National Petroleum Council 2006-7 Global Oil and Gas Study

1. Facing The Hard Truths About Energy A Comprehensive View To 2030Of Global Oil And Natural Gas July 18, 2007 People all around the world, are very concerned about energy Its availability, reliability, cost, and environmental impact. In the US, energy is also the subject of urgent policy discussions Energy is a complex subject Touching every part of daily life The overall economy Involving a wide variety of technologies Affecting many aspects of international relations The facts about energy are not widely understood NPC completed a study to: Inform and shape the energy debate Enhance widespread understanding about the scale and significance of the industry's activities Propose sound, balanced strategies to meet today's challenges Benefit future generations People all around the world, are very concerned about energy Its availability, reliability, cost, and environmental impact. In the US, energy is also the subject of urgent policy discussions Energy is a complex subject Touching every part of daily life The overall economy Involving a wide variety of technologies Affecting many aspects of international relations The facts about energy are not widely understood NPC completed a study to: Inform and shape the energy debate Enhance widespread understanding about the scale and significance of the industry's activities Propose sound, balanced strategies to meet today's challenges Benefit future generations

2. 2 Today�s Discussion Study Approach What We Learned : The Hard Truths Recommended Strategies For The U.S. ..

3. 3 What does the future hold for global oil and natural gas supply ? Can incremental oil and gas supplies be brought on-line, on time, and at a reasonable price to meet future demand without jeopardizing economic growth ? What oil and gas supply and / or demand-side strategies does the Council recommend the U.S. pursue to ensure greater economic stability and prosperity ? The Secretary�s Suggested Questions 

4. 4 Dimensions of the Study Designed an organization and methodology for energy subjects Highly specialized but interdependent. Two separate teams were set up to assess demand and supply Third team focused on technology Fourth team, geopolitics and policy, considered above ground issues No analysis of the future of oil and gas complete without consideration of the potential alternatives to oil and gas biomass, other renewables, nuclear, coal Utilized expert resources to address such topics through subgroups. Viewed analysis through (?) economic, environmental and security lenses � Creating a balanced set of outcomes not always obvious in other parallel studies. Information and conclusions were truly open and transparent; Designed an organization and methodology for energy subjects Highly specialized but interdependent. Two separate teams were set up to assess demand and supply Third team focused on technology Fourth team, geopolitics and policy, considered above ground issues No analysis of the future of oil and gas complete without consideration of the potential alternatives to oil and gas biomass, other renewables, nuclear, coal Utilized expert resources to address such topics through subgroups. Viewed analysis through (?) economic, environmental and security lenses � Creating a balanced set of outcomes not always obvious in other parallel studies. Information and conclusions were truly open and transparent;

5. 5 How This Study is Different Participation in this study has been broad Over 350 participants engaged from NPC and beyond About two-thirds of the participants come from outside the oil and gas industry Outreach to over 1,000 third parties involved in the energy sector for their ideas and opinions. Intense interest in this Study We greatly appreciate the efforts of so many talented people. Participation in this study has been broad Over 350 participants engaged from NPC and beyond About two-thirds of the participants come from outside the oil and gas industry Outreach to over 1,000 third parties involved in the energy sector for their ideas and opinions. Intense interest in this Study We greatly appreciate the efforts of so many talented people.

6. 6 How This Study Is Different There are three primary reasons why we think this study is different from many others. (?) Integrated In-Depth Analysis (?) Diversity of Expertise (?) Technology Assessment Refer to wording on slideThere are three primary reasons why we think this study is different from many others. (?) Integrated In-Depth Analysis (?) Diversity of Expertise (?) Technology Assessment Refer to wording on slide

7. 7 Technology Assessment Depth Technology Development Personnel Issues: The Big Crew Change Carbon Management Conventional Resources (includes EOR and Arctic) Exploration Technology Deepwater Technology Unconventional Gas (including Coal and Shale gas) Heavy Oil and Bitumen Oil Shale Gas Hydrates Coal to Liquids and Gas Biomass fuels Nuclear Outlook and impact on Oil and Gas demand Transportation Efficiency Other Renewables A range of technology subjects were considered Covering topics ranging from CCS Deepwater exploration Biomass fuels Transportation efficiency. More than 120 subject matter experts in the Technology Task Group to investigated Time horizons Research budgets Human resource requirements Deployment in each specialist area. Topic papers covering the outstanding work of the Technology teams are available on CD-rom, Released with the full approved report. A range of technology subjects were considered Covering topics ranging from CCS Deepwater exploration Biomass fuels Transportation efficiency. More than 120 subject matter experts in the Technology Task Group to investigated Time horizons Research budgets Human resource requirements Deployment in each specialist area. Topic papers covering the outstanding work of the Technology teams are available on CD-rom, Released with the full approved report.

