Oil and Security: A World beyond Petroleum [1 ed.] 1402063814, 9781402063817, 9781402063824

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OIL AND SECURITY

TOPICS IN SAFETY, RISK, RELIABILITY AND QUALITY VOLUME 12

Editor Adrian V. Gheorghe Swiss Federal Institute of Technology, Zürich, Switzerland Editorial Advisory Board P. Sander, Technical University of Eindhoven, The Netherlands D.C. Barrie, Lakehead University, Ontario, Canada R. Leitch, Royal Military College of Science (Cranfield), Shriverham, U.K. Aims and Scope. Fundamental questions which are being asked these days of all products, processes and services with ever increasing frequency are: What is the risk? How safe is it? How reliable is it? How good is the quality? How much does it cost? This is particularly true as the government, industry, public, customers and society become increasingly informed and articulate. In practice none of the three topics can be considered in isolation as they all interact and interrelate in very complex and subtle ways and require a range of disciplines for their description and application; they encompass the social, engineering and physical sciences and quantitative disciplines including mathematics, probability theory and statistics. The major objective of the series is to provide series of authoritative texts suitable for academic taught courses, reference purposes, post graduate and other research and practitioners generally working or strongly associated with areas such as: Safety Assessment and Management Emergency Planning Risk Management Reliability Analysis and Assessment Vulnerability Assessment and Management Quality Assurance and Management Special emphasis is placed on texts with regard to readability, relevance, clarity, applicability, rigour and generally sound quantitative content.

The titles published in this series are listed at the end of this volume.

Oil and Security A World Beyond Petroleum Towards the Demise of the Unreliable and Risk Prone Use of Solid and Liquid Fossil Fuel and the Development of a Sustainable World Energy System which Assures Environmental Quality and an Equitable Socio-economic System

Ernst Gabriel Frankel Massachusetts Institute of Technology, Cambridge, USA

A C.I.P. Catalogue record for this book is available from the Library of Congress.

ISBN 978-1-4020-6381-7 (HB) ISBN 978-1-4020-6382-4 (e-book) Published by Springer, P.O. Box 17, 3300 AA Dordrecht, The Netherlands. www.springer.com

Printed on acid-free paper

All Rights Reserved © 2007 Springer No part of this work may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, microfilming, recording or otherwise, without written permission from the Publisher, with the exception of any material supplied specifically for the purpose of being entered and executed on a computer system, for exclusive use by the purchaser of the work.

TABLE OF CONTENTS

List of Figures

vii

List of Tables

ix

Abbreviations and Acronyms

xi

World Energy Assessment Overview

xiii

Preamble

xv

Preface

xxi

1. Introduction 1.1. Cradle of the Petroleum Age 1.2. Future Energy Challenges 1.3. Assuring Energy Supply Reliability, Quality, and a Clean Environment 1.4. How Much Oil is There?

1 5 13 17 19

2. Energy Supply and Policy Issues 2.1. The State of Global Energy Supply 2.2. New Sources of Energy and Energy Developments 2.3. Energy Policy Issues and International Impacts

23 26 37 43

3. Drivers of the Transition to a Cleaner and More Energy Efficient World 3.1. Energy Saving Developments 3.2. Environmental Emissions and Reversal of the Greenhouse Effects 3.3. Developments in Electric Power Generation and Distribution 3.4. Extending Fossil Fuel Reserves

45 47 54 60 62

4. Developing the Energy Future 4.1. Development of Alternative Energy Sources v

75 75

vi

Table of Contents

4.2. Fuel Cell Technology Developments 4.3. Hydro, Wave, and Current Energy Supply 4.4. Climatic and Environmental Impact Remediation or Saving the world from Self-destruction

83 85

5. Political and Socio-Economic Effects of the New Energy Future 5.1. Population Growth, Social Factors, and Fuel Impacts 5.2. Effects of the New Energy Environment 5.3. Political Upheavals, Changes, and Impact on the Oil Markets

103 105 108 109

6. Arabia: The Center of the Petroleum World 6.1. Socio-economic Political Development 6.2. Opportunities for Arabian Development

111 113 124

7. The Global Energy Future 7.1. A New Energy Horizon 7.2. Impact on Arabia and the Persian Gulf 7.3. New Driving Forces of the Energy Future 7.4. A New Energy Future

129 131 134 137 139

Conclusions

145

Postscript

149

Finale

153

Appendix A. Production, Emulsification, Transportation, and Use of Orimulsion

155

Appendix B. The Future of the Automobile as the Major Oil Consumer

161

Bibliography

165

Index

169

95

LIST OF FIGURES

1. Global Energy Systems Transition, 1850–2050 2. Oil Reserves and Reserves to Production in Years 3. Crude Oil Production (Million barrels per day (OPEC-March 2001, others Jan. 2001) 4. Oil Production and Imports Unit in Million barrels per day 5. Per Capita Energy Consumption Unit: Million barrels 6. U.S. Oil Production and Imports 7. Crude Oil and Orinoco Proven Reserves by Country Unit: billion barrels 8. Coal Gasification and Its Uses 9. Worldwide Gasification-Capacity Forecast 10. Hydrogen Energy Systems 11. The Role of Petroleum in Global Energy Supply

vii

27 29 32 33 33 34 64 71 72 81 104

LIST OF TABLES

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. A-1. A-2. A-3.

Total Energy Consumption and Production Quadrillion BTU – 1999 Average Oil Discovery and Consumption (Billions of barrels/year) Oil Import Projections as a Percentage of Consumption World Crude Oil and Natural Gas Reserves January 2, 2000 World Oil Demand and Supply (in mb/d) U.S. Oil Supply World Fossil Fuel Consumption (mill ton oil equivalent) Summary of Energy or Fuel Consumption and Consumption Forecasts (m tons oil equivalent) Petroleum Dependence (2004) General Energy Drivers, Enablers, and Changers Estimated Consumer Costs of Automobile Use (2005) Cost of Electric Power Generation in the United States 1985, 1993, and 2000 (1993 cents per kilowatt hour) Use of Energy for Electricity Generation (2006) Typical Characteristics of Orinoco Heavy Crude Nuclear Electricity Generation by Selected Country/Nations Most Reliant on Nuclear Energy World Nuclear Power Summary Nuclear Power Production (% of total electric power output) At-a-Glance, Five Principal Fuel Cell Types in Development Sampling of Proposed Large-scale Projects to Capture CO2 Storage and Handling Conditions Trials by Potential Users Typical Performance of Orimulsion on a Commercial Plant

ix

15 19 28 30 31 35 40 42 43 46 53 60 62 65 76 77 78 84 101 156 157 158

ABBREVIATIONS AND ACRONYMS

AEO AFV API Bbbl bbl BP Cdn CERI CIA CIS CPE DOE ECE EIA EMF EOR FSU GDP GNP HFO IEA IEW kb/d LNG LPG mb/d mbbl ME mtoe NCW NGL OECD OPEC

Annual Energy Outlook Alternative Fueled Vehicles American Petroleum Institute billion barrels barrel British Petroleum Canadian Canadian Energy Research Institute Central Intelligence Agency Commonwealth of Independent States Centrally Planned Economies Department of Energy Eastern and Central Europe Energy Information Administration (US) Energy Modeling Forum Enhanced Oil Recovery Former Soviet Union Gross Domestic Product Gross National Product Heavy Fuel Oil International Energy Agency International Energy Workshop thousand barrels per day Liquefied Natural Gas Liquefied Petroleum Gas million barrels per day million barrels Middle East million tons oil equivalent Non Communist World Natural Gas Liquid Organization for Economic Cooperation and Development Organization for Petroleum Exporting Countries xi

xii

ABBREVIATIONS AND ACRONYMS

p.a. PEMEX PNG PPP RFG ROK TFC TPES UAE US WAES WTI ZEV

per annum Petroleos Mexicanos Papua New Guinea Purchasing Power Parity Reformulated Gasoline Republic of Korea Total Final Consumption Total Primary Energy Supply United Arab Emirates United States Workshop on Alternative Energy Strategies West Texas Intermediate Zero Emissions Vehicles

WORLD ENERGY ASSESSMENT OVERVIEW

Table A1. Energy Conversions∗ To:

Terajoule (TJ)

Gigacalorie (Gcal)

Megatonne oil (equiv.)(Mtoe)

Million British thermal units (Mbtu)

Gigawatt hour (GWh)

From:

Multiply by:

Terajoule (TJ) Megatonne oil (equiv.)(Mtoe) Million British thermal units (Mbtu) Gigawatt hour (GWh)

1 41868 × 104

238.8 107

2388 × 10−5 1

947.8 1968 × 107

0.2778 11,630

10551 × 10−3

0.252

252 × 10−8

1

2931 × 10−4

3.6

860

86 × 10−5

3,412

1

∗

IEA figures. Additional conversion figures available at http://www.iea.org/stat.htm Table A2. Unit Prefixes kilo (103  mega (106  giga (109  tera (1012  peta (1015  exa (1018 

k M G T P E

Table A3. Assumed Efficiency in Electricity Generation (for calculating primary energy) Type of power

Assumed efficiency

Nuclear power Hydroelectric Wind and solar Geothermal

33 100 100 10

xiii

xiv

WORLD ENERGY ASSESSMENT OVERVIEW Table A4. Abbreviations CO2 H2 GWe GWth MWe TWh GJ PJ EJ Gtoe ha km2 T

Carbon dioxide Hydrogen Gigawatt electricity Gigawatt thermal Megawatt electricity Terawatt – hour Gigajoule Petajoule Exajoule Gigatonnes oil equivalent Hectare Square kilometer Tonne

Source: World Energy Assessment Overview 2004, update.

PREAMBLE

The celebration welcoming the second half of the 21st century on 31 December 2050 was subdued in the Persian Gulf. The major cities of Saudi Arabia, Kuwait, and others were dark. No fireworks or other signs of jubilation. Even those among them who had diversified their economies by investing in tourism, technology parks, financial institutions, among others, could not really celebrate as global interest in their institutions and recreational offering had declined precipitously. For several decades the oil loading, storage, and pipeline delivery systems as well as all the back area production systems had experienced a steady decline in their use as demand for Persian Gulf oil in particular and fossil fuel in general experienced a steady decline. Now the last scheduled very large crude carrier (VLCC) was departing from the rusty dilapidated loading terminal facility with a load of Saudi crude for the Far East. No further ships were expected notwithstanding the precipitous fall in the price of Persian Gulf petroleum. Other major oil producers such as Russia, Kazakhstan, Nigeria, Venezuela, Mexico, and more had also suffered major declines in demand but were at least able to sustain reasonable outputs, this largely because they offered more reliable supply and cheaper transportation to places of demand. The beginning of the 21st century had experienced increasingly violent attacks by Muslim extremists and terrorists against Western interests and those of other infidels or “non-believers”. These culminated with the attack on the New York World Trade Center which caused not only 3 000+ deaths but also huge losses in assets as well as confidence in the reliability of economic relationships with some Middle Eastern energy suppliers. In turn, it triggered a determined global effort to wean demand from reliance on oil and gas as primary fuels, particularly as the major sources of oil and gas supply were in the volatile Middle East. In addition to concern with supply security, environmental degradations, particularly those resulting from fossil fuel generated greenhouse gases were finally recognized as an imminent danger to the health and ultimate viability of human life on earth. As a result, major efforts were made to reduce fossil fuel consumption by improving transportation, power generating and energy use efficiency. In parallel, many new sources of fossil fuel were discovered or rediscovered and existing well production extended. Finally, a whole array of alternative, including renewable, sources of energy were developed and introduced. All of this resulted not only in a gradual global decline in the use of oil after 2010–15 but also a rapid loss xv

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of market share by the Middle East to other oil producers and exporters. Since then Middle Eastern producers of oil and to a lesser degree gas had not only lost market share but also in some cases complete markets which in turn decimated their economies, as only a few had built up adequate reserves or diversified their economies adequately. The Gulf countries in general, with the exception of the Emirates, Qatar, Oman, among a few, had for decades relied mainly on petroleum revenues, produced little else and failed to invest in major productive and employment generating facilities at home. Unemployment hovered at huge unsustainable levels, particularly among the young. Civil unrest and political instability had caused insecurity and unreliability of petroleum supply for some time and more and more customers found it necessary to use alternative sources of supply or alternative sources of energy in a market where supply vastly exceeded rapidly declining demands as alternative and renewable energy sources as well as many new sources of oil and gas provided more and more of the needs, and more secure, accessible, and often cheaper sources of fuel or energy. Within the last decades preceeding the mid century, Saudi Arabia, Kuwait, Iraq, Iran, and lesser petroleum producers had to dip into their long-time financial reserves by selling off their foreign investments as well as domestic assets just to sustain their economies. Now they had not only exhausted their reserves but were also loosing their principal, if not only, source of export revenues which in most cases also represented a very large chunk of their national income. After decades of misuse of petro dollars and lack of effective diversion of their economies with investments in productive assets, economic realities finally caught up. Some Gulf countries claimed that they did not ‘waste’ their oil or gas wealth by only investing in the West, but that they were also developing their domestic economy, this largely by building fancy real estate and other developments, using mainly foreign contractors and labor. Some of this brought in foreign investors and tourists as well as additional foreign guest workers to serve them, but little if any of these developments created jobs, particularly for the region’s domestic young, including their newly educated young professionals.1 Also investments in hotels or office buildings in Egypt or Lebanon did not help to resolve this basic festering problem of long-term unemployment and hopelessness, particularly among the young males. Arab investors lacked interest in developing labor intensive manufacturing or service activities. Demographic challenges such as education and unemployment which East Asian countries addressed so well and with great success in advancing their economies were largely ignored in the Arab world and particularly by the rich oil and gas producing Gulf countries. At the same time, high birth rates added 2–4% annually to the population. The energy wealth which was fueling huge export incomes for so long was not used to solve the long term problems of social underdevelopment, joblessness,

1

Bowring, Philip, “In the Mideast, Oil or Nothing”, International Herald Tribune, February 5, 2006.

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xvii

inadequate use of education and knowledge, and the confinement of women to the home. During the first half of the 21st century, the economic and political center of the world had decidedly moved from Europe, America, and the Atlantic basin to Asia and the Pacific Basin. More recently the Indian Ocean had also become an increasing important economic region. America, which replaced Europe as the global economic and military power in the second half of the 20th century, continued to assert itself for much of the beginning of the 21st century but by now, in 2050, had its role and economic power greatly reduced. China, India, and various groupings of South East Asian and North East Asian (Japan, Korea, and Taiwan) countries supplied the bulk of the global gross product and were politically as well as economically dominant in world trade and global affairs. In parallel, the greenhouse effects caused by extravagant and irresponsible use of fossil fuels had resulted in major changes in the earth’s condition. While for most people the results were polluted air, radical climate change, inadequate water, and declining fish and wildlife, there were many even more detrimental effects. The Arctic polar ice cap had receded enough to permit year round passage of vessels on the Northern Siberian and North West Passage (Canadian) sea routes, bringing the Northern Hemisphere continents closer together than ever before. Now in 2050, half way through the 21st century, the global energy system had finally undergone radical changes away from large-scale use of polluting liquid and solid hydrocarbons to the large-scale use of renewable energy, gaseous hydrocarbons, and other alternative energy sources. While this may not be enough to reverse the adverse effects of greenhouse gas caused pollution accumulated over 100–150 years of unbridled use of solid and liquid fossil fuels, the effects were at least stabilized and hopefully would reverse how ever so slowly. The world had finally recognized the folly of the indiscriminate and growing use of solid and liquid hydrocarbons for energy generation and accepted a more rationale and benign approach to provide the energy needs of humanity. The results were not only better environmental quality but elimination of many of the conflicts, which required access to oil and gas, had triggered. The world finally entered a new epoch of sustainable energy supply where most countries were able to satisfy the bulk of their energy needs from sustainable, renewable or biological sources, with much lower if any adverse impact on the environment. Professor D. G. Nocera2 predicted in 2006 that demand for energy on earth would grow from 12.8 T watts in 2006 to over 28 T watts by 2050 or by a factor of 2·2. He proclaimed that only the sun which pours more energy onto the earth’s surface in an hour than the entire planet uses in a year could really provide for these future needs in an acceptable, environmentally safe and sustainable manner. The sun has always been the earth’s major energy source and the force which sustained it and supported its life and vegetation. It also contributed to the degeneration of fossil

