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ENERGY REALITIES

ENERGY REALITIES. Karen A. Harbert Executive Vice President Institute for 21 st Century Energy US Chamber of Commerce . The New Energy Reality Energy Security is central to our national and economic security. Demand to increase 50% by 2030 70% in developing world

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ENERGY REALITIES

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  1. ENERGY REALITIES Karen A. Harbert Executive Vice President Institute for 21st Century Energy US Chamber of Commerce

  2. The New Energy RealityEnergy Security is central to our national and economic security Demand to increase 50% by 2030 70% in developing world Electricity demand to increase 100% 1.6 billion people without electricity $26 trillion of new investment by 2030 to meet rising demand Environmental Realities - over 70% of the current GHG emissions are energy related

  3. The New Energy RealityEnergy Security is central to our national and economic security Access to reserves is limited 2/3 of world’s reserves becoming inaccessible Rising importance of NOCs Own 80% of reserves Lack of investment in exploration Significant rise in project costs Resource Nationalism Lack of qualified engineers/skilled labor BANANA Syndrome

  4. Global Challenges China China relies on coal for 70% of their energy needs, building approximately one coal-fired plant a week By 2025, they could have 300 million cars on the road, compared to 30 million today By 2030, energy-related CO2 emissions from China are projected to account for 26% of the world total and 48% of total coal-related emissions worldwide India Oil consumption has increased sixfold over the past 25 years

  5. GLOBAL ENERGY DEMAND

  6. World oil production by OPEC/non-OPEC 120 52% OPEC - other mb/d 50% 100 OPEC - Middle East 48% 80 Non-OPEC - non- 46% conventional 60 Non-OPEC - 44% conventional 40 OPEC share 42% 20 40% 0 38% 2000 2007 2015 2030 Production rises to 104 mb/d in 2030, with Middle East OPEC taking the lion’s share of oil market growth as conventional non-OPEC production declines Source: IEA 2008

  7. World oil production by source 120 Natural gas liquids mb/d Non-conventional oil 100 Crude oil - yet to be developed (inc. EOR) or found 80 Crude oil - currently producing fields 60 40 20 0 1990 2000 2010 2020 2030 64 mb/d of gross capacity needs to be installed between 2007 & 2030 – six times the current capacity of Saudi Arabia – to meet demand growth & offset decline Source: IEA 2008

  8. Cumulative energy-supply investment 2007-2030 Coal 3% Biofuels <1% $0.7 trillion $0.2 trillion Gas 21% Oil 24% Power 52% $13.6 trillion $5.5 trillion $6.3 trillion Shipping Shipping & 4% Refining ports Transmission 16% 9% Transmission & distribution Power Exploration & 31% & distribution generation development 50% 50% Exploration and 61% Mining LNG chain development 91% 8% 80% Investment of $26 trillion, or over $1 trillion/year, is needed, but the credit squeeze could delay spending, potentially setting up a supply-crunch once the economy recovers

  9. Market Situation Market fundamentals Economic growth still boosting demand OPEC production decisions (ex: cuts in production) Moderating non-OPEC production –growth Stock builds Economic Crisis – Demand uncertainty Credit Crunch Geopolitical risks Dollar Fluctuations VOLATILITY

  10. What’s happening at home? 85% of oil and gas has been off limits Just from the OCS, we could fuel 80 million cars for 35 years and heat 60 million homes for 100 years No nuclear plants built in 30 years New coal fired power plants stalled New LNG import terminals cancelled Transmission lines in litigation Intermittent subsidies for renewables UNPREDICTABLE INVESTMENT ENVIRONMENT

  11. Growing Support for Oil Exploration 75% support increased exploration to reduce our dependence on foreign oil; 77% of independents and 66% of Democrats (July Fox News Poll) 73% favor more exploration (June CNN) 68% (June LA Times)

  12. Administration Action Friday MMS Draft Proposed 5 year Lease Plan Announcement Friday 1) Entire Eastern Coast; 2) Areas off the coast of Northern AND Southern California; 3) An area in the Eastern Gulf 75 south of FL; and 4) Various areas in AK not already available for lease. HOWEVER, BUFFER UNCLEAR

  13. Obama Campaign Energy Plan Enact a Windfall Profits Tax to Provide a $1,000 Emergency Energy Rebate to American Families Use it or Lose it $150 billion on clean energy R&D Establish a low carbon national fuel standard and mandate 60 billion gallons of advanced biofuels to be phased into our fuel supply by 2030 Increase CAFE Standards and Mandate all new vehicles are flex fuel Mandate 10 percent of electricity from renewable sources by 2012, and 25 percent by 2025 Implement an economy-wide cap-and-trade program to reduce greenhouse gas emissions 80 percent by 2050.

  14. Obama Evolving Energy Plan Qualified support for more domestic exploration IF part of a comprehensive plan Qualified support for nuclear – only if it is safe Different messages on coal STIMULUS Amount for energy unclear Green jobs – green federal workforce Renewable tax incentives refundable Double renewable energy in three years Smart Grid Federal government building retrofits Weatherization assistance Cap and Trade DEALINGS WITH CONGRESS

  15. Public Views on Climate Change The public views climate change as a serious problem but not as a planetary emergency. Public believes energy security more important than addressing climate change. Technology can solve climate change. Public not willing to make great personal sacrifices. Public wants a joint cooperative effort between government, business and the citizens to solve the challenge. U.S. politics: Administration and Congressional approaches are in flux.

  16. Obama’s Team Carol Browner, White House Coordinator for Energy and Climate Policy Larry Summers, Director of National Economic Council General Jim Jones, Director of National Security Council Steve Chu, Secretary of Energy Ken Salazar, Secretary of Interior Ray LaHood, Secretary of Transportation Lisa Jackson, Administrator of EPA Hillary Clinton, Secretary of State USDA, Commerce, CEQ, FERC, NRC, Defense

  17. U.S. Energy Strategy-More Realism Increase domestic oil and gas Recognize role for nuclear and clean coal New alternative transportation fuels that do not conflict with rising food demands Sustainable policy on renewables Modernize our infrastructure Exert authority to get beyond NOPE syndrome (less burdensome regulation) Invest in our technology solutions and our intellectual foundation for innovation

  18. Road Ahead Huge Public Expectations for next President Growing desire to capitalize on American resources, create American jobs Energy Policy had become a Political Football – is it the new Economic Football? Public needs better informed debate You need certainty to unlock projects and capital Role of private sector vs. public sector Challenges will grow internationally – will the US counter shift in power?

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