8. 8 The Hard Truths .... Demand Supply Energy Sources Energy Security Workforce Carbon Emissions The approach to this Study enabled us to include a broad group of people assisting our understanding of the complex energy world - summarized now in a set of findings. Findings we have called the hard truths about energy. There are 6 hard truths. Refer to above.The approach to this Study enabled us to include a broad group of people assisting our understanding of the complex energy world - summarized now in a set of findings. Findings we have called the hard truths about energy. There are 6 hard truths. Refer to above.

9. What We Learned: The Hard Truths

10. 10 The Hard Truth: Demand Coal, oil, and natural gas will remain indispensable to meeting total projected energy demand growth. The Hard Truth - Demand Read above.The Hard Truth - Demand Read above.

11. 11 OECD and Non-OECD Countries Member countries of the Organization for Economic Cooperation and Development, the OECD Historically been identified as developed countries Countries outside of the OECD, the non-OECD countries Historically been identified as developing countries The blue shaded countries are OECD members, The yellow shaded areas are non-OECD countries. This color scheme consistent throughout presentation. Member countries of the Organization for Economic Cooperation and Development, the OECD Historically been identified as developed countries Countries outside of the OECD, the non-OECD countries Historically been identified as developing countries The blue shaded countries are OECD members, The yellow shaded areas are non-OECD countries. This color scheme consistent throughout presentation.

12. 12 Economic Growth Patterns Are Shifting

13. 13 ... And Energy Demand Growth Follows As incomes rise so does demand for energy Reference case projections for world energy demand show roughly a 50-60 percent increase in demand from 2005 to 2030. For the first time in history, non-OECD energy demand will exceed OECD energy demand. This has geopolitical implications as well You will hear more about geopolitics later As incomes rise so does demand for energy Reference case projections for world energy demand show roughly a 50-60 percent increase in demand from 2005 to 2030. For the first time in history, non-OECD energy demand will exceed OECD energy demand. This has geopolitical implications as well You will hear more about geopolitics later

14. 14 Range of Projections Point to Growing Demand Wide range of expectations about future energy demand levels. These outlooks are from the United States Energy Information Administration and the International Energy Agency ( a cooperative grouping of most OECD members) . These projections show significant long-term growth in energy demand. At the low end of these projections there is still a 34 percent increase in global energy demand to 2030. Equivalent to volume gain in excess of what the U.S. currently consumes For context about what this means in terms of energy demand, Mid-range case for oil in 2030 world consuming about 57,000 gallons of oil per second. Wide range of expectations about future energy demand levels. These outlooks are from the United States Energy Information Administration and the International Energy Agency ( a cooperative grouping of most OECD members) . These projections show significant long-term growth in energy demand. At the low end of these projections there is still a 34 percent increase in global energy demand to 2030. Equivalent to volume gain in excess of what the U.S. currently consumes For context about what this means in terms of energy demand, Mid-range case for oil in 2030 world consuming about 57,000 gallons of oil per second.

15. 15 Coal, Oil, and Natural Gas Will Remain Indispensable This is the IEA reference case outlook Generally indicative of most of the outlooks reviewed. Significant growth in non-fossil fuel energy sources More is projected. Although the share of non-fossil fuels is growing rapidly Fossil fuels will continue to play a significant role through 2030. The hard truth about demand: Fossil fuels are indispensable to satisfy demand as global prosperity and incomes increase. This is the IEA reference case outlook Generally indicative of most of the outlooks reviewed. Significant growth in non-fossil fuel energy sources More is projected. Although the share of non-fossil fuels is growing rapidly Fossil fuels will continue to play a significant role through 2030. The hard truth about demand: Fossil fuels are indispensable to satisfy demand as global prosperity and incomes increase.

16. 16 The Hard Truth: Supply The world is not running out of energy resources, but there are accumulating risks to continuing expansion of oil and natural gas production from the conventional sources relied upon historically. These risks create significant challenges to meeting projected total energy demand. The Hard Truth - Supply Read above. The Hard Truth - Supply Read above.

17. 17 Wide Range of Projections Historic assessments of ultimate recoverable resources for oil from the U.S. Geological Survey These estimates increase over time due to: Changes in methodology Increases in geological knowledge and data, As well as advances in technology. Just over one trillion barrels of it has been produced to date. (? ) Here are two alternative assessments ( refer to graph ) High and a low. The difference between these estimates is significant because varying resource estimates can lead to different oil production forecasts. (?) <to disappear the high and low labels> Historic assessments of ultimate recoverable resources for oil from the U.S. Geological Survey These estimates increase over time due to: Changes in methodology Increases in geological knowledge and data, As well as advances in technology. Just over one trillion barrels of it has been produced to date. (? ) Here are two alternative assessments ( refer to graph ) High and a low. The difference between these estimates is significant because varying resource estimates can lead to different oil production forecasts. (?) <to disappear the high and low labels>

18. 18 USGS 2000 survey added a view of unconventional resources Shown in blue Expand the overall resource base. These resources, which include tar sands and oil shale Possess uncertainties and challenges of their own Coal and biomass resources are not illustrated here, Were included in the study Represent significant potential sources of power and liquid fuel. USGS 2000 survey added a view of unconventional resources Shown in blue Expand the overall resource base. These resources, which include tar sands and oil shale Possess uncertainties and challenges of their own Coal and biomass resources are not illustrated here, Were included in the study Represent significant potential sources of power and liquid fuel.