2

W. N. Keok, Professor of Energy and Professor of Chemistry at MIT.

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wastes to build up the huge reservoirs of solid, liquid, and gaseous fuels which were for long the main sources of energy used by man. However, their use requires combustion or combination of carbon with oxygen which results in hazardous CO2 emissions. Use of oil had steadily declined by 1–2% per year since 2010–15, the peak in global oil consumption, and now amounted to less than half of the 87 million barrels per day consumed then. In fact, some countries had practically eliminated the use of petroleum for power generation, home heating, and transportation with most now being used, consumed by the petrochemical industry and by some isolated countries which had not adopted non-polluting energy policies. Direct and indirect solar source generated energy accounted for the bulk of the energy supply and various conversion technologies had been developed, permitting wide use of renewable solar powered energy to meet all types of human energy requirements. Renewable energy now accounted for over 60% of all global energy use and much of the remainder was supplied by natural gas and other less polluting fuels. Most importantly, CO2 emissions had been reduced by over 80% of those generated in 2010, and even though the green house effects were still discernible, some of their impacts were reversed with ice reforming in the Polar Regions and ozone layers reconstituting in the atmosphere. Although these developments were gradual and predictable, many petroleum producers, particularly among OPEC members who had used oil not only as a major or sole economic resource but also political or strategic weapon, continued to believe in its ultimate importance and essentiality. In fact, they refused to admit the decline of the global need for oil and its economic importance. As a result, their development planning continued to rely on petroleum income as the major revenue source. However, now at the birth of the second half of the 21st century, the petroleum market had finally collapsed and demand, particularly for Persian Gulf oil had completely evaporated. With few other economic resources the major Middle Eastern oil producers such as Saudi Arabia, Iraq, Iran, and even Kuwait now faced a dismal future. They had been forced to sell most of their foreign investments, mortgage much of their domestic assets, and accumulated huge foreign debts which were now being called in. Most of the foreign experts and workers who had for long provided labor and skills to their economies had left, as had many of their own professionals, as well as guest workers from various Arab countries. They now had deserted urban areas, desolate shadows of their past with no discernable future, except one of the traditional desert life which had sustained the region for centuries before the dawn of the petroleum age. However, now their populations were largely urban and unprepared for such a traditional life. As a result, old enmities were revived and many traditional rivalries which had been covered up by wealth and economic opportunity resurfaced. The world had learned not just to live but to thrive without large and in fact declining use of fossil fuels. Most of the fossil fuel still in use in the middle of the 21st century was produced in America, the European Union, Central Asia, Russia, South America, and West Africa. The main remaining users of Middle Eastern oil

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and gas were in South Asia, primarily India. OPEC which once dominated global oil markets and supplied as much as 43% of all oil traded had become a small and rather inconsequential trade organization with little cartel power. The Middle East had been the cradle of the oil revolution and was now becoming its graveyard. While the oil boom in America began in Pennsylvania when the first wells were discovered in 1850, followed by a rather slow development of oil production and distribution, the Caspian Sea had been a source of oil for over two thousand years. Baku in Azerbaijan had been a center of the black gold which was used by the Zoroastrians3 in their local temples and later by traders on the silk route between Europe and China, as described by Marco Polo. Oil was not only a source of energy and used for heating, cooking, and to serve various other human needs but also as a source of fire which was a sign of greater powers which the Zoroastrians worshipped. In a major change in the global economy, now in the middle of the 21st century, the role of the Middle East as a principle source of fuel or energy and thereby economic and political power was being eclipsed. However, unlike other economies, particularly those not endowed by natural resources such as oil or minerals, who developed their human capital, infrastructure, technology, and productive assets to meet their needs, most of the Middle East relied on oil and gas wealth for most developments. Now these countries had no choice but to return to their old ways of life as desert dwellers, traders, herdsmen, and Bedouins. Newspapers surveying these conditions claimed that nature had reclaimed its deserts. “Sands Over Arabia” became a banner slogan and a warning to those not preparing for the future.

3 Reiss, Tom, “The Orientalist”, (a vivid description of life in Baku), Random House, Trade Paperbacks, New York, 2005.

PREFACE

This book examines the economic impact of changes in the global demand and supply for fossil fuels both on the major producers in Middle Eastern countries around the Persian Gulf, other producers, as well as the world at large. The economic, social and political life of most countries is not only intimately linked to and influenced by the energy market but also affected by historical developments. Among other issues, it shows how the economic, social and political development of societies in Arabia, the peoples of the Arab Peninsula are influenced by their historic and cultural environment, and what the future may bring to this region when their principal economic assets, petroleum and gas, start to lose markets as alternative sources of fossil fuel, alternative, and renewable energy supply the bulk of global energy needs. It also describes how changing fossil fuel costs, access, security of supply, and environmental impacts may affect future economic, social, and political developments as well as technological advances and changes in priorities. As noted, demand for fossil fuels and particularly petroleum is affected by four major issues: 1. Energy or fuel security, safety, and access 2. Energy or fuel cost and economic impact 3. Climate change and other environment concerns 4. Availability, access, and costs of alternative energy sources Energy security of supply really means reliability and availability of energy or fuel at reasonable prices where and when needed. This in turn requires meaningful upstream and downstream control which prevents disruption of supply. This can be achieved by a variety of means including control of sources, supply routes, development of domestic and foreign fuel alternatives, including renewable energy sources, energy saving methods, and diversification of energy supply, and use. As shown in Figure 1, demand and supply of fossil fuel affects and is affected by many factors, which are becoming increasingly important as their impacts are recognized and felt. Energy security, safety, and access are interdependent and increasingly affected by political, strategic, and economic or market developments. Other factors such as new routing of pipelines and shipping also enter into it as do currency exchange rates. For example, Russia’s oil and gas price conflicts with Ukraine, Belorussia, and xxi

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other former Soviet republics interrupted fossil fuel deliveries to Western Europe in the early part of the 21st century. Many oil and gas producers had become increasingly nationalistic. This resulted not only in a decline of investment in and transfer of technology to these countries but also quite often in uncompensated seizure or nationalization of foreign assets in oil and gas industries by such countries. This in turn affected the market as importers switched to more secure sources without exposure to lengthy legal or ownership claims. Local unrest and outright uprising, such as experienced in Nigeria among others, also caused both supply disruption as well as security and safety concerns. Energy security and safety concerns also affect energy logistics and routing of fuel transportation. Control of shipping and pipeline routes is an important consideration in preventing potential interruptions of supply, due to terrorist or political actions. Alternative supply methods and routes are therefore of increasing concern. Also the future potential of shipping along the polar circle Northwest Passage (north of Canada) and the Northern Route from northern Norway to Eastern Siberia and the Bering Straits must be considered as a potential challenge. Crude oil prices which escalated to over $78 per barrel in 2006 caused major new investments in alternative fossil fuel sources such as Tar Sands (Canada) – Shale Oil (USA) and Heavy Bitumen (Venezuela) derived petroleum. Such petroleum extraction was found to be economical with crude prices in excess of $50/bbl or less. It similarly made investments in clean coal, coal gasification, nuclear and hydroelectric power attractive and caused large new commitments to all kinds of renewable energy developments using wind, solar, current, wave, and other natural energy sources. This trend was not only driven by increasing security, safety, and access concerns as well as high costs but also by more and more evident climatic changes caused by fossil fuel generated greenhouse gases. Environmental impacts such as newly large and sustained temperature changes, storms, reductions in arctic and Antarctic ice cover and resulting increase in ocean levels were finally recognized as important danger signs which demanded radical changes. Renowned climatologist Hansen has concluded that the earth is getting warmer and that humans are causing it.4 Greenhouse pioneer Charles, David Keeling showed that for almost 50 years CO2 levels measured on the summit of the Mauna Loa peak in Hawaii had risen continuously. Global warming increases evaporation from oceans and the Arctic/Antarctic ice mass. While it was feared that this would result in an increase in ocean water levels, endangering low coastal regions worldwide, the impact on ocean water level increases has actually been much lower than expected. Much of the humidity generated increased rainfall in many parts of the world but mainly on land to an extent where many previously arid regions now have adequate and often excessive rainfall. Similarly, other regions with adequate water supply experienced a significant increase in rainfall that caused both severe flooding, as well as replenishment of 4

Bowen, M., “The Messenger”, Technology Review, July/August 2006.

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aquifers as well as subsurface and surface reservoirs. An example is Palestine/Israel and Jordan with a historic water shortage that became very acute in recent years as a result of a large increase in population and per capita water consumption (35– 110 m3 /year); however, in the last few years experienced not only a replenishment of its aquifers but also filling of the major regional reservoir (Lake Tiberial) to overflowing. As a result, the Jordan River that had not received any flow from Lake Tiberial for a long time as all lake waters were used for human and agricultural consumption is now providing some Jordan water during the rainy season to prevent the overflowing of the lake during some years. Similar developments are experienced in many parts of the world. As this phenomenon will not be reversed over the short run even if CO2 emissions are stabilized and later reduced, the greenhouse effects will continue for a long time; yet their impacts will not be the projected rapid increase in ocean levels but a large increase in rainfall and a lesser increase in ocean levels. In other words, the greenhouse effects while costly in many ways also provide some benefits that should be studied and understood to provide some guidance to future developments. Similarly, recedance of the Arctic ice cover may make the Hudson Bay and much of the Northwest Passage navigable for much of the year, a development that has major economic implications by permitting easy, inexpensive access to the Northwest Territory (Canada) and the North Slope (Prudhoe Bay-Alaska) gas and oil reserves. Similarly, the reduction of the Antarctic ice cover provides new access to the resources of the Antarctic continent. The biggest loss of ice cover in the Canadian Arctic close to Greenland and the break away of a 66 square km (25.5 square miles) ice island from the Island of Ellesmere occurred in August 2005. This was so violent that it caused tremors detectable 210 Km away. The actual loss was only identified a year later when the area became accessible.5 While in the past climate change effects were assumed to be just a gradual melt of ice cover, it now seems that it also weakens the ice structure, leading to breakups. Ellesmere’s ice shelf was sheltering unique ecosystems with fresh water lakes above and under the ice shelf. In an article by US and Canadian researchers published in December 2006, they predicted that by 2040 Arctic Ocean ice will nearly disappear in the summer all along the Northwest Passage. Greenland glaciers which flow towards the south of this largest of the world’s islands are increasingly fast moving and are estimated to contribute nearly one sixth of the annual rise in sea level. These flows have doubled in the past 4–5 years and these glaciers now flow about 8 miles per year. According to Dr. E. Rignot6 Greenland was loosing about 100 cu km of ice per year in 2006, an amount which could double every year or two. Greenland’s ice cap alone covers more than 650,000 square miles and is as much as 10,000 ft thick. If all the ice of Greenland alone were to melt, the world’s ocean surfaces could rise as much as 10–20 ft. 5

Lavallee, Guillaume, “Immersed ice shelf breaks off in Canadian Arctic”, AFP, December 29, 2006. Rignot, Erro, “NASA Jet Propulsion Laboratory, American Association for the Advancement of Science Meeting, 2006. University of St. Louis, MO, 2006. 6

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While this could not happen in a century or two, the current rate of melting could easily elevate the Atlantic Ocean surface by as much as a foot in 50–80 years which would mean average retreat of Atlantic shorelines by about 100 ft. The Greenland ice cap melting is moving increasingly northwards. These melt waters form and increasingly facilitate massive outflows of ice not previously experienced. While Antarctica is less affected at this time, it does contain ice caps 10 times as large as Greenland’s, which also started accelerated melt and experienced a recent break off of a huge iceberg from the Larsen Ice Shelf in 2002 the size of Martha’s Vineyard which endangered some southern shipping lanes. The increase of fresh water inflow into the Atlantic also reduces salinity and the density of surface waters, which then remains a lower density layer reducing ocean circulation. This affects ocean currents which are important in distributing nutrients and maintaining atmospheric balances. Large masses of melted sea ice have also been noted north of Alaska. The overall effects are expected to rapidly move the projected tree line, permafrost and ice boundaries northward by hundreds of miles in the northern hemisphere. By 2070 nearly one quarter of Greenland is expected to be permanently ice free and the northern route and Northwest Passage only covered by young ice and floes 4–6 months per year, permitting year round navigation by ice strengthened vessels. While with large curtailment of CO2 and other polluting emissions, the rate of destruction may be reduced, effects will continue to be felt for hundreds of years with sea levels and air temperatures continuing to rise.7 At this time we do not have an international energy strategy, although the problem of anthropogenic climate change is here now – real and dangerous. We all accept the fact now that human activity or energy generation and use are changing the weather. CO2 levels today are 40% higher than before human civilization of the earth. We must reduce emissions even if it requires changes in our socio-economic models, if we are to maintain the earth as a livable planet. Unfortunately the world is not united and energy is no longer just a commodity but is used as a political, strategic, and economic weapon, without consideration for the common good. In fact, petro politics has become the major concern in international relations, and oil or gas rich nations increasingly use this wealth not just to improve themselves but to influence or even dominate others and in the end much or all the world. Improving energy efficiency and thereby fossil fuel consumption would have major environmental, economic, as well as political effects. The two largest oil exporters, Saudi Arabia and Iran, are not coincidentally also the largest direct and indirect financial contributors to global terrorist organizations. Reducing their oil export income, and oil is their primary if not only export and provides the bulk of their revenues, would severely reduce their ability to fund such activities. The large

7 Intergovernmental Panel on Climate Change, Arctic Climate Impact Assessment, UN Framework Convention on Climate Change, 2006.

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escalation of oil prices in 2006 had allowed both countries to accumulate large budget surpluses and foreign reserves. While some factors causing large increases in oil and gas consumption cannot be easily controlled, such as the rapid increase in China’s and India’s economies, industrialization, and standard of living, all of which cause greater fuel consumption, the U.S. is still the major oil consumer using 20.4 million barrels/day versus 6.5 million barrels/day for China in 2006. In other words, America with only 5% of the world’s population consumes about a quarter of the world’s oil; most of it for transportation. Here the average American consumes more than 13.8 times the average global consumption. Making transportation more fuel efficient in the U.S. would go a long way towards more responsible and efficient use of energy in America. In April 1977 President Carter tried to convince Americans of the importance of reducing energy consumption by his call to consider the energy crisis “the moral equivalent of war”. This call for self-restraint was later changed by Republicans into a call for greater use of technology and increased domestic fuel production. The battle between conversationalists and those who advocate better, smarter, and cleaner domestic production continues. A lot of effort and capital is now devoted to the development of alternative fuels, alternative and renewable energy sources, more efficient use technology, and better technology for the production and exploitation of fuel sources, such as ultra deep production wells.

GLOBAL SUSTAINABILITY Globalization has brought greater interdependence which by itself is good as it permits surpluses and deficits to be better balanced, but it may also impact on sustainable development by diverting temporary or artificial surpluses which in the long run may reduce capability to sustain development. A typical example may be diversion of surplus intellectual capital or professionals brought up, educated or trained at local expense who are exported to other economies more capable or in need of these assets. Once diverted, such professionals seldom return to their homeland, depriving it of the opportunity to use such capability to advance its own development. Sustainability has many dimensions, the most important of which is human survival, though equity, quality of life, maintenance of the environment and supply of essentials for life support. Some may include consideration of bio and other diversity. These in turn raise questions such as to what are the number of people the earth can support which in turn begs the question of the level of support. Support can imply means for survival or a higher standard of living or quality of life. Equity is similarly a difficult measure and includes aspects of life quality, which in turn is affected by history and experience. The use of GDP per capita is a rather useless measure of equity or even quality of life. It similarly does not provide a means of determining sustainability. Growing GDP per capita may or may not indicate growing or sustainable equity or quality of life.

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PREFACE

Sustaining human society requires many resources, some permanent, others temporary. Culture, for example, is an important factor in human happiness and satisfaction; yet is seldom considered a factor in measuring sustainability. Globalization is a process that cannot be reversed, but to be effective and fair it must be managed in the interest of all mankind and the earth we live on. It must be designed to solve global problems of security, need, health care, education, shelter, environmental maintenance, and communication. Today solutions of major problems such as climate change and energy supply require global approaches. Similarly, the major deterrents to human (economic, health, social, cultural, etc.) developments, such as corruption, crime, illicit markets, warfare, misuse of aid funds, terrorism, sickness, biological, nuclear, and chemical weapons, as well as human, labor rights and environmental protection, etc., all require worldwide approaches and actions, which in turn demand global understanding, concern, and cooperation. ENERGY SECURITY Energy, like water and air, serves essential needs of mankind. It is a most important factor as it contributes to a meaningful quality of life, freedom of movement, and access to comfortable shelter. Now at the crossroads after a near century of dependence on and irresponsible use of fossil fuel to supply global energy needs, we are at the beginning of a new era. Energy security, affordability, environmental quality and renewability are the new driving forces identified in this book. It describes all the opportunities toward independence of fossil fuel and the road towards a cleaner, healthier, secure, and cheaper, largely renewable energy system. This is not a scholarly work. It relies largely on secondary sources of information. It makes no claim of academic rigor and there are, as a result, few footnotes and references. Obviously all facts, figures, and statements were checked, but little effort was made to consult primary sources. The objectives of the book are to present an informed potential of the energy future, its sources, and an unbiased review of past history and developments in Arabia. It also discusses how a people with so rich a history and contribution to human civilization can degenerate into a cultural abyss and put all their faith into the fleeting economic boom of petroleum which cannot and will not last. This when increasing political, economic, and environmental protection concerns are encouraging development of renewable fuels or energy sources. The status of the world energy use and resources are reviewed. Efforts at developing alternatives are discussed, and the prospects of success in replacing fossil fuels are evaluated with a view of improving standards of living, security of energy supply, environmental safety in the use of energy, and global peace and equity. This work provides a measured analysis of the combined contribution of • energy saving methods • new oil and gas discoveries • addition of recoverable reserves from existing wells • new conversion technologies

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• alternative energy sources and • renewable energy to the total energy supply/demand balance. It clearly shows that fossil fuel savings in Western industrialized countries will become substantial within the next 10–20 years and equal more than half the new demands by China, India, etc. It also shows that alternative and renewable energy sources will meet over half the energy needs of Western countries within 20 years and then continue their inroads into fossil fuel consumption Overall the “Future Energy Balance Analysis” presented shows clearly that we are on the verge of not only reducing our dependence on oil but at the beginning of a radically new energy future which will assure greater energy security, more equitable access to and use of energy, and a cleaner, more livable environment.

