matt simmons on energy & water

8/14/2019 Matt Simmons on energy & water

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Twin Threats to Resource

Matthew R. Simmons, Chairman EmeritusSimmons & Company International

www.marsh.com


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Many Scarce Resources Have Abundant Substitutes

! World could learn how to get along without copper.

! New technologies also obsolete some resource needs: Telephone lines and wires are fast becoming

o so e e Lead is barely used today

! ,resource demands.

.

2Marshs National Oil Companies Conference 2010 February 22 - 2 4, 2010 I ntercontinental Hotel, Festival City, Dubai


4/32

Few Resources Are Invaluable But, Two Top This List

! Oil created miracle of 20 th century: Globalized travel Long-distance Suburban spread Globalized food

! Water is even more priceless: Without water, we cannot create

Without water, we have no food

! ,of both precious resources.



5/32

World Will Never Run Out Of Oil Or Water

! But, high quality (sweet and light) oil andotable fresh water are becomin scarce.

! Crude oil flows are steadily getting heavier and more sour.

!

any groups es ma e rema n ng provenunproven oil resources, but fail to differentiatehigh-quality flow. Source: Oil & Gas Middle East - April 2008

! There are few estimates of remaining freshwater/potable ground water.

! Most of worlds usable water is now brackish

or saline.! Running short of oil or water used to be a


.


6/32

There Are Few Easy Substitutes For Oil

! Years ago, oil was used to create electricity, although there.

! Today, crude oil is essentially transportation energy, withfew obvious alternatives: Compressed natural gas works great for fleets Electric cars/hybrids work,

internal combustion fuelledvehicles

Biofuels (except sugarcaneethanol) are very energy/water intensive to create



7/32

There Are No Substitutes For Potable Water

! Only known substitute for fresh water is desalinated brackish.

! Historically, this process has been very energy intensive.! As lobal o ulation

grows, water usage hasto rise for sanitation,

modern energy creation.!

It is unclear whether thiscan happen.! It is less clear what


appens wa er supp es wane.


8/32

Historically, We Gave Both Resources Away

! From 1890 1970 (in current $) oil prices averaged onlyor . a cup .

! Water was essentially free to many key users and cheap

.! Low prices for both resources defused supply concerns

.



9/32

Modern Energy Production Requires Vast AmountsOf Water

! USAs power generation uses 40% of our fresh water.

! n eory, s recyc e as ra n somew ere .! A gallon of motor gasoline uses 2 3 gallons/water in

.

Water Use by Plant Type

900

800

700

600

500

400 a

t e r

U s e g a

l / M W h

300

200

100

0

W



10/32

Some Inconvenient Truths About Oil

! Flimsy statistics indicate that

NGLs, etc.) peaked in 2005.! Steep declines in North Sea,

ex co an o er ey sourcesare getting impossible toovercome.

! High quality light, sweet crudeflows rapidly dwindling:

Brent turned into blended Brent

! Quality crude is being replaced Source: EIA Monthly Energy Report March 2008


by junk crude.


11/32

High Percentage Of Oil Flows Come From VeryOld Fields

! ! 300 giant/supergiant oilfields make up 2/3 of world supply.! Almost all these fields are past their peak flows.! Most are over 50-years old.! Most of remaining oil supply comes from small fields.

Horn Mountain / King Llano (GB 387)Lobster/Oyster

102030405060708090

100

510152025303540

0102030405060

Mars-Ursa

Nansen (EB 602)

Neptune (VK 825)

050

100150200250300

05

1015202530

05

1015202530



12/32

Junk Crude Is Harder To Refine Into Finished Oil

! Junk crude is great source for asphalt.

! But, most refineries were built to,

not junk.

! refineries are few and far between.

! ,diesel will get increasingly costly andhard to grow.



13/32

Some Far More Inconvenient Water Truths

! We are running out of fresh water.-

appreciated global challenge of our time.*

!

any o wor s megac es oseexceeding 10 million people) are nowex eriencin water shorta es: Mexico City Calcutta Cairo Jakarta Beijing Lagos


an a*World Water Institute


14/32

More Inconvenient Water Truths

! Tiny amount of worlds fresh water comes from rivers lakes andstreams.

! Aquifer supplied ground water is

now primary fresh water supply.! Knowledge of aquifer water tables

s s e c y: Drilling wells into water tables is still

only accurate measurement

! One giant oil well can drain anentire aquifer.



15/32

Water Scarcity Is Already A Major Health Hazard

! Two billion people now live with un-sanitized water.

! Over last decade, childrenkilled by diarrhoea caused

number of people killed inall armed conflicts sinceWWII.

! Every eight seconds, achild dies from drinking dirtywater.



16/32

Worlds Most Prosperous People Use Most Of Our

! USA uses ! 25 Bbls/oil per person/year.

! Non-OECD countries use 2.7 Bbls/oil per person/year.

! Average water use per person in North America is 600 litres

per day.! Outside North America,

average person on yuses 50 litres/day for

drinking, cooking andsanitation.



17/32

How Did We Get In Such A Mess?

WORLD POPULATION GROWTH

! Two easy answers:

richer and richer

too fast


Source: Wikipedia


18/32

Middle East Is Epicenter Of This Scarcity Crisis

! Too many people still think1970 1980 1990 2000 2010* Est

Population

e as s sparse ypopulated.