19. 19 Risks Reflected in Range of Production Projections Total global liquids production forecast to 2030 includes a broad range of views. Spans from 80 million bpd to more than 130 million bpd The study team collected data from a diverse set of sources including: Integrated forecasts from the IEA and EIA Other publicly available sources such as ASPO (?) and aggregated proprietary data from international energy companies and consultants. This range reflects different assumptions about Decline rates in the existing production base Risks in the current reserve estimates and their conversion to production Technology role to enhance recovery from existing fields The rate and timing of major investments The timing and scale of new discoveries The role of unconventional fuels in meeting overall liquid production Aggregated proprietary data gathered from the International Energy Companies provided a unique perspective in this study. (?) The IOC average of 107 MBD falls below the EIA reference case - by about 10 million barrels a day. Equivalent to the current production of Saudi Arabia. Memo: The IEA 2012 projection falls in the middle of the projections (?) Total global liquids production forecast to 2030 includes a broad range of views. Spans from 80 million bpd to more than 130 million bpd The study team collected data from a diverse set of sources including: Integrated forecasts from the IEA and EIA Other publicly available sources such as ASPO (?) and aggregated proprietary data from international energy companies and consultants. This range reflects different assumptions about Decline rates in the existing production base Risks in the current reserve estimates and their conversion to production Technology role to enhance recovery from existing fields The rate and timing of major investments The timing and scale of new discoveries The role of unconventional fuels in meeting overall liquid production Aggregated proprietary data gathered from the International Energy Companies provided a unique perspective in this study. (?) The IOC average of 107 MBD falls below the EIA reference case - by about 10 million barrels a day. Equivalent to the current production of Saudi Arabia. Memo: The IEA 2012 projection falls in the middle of the projections (?)

20. 20 Range of Global Supply Projections � Gas Like oil, natural gas has a broad range of supply projections. Majority of forecasts lie above the yellow historical trend line Forecasts and the estimated resource base indicate meeting future demand to 2030. To meet these mid-range forecasts we will consume approximately 50 percent of the existing proved reserve base. Implication is, a significant amount of additional discovery and development required to replace reserves Unlike the case with oil, gas is less developed on a global scale Amount of infrastructure that must be added on a global basis, pipelines, LNG, et cetera, is significant and massive. Like oil, natural gas has a broad range of supply projections. Majority of forecasts lie above the yellow historical trend line Forecasts and the estimated resource base indicate meeting future demand to 2030. To meet these mid-range forecasts we will consume approximately 50 percent of the existing proved reserve base. Implication is, a significant amount of additional discovery and development required to replace reserves Unlike the case with oil, gas is less developed on a global scale Amount of infrastructure that must be added on a global basis, pipelines, LNG, et cetera, is significant and massive.

21. 21 The Hard Truth: Energy Sources To mitigate these risks, expansion of all economic energy sources will be required, including coal, nuclear, biomass, other renewables, and unconventional oil and natural gas. Each of these sources faces significant challenges including safety, environmental, political, or economic hurdles, and imposes infrastructure requirements for development and delivery. This leads us to a second hard truth about energy sources. Read above. This leads us to a second hard truth about energy sources. Read above.

22. 22 All Sources of Energy Will Be Needed You�ve seen this data before in the demand section This is a different representation. The key message is , Whether it�s petroleum, gas, coal, or other sources of energy, we are going to need them all. Given the anticipated and projected demand rates, no one segment can be missing in order to meet them. You�ve seen this data before in the demand section This is a different representation. The key message is , Whether it�s petroleum, gas, coal, or other sources of energy, we are going to need them all. Given the anticipated and projected demand rates, no one segment can be missing in order to meet them.

23. 23 Contribution of Unconventional Liquids Unconventional liquids will be an important contribution to supplies The EIA reference case projects approximately 9.5 million barrels a day of �unconventional liquids.� Significant differences across the spectrum of forecasts relates to: Assumptions about timing and investment in these unconventional fuels Detailed topic papers assess each of these alternatives. Unconventional liquids will be an important contribution to supplies The EIA reference case projects approximately 9.5 million barrels a day of �unconventional liquids.� Significant differences across the spectrum of forecasts relates to: Assumptions about timing and investment in these unconventional fuels Detailed topic papers assess each of these alternatives.

