SPE DISTINGUISHED LECTURER SERIESis funded principally

through a grant of the

SPE FOUNDATIONThe Society gratefully acknowledges

those companies that support the programby allowing their professionals

to participate as Lecturers.

And special thanks to The American Institute of Mining, Metallurgical,and Petroleum Engineers (AIME) for their contribution to the program.

The Medium (2020) and Long-Term (2050)The Medium (2020) and Long-Term (2050)

of Oil, Natural Gas and Other Energiesof Oil, Natural Gas and Other Energies

By By Pierre-René BAUQUISPierre-René BAUQUISAssociated Professor IFP-SchoolAssociated Professor IFP-School

Professor TPAProfessor TPA

2003-2004 2003-2004 SPESPE Distinguished Lecturers Program Distinguished Lecturers Program

3/28

Growth rateGrowth rate% / year% / year

0.0

0.5

1.0

1.5

2.0

2.5

210017001700 18001800 19001900 20002000 21002100

WORLD POPULATION GROWTH RATE

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0%

20%

40%

60%

80%

100%

1850 1900 1950 2000

Coal Renewables (except hydro.)

Oil Natural gas

Hydropower Nuclear

HISTORY OF PRIMARY ENERGIES (1850 2000)

5/28

Carbon intensityCarbon intensitytC/toetC/toe

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1850 1900 1950 2000

Wood = 1.25Wood = 1.25

Coal = 1.08Coal = 1.08

Oil = 0.84Oil = 0.84

Natural gas = 0.64Natural gas = 0.64

Source: ENERGIE from Nakicenovic & al. '96

HISTORICAL CHANGES IN WORLD ENERGIES CARBON INTENSITY

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1919 “... The peak of U.S. production will soon be past - possibly within three years”

1936 “…it is unsafe to rest in the assurance that plenty of petroleum will be found in the future merely because it has been in the past.”

1981 “If petroleum is not there to begin with, all of the human ingenuity that can be mustered into the service of exploration cannot put it there…”

1990 “… non-OPEC production in the longer term will at best remain stagnant and is more likely to fall gradually due to resource constraints.”

1998 “Global production of conventional oil will begin to decline sooner than most people think probably within 10 years”

Source : Daniel BUTLER, U.S. EIA/DOE AEO 2001 conference

PESSIMISTS HAVE HISTORICALLY BEEN WRONG

7/28

What people "can see": published information, i.e. proven What people "can see": published information, i.e. proven reserves, which is an economical concept, which therefore reserves, which is an economical concept, which therefore changes with changes in technology and oil prices - These are the changes with changes in technology and oil prices - These are the visible part of the icebergvisible part of the iceberg

What 99% of people "cannot see", i.e. the non visible part of the What 99% of people "cannot see", i.e. the non visible part of the iceberg, i.e. the already discovered resources in place on one iceberg, i.e. the already discovered resources in place on one hand the ultimate reserves on the other handhand the ultimate reserves on the other hand

are not published, but could be are not published, but could be estimated at 3,000 Gbbl i.e. three times estimated at 3,000 Gbbl i.e. three times the proven reserves of 1,000 Gbblthe proven reserves of 1,000 Gbbl

today (estimated 2000/3000 Gbbl) are today (estimated 2000/3000 Gbbl) are two to three times the proven reserves two to three times the proven reserves of around 1,000 Gbblof around 1,000 Gbbl

Discovered resourcesDiscovered resources

Ultimate reservesUltimate reserves

RESERVES and RESSOURCES

8/28

Observing the "visible part of the iceberg" leads to conclude Observing the "visible part of the iceberg" leads to conclude that we have plentiful and fast growing oil and gas reserves that we have plentiful and fast growing oil and gas reserves

and that there is no problemand that there is no problem

Oil world reservesOil world reserves

Gas world reservesGas world reserves

19731973

Years ofYears ofconsumptionconsumption

GTOEGTOEYears ofYears of

consumptionconsumptionGTOEGTOE

20002000

8686

5252

3030

4848

140140

140140

4040

6565

PROVEN RESERVES : AN OPTIMISTIC PICTURE

9/28

Beetween 1973 and 2000 there is practically no increase in Beetween 1973 and 2000 there is practically no increase in

ultimate conventional oil reserves estimatesultimate conventional oil reserves estimates