CHAPTER 1

INTRODUCTION

The oil crisis of the 1970s and various oil supply shocks since then have taught us vivid lessons in the limitations of reserves and supplies of fossil fuel, especially oil and gas, and the danger of allowing a small group of major suppliers to dictate energy market terms and behavior. Although world reserves of fossil fuels are limited, new discoveries of recoverable reserves have led to a situation where reserves have actually grown substantially notwithstanding increasing world production and consumption. In fact, the amounts of newly discovered reserves were in recent years a function of the price of fossil fuels and any increase in price led to a proportional increase in recoverable reserves. At the same time, the control of 35–42% of supplies8 and over 60% of recoverable reserves by the OPEC monopoly causes world petroleum markets to be very volatile. In 1979 for example a drop of only 11.5% in world oil supply caused petroleum prices to triple. The world’s proven oil reserves totaled 700 billion barrels in 1987 and have since increased significantly. It is estimated that we have proven reserves of more than 30 times current annual consumption and that for the last 20 years global oil consumption has increased roughly in line with the increase in proven reserves. At the same time, the U.S. had developed a Strategic Petroleum Reserve (SPR) with a capacity of over 600 million barrels to prevent or diffuse any oil crisis or supply market blackmail. The oil shocks during the first half of 2004 greatly affected the economic revival of the western nations. With crude prices repeatedly rising above forty dollars per barrel, the assumed consensus of maintaining a price in the $25–30 range per barrel had been broken, and the confidence of the major oil consumers in the fiscal reliability of the petroleum market was severely shaken. On top of this, OPEC the major oil cartel which controlled nearly half of global oil supplies and a larger percentage of recoverable reserves has floundered with repeated changes in production quotas as well as lack of discipline among its members. At the same 8 In 1973 OPEC produced 56% of world petroleum and accounted for 87% of global petroleum exports. By 1987, these dropped to 33% and 56% respectively; but reached 39% and 61% in 1995. Since then, OPEC production and export have declined in percentage terms, a trend which is expected to continue.

1

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CHAPTER 1

time, Russia, the world’s second largest producer of petroleum, experienced some major upheavals and policy changes. The Russian government on occasion challenged terms of privatization and encouraged renationalization of its oil industry. This sometimes resulted in delays in new production and the construction of oil pipelines. It also reduced confidence by foreign investors, particularly after Yukos, Russia’s largest producer of oil, was forced into bankruptcy. At the same time, Americans were shocked when gasoline prices hit nearly three dollars per gallon. Though even then they were still paying only about half of what Europeans and many others were charged. More recently large new oil production developments in West Africa, Central Asia, and in deep offshore locations in North America were coming on line. These may replace some traditional producers. As so often before, the question of adequate petroleum supply hangs in the air and many are worried that we may soon run out of affordable petroleum to meet our growing energy demands. In the background, there were many new developments, such as development of fuel efficient cars, new renewable or sustainable non-polluting sources of energy, improved waste energy recovery processes and more. Yet most people are confused. On one hand oil prices are rising and a shortage of petroleum is predicted by many, while at the same time many new renewable energy sources are being developed or perfected. What will the future really bring? We should remember that petroleum has been a major energy source or fuel for only 80–90 years. Before World War II it played a very minor role in global energy supply, and only assumed an important role after 1950. While petroleum consumption continues to rise, the rate of growth in consumption is declining, and we appear to be close to the peak, which may be followed by sustained decline. How rapid such a decline will be depends on many economic, technological, political, environmental, and social factors. Yet a decline in oil consumption may have major ramifications which would affect the socio-political well being of many countries, particularly those petro-economies which depended mainly on oil revenues, such as the Persian Gulf countries. As noted, major disruptions of oil and gas supplies can be technical, political or economic. The latter are the more serious, both in scope as well as implication. Political and economic causes disrupt oil and gas markets often in combination. A major factor influencing the scope and impact of supply disruptions is the ratio of supply capacity and production that indicates the percentage of available surplus supply capacity. Another is obviously the effect of inventories at the production or consumption side of the market. The SPR plays a major stabilizing role here. OPEC’s oil production capacity, which fell to 14 million barrels/day in 1982/83, has since increased more than two fold. While utilities and industrial users can reduce oil consumption in a crisis or under pressure of large price increases, transportation cannot reduce oil use by switching to other fuels in the near term. In the U.S., oil used by transportation has risen from 54% of total in 1979 to 66% in 1995 and nearly 70% in 2005. The increases in Europe and Japan were even higher.

INTRODUCTION

3

Overall U.S. petroleum consumption which fluctuated between 14.2 and 18.9 million barrels per day between 1970 and 1995 has grown to just over 21 million barrels per day in 2006 and has remained at about the same that level since then. Imports have increased correspondingly and reached 11.8 million barrels per day in 2005, with over 50% of imports from OPEC suppliers. Major efforts are under way now to reduce U.S. dependence on Middle Eastern oil by support of developments in Russia (Western Siberia, North Siberia, and the Caspian Sea), as well as other oil suppliers such as West Africa, Mexico, Central Asian republics, etc. The potential for future crisis in oil supply has been reduced by the leveling off of OPEC’s global market share, and the heavy indebtedness of most OPEC countries, many of which have squandered their oil revenues on expensive, often prestigious, projects or wasted the money instead of investing it in productive assets. Another contributing factor is, as noted, the emergence of major new independent suppliers. Even the U.S. has many new reserves of oil and gas, mainly in Alaska and at various offshore sites that could serve to reduce dependence on oil and gas imports. Finally, global oil consumption has leveled off and is expected to actually decline between 2010 or 2015. At the same time, we must recognize that the Middle East will remain among the lowest cost producers ($2–5/barrel) versus a cost of $20 plus in the U.S. and Canada. None of the Middle Eastern and North African oil producing exporting countries is a democracy by any measure. They have no free elections, most lack a constitution, and there is little if any popular representation. It is interesting that the economies of most, if not all, these OPEC countries have grown much more slowly than those of countries in the Middle East with fewer if any natural resources, particularly oil. Similarly, income distribution in most of these countries is among the most distorted with little or no middle class, small if any investment in nonpetroleum productive assets such as manufacturing or productive services, a below average ratio of expenditure for social services including education and health care and most importantly little if any support for free communications and discourse. Lack of confidence in the political, social, and economic stability of many OPEC members, particularly in the Middle East, and increasing concern with the greenhouse effect of fossil fuel use has resulted in vigorous development of higher efficiency fossil fuel applications, alternative sustainable energy systems, as well as new more reliable sources of fossil fuels. While increasingly abundant petroleum supplies and relatively low prices were deterring faster development of new fuels and alternative energy sources needed to assure a better environment and less dependence on Middle East oil, effective new technological developments, environmental concerns, and increasing availability of alternative energy or fuel sources are slowly eclipsing the dominant role petroleum had since 1955. Solid fuel use, mainly coal, is also on a sustained decline in relative as well as absolute terms. In fact, major advances in renewable energy efficiencies and costs may soon offer opportunities for a sustainable and environmentally friendly energy future, particularly now when oil prices hovered well above fifty dollars per barrel for some time.

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The stage is now set for the eclipse of the fossil fuel age in global development. It will start with the rapid replacement of traditional coal and petroleum use in power plants and industry by cleaner burning gas and other fuels, as well as nuclear, wind, hydro, and solar power processes. We expect that within 20 years (2027) only about 10% of utility and industrial fuel will be petroleum and coal. In fact, it is expected that its use in power generation may be phased out completely before the middle of this century. Similarly, transportation will experience rapid development of alternative energy conversion technologies, from the highly efficient hybrid (gas/electric) power plants to all hydrogen fuel, fuel cell and similar energy converter power plants. The overall effect is expected to be a rapid decline of petroleum imports from OPEC and other producers. In fact these may have difficulty selling even a fraction of their production capacity by 2023. This will not only affect global energy and economic stability but will greatly reduce environmental damage as well as hazardous emissions and permit the gradual reduction of the greenhouse effect that has been exposed as the major factor in global warming, climate change, reduced agricultural output, and increasing seawater levels. The world will move towards use of more reliable and less politically and environmentally encumbered fuel supplies. The challenges posed and opportunities provided for a determined drive towards conversion of global energy demand to clean sustainable energy sources are complex, yet the opportunities abound. These are not easy developments. They involve technological, political, social, and logistic challenges, but the payoffs are not only huge in ecological terms but also in terms of the opportunities offered for more equitable development and greater socio-economic justice. As affordable energy is one of the major prerequisites for effective socio-economic development, the change over from largely petroleum-based economies to more accessible and ultimately cheaper, readily available alternative and renewable and sustainable energy sources is expected to accelerate the economic development of countries in subsahara Africa, South Asia, and much of South America. At the same time, the decline in dependence on Middle Eastern oil is expected to not only lead to more secure, accessible, cleaner, and cheaper energy supply but also a more peaceful and stable Middle East and world at large. Access to affordable, clean energy services is essential for human development and economic growth. At this time over one-third of mankind does not have access to affordable energy services, this not only caused poverty and stymied human development but also contributed to inequitable living conditions and large-scale environmental decay. Access to petroleum, particularly in the Middle East, has for too long been a source of friction, political turmoil, social dislocation, human suffering and suppression, and war. Power struggles have decimated the economic opportunities of its people and wasted many of the resources of the region. While petroleum has been a bonanza for the few, particularly those in power, the large masses of people in the region have benefited little, with most of the petroleum income wasted, spent on prestige projects or diverted abroad, as noted before. As shown in this book, the

INTRODUCTION

5

world will soon be able to live and grow the global economy without Arabian oil. It is highly likely that such a development will also benefit the masses of disadvantaged and often disenfranchised Arabs of the region who never really benefited from the large oil revenues either directly through employment or indirectly through the use of oil revenue for social development. 1.1

CRADLE OF THE PETROLEUM AGE

Baku, capital of Azerbaijan, was the first oil capital of the world, with near surface petroleum finds and exploitation about one hundred years ago. The rest of the Middle East, particularly the Gulf of Arabia countries, followed with discoveries of fossil fuel deposits close to the surface and easily extracted early in the 20th century; yet, large-scale production actually only commenced between the world wars and really took off after World War II. Since then, this area has become the cradle of petroleum and later gas production. The stark desert lands of the Arab Peninsula are bound in the north by the Euphrates and Tigris estuaries, the Persian Gulf and Arabian Sea, the Red Sea, and the Mediterranean, this the cradle of Western civilization which spawned three major world religions. Abraham was born in Ur, the ancient city at the confluence on these two rivers and became the founder of monotheism which evolved into Judaism from which sprang Christianity and over seven centuries later, Islam. The Zuggurat of Ur stands today as an archeological marvel and evidence of the origin of the peoples of the book, the term coined by the Prophet Muhammad who recognized the revelations of Abraham as the basis of later revelations which led to the emergence of Judaism, followed by Christianity and Islam. The fertile crescent, the lands from Israel, Lebanon, and Syria to those between the Tigris and Euphrates rivers, today’s Iraq, became as long as 6000 years ago, the center of civilization where successive peoples such as the Sumerians, Acadians, Babylonians, Kassites, and Assyrians developed irrigation, invented the wheel for transportation, and introduced the first formal legal code. The area also gave the world the foundations of mathematics, astronomy, and great advances in architecture and literature. Similarly, the first attempts at developing large centralized administrative systems were developed here, at first to manage irrigation and water supply as well as food distribution and defense. Later the Persians and Greeks used the area to further and support the extension of their empires. Muslim Arabs actually only arrived in the area in the seventh century A.D. mainly as Bedouin or nomadic tribes looking for fertile grazing lands. Mesopotamia was later to become the site for major conflicts between the two major groups of successors to the prophet, the Sunnis and Shiites. The latter revolted in 687 to become a distinctly separate group. Baghdad founded in 762 by Caliph al Mansur, an Abbasid, became a Sunni stronghold and one of the world’s major metropolises. After several centuries though various nomadic groups from the North overrun the Caliphate and in 1401 the Mongols conquered Baghdad and dissolved the Caliphate.

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A century later the Ottoman Sunni Turks not only replaced the Mongol invaders but also prevented the Shiite Persians from capturing Iraq or Mesopotamia. The Ottoman Turks extended their domination to include most of the Middle East, Egypt, and other parts of North Africa. Yet during the last century of Ottoman domination and until the end of World War I and the dissolution of the Ottoman Empire, modernization and more representative government was increasingly encouraged as the young Turks gained more influence. This increasingly led to more Arab nationalism and ultimately establishment of new Arab countries throughout the Middle East. After World War I the British and French were given the responsibility of dismantling the Ottoman Empire and they went about it by forming countries based largely on artificial boundaries and anointed friendly rulers to govern these so-called ‘new’ nations. In Iraq for example the British introduced the Sunni King Faisal who had briefly ruled Syria under the French Mandate. Yet this Hashemite rule also came to an end after 37 years. Another Hashemite dynasty was installed in the eastern part of Palestine called Transjordan which rules until today. In Arabia the Saud Olan took over much of the Peninsula and in collusion with Wahhabi clerics maintain rigid control of Saudi Arabia until now. This is the only country named after a ruling clan. Arab nationalism, initially influenced by European socialism and fascism soon encouraged nationalistic coups led by military officers. In Egypt Colonel Gamal Abdel Nasser took over. In Syria as well as in Iraq, Baath ‘Socialist’ parties imposed unique types of Arab nationalism which promised social reform. Though initially set up to heal social inequities and solve social problems, the new Arab social nationalism often changed into military dictatorships, a condition prevalent until today. Social inequities, unemployment, huge income discrepancies, and underdeveloped social services continued to grow and receive little if any attention by some Arab leaderships which often use schools, media, and religious institutions to blame the West and particularly America and Israel for poor conditions and major inequities. Some Arab nationalists have distorted Islam from a peace-loving, tolerant, cultural, and progressive faith into a convulsion of hate and blame. Its leaders refuse to assume responsibility for the ills they imposed on their people and use their power, media, and cooperating clerics to blame all but themselves for the dilemma in which many Arab societies find themselves. Islam, the youngest of the Western monotheistic faiths, developed rapidly after the Prophet bore the revelation of submission to the one god and established Islam. The Arabs, residents of the Arab Peninsula and first Moslems, were largely but not exclusively nomads or Bedouins. Their travels though brought them in contact with adjacent peoples and cultures such as those of the Fertile Crescent from Syria to Mesopotamia, the Egyptians and other East and North African peoples. Islam soon became the spiritual basis of all these peoples. Within one hundred years from the death of Muhammad in Medina in 632 AD much of the Middle East and North Africa, all the way west to Morocco, had converted to Islam. The earliest rulers