24. 24 A large and complex infrastructure including transportation, storage, manufacturing, and distribution will be required to support future growth. Infrastructure is not accounted for in many forecasts, including integrated outlooks (?)The combination of Significant growth in supply Geographic shifts in demand centers Growth of unconventional resources, All points to a need for massive infrastructure investment. Estimates about energy infrastructure investment Around $20 trillion A large and complex infrastructure including transportation, storage, manufacturing, and distribution will be required to support future growth. Infrastructure is not accounted for in many forecasts, including integrated outlooks (?)The combination of Significant growth in supply Geographic shifts in demand centers Growth of unconventional resources, All points to a need for massive infrastructure investment. Estimates about energy infrastructure investment Around $20 trillion

25. 25 The Hard Truth: Energy Security "Energy Independence" should not be confused with strengthening energy security. The concept of energy independence is not realistic in the foreseeable future, whereas U.S. energy security can be enhanced by moderating demand, expanding and diversifying domestic energy supplies, and strengthening global energy trade and investment. There can be no U.S. energy security without global energy security. Hard Truth � Energy Security Read above. Hard Truth � Energy Security Read above.

26. 26 Oil Resource Concentration � conventional Many of the risks to energy security are �above ground,� example, the geographic distribution of resources. Conventional oil production in traditional areas continues to decline, Available resources increasingly concentrated in Middle East Former Soviet Union Incremental oil demand comes from emerging economies Conventional oil production shifts to a few major oil producing countries (?) Add unconventional resources � such as oil sands, bitumen or oil shale � Situation improves for North and South America. Increasing unconventional production at scale requires long lead times and carries its own challenges. Oil Resource Concentration � conventional Many of the risks to energy security are �above ground,� example, the geographic distribution of resources. Conventional oil production in traditional areas continues to decline, Available resources increasingly concentrated in Middle East Former Soviet Union Incremental oil demand comes from emerging economies Conventional oil production shifts to a few major oil producing countries (?) Add unconventional resources � such as oil sands, bitumen or oil shale � Situation improves for North and South America. Increasing unconventional production at scale requires long lead times and carries its own challenges.

27. 27 Global Oil Trade Global Oil Flows Shifting demand and supply patterns will lead to shifting flows of oil and gas. If we compare oil flows today to what it might look like by 2030, (?) More long-haul cargoes will be shipped from Persian Gulf, Russia and the Caspian region. The shift in demand and supply raises the question of whether the rules of the international oil game will change Or have the rules already started to change, with Market-driven trade and investment no longer a lofty, universally-held, objective. Issues like resource nationalism that limit access for development has renewed importance. Global Oil Flows Shifting demand and supply patterns will lead to shifting flows of oil and gas. If we compare oil flows today to what it might look like by 2030, (?) More long-haul cargoes will be shipped from Persian Gulf, Russia and the Caspian region. The shift in demand and supply raises the question of whether the rules of the international oil game will change Or have the rules already started to change, with Market-driven trade and investment no longer a lofty, universally-held, objective. Issues like resource nationalism that limit access for development has renewed importance.

28. 28 Global LNG Trade Global LNG Flows The contrast is even more dramatic in the case of gas, Big jump in long-haul inter-regional gas flows. Future liquefied natural gas flows indicate tanker movements will increase greatly From producing areas to U.S. and East Asia. This illustrates challenges of building massive new infrastructure for Liquefaction Transportation Receiving Re-gasification.Global LNG Flows The contrast is even more dramatic in the case of gas, Big jump in long-haul inter-regional gas flows. Future liquefied natural gas flows indicate tanker movements will increase greatly From producing areas to U.S. and East Asia. This illustrates challenges of building massive new infrastructure for Liquefaction Transportation Receiving Re-gasification.

29. 29 Supply Vulnerability Zones More than half of international oil movements go through half a dozen choke points today. This vulnerability will likely increase over time.Supply Vulnerability Zones More than half of international oil movements go through half a dozen choke points today. This vulnerability will likely increase over time.

30. 30 U.S. Historical Supply and Demand Trends U.S. Historical Supply and Demand Trends Net U.S. imports have grown in the last thirty years Domestic consumption outpacing growth in domestic supply. Without changes, this trend is likely to continue.U.S. Historical Supply and Demand Trends Net U.S. imports have grown in the last thirty years Domestic consumption outpacing growth in domestic supply. Without changes, this trend is likely to continue.

31. 31 The Hard Truth: Workforce A majority of the U.S. energy sector workforce, including skilled scientists and engineers, is eligible to retire within the next decade. The workforce must be replenished and trained. Hard Truth � Workforce Read above. Hard Truth � Workforce Read above.

32. 32 U.S. Human Resources Challenge Oil industry experienced hiring surge in late 70�s and early 80�s Followed by an extended period of decline resulting in the peak evident in this age distribution. Recent influx of new talent has not made up for decades of depressed hiring activity. Over half of today�s workforce is eligible for retirement within the next 10 years Often referred to as �the big crew change�. The workforce must be replenished This challenge is exacerbated by an overall shortage of science and engineering graduates Particularly women and minorities. Additional challenges include the industry�s image and competition from other industries. Oil industry experienced hiring surge in late 70�s and early 80�s Followed by an extended period of decline resulting in the peak evident in this age distribution. Recent influx of new talent has not made up for decades of depressed hiring activity. Over half of today�s workforce is eligible for retirement within the next 10 years Often referred to as �the big crew change�. The workforce must be replenished This challenge is exacerbated by an overall shortage of science and engineering graduates Particularly women and minorities. Additional challenges include the industry�s image and competition from other industries.