GbarrelsGbarrels

19731973Ultimate world oilUltimate world oilconventional reservesconventional reserves

2000 - 30002000 - 3000 2000 - 30002000 - 3000

20002000

ULTIMATE RESERVES : A PESSIMISTIC VIEW

10/28

Source: IFP/DSEP adapted from Martin (1985) and Campbell (1992) - Updated 2000

* Cumulative production + proven reserves + possible reserves yet to be discoveredGb

0

500

1000

1500

2000

2500

3000

3500

Pra

tt (

1942

)D

uce

(19

46)

Po

ug

e (1

946)

Wee

ks (

1948

)L

ever

son

(19

49)

Wee

ks (

1949

)M

acN

aug

hto

n (

1953

)H

ub

ber

t (1

956)

Wee

ks (

1958

)W

eeks

(19

59)

Hen

dri

cks

(196

5)R

yam

n (

1967

)S

hel

l (19

68)

Wee

ks (

1968

)H

ub

ber

t (1

969)

Mo

od

y (1

970)

Wee

ks (

1971

)W

arm

an (

1972

)B

auq

uis

(19

72)

Sch

wei

nfu

rth

(19

73)

Lin

den

(19

73)

Bo

nill

as (

1974

)H

ow

itt

(197

4)M

oo

dy

(197

5)W

EC

(19

77)

Nel

son

(19

77)

De

Bru

yne

(197

8)K

lem

me

(197

8)N

ehri

ng

(19

78)

Neh

rin

g (

1979

)H

alb

ou

ty (

1979

)M

eyer

ho

ff (

1979

)R

oo

rda

(197

9)H

alb

ou

ty (

1979

)W

EC

(19

80)

Str

ickl

and

(19

81)

Co

liti (

1981

)N

ehri

ng

(19

82)

Mas

ters

(19

83)

Kal

inin

(19

83)

Mar

tin

(19

84)

Ivan

ho

e (1

984)

Mas

ters

(19

87)

Cam

pb

ell (

1991

)M

aste

rs (

1991

)T

ow

nes

(19

93)

Pet

roco

nsu

lt. (

1993

)M

aste

rs (

1994

)U

SG

S (

2000

)

1940194019491949

1950195019591959

1960196019691969

1970197019791979

1980198019891989

1990199020002000

HISTORICAL VIEWS ON ULTIMATE RESERVES

11/28

THE IRREVERSIBLE DECLINE OF OIL PRODUCTIONS IN THE USA

Discoveries(*)

Gbbl/year

Productions

(*) Discoveries are registered as per their initially declared sizes and their timing is « forwarded » by 33 years

Source : King Hubbert 1956 - Updated by Jean Laherrere

years

12/28

Source: USGS - WPC - Calgary - June 2000

million of barrelsmillion of barrels

Already produced :Already produced :

Proven conventional :Proven conventional :

Remaining to be discovered :Remaining to be discovered :

Future "reserve growth" :Future "reserve growth" :

800800

10001000

725725

610610

31353135

AN USGS VIEW ON WORLD ULTIMATE RESERVES

13/28

Increase in proven reserves from 1973 to 2000 largely

due to old discoveries reevaluations and not essentially

to new discoveries

Reevaluations due both to increases in expected

recovery rates, and to underestimation of accumulation

volumes at early evaluation stages

A secondary factor has been the acceleration of the

delineation - development process

Last but not least the emergence of non conventional

reserves as part of new proven reserves (permanent

blurring of frontiers beetween the two categories)

Source : P.R. BAUQUIS. Fort Lauderdale 28 NOV 2000Source : P.R. BAUQUIS. Fort Lauderdale 28 NOV 2000

CAN WE RECONCILE LONG-TERM VIEWS

14/28

Extra heavy crude - bitumens will represent the major portion of Extra heavy crude - bitumens will represent the major portion of new "reserves"new "reserves"

(See World Energy Congress Houston September 1998 - Paper by P.R. Bauquis)(See World Energy Congress Houston September 1998 - Paper by P.R. Bauquis)