INTRODUCTION

7

of these vastly dispersed Moslems where Umayyad and later Abbasid, caliphs who used governors or emirs to rule complete regions on their behalf. The succession to Muhammad was vested in these caliphs (Khalifa – Arabic for successor) who were chosen from Muhammad’s family and companions. Notwithstanding numerous bloody assassinations and murderous fights for succession and legitimacy as rulers, the Moslem Empire expanded rapidly and by 752 AD extended from India to the western shores of North Africa and the Spanish peninsula. Islam though became not only a military force and a unifying polity under which peoples of different heritage and culture could unite but also a major civilizing force driving advancements in science, mathematics, architecture, arts, and literature. In fact, within a short period of time, the caliphate empires became the veritable cradle of much of what were considered the great advancements of mankind at that time. Damascus, Baghdad, and Cordoba among the caliphate capitals became architectural marvels and great centers of learning. Literature and poetry thrived and were considered essential ingredients not only of cultural life but also contributions to the faith. While Islam extended its power from the Middle East and North Africa into Eastern and Western Europe reaching far into France, occupying Sicily and other Mediterranean islands and making major inroads into the remnants of Rome and the Byzantine or Eastern Roman Empire, it simultaneously became a unifying force which created a culture of tolerance. Medieval Spain, in particular under the Western caliphate in the last 200 years of the first millennium and nearly one hundred years after, became a center of religious tolerance among Muslims, Jews, and Christians and a center of learning, innovation, architectural splendor, artistic beauty, and literary prowess. Since then, there were other examples of great Moslem contributions to civilization. Centuries later Saladin exhibited not only superior military prowess but also showed great humane compassion for his defeated enemies, the crusaders, who had shown themselves to be merciless in their pursuits and uncompassionate for their vanquished. It is difficult to understand that Moslems and Arabs in particular who had led Islam to its glorious past have failed to make major contributions to culture, science, technology, and even literature or art in more recent times. Many reasons for this have been advanced, such as the intra-regional struggles and the decline of the Ottoman Empire that ruled much of what used to be the Eastern Roman Empire for very long. It even advanced to the gates of Vienna centuries ago, until it was defeated, and after World War I decimated by having much of its territories turned over to the victor nations. Most of today’s Middle Eastern and North African Moslem nations are post World War I or even World War II creations, often established on an arbitrary basis by the European victors. Many became kingdoms or sheikdoms with rulers anointed from among tribal leaders or descendants of the prophet which often led to local disenchantment. While many of the rulers of the Arab Peninsula countries have been able to retain their control, others in countries from Iran and Iraq to Egypt and Libya were removed, usually by military dictators. The reason for this may be the close cooperation among clerics and rulers as well as the oil wealth of the Arab Peninsula countries that

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allowed them until recently to maintain attractive economic and social conditions that largely diverted popular opposition. But conditions are changing and there is increasing evidence of popular dissatisfaction with non-secular governance which defers or prevents meaningful introduction or use of modern technology and social freedoms. After the Arab liberation, religious and nationalistic tendencies took over in most Arab countries. Also the concept of an enlightened dictatorship became popular and formed the basis for many ruling regimes which soon corrupted the concept for political and economic convenience as well as to assure themselves of a reliable power base, usually founded on the support of clerics or nationalistic dogmatists. Many Moslems consider democracy a Western colonialist concept designed to perpetuate foreign control. They feel it to be impossible to impose or even introduce or offer democracy in Arab states. For democracy to take root and flourish in Arab countries it would be necessary to have a healthy economy, introduce technological and educational changes, and assure social and political freedoms, none of which are easy or even perceivable in some Arab countries. The trouble is that even intellectuals in many Arab countries are often wed to these concepts. There is an urgent need to carry out reforms but these could only be introduced if done in a way as though the process has nothing to do with the U.S. or the West. Even though many Arabs may be happy with the removal of Saddam from power in Iraq, the U.S. and Britain are not considered liberators but occupiers of Iraq. Similarly, to placate the U.S., Arab regimes are usually willing to pay lip service to the war against terrorism and even arrest a few minor Al Qaeda operatives as well as supposedly support the roadmap to peace in Palestine. This is often done not out of conviction or recognition of correctness of these actions but to placate the U.S. At the same time there is growing frustration among Arabs with their impotence in political and military terms as well as the lack of technological and economic advancement. It is not by chance that the Arabs who contributed to human development, science, technology, literature, and arts so greatly between 700 AD and 1600 AD have made few, if any, contributions since then. It is curious to note for example that the world’s Jews, outnumbered by Arabs about 30 to 1, won 80 times as many Nobel prizes as Arabs since the start of the Nobel Foundation. While Islam’s leaders encouraged broad-based cultural and technological developments in the past, this is not the case today, particularly in many of the Middle Eastern countries. Spreading democracy in the Middle East had been an unrealistic diversion from the solution of basic social and cultural problems or ills such as the archaic role of women, lack of tolerance of other beliefs or religions, anti-secular political structures, limited freedoms of expression, and intolerance towards other customs; all this while demanding complete freedoms to spread restrictive doctrines and customs elsewhere. While Muslims and particularly Arab Muslims restrict the rights of foreigners living within many Middle Eastern countries from freely worshipping, dressing in respectful Western garb or expressing their opinions, they demand all these and more rights when habiting in Western countries. Even American allies

INTRODUCTION

9

such as Saudi Arabia or Kuwait take part in such actions and may in fact be indirectly complicit in the global jihad. Wahhabism is really a state religion in Saudi Arabia that hereditary rulers encourage to achieve the support of the influential clerics. The oil wealth, particularly of Middle Eastern and some North African Arab countries, has shielded most Persian Gulf countries from the broader economic and socio/political implications of these developments for a long time, yet increasing income discrepancy, rampant unemployment particularly among the young, and the potential decline in global energy market share and lower real oil prices, may force a radical change. It may also result in even greater discontent. The governments in the region are trying to divert public dissatisfaction with declining living standards and large-scale unemployment, particularly in Saudi Arabia, by misinformation and support of religious dogma blaming the outside and particularly the West and Israel for the people’s dilemma, while the ruling elite continue its extravagant and often hypocritical lifestyle which in many ways contradicts Islamic laws and social norms. Little is done by most of these countries to prepare for or adapt to the changing needs of a globalized world economy, open society, widespread information access, and modern technology in general which affect lifestyles that are becoming increasingly in conflict with Islamic religious tradition. In economic terms, these countries dependence on oil income is increasing instead of declining and little of the oil income is used for the development of alternative productive and employment generating resources or enterprises so as to counter the inevitable decline of oil income. This is a formula that may lead to a disaster not experienced by Arabs for centuries and accelerate even further the decline of Arab influence. The oil weapon used effectively in the past to stem any westernization, modernization or political reform is of declining value and may become useless as global dependence on Persian Gulf oil diminishes. The day is not far off when the world will be able to survive without it and then Arabia may again become a desolate desert, with its people eking out a bare living, unless there is a radical change in attitude, politics, education, and relations with other peoples, faiths, and cultures. Most importantly, education will have to broaden its peoples view of the world as an increasing complex place of many peoples who mostly share monotheistic beliefs just as Moslems and respect their different ways of belief in one god. In a world in which weapons of mass destruction are increasingly prevalent, peoples must respect their differences to prevent the risk of mutual annihilation. Religious dogma cannot form the basis of global political domination. The Middle East countries from Persia to Libya were as noted all part or provinces of the Ottoman Empire until the end of World War I. Then much of it was transferred to French and British administration which in turn later transferred power to various national governments which formed Egypt, Saudi Arabia, Iraq, Syria, Lebanon, Kuwait, and more. Many of these new countries’ borders, finally independent nations after 1950, were not based on national or other identities but on ruling convenience. As a result, many contain several ethnically religious and culturally

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distinct peoples, a fact which has caused frictions and upheavals ever since. For example, the Kurds (now numbering about 25 million) were incorporated into four countries (Turkey, Syria, Iraq, and Iran). The Middle East at the time after World War I was culturally and politically important as the cradle of Western civilization and the strategic crossroad between Europe, Asia, and Africa. Economically though, it had little significance until 1927 when the first commercial find of oil in any Middle Eastern (or Arab) country was made near Kirkuk in Iraq. It took another 11 years (1938) for the first commercially viable oil well to be drilled in Saudi Arabia. Little development of the oil fields in the Middle East occurred during the Second World War and it was only in 1945 that the center of attention for oil production by the oil majors moved from the Mexican Gulf and Caribbean to the Middle East, primarily the Persian Gulf. Today the Persian Gulf countries produce about 21 million bbls/day or about twice U.S. production of petroleum and about 27% of world total of 82 million bbls/day. At the same time we should recognize that in 1975 Persian Gulf production supplied 40% of world output of 52 million bbls/day. Persian Gulf oil is still the cheapest to produce but comparatively high transport costs and new finds of petroleum closer to major consumption centers with low transport costs are cutting into its market share. Future growth in demand will be mainly by developing countries in Asia and Africa which are close to new petroleum producing countries in Central Asia and West Africa. As a result, the Middle East and particularly Persian Gulf petroleum producers my find it increasingly difficult to hold on to their market share in petroleum and gas. It now appears that dependence on and demand for Middle Eastern oil will soon start to decline and with it the economic and political influence of Middle Eastern countries. With much of the oil income accumulated over decades wasted on prestigious projects, extravagant expenditures or simply diverted or stolen, the growing and increasingly young population of these countries is in for a dismal future unless there is a radical change in the social, political, and economic structure of these countries. They cannot blame the rest of the world for regimes and economic policies or behavior that they were taught to and did accept. The educated will probably leave and the rest assume the desert life of their forefathers. There is still time for a renewal of Arab culture, not democracy in the Western sense, but a more egalitarian system which is ruled by freely elected and representative leaders who rule in the interest of all and not just the few who do not use the unislamic dogma to suppress the masses and blame non-Moslems for their plight. The major Persian Gulf Arab countries generate nearly half their GDP from oil and gas as well as nearly 90% of their exports. Without these revenues, and low monetary reserves their economies as existing now are doomed. Moslem culture, as noted, was for many centuries the pride of the world and Islamic science enriched and advanced many areas of human knowledge. However, in recent years, few advances can be traced to the Arabs. This is largely because of the distortion of a system driven by greed and lust for power by a few, and a social system in which narrow cliques of clerics connive with self-appointed rulers

INTRODUCTION

11

to divide the spoils and riches nature provided in their lands and blame the rest of the world for the lack of development and opportunities for the masses. While Muslims habitually refer to non-Moslems as infidels and some of their clerics publicly call Christians and Jews by outright insulting terms, any critical reference to the Moslem faith or the Prophet is immediately called an insult, justifying violent response. Outraged by cartoons of Muhammad published in Denmark recently, Moslems everywhere staged violent attacks and demonstrations and governments of Moslem countries introduced boycotts and other measures. While everywhere else globalization and freedom are spreading and the influence of religion is declining in public affairs, it is booming, particularly in Muslim societies and countries, where it is now often the deciding factor who gets elected, what laws are enacted, and what political and social direction is imposed. The concept of democracy is increasingly considered a Western idea, incompatible with religious doctrine, particularly in Islamic laws. At the same time, Moslems are using the freedoms democracy in Western countries conveys to spread and often impose restrictive religious interpretation of social and political behavior. Political Islam is today largely extreme and uses liberalized open intercourse to restrict others, by demolishing the boundaries between religion, politics, and human rights. In other words, they often turned the tables on liberal democratic dogma and processes. Religious radicalism occurred repeatedly since post war independence of many of the Moslem countries. It was usually short lived in the past. Today the situation seems to be different and religious extremism has not only become a political power in many Moslem countries, but is also exerting its influence in countries where Moslems are a minority or where secular and democratic institutions had long been adopted. They often attempt to win power by using some of the weaknesses of free democratic systems and then using their newly won powers to restrict freedoms and exclude non-believers, ultimately negating the principles of democracy. It is becoming increasingly evident that religious radicalism and democratic values are incompatible, a fact that underlies many of the socio-political problems of today. However we must also recognize that the long period of economic and political freedom, which globalization has afforded in recent years, also encouraged greater religious activity in many parts of the world. This is different from the premises of globalization and democratization which were supposed to raise living standards and human freedoms, but have in many cases reignited religious dogma and narrow, restrictive interpretations of human rights. Similarly, increased trade and resulting wealth encouraged and facilitated by globalization has quite often resulted in greater social and political restrictions. This is particularly true when wealth creation is based largely, if not exclusively, on oil and gas exports. As noted by Friedman9 , the only real democracy in the Arab world does not have any oil or as concluded by Dr. Michael L. Ross10 , 9 10

Friedman, Thomas L., “The First Law of Petropolitics”, Foreign Policy, May/June 2006. Ross, Michael L., “Statistical Analysis of 113 States”, UCLA, 1999.

12

CHAPTER 1

“reliance on oil exports tends to make states less democratic”. This finding is not limited to the Arab Peninsula or the Middle East, but is a worldwide phenomenon also experienced in Nigeria and other oil producing countries. A major factor in the growth of fundamentalism and unrest in many Middle Eastern countries is the high birth rate, which is not only fostered by religion but also by social and cultural restrictions in the role of women. As a result, more than half the populations of these countries are young people now, with women giving birth to more than six children on average. Similarly, as economic policies in these countries restrict many business activities as well as employment of women, many young women, including college graduates cannot find jobs. Unemployment in the Gulf countries is not only a socio-economic but also a security problem, as many young, particularly unemployed men, see no options but terrorism as a career. People and particularly unemployed young people are frustrated; yet their anger is largely diverted towards the West and the non-believers or infidels by both the governments and their primary supporters the clergy who in turn receive generous support from the government. These are two class societies, the very poor and unemployed and the very rich with the clergy and government bureaucracy filling the gap and fueling the status quo. For Saudi Wahhabists modernity means westernization and they assume that there is a fundamental contradiction between Islam and modernity. Wahhabi clerics, as noted, not only interpret the Koran but enforce their interpretation which goes back in time to where the words of the Prophet became rules and were rigidly enforced. People who contradicted the words of the Prophet were beheaded when Mecca was taken over by extremists (1979). Ulama was taught by Wahhabists as the only true Islam and anyone else was considered an infidel who must be taken out. Everything in Islamic countries is affected by religion. Religion rules all decisions. Wahhabis usually consider non-Moslems enemies of God. Expressions of hatred for others are the major Wahhabi educational tool and hate is the major content of instructions. A basic assumption is that American culture is an enemy of Islam and must be renounced. Similarly, the doctrine that females are inferior to men must be accepted. In general, Wahhabis refuse to join the 21st century and assume that oil dependent America cannot afford the demise of Saudi Arabia. The long-term alliance between the Saudi royal family and the Wahhabi cleric establishment is now finally under stress largely because of the allegations of corruption and nepotism. At the same time, Saudis are basically pampered and not really ready for radical change. In 2004 over 57% of Saudi Arabia’s population was under 20 years of age. Even youth raised with little religious training are vulnerable to extremism, largely as an excuse for their failure to a more devout education. However, few Islamic youth in these countries choose or are given opportunities to study marketable skills. Only recently has Saudi Arabia tried to replace the armies of foreign workers who perform most non-government jobs by Saudis, paying them as much as 5 times what foreign workers get. This is obviously a rather disruptive strategy. The idea is that unlike foreign workers, locals will spend their earnings locally and thereby

INTRODUCTION

13

improve the economy. Often Bedouin herdsmen join this system more than city dwellers. Saudi Arabia has so far been unable to create a vibrant non-oil economy and as a result its fortunes oscillate with the oil markets. Per capita GDP fell from $30,000 in 1980 to $6,000 in 1994 but has recovered to $9,500 in 2003. The indigenous population does not want to do most of the basic or menial work, though they often lack ability for other work. Malay, Indonesian, and Indian Moslems have little in common with Arab Muslins as they often share a cultural heritage with Hinduism, Buddhism, and animism, among others. Their attitudes are distinctly different and less adversarial to peoples of other cultures and religions. A major social problem in most Arab states is not only that their unemployment rate is among the highest in the world but real economic inequality. Growth in per capita GNP of Arab states 1975–1999 was only 0.3% versus 2.2% for OECD countries. The issue is largely political that external or non-Arab interests cannot redress. It is disconcerting how the large increase in the price of crude oil, largely driven by issues such as terrorist attacks, the uncertainties of the Iraq war, and the rapid increase in demand for oil by countries like China and India, whose economies continue to expand rapidly, could affect the U.S. and world economy in such large measure. While the U.S. now (2007) imports more than 61% of its petroleum consumption or in excess of 12.5 million barrels per day, an increase in the costs of these imports of say $10 per barrel from $50 to $60 are only about $79 billion per year. This is a large sum of money but as a percentage of the total U.S. product of over twelve trillion dollars per year it constitutes a miserly 0.38 of one percent. In fact, the total added costs of such a price increase even if it were to last a whole year would be a small fraction of the U.S. costs of the war in Iraq, which by the end of 2006 exceeded $400 billion in direct costs and probably twice that in indirect and deferred costs such as future medical and pension cost of over 27,000 wounded American servicemen. 1.2

