Energy, Oil & Gas, and Utilities OVERVIEW
There is a broad, global focus today on energy as an economic, geopolitical and strategic resource.
In addition, there is an intense interest in the potential environmental consequences of energy production, and a steady push toward adoption of energy conservation technologies and practices.
Advanced oil and gas production technologies, including 3D seismic, ultra-deep ocean rigs, hydraulic fracturing and directional drilling, have opened up exceptional new levels of oil and gas discovery and production around the world.
In fact, the application of new technologies has dramatically upset the former balance of power in the energy industry, making North American production much more important while lessening the influence of OPEC.
Recently, a flood of production released by these technologies has led to a stunning drop in market prices for crude oil and natural gas, much to the financial detriment of the very companies that funded and fostered these technological breakthroughs.
In addition, there is a greater focus than ever before on the potential impact of energy production and consumption on the environment.
A large number of nations have very ambitious goals to reduce consumption of fossil fuels.
Worldwide, investment in the development and implementation of clean or renewable energy sources is a major priority for many governments and industries.
This emphasis varies widely from nation to nation, ranging from cleaner ways to burn the world's immense stores of coal; to the construction
There is a broad, global focus today on energy as an economic, geopolitical and strategic resource. In addition, there is an intense interest in the potential environmental consequences of energy production, and a steady push toward adoption of energy conservation technologies and practices.
Advanced oil and gas production technologies, including 3D seismic, ultra-deep ocean rigs, hydraulic fracturing and directional drilling, have opened up exceptional new levels of oil and gas discovery and production around the world. In fact, the application of new technologies has dramatically upset the former balance of power in the energy industry, making North American production much more important while lessening the influence of OPEC. Recently, a flood of production released by these technologies has led to a stunning drop in market prices for crude oil and natural gas, much to the financial detriment of the very companies that funded and fostered these technological breakthroughs.
In addition, there is a greater focus than ever before on the potential impact of energy production and consumption on the environment. A large number of nations have very ambitious goals to reduce consumption of fossil fuels. Worldwide, investment in the development and implementation of clean or renewable energy sources is a major priority for many governments and industries. This emphasis varies widely from nation to nation, ranging from cleaner ways to burn the world’s immense stores of coal; to the construction of advanced-technology nuclear generating plants that are exponentially safer than older models; to the use of more cost-effective renewable technologies based on solar, wind and wave power.
With the exception of hydroelectric power, renewable energy sources were initially much more expensive as an electricity resource than fossil fuel-based generation (primarily coal and natural gas). This meant that they required significant government subsidies, loan guarantees or incentives in order to encourage investment. Today, however, onshore wind power as well as solar power have become dramatically more efficient, and in some instances very competitive on price. It remains to be seen whether or not governments will cut back significantly on their subsidies and incentives for renewables.
The most important emerging nations are investing heavily in alternative energy sources, while continuing to use growing quantities of fossil fuels. China continues to face a serious environmental challenge due to the immense amount of coal it burns. India is likewise remains dependent on electric generation from coal. Brazil continues to be a leader in the low cost production and use of ethanol as a transportation fuel, while it is slowly developing some of the world’s most important offshore oil and gas fields.
Today’s relatively low market prices for oil and gas have caused exploration and production companies to strive for lower exploration and operating costs and accelerate the adoption of efficient new techniques and technologies.
The world’s energy supply will remain abundant for the foreseeable future. Better science, technology and engineering are being applied to exploration, production, conservation and distribution alike, with stunning success. At the same time, total energy usage in mature economies is on a path of decline or slow growth. For example, analysts at BP estimate that American consumption of primary energy sources (such as coal, natural gas and crude oil) declined by a bit more than 2% from 2005 to 2015. In the booming economy of China, however, the same measure increased by 68%, while the increase was 78% in India, over the same time period.
Emerging economies will continue to burn huge amounts of coal and other fossil fuels while total energy usage continues to soar. This is where the growth in consumption and related emissions and pollution is largely unavoidable for the near future: in rapidly rising economies that are adopting modern industrialization, transportation (including tens of millions of new automobiles yearly), business services and housing, with all of the energy consumption that such development demands.
Dramatic shifts in the global energy supply are occurring. Iraq, still suffering from political unrest but home to some of the world’s largest oil reserves, has resumed significant production thanks to increased foreign investment. Iran is also ramping up production and exports due to recently relaxed foreign sanctions.
Meanwhile, very exciting technologies continue to bolster nearly all facets of the energy sector, from green technologies applied to electricity conservation, to tremendous advances in oil and gas exploration technologies, to highly evolved safer nuclear plants. At the same time, many renewable energy technologies, such as thin-film solar, concentrated solar and wave power (to name but a few), are also making significant advances in cost per watt of output, thanks to substantial improvements in engineering and design. Nanotechnology, an exciting materials science, is about to find broad applications in energy production and consumption with tremendous results.
A looming question is whether America and major nations in Europe will resume significant construction of nuclear generation plants. The fact that several nuclear plants were destroyed by a tsunami at Fukushima, Japan in early 2011 makes significant new development of nuclear sites even more controversial. Meanwhile, advanced generation nuclear technologies have the potential to provide much greater operating efficiencies with vastly increased safety over the plants constructed in earlier years, and the nations of China, India, Saudi Arabia and the UAE are likely to move ahead with massive nuclear plant construction plans that are already in place. China may construct as many as 90 to 100 new nuclear plants over the long term.