33. 33 This issue is not exclusive to the US. Map depicts one calculation of the net deficit or surplus of geoscience graduates by country for the next ten years. Countries in green have limited data or are in balance. The US could fill its deficit by importing talent U.S. will be in competition with other countries who face similar needs Immigration policies would have to be revisited This issue is not exclusive to the US. Map depicts one calculation of the net deficit or surplus of geoscience graduates by country for the next ten years. Countries in green have limited data or are in balance. The US could fill its deficit by importing talent U.S. will be in competition with other countries who face similar needs Immigration policies would have to be revisited

34. 34 The Hard Truth: Carbon Emissions Policies aimed at curbing carbon dioxide emissions will alter the energy mix, increase energy-related costs, and require reductions in demand growth. Hard Truth � Carbon Emissions Read above. Hard Truth � Carbon Emissions Read above.

35. 35 Growing concern that climate is warming and CO2concentrations in the atmosphere play a role. The challenge of significantly reducing CO2 emissions is unprecedented and will require: Global, broad actions on multiple fronts Long time horizons Major additional investments  Carbon dioxide emissions from continuing use of fossil fuels are a growing concern Pragmatic approach to carbon management taken, including Technical, environmental and regulatory considerations Distinguished team of diverse experts from within and outside the oil & gas industry Several factors combine to make this a long term and global challenge, including the fact that atmospheric concentrations are : Cumulative, Long lasting and Don�t conform to geographic boundaries. The scale and complexity of the challenge to meaningfully reduce carbon emissions is daunting. For perspective: US currently emits 6.3 billion tons of CO2, or 115 lbs per person per day, or 20 times the daily solid waste of an average person. In terms of sequestration volumes, one 1 GW coal fired power plant produces 150,000 bbls of liquefied CO2 per day. Carbon dioxide emissions from continuing use of fossil fuels are a growing concern Pragmatic approach to carbon management taken, including Technical, environmental and regulatory considerations Distinguished team of diverse experts from within and outside the oil & gas industry Several factors combine to make this a long term and global challenge, including the fact that atmospheric concentrations are : Cumulative, Long lasting and Don�t conform to geographic boundaries. The scale and complexity of the challenge to meaningfully reduce carbon emissions is daunting. For perspective: US currently emits 6.3 billion tons of CO2, or 115 lbs per person per day, or 20 times the daily solid waste of an average person. In terms of sequestration volumes, one 1 GW coal fired power plant produces 150,000 bbls of liquefied CO2 per day.

36. 36 60% of Emissions Growth in Developing World Energy demand growth is accelerating in the developing world and CO2 emissions follow. Energy mix in these geographies includes a higher concentration of fossil fuels. US and China together make up about 40% of the world�s total CO2 emissions going forward Points to global issue requiring global solutions Energy demand growth is accelerating in the developing world and CO2 emissions follow. Energy mix in these geographies includes a higher concentration of fossil fuels. US and China together make up about 40% of the world�s total CO2 emissions going forward Points to global issue requiring global solutions

37. 37 Carbon Mitigation Continued use of fossil fuel in a carbon constrained world will require: Moderating demand by improving energy efficiency Developing low / no-carbon energy sources Implementing large scale carbon capture and sequestration While addressing carbon concerns, we need to enable the continued use of fossil fuels A carbon constrained world requires: Moderate demand by improving energy efficiency across the transportation, industrial and commercial sectors (?) Accelerate development of low carbon energy (?) Implement large scale carbon capture and sequestration at large point sources While addressing carbon concerns, we need to enable the continued use of fossil fuels A carbon constrained world requires: Moderate demand by improving energy efficiency across the transportation, industrial and commercial sectors (?) Accelerate development of low carbon energy (?) Implement large scale carbon capture and sequestration at large point sources

38. Five Core U.S. Strategies Heard a brief summary about our findings - the hard truths. Analysis supporting findings and can be found in the detailed study and topic papers. Everyone is concerned about energy Availability Reliability Cost and Environmental impact To address these concerns, the study team proposes five core strategies to meet the energy challenges to 2030 and beyond All five are essential Prompt adoption of these strategies, along with sustained commitment to implementation, will promote US competitiveness Balancing economic, security and environmental goals. Heard a brief summary about our findings - the hard truths. Analysis supporting findings and can be found in the detailed study and topic papers. Everyone is concerned about energy Availability Reliability Cost and Environmental impact To address these concerns, the study team proposes five core strategies to meet the energy challenges to 2030 and beyond All five are essential Prompt adoption of these strategies, along with sustained commitment to implementation, will promote US competitiveness Balancing economic, security and environmental goals.