FUTURE ENERGY CHALLENGES

We now face the challenge of future economic, social, and political developments of the large oil producers in the Middle East and North Africa, most of which, as noted before, squandered their high incomes from petroleum exports for decades. Only a few alternative productive economic assets were developed in these countries during the boom oil export years. They may find themselves with an inadequate economic base in future once the need for their petroleum exports declines or even evaporates. Most of these countries are, as noted, ruled by unelected leaders or dictators often exhibiting little concern for the socio-economic welfare of their own people. These developments may force them back into the pre-petroleum days when many of them scraped out a base living from their inhospitable largely desert lands. The Iraq war started in 2003 has been a wake up call that may force radical changes in the social and political structure of many of these countries. This may have been just

14

CHAPTER 1

in time not only to defuse the urgent social upheavals that are simmering but also provide these countries with new opportunities. We expect that within 20–30 years oil will be largely replaced by natural gas and alternative largely renewable energy sources as the major source of energy. Similarly, sources of oil and gas will expand and the Middle East will lose major market shares in a declining world petroleum markets. The Arab world in general and the Persian Gulf countries in particular must decide now if to join the path towards industrialized civilizations or fall back into the abyss of sand-blown desert countries, sustaining largely nomadic life. This scenario is not an abstraction but an increasingly realistic potential. Consider recent developments in petroleum supply and demand. Worldwide consumption of fossil fuels such as coal, oil, and natural gas declined during recent years, at an average rate of decline of 0.2% to 7100 million tons of oil equivalent in 2005. While this is small, it indicates a real change in the use of fuels. In part this may have been the result of a slowdown in the world economy, but other indicators show the start of a distinct and determined shift towards a new energy future, with a decline in per capita and global energy consumption and increasing use of non-fossil fuel. Efficiencies introduced by globalization, increased concern with the impact of fossil fuel use on the environment, demands for greater supply safety and security, and major technological breakthroughs in alternative energy all contribute to these developments. While declines of fossil fuel use are very small now they will accelerate and ultimately become major factors in reducing fossil fuel use. Sands over Arabia is not a fable based on Lawrence of Arabia’s stories, but a long-term reality that will not only affect global energy and development economics but also the future of the Arab world. Many OPEC countries have lived in a dream world in which petroleum was the ultimate economic weapon and source of influence. Not only their economies but also their socio-political structure have for long been tightly linked to petroleum revenues and the assumption that the importance of petroleum will not wane and their economic and political role in the world will be sustained indefinitely. Most Middle Eastern oil producing countries are as noted ruled by autocratic governments, often closely allied with religious interests and fanatics. Few have used their massive oil revenues to build alternative economic resources capable of sustaining their country whenever petroleum revenues no longer suffice to maintain their economies. Most suffer under huge unemployment, particularly youth unemployment, a major potential factor for unrest. Pressures to reduce the environmental impacts of energy generation, mainly from fossil fuels such as petroleum and coal, as well as the desire to improve energy supply security and price stability have resulted in the rapid development of alternative energy and energy conversion technology as well as alternative sources of fossil fuel and fossil fuel delivery systems. These developments are now accelerating and have become irreversible. We will review the status, development, and future opportunities of alternative sources of energy, alternative energy delivery systems, and alternative sustainable energy technology development, and use this information

15

INTRODUCTION

to project the new and distinctly different energy future – a future in which fossil fuels will play a declining role and where most fossil fuels used are supplied by easily accessible, safe, and secure production sources. While we usually consider U.S. or Western dependence on oil imports a major trading and political constraint, it is much more reasonable to consider the total global energy balance between demand and supply. Here consumption and production of primary energy measured in quadrillion BTU includes petroleum, natural gas, coal, hydroelectric, nuclear, geothermal, and solar, wind, wood, waste, ocean current, and wave energy. Table 1 shows the total energy demand and supply by the 10 largest consumers and producers. It shows that the U.S., Russia, and China all far out-produce Saudi Arabia in total energy. In fact, although petroleum is still the largest global energy contributor with 152.2 quadrillion BTU, other primary energy sources are catching up and are rapidly increasing their contribution to world energy demand. Natural gas with 86.89, coal 84.77, hydroelectric power 27.29, nuclear 25.25, and other 2.83 quadrillion BTU (1999) are rapidly gaining on petroleum as the primary global energy source (U.S. Department of Energy, August 2001). Saudi Arabia now supplies about 12.9% of global petroleum output and 5.2% of global energy production. The total of Middle Eastern production is about 2.5–3.0 times as large, dependent on Iraq’s contribution. It is important to recognize that the contribution of Middle Eastern fossil fuels to global energy demand has been falling by nearly one percent per year since 1996. This largely due to the combined effects of zero growth or level consumption, the increased use of alternative energy sources, and the introduction of fossil fuel from new and expanding sources of supply such as Russia, Central Asia, China, and more. U.S. petroleum consumption which fluctuated between 14.2 and 18.9 million barrels per day between 1970 and 1995 has grown to about 20 million barrels per day in year 2000 and exceeded 21.6 million barrels per day in 2006. Imports have increased correspondingly and reached 12.8 million barrels per day in 2006, with Table 1. Total Energy Consumption and Production Quadrillion BTU – 1999 Consumption U.S. China Russia Japan Germany Canada India France U.K. Brazil

Production 96.87 31.86 26.01 21.71 13.96 12.52 12.10 10.26 9.92 8.51

U.S. Russia China Saudi Arabia Canada U.K. Iran Norway India Mexico

Source: U.S. Department of Energy, August 2001.

71.98 41.54 30.87 19.64 17.71 12.01 9.84 9.55 9.17 9.03

16

CHAPTER 1

over 58% of imports from OPEC suppliers. Major efforts are under way now to reduce U.S. dependence on Middle Eastern oil by support of developments in Russia (Western Siberia, North Siberia, and the Caspian Sea), West Africa, as well as other oil suppliers such as Mexico, Venezuela, Canada, and the Central Asian republics, etc. As noted, Alaska’s Arctic National Wildlife Refuge (ANWAR) area of 6000 Km2 in northeast Alaska and close to Prudhoe Bay is the single largest oil and gas reserve in the USA and projected to hold 4–12 billion bbls of recoverable oil and an equally large amount of gas. Exxon Mobil is considering development of Prudhoe Bay and Port Thompson (Alaska) gas projects as well as gas wells in the Mackenzie River Delta, in Canada, with total expected production rates of 4–5 billion ft3 per day. U.S. crude oil imports are quite diversified and their origin changes quite often as price, risk, and other market considerations come into play. In the first half of 2004, for example, according to the U.S. Energy Information Administration, Canada supplied 1.6 m bbls/day, Mexico 1.6 m bbls/day, Saudi Arabia 1.4 m bbls/day, Venezuela 1.3 m bbls/day, and Nigeria 1.1 m bbls/day in addition to smaller suppliers. This distribution though changed soon afterwards when Nigeria, among others, suffered production problems caused by terrorism, corruption, and more. In recent years, petroleum origins to supply demands have been highly volatile for economic, political, and security reasons as mentioned before, and particularly major consumers such as the U.S., China, and large European countries are increasingly covering their bets by diversifying their purchases, buying into new sources of supply, and most importantly developing alternative energy or fuel technology and sources. The 2006 escalation of oil prices was largely demand driven. It was not sustainable, not only because the peaking of demand was temporary but also, as mentioned before, it drove the price to a level where many competing and more secure energy sources became very attractive. Now (2007) that the new commitments have been made, it will become difficult to reverse the situation, particularly if climate change and security as well as political concerns continue to influence both short- and long-term decisions. It is interesting to note how history repeats itself. The world’s first oil pipeline which was constructed nearly 100 years ago to connect the oilfields of Baku in Azerbaijan with Baram on the Black Sea in Georgia is now replicated by a $4b BakuTbilisi-Ceyhan pipeline which connects Azerbaijan, Georgia, and Turkey bypassing Russia to bring oil from the Caspian fields to the Mediterranean. Kazakhstan also on the Caspian Sea has three of the world’s largest oilfields and is expected to grow its production from 1.2 m bbls/day in 2006 to over 3 m bbls/day by 2015. Kazakhstan is also building pipelines to China and is expected to start exporting there within 5 years. The newly oil rich central Asian countries are playing off the various major oil importers. Another potential development affecting the future of global energy markets is the potential organization of an OPEC like cartel for gas which would include Russia, Algeria, various central Asian former Russian republics and others. In

INTRODUCTION

17

preparation President Putin of Russia is trying to transform Gazprom, the state gas giant, into a world class energy company11 . There are a lot of expectations that Russia, already the world’s second largest producer of oil and largest gas producer will assume an even bigger role in future with the east Siberian, Sakhalin and other fields coming on stream. However, there are also doubts that Russia will really act as a global commercial supplier, operating in a free energy market. Recent development, including moves towards renationalization and attempts to form cartel like arrangements, introduce some concern about the future role of Russia in the global energy market. Similarly, the role of Central Asian producers and China as the world’s second largest consumer are largely unpredictable. There are many future energy challenges that should be addressed, such as: • International pressure towards stricter greenhouse effect control • Increased development, adoption, and use of alternative and renewable energy, as well as cleaner use of fossil fuels • Development and supply of affordable energy to poor countries and the poor in industrialized countries • Management of security and quality of supply of energy and fuels • Development of more efficient, effective, and clean use of energy and fuels • More effective, safe, and affordable disposal of gaseous, liquid, and solid energy waste • Better, safer, and more reliable transport, transmission, delivery, and storage of fuels and energy • Development of more economic, safe, and reliable energy and fuel production These and other energy challenges are discussed in this book. The state of the world energy use and resources is reviewed and efforts at developing alternatives are discussed. The prospects of success in replacing fossil fuels are evaluated, with particular reference to energy security and its important role in human development. 1.3

ASSURING ENERGY SUPPLY RELIABILITY, QUALITY, AND A CLEAN ENVIRONMENT

Energy supply consists of discovery, production, transportation, storage, refining, and conversion of fuels, as well as generation, storage, transmission, and use of energy. All these processes require physical assets, management, information gathering, use and control. All of these are subject to failure or degradation as a result of mismanagement, natural disasters, degradation, terrorism, security breaches, defective materials, and many more factors. To reduce the potential for and probability of failure or degradation in energy or fuel supply and use, important quality controls, engineering, and testing standards, as well as continued supervision and tests are usually employed, documented and any prospective deficiency is remedied. Because fuel and energy production, supply, and use chains involve so many links,

11

Matthews, Owen, “Betting on a Gusher”, Newsweek, January 30, 2006.

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CHAPTER 1

the chances of compromising their quality and use reliability are great and control of the chain is therefore quite difficult. The same applies to the control of potential environmental damage at the fuel production site, supply and use chain as well as the final waste disposal management. Although there are many regulations and agreements in force, their enforcement is often difficult because of the multitude of jurisdictions involved in the energy production, supply, and use chains. The increased complexity of these chains which often involve not only many parties but also jurisdictions require development of internationally recognized quality and performance measures and enforcement tools to assure compliance. While such measures and tools are available for some links in the chains, such as for example in oil tanker shipping and refinery operations, they are lacking for some links in the chains, thereby providing opportunities for quality and security breaches, as well as non-compliance with environmental impact exposures. 1.3.1

Energy Risk Management

Energy risk as any other fundamental risk management is based on strategies which reduce and limit the chances as well as severity of any disruption of supply, delivery of low quality, extraordinary escalations in price, imposition of detrimental terms and other conditions which interfere with a normal operation of the global, national, and local economy, including the safety and wellbeing of society or mankind and the maintenance of a clean environment. Various risk management strategies can be employed. One could attempt to decrease the frequency of detrimental events and/or decrease their consequences. In both cases, there is a need to identify, install, and manage warning systems. In recent years we experienced major disruptions in oil supply, including terrorist attacks on oil producing assets in Nigeria, and nationalization of oil and gas producers in Russia, Venezuela, Bolivia, and earlier in the Middle East and Mexico. There have also been attacks on oil pipeline, tanker shipping, refineries, and oil terminals. There were also instances where contracts were not honored or investors not compensated when their oil or gas production facilities, pipelines, terminals or refineries were seized. The energy industry faces many risks and is probably more in the public eye than any other. It is considered vital for economic wellbeing and growth, social development and quality of life; yet it is a most volatile and often maligned sector of the global economy. Energy developments usually take a lot of time and resources, be it for fuel or energy production or conversion and are always subject to evaluation and permitting by hosts of public and private interests. As a result, energy projects generally face more risks than most others. Unlike risk management in other areas such as transportation, building construction, agriculture, among others, there is usually inadequate background information, a lack of understanding of all potential hazards, insufficient or nonexistent warning systems, and quite often no effective fallback or recourse to correct

19

INTRODUCTION

failures. As a result, the energy industry is considered not only high risk but also an industry requiring unpredictably large amounts of resources which may or may not be recouperable. While in the past most risks in energy projects were physical and economic, we today face the highly untractable combination of physical, economic, political, terrorist, war, environmental, social impact, and other risks in an ever more unstable world subject to increasingly unreliable warning systems. Risk in the energy field has, as a result, become exceedingly difficult to manage, which causes both increasing reluctance by investors to commit resources and a resulting huge increase in the costs of energy projects. 1.4

HOW MUCH OIL IS THERE?

Since oil became the major source of energy in the world in the 1930–40 period, there have been repeated claims that we will run out of oil soon and that we are depleting recoverable reserves. However, recoverable reserves continue to increase at a time when we produce and consume more oil than ever before. At the same time, while production from existing fields was declining, new recoverable reserves were found (Table 2). Based on this table recoverable reserves increased until 1990 and then started a decline in actual physically verified discoveries, excluding identification of potential new discoveries. At the same time, new technologies and the high price of crude make many so-called fully exploited wells attractive assets again. Similarly, there are many technically recoverable oil and natural gas reservoirs worldwide which were not included among recoverable reserves in the past. In the U.S., estimates of technically recoverable oil are U.S. mainland onshore 82 billion bbls, Alaska, 11 billion bbls, along the Pacific coast, 25 billion bbls, along the U.S. Gulf Coast, and 4 billion bbls along the Atlantic coast, for a total of 122 bbls. There are similar reservoirs of recoverable oil in many parts of the world and it is therefore irresponsible for anyone to claim that we will run out of oil or gas for that matter in the foreseeable future. Such claims have been made since in 1874 Table 2. Average Oil Discovery and Consumption (Billions of barrels/year) Decade

Oil Consumption

Oil Discoveries

1930–40 1941–50 1951–60 1961–70 1971–80 1981–90 1991–00 2001–01

3 7 12 20 23 26 29 32

10 25 30 48 31 26 15 10

Source: IEA Statistical Forecasts, 2000.

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when the Chief Geologist of Pennsylvania12 predicted that we would run out of oil in four years. Similarly, the Club of Rome predicted about 32 years ago that petroleum reserves would run out before the end of the 20th century. Oil and gas discovery or survey and production as well as gathering/transport technology is advancing all the time. As a result, we can now recover much more at existing wells, discover oil and gas reservoirs under difficult geological conditions, drill and produce at much greater onshore and offshore depth, operate in much more difficult climatic and physical conditions, and gather, store as well as transport oil and gas from deep offshore or difficult land locations. Saudi Arabia’s oil company (ARAMCO) also argues the oil production and potential reserves are very much greater and claims that we produced so far about 1 trillion barrels of oil, the remaining proven reserves are another 1.2 trillion barrels, future new discoveries are another 1 trillion barrels, improved (technology) recovery of reserves add 1 trillion barrels, and finally, non-conventional oil (Tar Sands, etc.) can be expected to contribute another 1.5 trillion barrels, for a grand total of 5.7 trillion barrels or enough oil for 140 years of supply. I cannot help but recount my conversation with a relative of mine (a renowned petroleum geologist) in 1972/3 during the first major oil crisis. When asked how much oil there was, where it was, and when we should expect to run out of oil, he responded that we will never run out of oil as there was oil and/or gas everywhere, and that it was just a matter of drilling deep enough to find it. As technology advances so will the amount of recoverable oil and gas. It is just a matter of economics or how much we are willing to pay to extract, refine, and deliver it, and what alternatives there are to meet mankind’s’ need for energy. Since that time, the global energy environment has changed radically. Not only has consumption of energy escalated, largely fueled by the rapid development of China, East and South East Asia, and now also India which added over half the world’s population as new energy users, but huge new sources of fossil fuel as well as alternative and renewable energy sources have entered the market and supply an ever increasing percentage of energy needs. This process is not only continuing but accelerating, both because of socio-economic and market pressures, and increasing environmental impact and resulting public concerns. As noted, the polar icecap and Greenland’s as well as Antarctica’s ice cover are rapidly melting, causing not only a precipitous increase in sea levels but also major detrimental climatic effects. Oil prices increased from $24/bbl in 2003 to over $78/bbl in 2006, only to fall back to $50/bbl in early 2007. The price of oil is now increasingly affected by phenomena such as changing weather, levels of strategic reserves, new discoveries, changing technology, as well as production, trading, and logistics strategies of both producers and consumers. Even so, the total value of oil consumed is only about $3 trillion or

12 Caveney, Red, “Global Oil Production about to Peak? A Recurring Myth”, World Watch, January/February 2006.

INTRODUCTION

21

about 6–7% of the world’s product.13 Yet it has a greater impact on the world economy than trades in other goods which are more significant in total value. At the same time, oil production has been falling in 33 of the world’s largest oil producing countries, including 6 of 11 OPEC members.14 We currently (2006) assume that there are more than 1.1 trillion bbl of proven reserves, equivalent to all the oil consumed so far and 40 plus years of consumption at current levels. Now about 100 years after the start of the commercial use of oil, we continue the discussion of its future as the most valuable source of energy, the lifeblood of human civilization. We will later discuss the state not only of alternative fuels and efficiency technology, but also the myriad of new fuels and fuel sources, energy and energy sources, and most importantly alternative and renewable energy which may make the discussion of how much oil is there a moot issue, as the demand for oil is expected to start to decline within 5 years or so. In the last few years, huge new irreversible investments and other commitments were made in extraction and refining tar sands, extra heavy crude and shale oil, wind farms, hydroelectric plants, new and updated nuclear power plants, fuel cell and hydrogen-fueled power projects, hybrid and other efficient and often alternative fuel-using automobiles, clean coal/coal gasification, natural gas, solar power, and energy conversion systems among others, that are expected to greatly replace the use of and need for petroleum that the imminent decline of global oil consumption is today no longer a plan but a fact. These developments were not only driven by the high price of oil but also global energy security. Many, particularly OPEC oil producers, made the mistake of using their assumed power to further their political aims. We will discuss the situation of the global energy future, which is now in 2007, on the verge of a radical change in direction which will not only have major economic and political ramifications but fortunately also finally start to reverse the destructive environmental or greenhouse effect of our energy policies.

