A new energy world order
Date: Sunday, June 25, 2006 @ 20:15:18 GMT
Topic: General


Our only hope lies in forging a new energy world order
By Michael Meacher (Telegraph.co.uk)

Although the price for July deliveries of Brent crude is over $70 a barrel, Lord Browne, BP's chief executive, thinks prices will halve in the medium term. According to a recent interview, he believes large oilfields are still being found and Canada's oil sands could be exploited.

Some hope. Already four-fifths of the world's oil supply comes from fields discovered before 1970 and even finding a field as large as Ghawar in Saudi Arabia, the world's largest, would only meet global demand for another 10 years.


Peak oil is the point at which oil production rises to its highest point before declining. Almost all expert opinion agrees that it is fast approaching, possibly within five years, almost certainly within 15, according to the former Saudi oil chief, Dr Sadad al-Husseini.

Whilst it has taken 145 years to consume half of the 2-2½ trillion barrels of conventional oil supplies generally regarded as the total available, it is likely that, given the huge increases in demand from China and India, with rates of growth of 7pc-10pc a year in economies supplying two-fifths of the world population, the other half will be largely consumed within the next 40 years.

The significance of this can hardly be over-stated. Oil is the fundamental underpinning of our civilization.

Alternatives like biofuels, ethanol or biomass can play a marginal supportive role but nowhere near on the scale required. When the oil runs out the economic and social dislocation will be unprecedented.

But isn't this too pessimistic? Won't new discoveries continue to fill the gap?

The pattern of the past few decades argues very strongly against it. Some 98pc of global crude oil comes from 45 nations, of which more than half may have peaked in oil production, including seven of the 11 Opec nations.

Major oil field discoveries fell to zero for the first time in 2003. Worse still, the excess capacity held by Opec nations has dwindled, from an average of 30pc to about 1pc of global demand now.

The political significance of this is almost incalculable. World oil and gas production is declining at an average of 4pc-6pc a year, while demand is growing at 2pc-3pc a year.

Global oil production is 84m barrels a day. As the president of Exxon Mobil Exploration, John Thompson, said in 2003: "By 2015 we will need to find, develop and produce a volume of new oil and gas that is equal to eight out of every 10 barrels being produced today." That is not just a problem of better technology. Additional oil on that scale is not available.

There are three options to escape this dilemma. One, which the US is ruthlessly pursuing, is to grab by force of arms the lion's share of what remains.

A second is to shift into unconventional sources of oil - tar sands, extra heavy oils and gas to liquids processing. A third is to accelerate the switch out of oil altogether into renewable sources of energy, especially wind power, biomass, tidal power and solar.

What is so disturbing is that long-term global policymaking on this, perhaps the biggest decision this century, is virtually non-existent and driven instead by self-destructive short-termism.

The first option was the real reason behind the first Gulf War in 1991, to deter Saddam gaining control of the Saudi oilfields.

It was also a major reason for the orchestrated revolutions in Ukraine, Georgia and Kyrgyzstan, as well as the military interventions in Afghanistan and Yugoslavia, all of which offer key oil transit routes from the Caspian Sea Basin, which holds the world's biggest untapped fossil fuel resources, worth up to $5 trillion.

Equally it is also one major reason for Russian intervention in Chechnya, part of the northerly transit route between the Caspian and Black Sea under current Russian control. It is certainly another reason for US concern about Iran, holding only slightly lower oil reserves than Iraq.

But, above all, option one was the main trigger for the Iraq war. Of more than 80 oilfields discovered in Iraq, only about 21 have been at least partly developed.

Despite this, Iraq's proven oil reserves exceed 110bn barrels but its total reserves are likely to be far more, perhaps even 200bn barrels more.

This explains US determination to control this fulcrum but it has involved an escalating political, military and economic price that must make this option unsupportable even for the US.

An alternative strategy is to take advantage of the rising oil price to develop unconventional oil sources, notably the Athabascan tar sands in Canada and the Venezuelan Orinoco heavy oils.

However, the downsides in terms of cost, manpower, water shortages and, above all, CO2, are prohibitive.

Cost-wise, the International Energy Agency reckons that investment needed in oil and gas over the next 25 years to meet an expected 50pc increase in global demand, will be $5 trillion, equivalent to more than four times the entire GNP of the UK.

The biggest constraint, however, is environmental. It takes almost as much energy to mine, process, refine and upgrade the oil extracted from tar sand as the energy contained in the light oil produced.

Worse still, the processing releases five to 10 times more greenhouse gases than a barrel of conventional oil. This is the exact opposite to the scientists' requirement for the world to cut greenhouse gas emissions by at least 60pc by 2050.

The third option is clearly the right way forward - a new energy world order. The potential for powering the world economy via renewables is almost infinite. Governments should now be switching to this option, far faster and on a far greater scale.

# Michael Meacher, Labour MP for Oldham West and Royton, was Environment Minister from 1997 to 2003

Source: A New Energy World Order






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