39. 39 The Five Core U.S. Strategies Moderate Demand By Increasing Energy Efficiency Expand And Diversify U.S. Energy Supply Strengthen Global And U.S. Energy Security Reinforce Capabilities To Meet New Challenges Address Carbon Constraints The strategies are as follows: (?)Moderate Demand By Increasing Energy Efficiency (?) Expand And Diversify U.S. Energy Supply (?) Strengthen Global And U.S. Energy Security (?) Reinforce Capabilities To Meet New Challenges (?) Address Carbon Constraints (?) All of these strategies will be essential - there is no easy solution to the multiple challenges we face.The strategies are as follows: (?)Moderate Demand By Increasing Energy Efficiency (?) Expand And Diversify U.S. Energy Supply (?) Strengthen Global And U.S. Energy Security (?) Reinforce Capabilities To Meet New Challenges (?) Address Carbon Constraints (?) All of these strategies will be essential - there is no easy solution to the multiple challenges we face.

40. 40 The Five Core U.S. Strategies Moderate Demand By Increasing Energy Efficiency

41. 41 Moderate Demand Growth Improve U.S. car and light truck fuel economy standards at the maximum rate possible by applying economic, available technology. Under half of the 21 million barrels per day of U.S. daily oil consumption is used by light-duty vehicles First pillar is to improve the fuel efficiency of cars and light trucks. Potential impact of a doubling of new vehicle fuel economy by 2030 Fuel savings of three to five million barrels per day. This one has the biggest potential energy savings among demand recommendations Under half of the 21 million barrels per day of U.S. daily oil consumption is used by light-duty vehicles First pillar is to improve the fuel efficiency of cars and light trucks. Potential impact of a doubling of new vehicle fuel economy by 2030 Fuel savings of three to five million barrels per day. This one has the biggest potential energy savings among demand recommendations

42. 42 Moderate Demand Growth Improve efficiency in U.S. residential and commercial sectors by encouraging states to implement and enforce more aggressive energy efficiency building codes, updated on a regular basis. Second pillar is to improve efficiency in the U.S. residential and commercial sectors which consume about 40 percent of U.S. energy. Three steps to achieving this. Update building codes to reflect cost effective energy building technologies that have outpaced US government standards. Enforce these building codes to ensure that all new buildings comply with updated energy code requirements. Develop new energy efficiency standards for appliances, such as digital products, not currently covered. Potential energy savings in the U.S. residential and commercial sector Seven to nine quadrillion BTU�s. Second pillar is to improve efficiency in the U.S. residential and commercial sectors which consume about 40 percent of U.S. energy. Three steps to achieving this. Update building codes to reflect cost effective energy building technologies that have outpaced US government standards. Enforce these building codes to ensure that all new buildings comply with updated energy code requirements. Develop new energy efficiency standards for appliances, such as digital products, not currently covered. Potential energy savings in the U.S. residential and commercial sector Seven to nine quadrillion BTU�s.

43. 43 Moderate Demand Growth Improve efficiency in U.S. industrial sector by conducting and promoting research, development, demonstration and deployment of industrial efficiency technologies and best practices. Third pillar is to improve efficiency in the U.S. industrial sector, which consumes about one-third of U.S. energy Industrial sector opportunities to increase energy efficiency are about 15 percent reduction The potential savings are four to seven quadrillion Btu�s by 2030, Equal parts coal, gas and oil. Efficient energy use essential for U.S. manufacturers to remain internationally competitive Third pillar is to improve efficiency in the U.S. industrial sector, which consumes about one-third of U.S. energy Industrial sector opportunities to increase energy efficiency are about 15 percent reduction The potential savings are four to seven quadrillion Btu�s by 2030, Equal parts coal, gas and oil. Efficient energy use essential for U.S. manufacturers to remain internationally competitive

44. 44 The Five Core U.S. Strategies Expand And Diversify U.S. Energy Supply Let�s move on to Supply and discuss the core strategies to expand and diversify U.S. energy supply. Let�s move on to Supply and discuss the core strategies to expand and diversify U.S. energy supply.

45. 45 Expand and Diversify Supply Reduce declines in U.S. conventional oil and natural gas production. Increase access for new energy development. The first recommendation to reduce the declines in the conventional U.S. oil and gas production. The U.S. is the largest historical producer of oil and gas Third largest producer in the world Efforts to retain the U.S. conventional production base will contribute significantly to stable supply Examples: Applying enhanced oil recovery techniques to recover more hydrocarbons from the existing resource base. Maintaining production from marginal wells which contribute around 17% of total US production Access should be expanded to the most favorable oil and natural gas basins. To support this goal: Conduct national and regional oriented resource and market assessments to identify biggest opportunities Use technology and operational advancements to allow environmentally responsible development The first recommendation to reduce the declines in the conventional U.S. oil and gas production. The U.S. is the largest historical producer of oil and gas Third largest producer in the world Efforts to retain the U.S. conventional production base will contribute significantly to stable supply Examples: Applying enhanced oil recovery techniques to recover more hydrocarbons from the existing resource base. Maintaining production from marginal wells which contribute around 17% of total US production Access should be expanded to the most favorable oil and natural gas basins. To support this goal: Conduct national and regional oriented resource and market assessments to identify biggest opportunities Use technology and operational advancements to allow environmentally responsible development