13 14

Flavin, Christopher, “Over the Peak”, Worldwatch, January/February 2006. International Energy Agency, IEA Report, 2006.

CHAPTER 2

ENERGY SUPPLY AND POLICY ISSUES

Energy policy has strategic significance for economic developments and must form a key focus of foreign policy. Organizations such as the International Energy Agency (IEA) and the International Atomic Energy Agency (IAEA) have tried but been largely unsuccessful in guiding energy decisions. They similarly seem to have had little influence on producer/consumer relations such as OPEC and oil importing nations’ dialogues. Similarly, inclusion of considerations of climate or environmental protection in energy policy making has generally been haphazard or ineffectual, if at all considered. Energy policy must consider the three pillars of energy supply effectiveness: energy economics, energy security, and environmental protection. In other words, we must find ways to assure economic growth with security while continuing reductions in greenhouse gas emissions and other detrimental environmental impacts. Europe and Japan are much more dependent on energy imports than the U.S. and act accordingly. The U.S. must learn to reduce per capita consumption of energy and from other industrialized countries such as Germany which uses only half the energy per capita for roughly the same per capita economic output and standard of living. The link between economic growth and energy consumption must and can be broken without reducing consumer standards of living. To achieve this, more competition and rewards must be introduced into the energy markets to assure not only greater efficiency in power generation but also in its distribution and delivery. The objectives must be to use markets and technology to improve energy efficiency and not only force consumers to reduce their demand. This, while encouraging consumers to become smarter energy users. Buildings, for example, can be designed to use 20–40% less energy without impacting on personal comfort. Germany, for example, introduced an eco-tax to improve demand side energy management. There are many new developments that will affect energy policy in future, such as clean coal technology. Competition among networks of energy suppliers or converting monopolistic into competitive markets, similarly offer opportunities for greater efficiency. Overriding though are issues of energy security in physical, economic, and political terms. These cannot be compromised 23

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in any approach to effective energy policy. In fact, global and energy security have become intimately linked, as terrorists increasingly threaten the use of the oil or energy supply weapon. Energy deregulation and free market operations can work. Every consumer (residential, commercial, and industrial) would be free to choose not only the supplier but also deliverer of gas, electricity, petroleum, and more. No tariffs need to be set and incentive pricing can readily be introduced. As in many economic sectors, some energy activities may have to remain monopolies such as gas or power distribution networks but by effective vertical separation of monopoly from competitive activities, the benefits of a free energy market can be assured; all this without compromising customer service. Increasingly important policy issues, in addition to diversification, expansion of the use of renewable and alternative energy sources, and improvements in energy use efficiencies, are the greater use of cogeneration (combining heat and power supply with regeneration) and better use of distribution and supply infrastructure, among others. Similarly, open, transparent energy trading markets at the fuel, energy supply, and distribution capacity level must be encouraged to improve greater capacity utilization and resulting efficiency of energy delivery. Many countries, including the U.S., have antiquated energy infrastructure and use outmoded generating and distribution technology. Introduction of available, often efficient, renewable energy sources has been painfully slow. Among various approaches to energy security, the U.S. Strategic Petroleum Reserve (SPR) provides some supply assurance. But this approach must be managed to assure its use as a supply security and not price-regulating instrument. U.S., as well as global, energy policies must be reviewed and brought up to date so as to reflect the realities of supply, demand, environmental, and market characteristics. They must provide meaningful incentives for development and use of efficient alternative fuels and energy conversion methods so as to assure greater security of supply and provide resources for alternative fuel and energy conversion developments and use. Access to economic and environmentally clean energy is a key to economic development. With more than 76% of the world’s population still living in poverty, pressure is growing to assure greater economic equality which increasingly depends on ready access to reasonably priced energy or fuels. Some OPEC members have used oil as a strategic and economic threat and continue to assume global dependence on their oil supplies. They fail to recognize that not only has global energy and particularly oil demand leveled off, but renewable energy developments, new sources of oil and gas, and large-scale energy conservation programs resulting from growing concerns with greenhouse effects all contribute to a serious potential decline of demand for and dependence on OPEC oil. OPEC, which primarily represents Middle Eastern and North African producers, has lost significant power and no longer controls or supplies the bulk of global petroleum demands. Access to major energy and particularly petroleum and natural gas supplies has become politicized in recent years. The oil weapon is

ENERGY SUPPLY AND POLICY ISSUES

25

occasionally used to achieve political objectives. This not only affects the security of supply but also its price. Some leaders of many oil producers, particularly in the Persian Gulf, are trying to divert the discontent of their people who as noted do not generally participate in the earnings from oil by blaming the West for their condition. At the same time, as noted before, they lavish large sums on religious institutions and their leaders to assure their loyalty and support. Wahhabi clerics in Saudi Arabia maintain not only a stranglehold on people’s freedom but influence the government of Saudi Arabia. The government is dependent on Wahhabi support and the clerics in return assure the kingdom’s hierarchy’s survival. Women live under strict control and have few rights, and youth are often taught fanaticism and hatred as a sign of religious fervor and devout adherence to Islam. The corruption of the peaceful and tolerant Moslem faith by people who use ignorance and faith to foster their own political and economic interests is undermining any opportunity for the economic advancement of the population, including moves towards democracy, and social liberalization particularly in Saudi Arabia. Fanaticism has become a political dogma and not a sign of religious fervor in Arabia where church and state are one. Saudi Arabia provides much of the religious, political, and economic support for terrorism notwithstanding the adamant denial of the Saudi regime. Independent of official Saudi statements, economic cooperation with and oil supply to the West may become increasingly unreliable and largely dependent on political convenience and the strategy of the religious extremists. There are many more reliable sources to supply the less than a quarter of U.S. oil imports that are coming from Saudi Arabia. It is really time for America and for that matter the West to liberate itself from a crippling dependence on Gulf oil that finances anti-American and anti-Western terrorism. America and the West could import oil from Russia and former USSR member nations, among many other sources. Massive new finds in the Caspian Sea, Tajikistan and the rest of Russia constitute today over a quarter of the world’s proven reserves. These countries need oil and gas revenues to develop their economy and become effective, free market economies, and global trading partners. Similarly, new finds in Africa as well as in America offer opportunities for changes in oil import strategies. Oil and gas have become more than commodities freely traded in a global competitive market. They have instead evolved into political instruments. OPEC has evolved from a trading alliance of oil producers into a pseudo-monopoly and instrument of political interests. U.S. and Western policy towards the major oil producers, particularly those in the Middle East, has been advanced out of economic deference. While we should not rock the boat and endanger the supply of oil from the Gulf in the short run, it should be recognized that the share of Middle Eastern oil in the global supply has been declining year after year, a trend expected to accelerate as other supply sources come on line. Somehow Western oil importers and particularly the U.S. assume that they are dependent on Middle Eastern oil and are therefore convinced that they must do

26

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everything to maintain the safe, reliable, and economic supply of Middle Eastern oil. As we will show, nothing is further from the truth. Not only will there be more than sufficient alternative petroleum and gas supplies available to substitute for any disruption in Middle Eastern oil and gas supplies, but most of these are cheaper, more accessible, and much more reliable. Furthermore, many of the countries offering these alternative sources of petroleum and gas supply urgently require new sources of income to sustain their rapid transition to market-based economic democracies and the reconstruction of their countries. Energy policies must not only emphasize reliability and economy of supply but also long-term social and economic development as well as improvements in global markets, security, and relationships.

2.1

THE STATE OF GLOBAL ENERGY SUPPLY

Global energy revenues were $2 trillion or about 6.8% of the world product in 1999. Global petroleum consumption was about 27.7b tons in 1999, valued at about $880b (global). Since then, global oil demand has grown to nearly 84 million bbls/day, which reached a price level of $78/bbl in mid 2006, with an average price of $54/bbl during that year and total value of about $1.66b. The U.S. imports about 25% of its crude requirements from the Persian Gulf and crude imports constitute about 52% of U.S. crude oil consumption now. While total energy revenues have risen to over $3.1 trillion or about 12.2% of the world gross product (2006), global petroleum consumption only increased by 12.8% during the period 1999–2006. Nearly 50% of the landed costs of imported petroleum are consumed by transportation and logistics services in the U.S. and 42% globally. At the same time, most imported gas both in the U.S. and Europe is piped in from producing wells. As a result, logistics costs for gas imports are significantly lower than those for petroleum. Russia and former USSR republics are expected to overtake Saudi Arabia as the largest petroleum exporters by 2010 to 2015 and continue to grow in relative terms. Among other advantages such as supply security and independence from OPEC rules, shorter shipping distances are expected to make their exports increasingly more competitive, particularly when the new Murmansk terminal and the Black Sea-Aegean Sea pipeline come online. Similarly, globally natural gas is found to be potentially much more abundant than oil and largely located near major consumption centers. If current trends continue and radical changes in consumption do not occur, oil imports as a share of total petroleum requirements of all industrial nations will increase from 56% in 1990 to 72% in 2010 and 76% in 2020 as shown in Table 2. At the same time, petroleum use is expected to decline as a percentage of total energy consumption as gas and renewable energy uses grow. As noted later in this book, energy conservation and use of alternative fuels and energy sources may change these projections and actually cause a decline in oil imports both as a percentage of consumption as well as in terms of total volume of imports.

ENERGY SUPPLY AND POLICY ISSUES

27

Globally oil and gas are much more abundant than previously estimated, but future oil production and delivery will be much more expensive as more is produced in remote places, deeper offshore waters, and difficult terrain. New gas reserves in Alaska, Mexican Gulf, Bolivia, Venezuela, Canada, and the U.S. will more than satisfy increased demand in North America, even though gas will continue to replace oil at a rate of 2–4%/year. The same is the case in Europe and China where Russian and Central Asian gas will play an increasingly greater role. In year 2000, the world’s fuel needs were supplied by 23% solid, 30% liquid, 31% gases, and 8% other energy systems supplied. As shown in Figure 1, there is a distinct transition from solid and liquid to gaseous fuel use. It shows that petroleum as a principal fuel source peaked around 1970–80 and is since in decline. In fact, petroleum use may become a minor energy source after the middle of this century and its role largely taken over by gases and renewable energy sources. Table 3 shows the cost of electric power generation by different means, and that the cost of other energy power sources has declined very rapidly in recent years, particularly when compared to oil. The threats to free world economies introduced by oil supply insecurity are driving new interests in reducing dependence on petroleum and other fossil fuels. Adding the real environmental costs to the costs of fossil fuels makes them increasingly non-competitive. This is particularly true for petroleum and coal, although new clean coal and coal gasification technology may offer a major reduction in the cost of clean coal (non-polluting) generated electricity to 3–3.8 per kW. 2.1.1

Petroleum Demand and Supply

Both oil and gas are now found in places not considered potential sources of recoverable reserves of these fuels in the past and in larger quantities than ever expected.

Figure 1. Global Energy Systems Transition, 1850–2050

28

CHAPTER 2 Table 3. Oil Import Projections as a Percentage of Consumption Region

1990

2010

2020

North America Europe Pacific

45% 53% 90%

63% 74% 96%

63% 85% 96%

Source: UNDP, UNDESA, and WEC

It is not only that new exploration and production technologies permit access to additional reserves but our whole perception of the origin of most hydrocarbon fuels, particularly oil, coal, and natural gas, as fossil fuels or residues of plants and animals buried millions of years ago may be wrong or at least partially wrong. New hydrocarbon fuel discoveries below deep layers of basement rock seem to indicate earth heat and pressure converted various elements into coal and oil. In this case, supplies of ‘fossil’ fuel would be constantly growing as part of such an ongoing process. This means that if we drill deep into basement rock we should find oil or coal in most parts of the world. In fact, a relative of mine, as noted, a renowned geologist stated thirty years ago at the height of the then oil crisis that we would never run out of oil. Oil is everywhere, he claimed, and it is just a matter of drilling deep enough for its recovery. Obviously this implies that we may have to spend more to recover oil in future as close to surface wells are exhausted. But then technology is advancing so rapidly that in future deep inshore and offshore drilling and production may not be very much more expensive than nearer-to-surface production now. No matter what theory of the origin of oil and coal is accepted, the fact remains that so-called world recoverable reserves have been growing notwithstanding our increased global production and consumption. In fact, while in 1995 world oil reserves were estimated to be 890 billion bbls, today’s reserves (2006) are conservatively estimated to stand at 1.15 trillion bbls by the U.S. Geological Survey. They similarly estimate that reserves may grow to 2–3 trillion bbls as a result of new discoveries and improvements in technology. As noted, the origin of oil and coal in particular has been questioned for a long time as the assumption of a fossil connection has been hard to accept in many instances, such as found below deep sea rock layers and deep granite overlaps. It may actually have several origins with the fossil connection just one of many. Notwithstanding the arguments of origin, it is clear that the old assumptions of fixed limited and known amounts of recoverable petroleum reserves is not tenable as we continue to discover new sources at hitherto unexpected locations. Current proven reserves assure supply of crude oil for at least 48 years (gas for 66 years and coal for 235 years) at the present rate of consumption as shown in Figure 2 for year 2000. The assumption that demand for fossil fuel will continue to increase and may be double by year 2025 if the world population increases to 10 billion and industrialization of developing countries continues unabated, are assumptions that

ENERGY SUPPLY AND POLICY ISSUES

29

are now considered highly unlikely. Recoverable reserves have remained nearly constant since 1986 at over 40 years worth of consumption notwithstanding growing demand over the 20 years since then. We must also recognize that recoverable reserves are largely a function of the price of oil. The higher world price of oil, the larger the recoverable reserves not only because more is spent for exploration but also because more expensive recovery of oil is economically viable. For that reason, more expensive offshore production now provides an increasing portion of world oil and gas supply. World crude oil and natural gas reserves continue to increase. While the Middle East still dominates in crude oil reserves now, Eastern Europe and the former USSR dominate in natural gas reserves (Table 4). World oil demand and supply is shown in Table 5, which also indicates World Bank projections. At this time Saudi Arabia continues to be the world’s largest producer (Figure 3) followed by Russia and the U.S. U.S. oil production has fallen from a high of 11.3 mb/d in 1970 to just about 9.1 mb/d in 2005, while imports are now over 11.0 mb/d (Figure 4). At the same time, per capita energy consumption in the U.S. has actually leveled off at about 354 million BTU/year (Figure 5). As shown in Figure 6, U.S. oil production and imports from North and Latin America have remained nearly constant and though Arabian Gulf imports have increased, the amount of the increase was marginal and is now on the decline. At

Figure 2. Oil Reserves and Reserves to Production in Years

30

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Table 4. World Crude Oil and Natural Gas Reserves January 2, 2000 Crude Oil (billion barrels) Natural Gas (trillion cubic feet) OGJ

WO

OGJ

WO

North America Canada Mexico United States

551 49 284 218

556 56 283 218

2613 639 301 1674

2613 635 301 1674

Central and South America Argentina Bolivia Brazil Colombia Ecuador Peru Trinidad and Tobago Venezuela Other