OrinocoOrinoco

AthabascaAthabasca

2030 estimated2030 estimated

reservesreserves1995 estimated1995 estimated

reservesreservesEstimatedEstimated

volume in placevolume in place

1,2001,200

1,7001,700

100100

100100

300300

300300

In billionIn billion

of barrelsof barrels

THE ROLE OF ULTRA-HEAVY OIL IN FUTURE RESERVES GROWTH

15/28

Main uncertainties which could affect oil reserves evolutions beetween now and 2020 - 2030

Global Foundation - November 26/28, 2000 0PRB9_01.ppt - Pierre René BAUQUIS

The climate change factor and the resulting COThe climate change factor and the resulting CO2 2

emissions limitation legislation (i.e. Kyoto Protocol and emissions limitation legislation (i.e. Kyoto Protocol and

subsequent legislation at world and individual countries subsequent legislation at world and individual countries

levels)levels)

The irrationality - Political factors and their possible The irrationality - Political factors and their possible

effects on energy policies = oil and gas exploration (see effects on energy policies = oil and gas exploration (see

greenpeace campaign to stop all exploration), and even greenpeace campaign to stop all exploration), and even

more important enhanced recovery methods possible more important enhanced recovery methods possible

environmental limitationsenvironmental limitations

16/28

* Energy equivalence used for electricity: nuclear power and renewables have been accounted as if they had been generated by conventional thermal power plants having an efficiency of 40% (as conventionally done by TotalFina)

HydropowerHydropower

Wind powerWind power

BiomassBiomass(for electricity production)(for electricity production)

GeothermalGeothermal

Solar Solar (photovoltaïc)(photovoltaïc)

Solar Solar (thermal)(thermal)

722.600722.600

700.000700.000

5.0005.000

10.00010.000

7.0007.000

600600

--

1.000.0001.000.000

200.000200.000

100.000100.000

20.00020.000

30.00030.000

--

2.4002.400

1010

5050

3030

11

1010

3.0003.000

500500

500500

100100

100100

5050

1.350.0001.350.000 2.5012.501 4.2504.250TotalTotal

19951995 20502050 19951995 20502050

Power installedPower installedMWMW

Electricity generatedElectricity generatedTWhTWh

Source: Revue de l'Energie, 50 ans, n° 509 Sept. 99

WHAT CONTRIBUTION FROM RENEWABLE ENERGIES ?

17/28

* Energy equivalence used for electricity: nuclear power and renewables have been accounted as if they had been generated by conventional thermal power plants having an efficiency of 40% (as conventionally done by TotalFina)** From which over 95% of large hydropower plants (i.e. plants larger than 10 MW)

Electricity consumptionsElectricity consumptions(all origins)(all origins)

Hydropower **Hydropower **

Other renewablesOther renewables

Total renewablesTotal renewables 2 5002 500

13 00013 000

2 4002 400

100100

19951995

Electricity generatedElectricity generated

in TWh in Gtep *in TWh in Gtep *

4 2504 250

42 00042 000

3 0003 000

1 2501 250

20502050

0.520.52

2.82.8

0.50.5

0.020.02

19951995

0.90.9

9.09.0

0.60.6

0.30.3

20502050

18.8%18.8%

100%100%

18.0%18.0%

0.8%0.8%

19951995

10.0%10.0%

100%100%

7.0%7.0%

3.0%3.0%

20502050

6.8%6.8%

34.0%34.0%

6.5%6.5%

0.3%0.3%

19951995

5.0%5.0%

50.0%50.0%

3.5%3.5%

1.5%1.5%

20502050

ei in pourcentageei in pourcentage

of electricityof electricity

generatedgenerated

ei in pourcentageei in pourcentageof overallof overall

energyenergyconsumptionsconsumptions

IN WORLD ENERGY TERMS, RENEWABLES SHOULD REMAIN MARGINAL

18/28

Source: Revue de l'Energie, 50 ans, n° 509 Sept. 99

20002000

GtepGtep %%

20202020

GtepGtep %%

20502050

GtepGtep

OilOilNatural gasNatural gas

Coal Coal (including lignite)(including lignite)

