronas (Malaysia) – and their affiliated governments will largely drive the world’s future economic development.

With future oil supplies in flux and at the whim of developing countries’ willingness to invest back into the industry or allow foreign investment, it brings into question the role and level of involvement the US should take on.

One solution brought to light by Chevron’s Peter Robertson was the need to integrate the policies of the US – calling for policy makers to all sit around the same table and coalesce foreign policy and trade policy with energy policies and so on, to ensure definite integration across the board. Holding such a national conversation about energy security and environmental sustainability not only would allow for visionary collaborative decision-making, but it would also help direct the national impetus of the American people.

Side chat with Michael Ming, President of the Research Partnership to Secure Energy for America, on the ‘Resource Triangle’ and the Talent Crisis

Michael Ming, President of the Research Partnership to Secure Energy for America focused on the intellectual capital needed to leverage new resources – insisting that the challenge that exists today is not a matter of a resource shortage but rather a creativity shortage.

The biggest challenges are the technical challenges needing to be solved to leverage unconventional natural gas sources. Referencing the ‘Resource Triangle’ diagram developed by John Masters, he noted the common tendency is to “get the easy stuff out first” - meaning the conventional resources, which lie at the top of the triangle, representing the smallest part of the volume.

Deeper into the triangle you encounter the more unconventional resources like gas shales and then areas like gas hydrates and oil sands – where the volume of the resources increases but so do the complexities of the technological challenges. “The volume of that triangle increases as you get deeper into it, but the technology challenges go up so every new technical innovation enables a larger layer of the triangle,” Ming explains.

In particular, Ming has his eyes on the gas shales portion of the triangle, though he acknowledges that gas shales present a huge technological challenge to get out and deliver.

Thus he calls out the necessity for new minds to come in to look at these new pockets of resources – noting that it requires the next generation of energy technologists, and departing from relying on those like himself who were classically trained on engineering conventional reservoirs.

But with a looming talent crisis in areas such as science and engineering, many fear a shrinking innovation capacity as the numbers of students in mathematics and scientific fields are rapidly dropping. Already the industry is witnessing a declining number of professionals just when it needs such intellectual capital the most.

Ming hopes that robust research projects and collaborative efforts will be a draw to students, and recalls how President Kennedy’s man-on-the-moon quest sparked interest across the nation in science, engineering and like-minded fields. “I think you need that same kind of leadership now to elevate energy up and bring students in – materials science, physics, engineering. You take the sort of dogma comparisons of US and China – and we are not keeping up,” Ming stated.

The New Seven Sisters

Originally coined by Italian entrepreneur Enrico Mattei, the Seven Sisters was a phrase referencing the seven major oil companies who dominated oil production, refinement and distribution after World War II. The influence of the Seven Sisters began to decline once Arab states gained a greater stake in oil production in the 1960s and 1970s.

The original Seven Sisters were:

1. Standard Oil of New Jersey (Esso), which merged with Mobil to form ExxonMobil.
   
2. Royal Dutch Shell (Anglo-Dutch)
   
3. Anglo-Persian Oil Company (APOC) (British) This eventually became BP Amoco after merging with Amoco (which was formerly Standard Oil of Indiana) and is now known as BP.
   
4. Standard Oil Co. of New York (“Socony”) This would become Mobil, before merging with Exxon to form ExxonMobil.
   
5. Standard Oil of California (“Socal”) This would become Chevron, then merged with Texaco to form ChevronTexaco and is now known as Chevron.
   
6. Gulf Oil. Most of Gulf oil became part of Chevron, with lesser parts becoming part of BP and Cumberland Farms. Some stations in the northeast portion of the United States retained the name.
   
7. Texaco. Merged with Chevron in 2001 to be known as ChevronTexaco until reverting back to Chevron in 2005, with Texaco remaining a Chevron brand name.

In March of 2007, the Financial Times called out the ‘New Seven Sisters’ – the national oil and gas companies who have since gained the greatest influence and now control approximately one-third of the world’s oil and gas production:

1. Saudi Aramco (Saudi Arabia) formerly Aramco
   
2. JSC Gazprom (Russia)
   
3. CNPC (China)
   
4. NIOC (Iran)
   
5. PDVSA (Venezuela)
   
6. Petrobras (Brazil)
   
7. Petronas (Malaysia)
   

Roundtable participants

Peter J. Robertson has been Vice-Chairman of the board of Chevron since 2002. Prior to this position, he was President of Chevron Overseas Petroleum, Inc. He has been responsible for Chevron’s North American exploration and production operations and for strategic planning.

Dr Phil Sharp is President of Resources for the Future. During his congressional tenure as Representative from Indiana from 1975 to 1995, Sharp took key leadership roles in the development of landmark energy legislation. He helped develop a critical part of the 1990 Clean Air Act Amendments and was a driving force behind the Energy Policy Act of 1992.

Dr Edward Ira Moses, internationally recognized in laser and optical sciences, is the Director of the National Ignition Facility at Lawrence Livermore National Laboratory in Livermore, California. He is responsible for building and bringing into operation the National Ignition Facility, the world’s largest and most energetic laser system.

Dr Ernest J. Moniz is the Cecil and Ida Green Professor of Physics and Engineering Systems, Director of the Laboratory for Energy and the Environment, and Director of the Energy Initiative at MIT He served as Under Secretary of the Department of Energy from October 1997 until January 2001.

Michael Ming currently serves as the President of the Research Partnership to Secure Energy for America. Ming formerly served as a Managing Member of K. Stewart Energy Group, LLC, an independent oil and gas company located in Edmond, Oklahoma and as a Principal, Director and VP of Engineering at K. Stewart Petroleum Corp.

Denise Bode, a nationally recognized energy policy expert, is the CEO of American Clean Skies Foundation, a national organization committed to educating the public on the necessity of clean-burning natural gas.