The Middle East, where industrial and residential need for electricity is set to soar, is a ripe area for nuclear power plant development. Saudi Arabia plans to build 16 new nuclear plants by 2030, at a cost of more than $100 billion. Nearby in the UAE, the government has awarded a South Korean consortium with a contract for the construction of four new nuclear plants at a cost of $20.4 billion.
Global Energy Numbers:
Oil: According to the latest data available from analysts at energy giant BP, the world produced 91.7 million barrels of oil daily in 2015, up 3.2% from the previous year (these are the latest available numbers). This includes unconventional petroleum output from such sources as oil sands, as well as natural gas liquids. However, it does not include alternative sources such as oil from biomass and coal derivatives. Proven reserves worldwide totaled 1,697.6 trillion barrels at the end of 2015, down slightly from the previous year.
Natural Gas: According to BP, global production of natural gas was 3,538.6 billion cubic meters in 2015, up 2.2% from the previous year. Proven reserves totaled 186.9 trillion cubic meters, enough to last several decades at today’s consumption rates. Massive discoveries of natural gas in shale formations in the U.S. and elsewhere have largely altered the gas industry while leading to great reductions in market prices for gas over the past several years. Likewise, vast investments in LNG (liquefied natural gas) infrastructure are enabling international shipment of gas from production areas such as Qatar and offshore Australia to major markets in China, Europe and elsewhere. Contracts for LNG from U.S. gas fields to be shipped to Europe have recently been signed.
Coal: Analysts at BP estimate that global production of coal was 3,830.1 million tons of oil equivalents in 2015, down 4.0% from the previous year. The largest emerging nations are hooked on coal, with China accounting for about 50.0% of global consumption. As of 2015, global coal reserves were massive at 891,531 million tons, or enough to last about 250 years at today’s consumption rates.
America’s Energy Numbers:
According to the U.S. Energy Information Administration, natural gas production in the U.S. increased by 4.7%, to 32,895 billion cubic feet in 2015, the latest year available. (U.S. proven reserves of natural gas soared by 108%
The Department of Energy estimates American oil production was 9,415 thousand barrels per day during 2015, up dramatically from 8,764 thousand barrels per day in 2014. (These numbers do not include natural gas liquids.) This soaring domestic production has led to dramatic cuts in America's oil imports. Consultants at Rystad Energy estimated in 2016 that the U.S. ranks first in total reserves of oil, at 264 billion barrels, surpassing 256 billion in Russia and 212 billion in Saudi Arabia.
As the nation’s natural gas industry has been growing very quickly, and new production has ensued, thanks largely to wells in shale, the total production picture of both oil and gas has improved dramatically, especially when natural gas liquids, or oil that is stripped from natural gas during processing, are included. (These gas liquids amounted to 3,342 thousand barrels per day of oil equivalent during 2015.)
Historically, America’s use of petroleum led to an increase in net petroleum imports from 588,592 thousand barrels per year in 1960 to 4,580,351 thousand barrels per year in 2005 (nearly an eight-fold increase). Net are equal to total imports minus total exports. Since 2005, the number dropped steadily through 2015, to 1,719,356 thousand barrels in that year. New American oil production, both onshore and offshore, has been a driver of this dramatic decline in imports. Meanwhile, the source of those imports has changed as well. Thanks to booming output in areas outside of the Persian Gulf, including Canada and the West Coast of Africa, America’s reliance on OPEC and Middle Eastern nations for oil has plummeted. As of 2015, America received less than 31% of its oil imports from all OPEC members (when measured in dollar value), down from 73.1% in 1980. America’s imports from Persian Gulf nations such as Saudi Arabia are now significantly less important than they were 30 years ago, while Canada has become the number one exporter to the U.S.
Only 140 refineries existed in America as of 2015, down by more than 50% from 1980. However, these remaining refineries have invested heavily in additional capacity to the extent that their total refining output has grown, despite the fall in the total number of refineries. America’s substantial new oil and gas production, combined with the expansion of existing refiners, made the U.S. a net exporter of refined petroleum products in 2011, the first time since 1949.
Total American consumption of energy of all types was 97,415 trillion BTUs in 2015. In terms of BTUs consumed per year per capita, American energy use is in a long-term decline. This is remarkable when you consider that the number of automobiles and aircraft per capita has grown dramatically, along with the percentage of homes and buildings that are air conditioned, and tremendous increases in the number of appliances, computers and entertainment devices per person. Thanks to immense leaps in engineering, technology and conservation, energy efficiency has grown to the extent that the energy consumption of an average American declined from a peak in 2000 of 351 million BTUs yearly, to only 303 million in 2015.
According to the U.S. Department of Energy, electric generation in America as of 2015 used the following ratio of fuels: coal 33.3%; nuclear 19.6%; natural gas 32.8%; hydroelectric 6.0%; and non-hydro renewables such wind and solar, 7.4%.
Consumers and businesses alike are increasingly willing to invest more in the initial cost of green buildings, high-efficiency appliances and energy-saving transportation equipment, with the promise of lower energy costs for daily operation. The automobile industry has responded with lighter, much more fuel-efficient vehicles. Even pickup trucks use much less fuel than they did in the recent past.
Thanks to the development of advanced technologies for producing gas from America’s immense shale formations, available gas reserves have soared. This trend is revolutionizing the electricity and petrochemicals industry, while keeping natural gas prices at very modest levels.