Fossil fuels to keep dominating energy consumption mix

World energy consuption mix27 February 2014 – Despite more than 25 years of efforts to reduce fossil fuel consumption and boost renewable energy use, fossil fuels will keep dominating the global energy consumption mix, said International Energy Agency, IEA, Chief Economist Fatih Birol.

In 1987, a number of countries kicked off a major effort to reduce their consumption of fossil fuels and increase use of renewable energy resources. This global effort came after Norway’s then Prime Minister Gro Harlem Brundtland, issued a report on sustainable development at the request of the United Nations World Commission on Environment and Development, Our Common Future, also known as the Brundtland Report.

At that time, fossil fuels comprised 82 percent of the mix if energy resources used. Despite 25 years of subsidies and government policies, however, the percentage of fossil fuels in the global energy consumption mix remains at 82 percent.

“This tells us that economic effects are stubborn, and may be more powerful than policy drivers,” Birol noted.

However, the amount of fossil fuels consumed might have even been higher with efforts to curb fossil fuel consumption. Birol believes that fossil fuels will continue to heavily dominate global energy consumption.

Natural gas consumption will grow to a level greater than oil and coal put together. Renewables also are forecast to grow significantly, primarily due to government policies. However, renewables will shrink without government subsidies to promote their use.

IEA sees continued growth in carbon dioxide (CO2) emissions, meaning the world remains perfectly on track for a temperature increase above a level accepted by scientists. World leaders will try again to address climate change in Paris this year after their failure in Copenhagen in 2009, Birol noted, adding that he believes carbon capture storage should be part of the equation for addressing climate change.

CO2 emissions from the United States, the second largest source of CO2, have improved since 2009. The United States and China are working closely to reduce emissions, and Europe continues to push its climate change agenda. Given these factors, Birol said he wouldn’t be surprised to see positive news on CO2 emissions in the future.

Nearly all countries agree that climate change is an issue that needs to be addressed, Birol said. But who should take on the largest burden of the clean up? China and other developing countries say they shouldn’t get all the blame, pointing out that the amount of coal burned by these countries during the Industrial Revolution still lingers in the atmosphere. However, this argument does not hold water, given the fact that emissions levels from OECD and non-OECD countries are now more or less equal.

China also has argued that emissions can be measured only by megatons, but on a per capital basis, and that China’s 1.3 billion population is much larger and not comparable with other nations. While China may have a point on the per capital basis argument, this argument also is not valid, given that China’s CO2 emissions are overtaking Europe and will overtake that of OECD countries if things don’t change. But Birol believes that “able French diplomats” will help world leaders to reach an agreement with China’s CO2 emissions at the United Nations Climate Change Conference in Paris in 2015.

Chinese renewables capacity will grow larger to that than all of the United States, Japan and Europe combined. Hydropower will serve as a main source of renewable energy resources in China and other emerging countries. While strong growth will be seen in renewables, all renewable sources except for hydropower will have difficulty competing with fossil fuels without generous government subsidies.

Birol noted that Germany, Spain and Italy are cutting renewables due to financial difficulties, which in turn have boosted renewable energy prices. As a result, some countries are switching back to burning coal.

Brazil to become oil exporter
IEA believes that Brazil’s deepwater oil production will rise significantly, although not as high as official estimates, to 4 MMbopd. The South American country will become a major exporter of oil, eventually joining the ranks of the top six oil producers in the world, said Birol. He considers Brazil a success story not only for raising its oil production growth, but reducing its domestic oil consumption by utilizing hydropower and other renewables.

However, $60 billion a year investment is needed for Brazil to realize its production potential, and attracting this investment may be difficult because of local content and other requirements. These requirements may put tension on the supply chain and delay some projects, Birol noted.

Significant investment will be needed not only in Brazil, but worldwide to ensure the oil needed to meet future demand will be available. Birol estimates that $15.1 trillion in investment is needed over the next 20 years for upstream oil and gas, with 30 percent or $4 trillion of that investment needed in North America to ensure that the U.S. shale revolution continues.

This investment will be required not only to meet new demand – which is just a small part of the story – but to meet existing production demand by enhancing production from existing fields or finding new fields to replace fields in decline.

“If you invest $3 in upstream over the next 20 years, $2 would be needed to maintain production, and $1 would be needed to meet future growth,” Birol noted.
*Karen Boman – Rigzone

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