895 28 01 74 26 21 04 06 726 10

6924 26 02 81 23 30 41 07 471 10

2227 242 43 80 69 37 90 198 1425 43

2279 243 55 62 66 49 88 214 1458 35

Western Europe Denmark Germany Italy Netherlands Norway United Kingdom Other

188 11 04 06 01 108 52 07

176 09 03 06 01 100 50 07

1595 34 120 81 625 414 267 55

1527 26 95 74 598 429 268 37

Eastern Europe and Former USSR Hungary Kazakhstan Romania Russia Other

589 05 54 14 486 33

647 01 64 12 527 43

19992 29 650 132 17000 2181

19476 11 706 40 17050 1669

6756 01 897 1125 965 53 37 2635 25 978 40 2 

6292 NA 931 1000 947 57 54 2614 23 638 21 05

17402 39 8123 1098 527 284 3000 2045 85 2120 169 03

18362 NA 7900 1126 564 293 3940 2080 88 2090 170 115

749 92 54 04 15 29 295

866 130 85 06 17 38 295

3942 1597 16 39 32 352 464

4097 1597 38 39 43 425 464

Middle East Bahrain Iran Iraq Kuwait Oman Qatar Saudi Arabia Syria United Arab Emirates Yemen Other Africa Algeria Angola Cameroon Congo Republic Egypt Libya

31

ENERGY SUPPLY AND POLICY ISSUES Nigeria Tunisia Other Far East and Oceania Australia Brunei China India Indonesia Malaysia New Zealand Pakistan Papua New Guinea Thailand Other WORLD

225 03 31 440 29 14 240 48 50 39 01 02 03 03 11 10168

245 03 47 587 29 10 341 34 84 46 01 02 08 03 29 9614

1240 28 174 3635 446 138 483 229 723 817 25 216 54 125 379 51496

1260 28 203 3754 446 92 413 161 808 852 21 229 173 111 447 52108

(1) Albania, Azerbaijan, Belarus, Bulgaria, Czech Republic, Georgia, Kyrgyzstan, Lithuania, Poland, Slovakia, Tajikistan, Turkmenistan, Ukraine. (2) Less than 50 million barrels. NOTE: Data for Kuwait and Saudi Arabia include one-half of the reserves in the Neutral Zone between Kuwait and Saudi Arabia. All reserve figures except those for the former USSR and natural gas reserves in Canada are proved reserves recoverable with present technology and prices at the time of estimation. Former USSR figures and natural gas figures for Canada are explored reserves, which include proved, probable, and some partially possible. Totals may not equal sum of components as a result of independent rounding. Source: Energy Information Administration, U.S. Department of Energy, U.S. Crude Oil and Natural Gas Liquides Reserves, December 2000; Oil and Gas Journal (OGJ), December 1999; World Oil (WO), August 2000. Table 5. World Oil Demand and Supply (in mb/d) 1985

1994

1995

2000

2005

2010

Change 1994–2010 mb/d

% p.a.

DEMAND OECD FSU Other Total

3465 895 1652 60.19

3990 480 2350 68.20

4040 440 2430 69.10

4225 480 2860 75.75

4315 530 3325 81.70

4385 580 3825 87.90

395 100 1475 19.70

06 12 31 1.6

SUPPLY OECD FSU Other Non-OPEC Total Non-OPEC OPEC Crude OPEC NGLs Total OPEC Total Supply Stock Change & Misc.

1710 1195 1287 41.92 1584 150 1734 59.26 –0.93

1760 720 1640 41.20 2500 230 2730 68.50 0.30

1790 680 1730 42.00 2470 240 2710 69.10 0.00

1770 700 1920 43.90 2925 270 3185 75.85 0.20

1700 850 2090 46.40 3240 310 3550 81.90 0.20

1600 1000 2200 48.00 3660 350 4010 88.10 0.20

−160 280 560 6.80 1160 120 1280 19.60 –

−016 21 19 1.0 24 27 24 1.6 –

Source: IEA, historical; World Bank, forecast.

32

CHAPTER 2

Figure 3. Crude Oil Production (Million barrels per day (OPEC-March 2001, others Jan. 2001) Sources: Reuters, OPEC, EIA

the same time, Central Asian, particularly Kazakhstan oil production (Caspian area) is increasing with oil majors as principal developers.15 China, which was a net oil exporter until 1993, may become the world’s largest oil importer by 2025/30 surpassing the U.S. petroleum imports. China’s increasing stake in Caspian and other Central Asian oil fields may lead to a major move towards delivery eastward to fuel China’s industrial revolution. The relative contribution of various petroleum sources to U.S. oil consumption for the first half of 2002 were:

15 Exxon-Mobil, Shell, Total, Conoco, and Inpex (China’s principal oil consortium) own the two major oil fields in Kazakhstan.

33

ENERGY SUPPLY AND POLICY ISSUES

U.S. Canada Mexico Latin America North Sea Africa Arabian Gulf Russia Other

42% 10% 8% 10% 4% 7% 13% 1% 6% 100%

Oil production and imports Despite a proven oil reserve of 21.8 billion barrels, the US has come to rely heavily on imports since the mid-90s. 11.3 m DOMESTIC OIL PRODUCTION

9.6 m 8.6 m 7.8 m

5.5 m NET OIL IMPORTS 0.3 m 1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

1999

Figure 4. Oil Production and Imports Unit in Million barrels per day Source: Energy Information Administration

Per capita energy consumption Has remained relatively constant since the energy crisis of the 1970s.

359

361

354

400

300 215 200

100

1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

0 1999

GLOBE STAFF GRAPHIC/JOHN LONG, HWEI WEN FOD Figure 5. Per Capita Energy Consumption Unit: Million barrels

34

CHAPTER 2

Figure 6. U.S. Oil Production and Imports

In other words, Arabian Gulf oil contributed only 13% of U.S. consumption. At the same time Russian exports to the U.S. have grown from 25,000 Bpd in 1995 to 160,000 Bpd in 2002. This is obviously still very small but expected to increase rapidly in future years as the Russian oil industry is growing at a rate of 9% per year. Russia lacks deep-water ports. The new deep water Primorsk terminal in the Bay of Finland and an offshore terminal in Greece are being developed for transfer of shipments to the U.S. and Western Europe in large tankers. A new pipeline to Murmansk is also being planned as is the Adria pipeline which runs from the Adriatic port of Omisalj in Croatia to Hungary. Similarly, a new 2 m bbls/day pipeline from Siberia to Nakhodka is planned. Russia could supply as much as 1 million bpd to the United States within a few years equivalent to a 4.8% share of current U.S. demand. Russia’s 2002 oil exports reached 3.2 bbl. In May 2003 Russia and China agreed to build 1–2 mb/day pipelines to supply Siberian oil to the Chinese industrial areas. All of these developments could advance Russia towards the role of second or even first oil exporter within 10 years (Russia’s 2001 oil exports exceeded 4.74 m bbl/day). In addition to Russia, the Caspian Sea nations are slated to increase exports to the U.S. significantly. Caspian reserves alone exceed 34 bbs. There are now three operating pipelines. Two run between Azerbaijan and Black Sea ports with a combined capacity of 215,000 bpd to be expanded by 100,000 bpd in 2003. Another operating pipeline is the Caspian Pipeline Consortium (CPC) which moves oil from Kazahkstan to the Black Sea that is expected to be at full capacity of 560,000 bpd by 2003. Beyond those already in operation, the region’s most important pipeline project, the Baku-Tiblisi-Ceyhan or BTC Pipeline, will move 1 million bpd of Caspian crude to the Mediterranean port of Ceyhan in Turkey. As a result, there is a lot more Russian and Caspian Sea crude flowing into the Atlantic basin, mostly to the

ENERGY SUPPLY AND POLICY ISSUES

35

U.S. Informed projections are that Russian, Caspian, and Central Asian oil exports to the U.S. could amount to over 3 mb/d by 2010, largely replacing Arabian Gulf imports. Table 6 shows a declining dependence of U.S. oil imports on OPEC supplies, a trend expected to accelerate as Russia and Africa become larger suppliers and petroleum consumption starts to gradually decline. The U.S. has started to forge closer ties with oil suppliers outside the Middle East to improve supply security and price reliability as well as reduce transport costs. Saudi Arabia, where contributions to U.S. imports grew from 4.2% in 1986 to 7.8% in 2002, is expected to experience a significant decline in its exports to the U.S., as closer supply sources become available. World oil production will show increasing excess capacity in future. Global production excess peaked in the mid eighties, during the global recession with an imbalance of 10 m bpd. In 2002 it was over 7 m bpd. With the completion of new production fields and delivery pipelines in Russia, Caspian region, Central Asia, and Africa, excess petroleum supply capacity is expected to increase to over 4.7 m bpd by 2010, and may even exceed this if new environmental rules affect global petroleum consumption and more alternative energy sources become effective. As shown in Table 1 total energy consumption greatly exceeds energy supplied by imported fossil fuel and even major petroleum importers such as the U.S. and China actually produce 75% or more of their energy consumption by use of domestic resources. The assumption of critical dependence on petroleum imports is therefore greatly exaggerated. Many energy needs are now for low temperature heat that can be efficiently provided by renewable sources or waste heat from electric power generation or other fossil fuel burning processes that are used extensively in many countries. For example, as noted before, domestic heating is supplied using waste heat from power plants in many Russian and European cities. The U.S. is a very inefficient energy user. It uses cheap oil/energy to replace more expensive labor or use of waste heat in manufacturing, transportation, material handling, and services, particularly for low temperature energy needs such as domestic heating and various industrial processes. Table 6. U.S. Oil Supply

1970 1975 1980 1985 1990 1995 2000 2002

Demand m b/day

Imports m b/day

OPEC % U.S. Imports

15.0 16.2 16.4 16.0 16.8 18.1 19.6 19.7

3.0 6.2 6.0 6.1 7.4 8.8 10.9 10.9

42 56 61 50 59 48 49 47

Source: U.S. Department of Energy, 2003.

36

CHAPTER 2

Replacing oil or gas heating appliances used in the U.S. for domestic heating by waste heat or solar heating could reduce U.S. oil and gas consumption by over 6% and air pollution by 8% while saving the economy tens of billions of dollars. Environmental costs (global warming, air pollution, etc.), unlike labor, insurance, equipment, and raw material costs, are usually not included in the cost (or price) of energy. In other words, externalities are excluded, as they are hard to allocate and define. To justify expenditures for technological change in energy conservation and environmental impact reduction requires inclusion of ALL economic costs and benefits, including remediation costs such as emission taxes. To resolve this problem disruptive (radical change) technologies may now be required. Similarly, supply security may finally force willingness to address these issues. At the same time, environmental impact costs are increasing and are reaching unsustainable levels. For example, global carbon emissions are now 6.3 billion tons/year and may grow to over 9.8 billion tons/year by year 2020 unless radical changes in the consumption and use of fossil fuels are introduced and enforced. The health and agricultural impact costs of fossil fuel use in the U.S. alone are estimated by the EPA to be $300b-$500b/year (2001). As a result, there are now major efforts underway to assure that the use of liquid and solid hydrocarbon fossil fuels be reduced. The goal is to greatly reduce the use of fossil fuels by 2050 and coal as well as oil before that time. Environmental concerns and increased energy supply security risks are also driving determined efforts towards a more sustainable energy future, largely based on a hydrogen economy. This will not only permit a reversal of the greenhouse effect but also assure better energy accessibility and distribution. Developing countries will be the major beneficiaries. The near term goal is to reduce CO2 levels in the atmosphere to twice the pre-industrial age levels. This is not easy as per capita energy consumption continues to grow but newer technology, reduction in the use of petroleum, and an increased role of renewable energy should permit this. While 60% of the world’s oil is shipped most or all the way from producer to the market by ocean tankers, nearly all Persian Gulf oil uses shipping. Tankers have been modernized, replacing single hulled ships with safer double-hulled vessels; yet tanker accidents and spills and resulting environmental damage and economic costs continue. Sixty percent of Europe’s oil imports travel by tanker and about 65% of U.S. oil imports use tankers much of the way. Modernization, liability, and other costs have increased the cost of tanker shipping significantly, a trend expected to continue as damage claims are mounting. In 2002 there were 148 tanker incidents (28% hull and machinery damage, 28% collision, 26% groundings, 9% fire and explosions, and 9% miscellaneous). Most countries now impose severe damage claims against tankers for any spills and tanker insurance costs, which are obviously passed on, are skyrocketing. These developments hit Persian Gulf countries, particularly as they are most distant from their principal markets and are forced to use Very Large Crude Tankers (VLCCs) for the transport of their oil which not only increases insurance costs but may also introduce the need for lightering, either because receiving terminals cannot accommodate Very Large Crude Tankers

ENERGY SUPPLY AND POLICY ISSUES

37

or because liability coverage for such tankers is too expensive for VLCCs in some countries. Lighterage obviously adds to operating costs. The price of oil has fluctuated between $30/barrel and $78/barrel in recent years and is expected to float between $50-$60/barrel in the next few years. Increasingly large excess capacity prevents continued large price escalation, as does the availability of substitute fuels such as Orimulsion, biofuels, and more; this particularly if and when Iraq reemerges as a major supplier. Another reason is the large amount of over target production or cheating common among OPEC members. In recent years Indonesia, Nigeria, and Iran have often exceeded their quota by as much as 1–2 m b/d. In addition, future petroleum demand will be affected by the cost and availability of other fossil fuels such as natural and other hydrocarbon gases, orimulsion, biofuels, ethanol, as well as alternative fuels and energy sources. The moves towards rapid development of alternative, often renewable, energy as well as alternative fuels are accelerating largely as a result of concerns with supply security, unacceptable high prices, and increasing concern for the environment. This trend is now becoming a global move while, at the same time, many new sources of basic fossil fuel are being discovered and/or developed. The future of fossil fuel as the major source of energy and major economic and political power asset may therefore be in doubt. There are many new fossil fuel production, alternative and renewable energy development opportunities available and under use or verge of introduction now. These will replace much of the traditional fossil fuel use by 2050 and result in a cleaner, more equitable and less confrontational world, with higher living standards and greater security. 2.2

NEW SOURCES OF ENERGY AND ENERGY DEVELOPMENTS

To fully understand the future role of fossil fuels in meeting global energy demand, it is necessary to consider both expected changes in demand and supply of energy in all its forms. Demand is affected by mutually interdependent factors such as: 1. population growth 2. advances in living standards and conditions 3. economic growth 4. environmental management and controls 5. technological advances and changes 6. socio-political developments 7. advances in civilization, interpersonal relations, moral and personal value systems 8. availability and accessibility of natural resources and their cost 9. changes in climatic conditions 10. changes in human expectation and measures of satisfaction The first three factors are closely related and describe socio-economic developments such as those of China and India, which are both rapidly emerging from a state of

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under development. China in fact has emerged into a formidable and most rapidly growing economy with a GDP growth rate in excess of 10% for over 15 years now which it is expected to continue to achieve over the next 5–10 years; this particularly now as it starts to systematically develop its interior which, with over two-thirds of the population, has so far been left largely behind. I spent a lot of time in China and visited first in 1977 or 30 years ago when China just emerged from the strict Marxist communist rule of the Gang of Four under Chairman Mao’s wife. Education, entrepreneurship, and basic discipline and comparatively little corruption continue to be the driving forces, guided by rational and disciplined economic development planning which not only included the construction of the Three Gorges Dam, the world’s largest multi-purpose hydroelectric project, but also largescale electrification, infrastructure development. In addition, the opening of a back door to the interior of China using a multi-lane highway from Chongking/Kunming to Mandalay and ultimately the coast of Burma on the Bay of Bengal, will reduce the distance from the interior of China to markets in Europe by about 40%. India is a rather belatedly awakening economic giant, using its historic Western legal, commercial, and unique higher education system to not only develop a huge service sector but also advance its manufacturing and pharmaceutical industries to world standards. China and India both lack adequate domestic sources of oil and gas, though both have huge recoverable reserves and are large producers of coal. This was and still is the primary fuel for electric power generation. Both though require large volumes of oil and gas imports to provide fuel for transportation, industry, and other purposes to foster rapid economic development. China has become the world’s second largest petroleum user and importer, growing now at a 5% and 6% rate. India’s demand is growing at a 6–8% rate per annum and it imports about the same percentage. Both are also increasingly important users and importers of natural gas. Demands by other developing countries is also growing, though some such as Brazil countered the trend by large-scale development of ethanol and biofuels to provide the bulk of fuel demanded by its transport sector. As a result, Brazil is not only self-sufficient but is expected to become a net exporter of fossil fuel. The rapid and increasingly evident climate change is now affecting fossil fuel demand. As a result, the major industrial nations of Europe, North America, and Japan are actually leveling their consumption of petroleum and demand is expected to start to decline both because of reductions in the growth of consumption as well as large-scale substitution by non-fossil fuels or alternative energy. Global petroleum consumption is, as noted, expected to continue to grow at a declining rate, peak at about 88.10 million barrels per day by 2010 and then start a gradual decline, as increases in consumption by newly developing nations is increasingly more than offset by reductions in consumption by the industrialized countries and the development and use of alternative fuels, energy sources, and renewable energy. It is interesting to note that many developing countries, particularly large countries such as Brazil and China, are intensely focused on meeting increasing demands

