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Topic 4 – Fossil Fuels. A – Energy Transitions B – Coal C – Petroleum D – Natural Gas. A. Energy Transitions. Factors Behind Energy Transitions Peak Oil Energy Markets. 1. Factors Behind Energy Transitions. Energy transition Shift from one dominant source of energy to another.
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Topic 4 – Fossil Fuels A – Energy Transitions B – Coal C – Petroleum D – Natural Gas
A. Energy Transitions Factors Behind Energy Transitions Peak Oil Energy Markets
1. Factors Behind Energy Transitions • Energy transition • Shift from one dominant source of energy to another. • Fossil fuels resources remain abundant. • Transition linked with three factors: • Demand: • Growth in the amount of energy used incites finding more abundant energy sources. • Price: • Function of availability and demand. • Higher prices incite finders alternative sources. • Technology: • Which types of energy forms are harnessed, processed, and delivered to the final consumers as well as where these activities take place. • Better technology enables access to a wider variety of energy sources.
1. Factors Behind Energy Transitions • Energy Quality • Difference in the ability of a unit of energy to produce goods and services for people. • One joule of electricity is not the same than one joule of coal. • Combination of physical, chemical, technical, economic, environmental and social attributes that are unique to each form of energy.
1. Primary Energy Production by Source, United States, 1750-2009
1. Global Energy Systems Transition, (% of market) 100 Wood Coal 80 Gases Solids 60 Hydrogen 40 Liquids 20 Oil Natural Gas 0 2000 2050 2100 2150 1850 1900 1950
2. Peak Oil • Hubbert’s peak • Geologist who predicted in the 1950s that oil production in the United States would peak in the early 1970s: • US oil production peaked in 1973. • Assumption of finite resource. • Production starts at zero. • Production then rises to a peak which can never be surpassed. • Once the peak has been passed, production declines until the resource is depleted. • Peak was estimated to be around 2004-2008: • One estimate placed it symbolically at Thanksgiving 2005. • Kuwait announced around Thanksgiving 2005 that the world’s second largest oil field (Burgan) has reached its peak. • As of 2010, peak oil remains unconfirmed.
2. World Annual Oil Production (1900-2009) and Peak Oil (2010)
2. Peak Oil • The case for Peak Oil • Largest oil fields discovered more than 50 years ago. • The peak of oil discovery year was 1965. • Some large discoveries in the 1970s (Alaska, North Sea), but none since then. • The last year when more oil was discovered than consumed was 1980. • Tar sands • Large supplies, particularly in Canada (Alberta). • A bottleneck in extraction and distribution. • Require a lot of energy to extract and transform into a usable form.
3. Energy Markets • Importance • Used to be informal and locally oriented (e.g. wood). • The growth in the use of fossil fuels created large and lucrative energy markets: • Became national and global. • Increasingly capital intensive. • Contracts between suppliers and customers: • Price, quantity and time of delivery (location). • Permitted the emergence of large multinational corporations. • Large financial markets: • Financing activities such as exploration, exploitation, transportation and refining.
3. The World’s 20 Largest Corporations by Market Value, 2009 ($US millions)
3. West Texas Intermediate, Monthly Nominal Spot Oil Price (1970-2010) Third Oil Shock Second Oil Shock 2 1 B A D First Oil Shock C
3. Energy Markets • Challenges to energy markets • Supply sources: • Low diversity of energy sources. Foreign sources. Dependence on oil. Keeping natural resources for future use. Low oil prices instead of an energy policy. • Affordability: • Economies of scale. Waste involves less profits. Market forces and profit margins. • Environmental impacts: • Lobbying against environmental legislation.
B. Coal Characteristics Coal Use Challenges
1. Characteristics • Nature • Formed from decayed swamp plant matter that cannot decompose in the low-oxygen underwater environment. • Coal was the major fuel of the early Industrial Revolution. • High correlation between the location of coal resources and early industrial centers: • The Midlands of Britain. • Parts of Wales. • Pennsylvania. • Silesia (Poland). • German Ruhr Valley. • Three grades of coal.
1. Characteristics • Anthracite (7%) • Highest grade; over 85% carbon. • Most efficient to burn. • Lowest sulfur content; the least polluting. • The most exploited and most rapidly depleted. • Bituminous (75%) • Medium grade coal, about 50-75% carbon content. • Higher sulfur content and is less fuel-efficient. • Most abundant coal in the USA. • Lignite (18%) • Lowest grade of coal, with about 40% carbon content. • Low energy content. • Most sulfurous and most polluting.