Population in ThousandsBahrain 220 348 501 635 738Egypt 33,574 42,634 54,907 65,159 80,472Iran 26,854 39,422 56,669 63,273 67,038

Iraq 9,414 13,233 18,140 22,679 29,672

almost three-fold from1970-2010.

Israel 2,903 3,737 4,478 6,115 7,354Jordan 1,503 2,163 3,267 4,688 6,407

Kuwait 748 1,370 2,142 1,974 2,789Lebanon 2,383 2,899 3,440 3,791 4,125

Oman 783 1,185 1,794 2,432 2,968

! There are now more peoplein the Middle East than in

Qatar 115 237 446 627 841Saudi Arabia 6,109 9,999 16,061 23,147 29,207

Syria 6,258 8,752 12,500 16,471 22,198Turkey 35,758 45,048 56,561 67,329 77,804

United Arab Emirates 249 1,000 1,826 3,219 4,976

USA and Canada .Source: U.S. Census Bureau

emen , , , , ,

Total 133,969 181,160 245,148 298,946 360,084



19/32

Population Growth Caused Explosion In Oil Use

! Total Middle East oil 1980 1990 2000 2008Thousand Barrels/day

Oil Consumption

consump on was . m onbarrels per day in 1970.

Bahrain 16 20 23 44

Egypt 260 465 553 702Iran 590 1,003 1,248 1,741

Iraq 217 400 462 616Israel 160 165 255 251,

3.1X to 8.1 million barrelsper day.

Jordan 37 66 101 111Kuwait 106 85 264 351Lebanon 45 33 106 93Oman 17 39 53 96

Qatar 17 28 48 123

! But, per capita consumptiononly grew from 7.1 barrels per

Saudi Arabia 610 1,107 1,537 2,376

Syria 110 205 256 273Turkey 314 477 667 676United Arab Emirates 75 243 330 525

Yemen 45 76 97 152

. .! As prosperity and jobs finally spread, the per capita oil use

Total 2,618 4,411 6,000 8,130

Source: IEA


.


20/32

Fresh Water Always Scarce In The Middle East

! Only handful of key rivers deliver fresh water to limited areas in

Nile River Tigris River Eu hrates River

! Now, all suffer from hot stainsand increasing salinity.

! Desalination became MiddleEasts water solution: , ,

25% of worlds desalinated water



21/32

Oil Exports Will Wane If Middle East Oil Supply Does

! Given current population trends, Middle East could have.

! If per capita oil consumption

person/year, this would doublecurrent internal oil consumption.

! If production stays flat, exportswould fall by ! 25%.



22/32

Could The World Get Along With Shrinking Middle

! Future energy projections assume increase in Middle East.

! IEAs latest forecasts summarize this dilemma:

To keep current oil supply flat through 2030, world needs four new Saudi Arabias.


Source: IEA World Energy Outlook 2008


23/32

It Is Time To Properly Price Oil And Water

! The re lacement cost of incremental oilis far higher than $147/barrel.

! If ener roducers had to a a fair price for the water they use, this wouldraise energy prices much higher.

! Why do we know so little about whatconstitutes a fair price for oil and water?



24/32

How Did We Get Into Such A Deep Hole?

! Rule #1: When you are in a deep hole: STOP DIGGING!! s ere anyway o s op gg ng

ourselves into an ever-deeper oil and water hole?

! The intertwining of oil and water is historical irony.

! The two do not mix and we cannot get along without both.

! Lack of transparent data was the shovel responsible for this deep hole.



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The Gulf Of Maine Will Become Test Ground For

! Ocean Energy Institute (OEI) is helping create world-class deepwater wind in Gulf of Maine.

! Maines offshore wind will create kilowatts to combine with seawater.! Output creates NH 3 (liquid ammonia) and desalinated seawater.! ,

without subsidies.

ElectricityElectricity created

Offshore WindCombine 3 Hydrogen with

1 Nitro en

NH3Li uid Ammonia



27/32

If It Works In Maine, It Can Scale Globally

! Recent Rice University Conference From Gulf of Maine toGulf of Mexico hi hli htedopportunity for developmentof offshore wind in Gulf of

.! Particularly valuable for

China India and the MiddleEast.

! Unclear which by-product willbe most valuable: Liquid ammonia; or Desalinated water



28/32

Several New Technological Advances Improve Offshore

! The University of Maines advanced composites (light, yetstrong material).

! Forward osmosis.

! Process to alter electrolysis.

! All could result incosts lower thanmos a erna eenergy sources.



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Other Pending Ocean Energy Initiatives

! Once Wind Project is underway, OEI plans to embark on

Tides Waves

Currents Aquatic biofuels See s

All hold great promise andare little understood

Gas hydrates OTEC



30/32

Ocean Energy Is Our Last Frontier

! We know oceans contain vast energy sources.! We know oceans make up 70% of our globe.! Location is ideal: 60% of global population work and live

within 50 miles of coastlines.!

s ore w n s g es qua ywind (and free).! Other ocean sources can also

be tapped.! 2.5 million new jobs could be

crea e n . . a one wclean-energy investments.

! This excitin o ortunit is where offshore oil and as was


80-years ago.


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