46. 46 Expand and Diversify Supply Diversify long-term energy production Accelerate development of energy from biomass Enable the long-term environmental viability of coal for power, fuel, and feedstock Expand domestic nuclear capability United States has unique and material unconventional resources. One of them is biomass Study recommends the accelerated development of biomass including Technology for growing and converting energy crops Developing the infrastructure required to bring biofuels to market (?) The second unique resource is coal. U.S. is one of the world�s largest coal producers By some measures, the largest reserve base. Most projections indicate coal will contribute long term to power generation and fuel production Coal must be environmentally viable and carbon management must be addressed. (?) Turning to nuclear, Study recommends reestablishing US historic technical leadership. Study does not recommend construction of new nuclear facilities Nuclear will play a role in a carbon constrained world United States has unique and material unconventional resources. One of them is biomass Study recommends the accelerated development of biomass including Technology for growing and converting energy crops Developing the infrastructure required to bring biofuels to market (?) The second unique resource is coal. U.S. is one of the world�s largest coal producers By some measures, the largest reserve base. Most projections indicate coal will contribute long term to power generation and fuel production Coal must be environmentally viable and carbon management must be addressed. (?) Turning to nuclear, Study recommends reestablishing US historic technical leadership. Study does not recommend construction of new nuclear facilities Nuclear will play a role in a carbon constrained world

47. 47 The Five Core U.S. Strategies Strengthen Global And U.S. Energy Security Strategy � Strengthen global and U.S. energy security Cannot separate U.S. energy security from global energy security. Interdependent nature of this relationship demonstrated in the aftermath of Hurricanes Katrina and Rita where: International markets responded to the temporary disruption in domestic production and distribution . Demonstrated that U.S. and world depend on the stability and reliability of international energy system.Strategy � Strengthen global and U.S. energy security Cannot separate U.S. energy security from global energy security. Interdependent nature of this relationship demonstrated in the aftermath of Hurricanes Katrina and Rita where: International markets responded to the temporary disruption in domestic production and distribution . Demonstrated that U.S. and world depend on the stability and reliability of international energy system.

48. 48 Promote Global and U.S. Energy Security Integrate energy policy into trade, economic, environmental, security, and foreign policies. Promote Global and U.S. Energy Security U.S. should elevate our energy policy goals to the same level as Security Foreign and Trade policy Approach mitigates the risk of unintended consequences from other policies impacting energy Must take advantage of opportunities to advance energy security.Promote Global and U.S. Energy Security U.S. should elevate our energy policy goals to the same level as Security Foreign and Trade policy Approach mitigates the risk of unintended consequences from other policies impacting energy Must take advantage of opportunities to advance energy security.

49. 49 Promote Global and U.S. Energy Security Continue to develop the international energy marketplace by expanding the energy dialog with major producing and consuming nations. Promote Global and U.S. Energy Security U.S. is world�s largest energy consumer U.S. a major producer of oil, natural gas and coal, U.S. is uniquely positioned to lead the dialogue between major producing and consumer countries Seeking common ground to protect the legitimate interests of both sides.Promote Global and U.S. Energy Security U.S. is world�s largest energy consumer U.S. a major producer of oil, natural gas and coal, U.S. is uniquely positioned to lead the dialogue between major producing and consumer countries Seeking common ground to protect the legitimate interests of both sides.

50. 50 Promote Global and U.S. Energy Security Promote an effective global energy marketplace by sustaining and intensifying efforts to encourage global adoption of transparent, market-based approaches. Promote Global and U.S. Energy Security Dialogue should promote market transparency, and encourage open trade and investment in energy. Long lead time and large capital requirements of the energy industry are required Major uncertainty for large investments is stability of international energy system.Promote Global and U.S. Energy Security Dialogue should promote market transparency, and encourage open trade and investment in energy. Long lead time and large capital requirements of the energy industry are required Major uncertainty for large investments is stability of international energy system.

51. 51 Promote Global and U.S. Energy Security Assist and encourage global adoption of energy efficiency technologies through technology transfer programs. Promote global and U.S. energy Security U.S. can play a natural leadership role is in energy efficiency and the speedy adoption of new technologies� Especially in developing countries and emerging economies, where demand growth is projected. Promote global and U.S. energy Security U.S. can play a natural leadership role is in energy efficiency and the speedy adoption of new technologies� Especially in developing countries and emerging economies, where demand growth is projected.