1. Main Coal Regions of the United States Lignite Powder River Basin (40%) Bituminous Bituminous Lignite
2. Coal Use • Coal use • Thermal coal (about 90% use): • Used mainly in power stations to produce high pressure steam, which then drives turbines to generate electricity. • Also used to fire cement and lime kilns. • Until the middle of the 20th Century used in steam engines (“Steam Coal”). • Coking coal: • Specific type of metallurgical coal derived from bituminous coal. • Used as a source of carbon, for converting a metal ore to metal. • Removing the oxygen in the ore by forcing it to combine with the carbon in the coal to form CO2. • Used for making iron in blast furnaces (without smoke). • New redevelopment of the coal industry: • In view of rising energy prices. • “Clean Coal” technologies, less ashes but same CO2.
2. Coal Consumption, 1965-2009 (in millions of tons of oil equivalent)
3. Challenges • Advantages of coal use • Easily combustible. • Easy to store and transport. • Relatively inexpensive. • Wide availability of sources. • Technologically simpler to use for energy generation. • Disadvantages of coal use • Non-renewable resource. • Combustion by-products (e.g. SO2 and sooth). • Coal mining is generally environmentally damaging.
C. Petroleum The Economic Importance of Petroleum Oil Reserves The Geopolitics of Petroleum
1. The Economic Importance of Petroleum • Nature • Formation of oil deposits (biotic perspective): • Decay under pressure of billions of microscopic plants in sedimentary rocks. • “Oil window”; 7,000 to 15,000 feet. • Created over the last 600 million years. • A-biotic perspective. • Exploration of new sources of petroleum: • Related to the geologic history of an area. • Located in sedimentary basins. • About 90% of all petroleum resources have been discovered. • Production vs. consumption: • Geographical differences. • Contributed to the political problems linked with oil supply.
1. The Economic Importance of Petroleum • Use • Transportation: • The share of transportation has increased in the total oil consumption. • Accounts for more the 55% of the oil used. • In the US, this share is 70%. • Limited possibility at substitution. • Other uses (30%): • Lubricant. • Plastics. • Fertilizers. • Choice of an energy source: • Depend on a number of utility factors. • Favoring the usage of fossil fuels, notably petroleum.
1. Petroleum Production and Consumption, 2002 (M barrels per day)
1. World Oil Consumption, 1965-2009 (1000s of barrels per day)
2. Oil Reserves • “Scarce Abundance” • The world oil production is currently running at capacity: • Limited opportunities to expand production. • 20% of the world’s output comes from 14 fields. • Ghawar: • The world’s largest oil field; been on production since 1951. • Produces approximately 4.5 million barrels of oil per day. • 55 to 60% of Saudi Arabia’s production. • Expected to decline sharply (use of water injection). • Could be 90% depleted. • OPEC countries may have overstated their reserves: • Production quotas are based upon estimated reserves. • The larger the reserves, the more an OPEC country can export. • In the 1980s, most OPEC reserves doubled “on paper”. • Extraction continues while reserves remain the same(?).
2. Proven Oil Reserves, 1980-2009 (thousand million barrels)
2. Major Crude Oil Reserves, 2009 (Thousand Million Barrels)
2. Estimated Oil Reserves, Selected OPEC Countries, 1980-1991 (billions of barrels)
2. Remaining Proven Oil Reserves for “Middle Eastern Five” According to Major Assessors, 2005
2. Crude Oil Production and Consumption, China, 1980-2009 (in 1,000 of barrels per day)
2. Petroleum Production, Consumption and Imports, United States, 1949-2009
3. The Geopolitics of Petroleum • The Seven Sisters • Petroleum has for long been the object of geopolitical confrontations. • The ability to fix the price and the production of oil was first established in 1928 by the Achnacarry Agreements. • Between the “seven sisters” forming an oil oligopoly. • Major oil multinationals (Exxon, Texaco, British Petroleum, Shell, Gulf, Standard Oil and Mobil Oil). • Invested massively in extraction infrastructures, especially in the Middle East. • Several producing countries, most of them in the Third World, wanted to have a more important share of the incomes of this lucrative market.
3. The Geopolitics of Petroleum • OPEC • Venezuela, Iran, Iraq, Saudi Arabia and Kuwait founded the Organization of Petroleum Exporting Countries (OPEC) in 1960 at the Baghdad conference. • Several other oil-producing nations joined thereafter the organization: • Qatar (1961), Indonesia (1962), Libya (1969), Algeria (1970), Nigeria (1971), Ecuador (1973-1992, left the organization in order to avoid production quotas), The United Arab Emirates (1973) and Gabon (1973-1994). • From its foundation until the beginning of the 1970s, OPEC was unable to increase oil prices. • Production was very important in non-member countries. • Difficulty of OPEC members to agree on a common policy.
3. OPEC Members and Countries with more than 10 Billion Barrels of Oil Reserves
