Go green or go west!

Neil McNaughton brings you the industry zeitgeist from a rather downbeat Madrid EAGE as reflected in the opening plenary. Spain makes progress on fracking. EAGE goes green. SPE president advises ‘go west' (to Mexico). Russia in decline as energy power. IEA - more energy innovation needed.

I thought that since we would not be reporting from the EAGE* for a couple of months that I would bring you a short summary of the introductory plenary session now before the zeitgeist got cold.

Spanish minister for energy Alberto Nadal Belda observed that green issues apart, the world is still dependent on oil and has no near-term substitute. It is important for a country like Spain to explore, ‘to know what we have.’ Spain recently promulgated a new law establishing rules for shale exploration that sets out to deliver wealth to affected communities and offer ‘fair compensation for risk takers, the local community and the country.’ In a veiled reference France’s ban on fracking, Belda observed that ‘it’s not very smart to forbid a particular technology.’ ‘We can’t afford, from one day to the next, not to use oil and gas.’

EAGE president Philip Ringrose then took the stage to give the state of association address. The EAGE now takes both energy and the environment seriously. Ringrose’s presidential theme has been to making the EAGE and earth science more ‘sustainable.’ This has involved re-casting what used to be near surface geoscience as green and setting up a green fund for suitable projects. To date these have included preserving the rainforest in Costa Rica and developing a system that scavenges drinking water from the air which is currently testing in Madagascar. Members are invited to submit suggestions for other sustainable earth science initiatives to greenfund@eage.org.

Helge Hove Haldorsen (Statoil and SPE president) thinks that the solution to the energy challenge lies in collaboration, citing Frank Ryan’s book, Darwin’s blind spot.’ The technology involved in deepwater exploration and fracking is amazing but we need to watch out for our social license to operate. Population growth means more cars and a need for more energy. In 2014 renewables represented only 5-10% of world energy use, ‘You all have “changing the world for the better” in your job description. On the other hand, the fall in the oil price has caused some 150,000 layoffs. But the SPE is there to help—check the spe.org website (we did, 90 jobs currently on offer).

But the real news is that if we don’t invest, the world will see a 20 million bopd shortfall by 2020. Young explorers should ‘go to Mexico’ for the July 2015 bid round. Closer to home we need to implement E&P 2.0 leveraging big data, the internet of things and the like. One problem is that our forecasts are ‘increasingly wrong’ due to systematic bias. Haldorsen likes to analyze projects in terms of good and bad risk (brisk and grisk!) He invited analysts to follow the advice of the late Theodor van Golf Racht viz. ‘if you are wrong, be wrong in the right direction.’

Gonzalo Escribano of the Elcano Royal Institute spoke of a geopolitical transition as power is shifting in the producer landscape. Escribano sees the world in terms of ‘Energy power,’ a blend of infrastructure, investment and spare capacity. In this context he sees Russia as being in decline for the next few decades particularly if it continues in its geopolitical rivalry with the EU. The US will remain center stage thanks to its domestic production and geopolitical stability. The narrative is different for the EU where there is a shift from hard to soft energy power. This could be an attractive model for others to follow, representing ‘a trend to more value-laden narratives in global energy markets’ (sic).

Simon Bennett from the International energy agency (IEA) traced (quickly) the last 250 years of innovation in energy. We often hear that energy needs more innovation, but a lot has already been done. Energy history is characterized by regular, decades-long transitions between fuels as better and cheaper alternatives are discovered. Major transitions include the shift from biomass to coal in the 1800s an from coal to oil in the 20th century. Meanwhile, the demand for lighting and heating has risen 10,000 fold in the last in 250 years while prices have fallen spectacularly. Both electricity and oil came in with very high price tags. By 1970 the world was ripe for a third transition, but nothing happened. The system stabilized around high oil consumption. Meanwhile, electricity demand stagnated which was unforeseen in the IEA’s population-based energy predictions. Today although the climate challenge is vast (coal and oil use needs to reduce quickly to meet the 2°C limit), there is a lack of demand for low carbon services. Low carbon energies will likely take a similar decadal amount of time to gain traction as earlier transitions.

While the IEA’s models out to 2040 include an enormous amount of hydrocarbons there is no growth scenario for oil and gas. More innovation is needed in developing the increasingly interconnected energy system. There is also big potential for renewables in the power sector and carbon capture and storage is of interest to this (geoscience) community. The fall in photovoltaic costs is also dramatic and very significant. Battery technology is improving at a comparable rate (though there are skeptics). The installed base of energy using technology not matched by current investment and innovation in energy supply equipment. Energy is no stranger to transitions but these take time.

Of course the other facet of the zeitgeist at the EAGE was, as one acquaintance put it, that the industry is going through ‘its worst crisis ever!’ In my next editorial I’ll try to unpick some of the above comments and reflect on subsequent developments. Not least the fact that the Pope himself has put the boot into an industry already on its knees!

* European Association of Geoscientists and Engineers


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