3.73.72.12.12.22.2

404022222424

5.05.04.04.03.03.0

404027272020

3.53.54.54.54.54.5

202025252525

%%

Total fossil fuelsTotal fossil fuels 8.08.0 8686 12.012.0 8787 12.512.5 7070

RenewablesRenewablesFrom which used forFrom which used forelectricity generationelectricity generation

0.70.7(0.5)(0.5)

7.57.5

11(0.7)(0.7)

6.56.5

1.51.5(0.9)(0.9)

88

NuclearNuclear 0.60.6 6.56.5 11 6.56.5 44 2222

Total commercial energiesTotal commercial energies 9.39.3 100.0100.0 14.014.0 100.0100.0 18.018.0 100.0100.0

AUTHOR SYNTHETIC ENERGY FUTURE VIEW

19/28

APPENDIX

20/28

0%

20%

40%

60%

80%

100%

1900 1950 2000 2050

Coal Renewables (except hydro.)

Oil Natural gas

Hydropower Nuclear

THE ENREGY MIX UP TO 2050

21/28

Assumption 1: use of 1 GtC generates an increase of 0.277 ppm COAssumption 1: use of 1 GtC generates an increase of 0.277 ppm CO22 in the atmosphere in the atmosphereAssumption 2: use of 1 GtC generates an increase of 0.228 ppm COAssumption 2: use of 1 GtC generates an increase of 0.228 ppm CO22 in the atmosphere in the atmosphere

COCO22 ppm ppm

200

250

300

350

400

450

500

550

1960 1980 2000 2020 2040

Assumption 2Assumption 2

Assumption 1Assumption 1

Mauna LoaMauna Loadatadata

THE RELATED GREEN-HOUSE GASES ISSUE

22/28

23/28

24/28

25/28

ENERGY AND SUSTAINABLE DEVELOPMENT,HYDROCARBONS AND NUCLEAR:COMPLEMENTARY ENERGIES

Making optimum use of each energy sourceMaking optimum use of each energy source Liquid hydrocarbon resources are limited, so they should be used Liquid hydrocarbon resources are limited, so they should be used

efficiently - i.e. where their high energy density and chemical efficiently - i.e. where their high energy density and chemical richness are fully exploited: richness are fully exploited:

as transport fuels (land, sea and air)as transport fuels (land, sea and air) as raw materials (petrochemicals, chemicals, solvents, etc) as raw materials (petrochemicals, chemicals, solvents, etc)

Heat production, including for power generation, is a less efficient Heat production, including for power generation, is a less efficient use of liquid hydrocarbons (except “bottom of the barrel” cuts and use of liquid hydrocarbons (except “bottom of the barrel” cuts and for off-grid consumers or cases where the grid is deficient)for off-grid consumers or cases where the grid is deficient)

gaseous hydrocarbons are a more efficient option in certain gaseous hydrocarbons are a more efficient option in certain cases in both the short and medium terms. However, after cases in both the short and medium terms. However, after 2050 gas resource problems become very likely2050 gas resource problems become very likely

in other cases, nuclear power is (already) the best solution in in other cases, nuclear power is (already) the best solution in countries with high safety standards. By 2020-2050, nuclear countries with high safety standards. By 2020-2050, nuclear power should be very widespread (need for small “fail-safe” power should be very widespread (need for small “fail-safe” reactors) reactors)

26/28

ENERGY AND SUSTAINABLE DEVELOPMENT,HYDROCARBONS AND NUCLEAR:COMPLEMENTARY ENERGIES

Energy complementarities: 2050 and beyondEnergy complementarities: 2050 and beyond

Production of hydrocarbons that are difficult to extract from the Production of hydrocarbons that are difficult to extract from the reservoirs holding them requires considerable amounts of energy reservoirs holding them requires considerable amounts of energy (e.g. steam injected into the reservoir, thermal treatment on the (e.g. steam injected into the reservoir, thermal treatment on the surface in the case of mined production). One way to minimize CO2 surface in the case of mined production). One way to minimize CO2 production is to use nuclear-generated calories.production is to use nuclear-generated calories.