52. 52 The Five Core U.S. Strategies Reinforce Capabilities To Meet New Challenges

53. 53 Reinforce Capabilities to Meet New Challenges Rebuild U.S. science and engineering capabilities. Create research and development opportunities. US future competitiveness enhanced by re establishing US leadership in science and engineering education Creation of research opportunities for US universities and national labs reinforces capability and leadership US future competitiveness enhanced by re establishing US leadership in science and engineering education Creation of research opportunities for US universities and national labs reinforces capability and leadership

54. 54 Reinforce Capabilities to Meet New Challenges Improve the quality of energy data and information. Develop a comprehensive forecast of U.S. infrastructure requirements. Scarcity of the data from which parties make recommendations fuels diversity of opinions For supply the USGS should take the lead in developing a new inventory of global endowment including unconventional resources Infrastructure, a critical piece of the energy chain: Historically been neglected Requires concerted effort to forecast future infrastructure needs Critical to the US particularly with respect to electrical demand and alternative fuels. Scarcity of the data from which parties make recommendations fuels diversity of opinions For supply the USGS should take the lead in developing a new inventory of global endowment including unconventional resources Infrastructure, a critical piece of the energy chain: Historically been neglected Requires concerted effort to forecast future infrastructure needs Critical to the US particularly with respect to electrical demand and alternative fuels.

55. 55 The Five Core U.S. Strategies Address Carbon Constraints Lastly, let�s address carbon constraints. Lastly, let�s address carbon constraints.

56. 56 Actions to Address Carbon Constraints Develop legal and regulatory framework to enable carbon capture and sequestration. Biggest hurdle to implementing carbon capture and sequestration is the lack of a clearly defined legal and regulatory framework. Hurdle must be removed as soon as possible to allow industry to go to work. Biggest hurdle to implementing carbon capture and sequestration is the lack of a clearly defined legal and regulatory framework. Hurdle must be removed as soon as possible to allow industry to go to work.

57. 57 Actions to Address Carbon Constraints As options are considered to reduce CO2 emissions: Provide effective global framework for carbon management Establish transparent, predictable, economy-wide cost for CO2 emissions Reducing CO2 emissions is a long term, global issue and must be dealt with as such. An opportunity for US leadership. A transparent, predictable, economy wide cost (price) for CO2 emissions will allow the market to find the most efficient means of addressing this complex challenge. Reducing CO2 emissions is a long term, global issue and must be dealt with as such. An opportunity for US leadership. A transparent, predictable, economy wide cost (price) for CO2 emissions will allow the market to find the most efficient means of addressing this complex challenge.

58. Summary Let�s wrap up now with a few summary comments.Let�s wrap up now with a few summary comments.

59. 59 There Is No Single, Easy Solution All Five Strategies Must Be Addressed Together Global Cooperation Required Begin Now And Plan For Sustained Commitment All five of the strategies must be addressed together to meet tomorrow's energy challenges. Global cooperation will be required with the US playing a leading role. Actions must begin now and be sustained over the long term. All five of the strategies must be addressed together to meet tomorrow's energy challenges. Global cooperation will be required with the US playing a leading role. Actions must begin now and be sustained over the long term.

60. 60 All Strategies Are Essential Illustrating potential effects of implementing the recommended NPC strategies EIA reference case -- liquid fuels demand is projected to grow to around 25 MBD by the year 2030. (?) Supply side, domestic production of liquid fuels grows: Unconventional fuels, including biofuels, offset the decline in domestic conventional production. Gap between domestic supply and demand is still growing Bridging that gap relies upon US interaction with global markets ( ? ) Implementing the NPC recommended strategies will have a dramatic impact Demand moderation reduces the slope of the upper curve, as requirements are reduced. Moderating the decline of conventional supplies, and further expanding and diversifying domestic sources, will change the lower curve. Combined effect of the strategies will reduce the gap between domestic supply and demand by about one third over the time period Improving the outlook for energy availability , reliability , cost and environmental impact. Illustrating potential effects of implementing the recommended NPC strategies EIA reference case -- liquid fuels demand is projected to grow to around 25 MBD by the year 2030. (?) Supply side, domestic production of liquid fuels grows: Unconventional fuels, including biofuels, offset the decline in domestic conventional production. Gap between domestic supply and demand is still growing Bridging that gap relies upon US interaction with global markets ( ? ) Implementing the NPC recommended strategies will have a dramatic impact Demand moderation reduces the slope of the upper curve, as requirements are reduced. Moderating the decline of conventional supplies, and further expanding and diversifying domestic sources, will change the lower curve. Combined effect of the strategies will reduce the gap between domestic supply and demand by about one third over the time period Improving the outlook for energy availability , reliability , cost and environmental impact.

61. Thank You We believe the report: Provides a fair and balanced view of the challenges facing the world's integrated energy system. Anticipate recommendations will stimulate continued discussions Encourage policy makers to find common areas of agreement in meeting our energy challenges.We believe the report: Provides a fair and balanced view of the challenges facing the world's integrated energy system. Anticipate recommendations will stimulate continued discussions Encourage policy makers to find common areas of agreement in meeting our energy challenges.

62. Thank you for listening to this presentation on: �Facing the Hard Truths About Energy�For information, please refer to the NPC Website for a complete list of available resources:http:www.npc.orgSend your follow-up questions and comments to:comments@npc.org