further improvement in recovery rates from conventional further improvement in recovery rates from conventional deposits, and a fortiori in the case of heavy or extra-heavy deposits, and a fortiori in the case of heavy or extra-heavy crudes (Athabasca, Orinoco) using nuclear-generated heatcrudes (Athabasca, Orinoco) using nuclear-generated heat

possibility of economic production of oil shales or gas possibility of economic production of oil shales or gas hydrates?hydrates?

possibility of improving gas-to-liquid (GTL) or “coal possibility of improving gas-to-liquid (GTL) or “coal liquefaction” processes using nuclear-generated hydrogen: liquefaction” processes using nuclear-generated hydrogen: eco-friendly Fischer Tropscheco-friendly Fischer Tropsch

The nuclear industry could produce hydrogen for massive demand The nuclear industry could produce hydrogen for massive demand in refining and petrochemicals processesin refining and petrochemicals processes

27/28

HYDROGEN AND SUSTAINABLE DEVELOPMENT:SOME PARADOXES -

Hydrogen and economic fundamentalsHydrogen and economic fundamentals

Hydrogen is and will remain expensive to produce:Hydrogen is and will remain expensive to produce: currently and until about 2030-2050, hydrogen will be currently and until about 2030-2050, hydrogen will be

produced using fossil energies, and will cost some 2 to 5 produced using fossil energies, and will cost some 2 to 5 times (per energy unit) the cost of the fossil fuels used to times (per energy unit) the cost of the fossil fuels used to produce itproduce it

in future, i.e. 2030 onwards, nuclear hydrogen will gradually in future, i.e. 2030 onwards, nuclear hydrogen will gradually take over (produced either by electrolysis or by direct thermal take over (produced either by electrolysis or by direct thermal water decomposition)water decomposition)

Hydrogen is and will remain expensive to transport and storeHydrogen is and will remain expensive to transport and store pipeline transport of hydrogen costs and will continue to cost pipeline transport of hydrogen costs and will continue to cost

10 times more (per energy unit) than liquid hydrocarbons 10 times more (per energy unit) than liquid hydrocarbons (« technical progress » cannot change the basic laws of (« technical progress » cannot change the basic laws of thermodynamics)thermodynamics)

the cost of storing hydrogen (pressurized, cryogenic, the cost of storing hydrogen (pressurized, cryogenic, adsorbed or chemically combined) may come down, but it will adsorbed or chemically combined) may come down, but it will remain much more expensive than storing liquid remain much more expensive than storing liquid hydrocarbons (a 100 times factor … even in 2050)hydrocarbons (a 100 times factor … even in 2050)

28/28

HYDROGEN AND SUSTAINABLE DEVELOPMENT:SOME PARADOXES -

Hydrogen and its usesHydrogen and its uses

As heat energy (industrial boilers, steam, electricity, space heating, As heat energy (industrial boilers, steam, electricity, space heating, air-conditioning, etc.)air-conditioning, etc.)

hydrogen is a less efficient vector than electricity. Both hydrogen is a less efficient vector than electricity. Both electricity and natural gas involve equivalent logistics costs, electricity and natural gas involve equivalent logistics costs, whether for huge quantities or for final networks, while whether for huge quantities or for final networks, while hydrogen is and will remain 2 to 3 times more expensive than hydrogen is and will remain 2 to 3 times more expensive than natural gas to transport and distribute (basic physics)natural gas to transport and distribute (basic physics)

As transport fuel (road transport, aviation, maritime shipping)As transport fuel (road transport, aviation, maritime shipping) the advantage of using hydrogen is its absence of urban the advantage of using hydrogen is its absence of urban

pollution (whether used in internal combustion engines, pollution (whether used in internal combustion engines, turbines or fuel cells). But the high cost of logistics and on-turbines or fuel cells). But the high cost of logistics and on-board storage (cars, aircraft, ships) means that hydrogen is board storage (cars, aircraft, ships) means that hydrogen is handicapped by its low volumic energy contenthandicapped by its low volumic energy content

The most efficient way to use hydrogen as a transport fuel would The most efficient way to use hydrogen as a transport fuel would probably be to “carbonize” it, thus producing synthetic probably be to “carbonize” it, thus producing synthetic hydrocarbonshydrocarbons