ENERGY SUPPLY AND POLICY ISSUES

39

for energy by use of non-petroleum fuels and renewable energy sources. Other developing countries in Asia and South America are expected to experience gradual growth in consumption of about twice their rate of population growth are about 3–4% per year, while those of Middle Eastern and North African countries should grow by more than 8%/year. Finally, Subsaharan African countries will continue their gradual development and increase in their use of fossil fuels, particularly petroleum with an increase in petroleum use of about 3–4%/year. As noted, most of these increases in consumption will be offset by increasing reductions in petroleum use in the industrialized world. There are many new sources of energy as well as energy saving techniques, all of which are expected to affect future demand for petroleum in particular and fossil fuel in general, which before long will no longer be the world’s dominant energy source. We are now on the verge of a radical transition from a largely indiscriminate use of fossil energy to one where energy serves as a non-destructive positive, clean contributor to human progress in an increasingly cleaner, safer, more equitable global environment. As in everything else, such change creates opportunity and encourages new and improved developments of fuel, energy sources, and energy saving techniques, as economic development and growth is intimately linked to energy. People of all cultures are trying to improve their lives and conditions and leave a mark on history. Yet throughout history human development has also resulted in confrontational as well as hierarchical structures which before long caused large discrepancies in living standards and thrive. Access to energy has always been a major issue in this regard. We are now on the verge of the transition from proprietary and often confrontational problems of access to fossil fuel sources to broader often renewable, readily accessible energy. This transition will be driven by: 1. New sources of fossil fuel, mainly petroleum, gas and coal such as – deep sea production – orimulsion and other bitumen based fuels as well as Tar Sand and Oil Shale derived petroleum – clean petroleum – coal derivatives and clean coal 2. Alternative energy sources such as – nuclear energy – wind power – solar energy – hydro-wave and current energy – ethanol and biofuels 3. Energy saving technologies such as – developments in electric power generation and distribution – hydrogen fuel related technologies – fuel cells – waste heat hydrogen generators

40

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– hybrid and other fuel efficient road transport – energy efficient buildings – other energy saving technologies Most importantly, the transition will be driven by an increasingly realistic concern of the effects of greenhouse gas pollution and its short- and long-term effects and costs. At the same time, there is growing evidence that advanced economic systems use a smaller amount of energy (and materials) per unit of output. There are many reasons for this based in part on the decoupling between economic growth and use of resources, which include technological innovation, market prices, policies, and public pressure.16 2.2.1

Fossil Fuel Futures

Although petroleum has been on the center stage of energy production and the principal fossil fuel actor since 1966 when it overtook coal in fossil fuel consumption, its total contribution to global fossil fuel consumption has leveled off and is expected to decline. As shown in Table 7 gas consumption is expected to surpass oil by 2015 which will constitute a declining percentage of total fossil fuel consumption and even smaller total of energy consumption as renewable energy sources contribute an ever larger percentage of global consumption. In addition, interests in nuclear power are expected to revive as a power generating source as safer reactors and improved waste storage/disposal technology for spent fuel is developed. Finally, more petroleum will come from areas outside the Middle East whose loss of participation in the declining global oil market will be significant. Russia and the Central Asian republics are expected to overtake Saudi Arabia as the Table 7. World Fossil Fuel Consumption (mill ton oil equivalent) Coal 1950 1960 1970 1980 1990 1995 2000 2005 2010 2015 2020

E E E E

1043 1500 1635 2021 2244 2218 2134 2100 2150 2200 2250

Petroleum 436 1020 2189 2873 2968 3069 3332 3280 3150 2800 2650

Gas

Total

187 444 1022 1406 1938 2075 2277 2500 2800 3100 3400

1666 2964 4846 6300 7150 7362 7643 7880 8100 8200 8300

% Petroleum 260 340 450 466 420 420 420 420 390 340 320

Actual “ “ “ “ “ “ Estimated “ “ “

Source: Actual: World Watch, Vital Signs, 2001. Estimate: Author.

16 Mazzanti, Massimilliano and Zoboli, Roberto, “The Drivers of Environmental Innovation in Local Manufacturing Systems”, Economia Politica XXII, december 2005.

ENERGY SUPPLY AND POLICY ISSUES

41

largest producers of oil by 2010 and out-produce all Persian Gulf countries by 2020. Russia’s new multi-million pipeline project which links remote oil fields of Western Siberia with a deep water (VLCC capable) tanker terminal on the Barents Sea near Murmansk is scheduled to begin operations in 2008 with an initial throughput of 1.6 million barrels/day. This port offers the shortest shipping route to Western European and U.S. East Coast markets. This is in addition to the new pipelines from the Caspian Sea area to Turkey in 2006 and Greece in 2009 as well as pipelines from Central Asia to China and Russia, the new oil port on the Gulf of Finland (Primorsk), and the existing overland pipelines to Western Europe which will allow Russia and the former Russian Republics to become the principal oil and gas exporters by 2010 with a total delivery capacity of over 6–8 million barrels of oil per day in addition to about 4–6 million barrels of oil equivalent of gas (25% of Europe’s gas consumption). The fossil fuel futures projected in Figure 1 which shows a leveling off of the growth in global solid and liquid fossil fuel consumption and the gradual replacement of petroleum by gas may be further affected by the increased capability, economy, and environmental cleanliness of alternative and particularly renewable energy sources. Nuclear energy is reemerging as a viable, safe, and economic energy source and renewable energy. Sources such as solar, wind, hydro, wave, and current energy are also becoming increasingly attractive. Their use has escalated to an extent where renewable energy now (2006) supplies over 7.9% of global energy and is expected to grow to 8.9% by 2010 and over 17% by 2020. Much depends on the speed of conversion of major energy consumers such as transportation, domestic users, and power generation energy to alternative renewable energy use. As shown in Chapter 3, great advances have been made, particularly in transportation toward the use of hydrogen as a fuel. Hydrogen would be generated using renewable energy sources, such as solar power. Such a hydrogen future would go a long way towards reducing the use of fossil and particularly petroleum fuels. This would reduce polluting air emissions. As noted, improved efficiencies in building construction, vehicle operation, electric power generation, and transmission, manufacturing and more are expected to more than make up for the increased accessibility to and use of modern energy by developing countries. In addition, there are numerous additional renewable energy sources as geothermal vents, undersea crevice emissions, undersea currents, tides, and more whose energy could be harnessed. In fact, projected future fossil fuel consumption shown in Table 8 may in fact be too high as non-fossil fuel or energy developments proceed aggressively and improved energy use and conversion efficiencies are achieved particularly when driven by concerns with the adverse effects of global warming, etc. A hydrogen or clean energy future is inevitable and will not only bring a cleaner environment but also contribute to a more peaceful, human, and cooperative world in which mankind everywhere can develop to its full potential. As discussed in the next chapter, fuel cell and electric drives for automobile propulsion technology is advancing rapidly. Savings of up to 50% in automotive fossil fuel consumption are now expected over the next 20 years. This would reduce

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Table 8. Summary of Energy or Fuel Consumption and Consumption Forecasts (m tons oil equivalent) 1990

1995

2000

2005

2010

2020

Petroleum Orimulson Natural Gas Coal Nuclear Solar Wind Hydro, Wave, and Current

2988 – 1938 2248 648 – – 648

3069 – 2075 2218 689 1 – 692

3332 5 2277 2134 678 3 18 729

3280 12 2500 2100 670 10 46 764

3150 80 2800 2150 630 16 108 808

2650 280 3400 2250 635 28 260 848

TOTAL % Petroleum

8470 35

8744 35

9176 36

9382 35

9742 32

10351 26

total projected global petroleum consumption by as much as 20–25%. This alone would mean that the projected global petroleum consumption of 2650 million tons in 2020 would be reduced by about 650 million tons/year, which is about equal to total projected Saudi exports of petroleum. Combined with greater Russian and other non-OPEC production, the need not just for Saudi Arabian but all Persian Gulf and even North African petroleum may be eliminated, allowing these countries to return to their natural environment of desert economies, inhabited by nomadic tribes surviving on desert agriculture and trade. Overall energy demand and supply (Table 8) clearly indicate the growing use of non-petroleum and for that matter non-fossil fuels and the gradual replacement of fossil fuels and particularly petroleum that will have increasing difficulty in maintaining energy market share and actually lose its position as a major energy source by the middle of the 21st century. This will not only have a major effect on the environment as petroleum and other fossil fuels are replaced by alternative cleaner and often renewable energy sources but will also greatly improve the global economic and political environment in which petroleum, in particular, has been such a major confrontational issue. It is increasingly evident that the role of petroleum and fossil fuels in general will soon eclipse as new fuels and energy sources emerge and become economically viable, secure, and more environmentally friendly alternatives. This will not only affect the global economy and the role of the major oil producers, but also have a radical impact on geopolitical, social, and environmental developments. Table 9 shows the dependence of the major OPEC members on petroleum exports. With an average contribution of 81% of export revenues and 15% of combined GDP, these countries are critically dependent on continued petroleum exports. In fact, the Arab Petro countries such as Saudi Arabia, Kuwait, Qatar, Libya, Algeria, and Oman are even more dependent on oil and their economies would probably collapse if oil exports were to seriously decline or vanish. With a combined GDP of about $664b and petroleum/gas export revenues of $188b (2004) which represented

43

ENERGY SUPPLY AND POLICY ISSUES Table 9. Petroleum Dependence (2004) GDP

Qatar Kuwait UAE Saudi Arabia Oman Iran Iraq Egypt Libya Algeria Nigeria Venezuela TOTAL

Population

Exports

Pet/Gas Rev.

%

$b

Mil

Per Cap $

$b

$b

175 395 577 2862 375 4778 398 2943 350 1943 1108 1179

84 22 25 258 29 675 253 761 56 321 1372 251

21 500 18 100 23 200 11 800 13 400 7 000 1 600 3 900 6 400 5 900 800 4 800

124 223 567 868 117 298 75 87 143 249 218 259

891 2229 3232 7812 538 2533 645 365 1401 2415 2071 2020

72 91 57 90 46 85 86 42 98 97 95 78

4 240

32280

26153

81

17083

4031

Source: IEA, World Bank, and U.S. Department of Energy, 2005.

nearly 30% of GDP and over 87% of exports, their vulnerability to any serious decline of oil and gas exports or price is critical. The recent (2005/6) escalation in the price of petroleum to as much as $78/barrel has actually made these countries even more dependent on oil sales, as these windfall increases in export revenues has resulted in large new investments and imports, many of which are neither productive nor reversible, if and when petroleum incomes decline in both the short and long term. These countries now find themselves in a dilemma. They must maintain petroleum revenues but if they encourage high prices by export or production cuts not only will non-OPEC producers fill the supply gap but demand may also shrink. Many of the new suppliers in fact increasingly invade traditional OPEC markets, a trend expected to continue and accelerate, particularly in the new Asian markets. 2.3

ENERGY POLICY ISSUES AND INTERNATIONAL IMPACTS

Petroleum has influenced not only economic but also political developments over the last 50 years. In fact, many of the conflicts since World War II were directly or indirectly affected by concerns for access to petroleum, its price, supply reliability, and related issues. Petroleum in a way became the key to or supported the establishment of various nations. In fact, many Middle Eastern, particularly Gulf nations, owe their very existence to oil. Without it they would have remained smaller or larger fiefdoms among the greater Arab nation.

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Petroleum and later gas became the life blood of the Gulf states and some North African nations, often to the exclusion or downplay of other development opportunities. For most of the period since WWII, the industrial nations, as major consumers of oil and gas, invested heavily and became major players in the oil and gas production industry worldwide, but particularly in the Middle East and the Persian Gulf. In more recent years, many of the major producing countries, particularly OPEC members, outright nationalized oil and gas production or severely limited or controlled foreign investments, operations, and management of such assets. While in many cases this was done in a fair and compensatory manner, there are examples of direct and/or indirect expropriation of such assets. At the same time energy markets have become more volatile with oil and gas prices fluctuating by as much as 50% within a year. These price uncertainties have made the energy markets more speculative. In part the uncertainties were driven by fears of terrorist or political interference in the free global markets for oil and gas. But other factors also intervened, such as cartelization, nationalization, and consolidation of producers and traders. As a result, these fuel markets have become much less predictable. The international impacts of these developments are far reaching, as they affect the reliability of supply. As a consequence, there are now major international commitments towards the development of alternative sources of fuel which not only involve Western nations and their firms, but also large new suppliers such as Russia and users such as India and China, both of which have committed large stakes to both traditional and non-traditional fuel and energy suppliers or producers.

CHAPTER 3

DRIVERS OF THE TRANSITION TO A CLEANER AND MORE ENERGY EFFICIENT WORLD

Changes in global energy use will be driven by increasing concern with the detrimental effects of the continued use of petroleum and coal among fossil fuels on the environment and as a result conditions on earth. There are major drivers that are expected to help veen mankind from dependence on these traditional fuels. These major drivers, enablers, and changers of our energy world will affect future energy consumption and in parallel cause a radical change away from the use of oil and solid coal. We will address these issues by addressing the effects of the following: • Energy Saving Methods and Improvements in Energy Use Efficiency • New and Expended Supplies of Traditional Fuels and Energy • Alternative Non-renewable Energy Developments • Alternative Renewable Energy Developments • Climate Change-induced Changes in Energy Demand All of these changes or developments are already under way. This allows us to make preliminary projections of their expected impacts on future energy demands and supplies. We discuss their current states and their potentials are evaluated. Similarly, their contribution to future global energy needs is identified. Finally, we present an up-to-date projection of fuel and energy supplies considering all potential contributions. There is growing evidence to suggest that in economically advanced technological societies lesser amounts of energy and material will be required or used per unit of output. While this is in part due to better engineering, higher or more advanced technology, greater application of specialized materials and more effective use, it is also affected by increased environmental concerns among the public. It therefore appears that we are finally on the verge of turning the corner towards less dependence on fossil fuels, particularly petroleum and traditional solid coal. However, to maintain this trend will require discipline and cooperation between consumers and suppliers. The high price of oil has encouraged huge new developments of new sources of oil, such as deep sea wells, secondary production at existing and previously presumed exhausted wells, as well as extraction of oil from coal, bitumen, tar sands, and oil shale. In addition, increases in efficiency in transportation, electric power 45

46

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generation and use, and more are finally changing consumption patterns in most developed countries. The effects of these measures will more than outweigh those of population growth and increased industrialization and mechanization in newly developing countries. In the U.S. more than 70% of petroleum consumption is used for transportation (while in China it is only 35%); however the per capita oil consumption in the U.S. dropped from 32 bls in 1978 to 26 blls in 2006. At the same time, Europeans consumed only half as much. High prices of oil are needed to encourage investment in production, refining, and conservation of consumption. The price of the most expensive oil should be set by the marginal value of a barrel of oil or the last barrel needed to meet demand which is between $35–45 (equal to the cost of extracting, refining, and marketing extra heavy or tar sand crude). If the price is too high, oil glut will occur and risk adverse investors will pull back. The current wave of significant investments in oil production will cause the price of oil to drop to a reasonably high but more appropriate level. We must also remember that the cost of production of crude in Saudi Arabia is still only about $4–5/bll. Arabia is considering expanding its capacity by 2–4 million bls/day. They are quite concerned with the high price crude which reached $78/bl in 2006, this largely because it both veens consumers from use of expensive oil as well as encourages large-scale development of alternative sources of petroleum (like tar sands) and alternative sources of energy. As a result, they have been a moderating influence and advocates for a more moderate price level for crude oil of about $50–60 per

Table 10. General Energy Drivers, Enablers, and Changers Renewable Energy Energy Storage Energy Transmission Energy Enablers

Climate Change

Energy Supply

Electricity

New Energy Delivery

Solar, wing, geothermal, waves, ocean currents, biofuels Electrochemical energy storage and conversion, hydrogen Superconductivity, microwave, nanotechnology, transport phenomena, information technology, thermal conversion Carbon sequestration, thermal conversion, energy efficiency, energy generation, conversion, delivery reliability, availability, energy innovation, nuclear fusion Science issues and databases, policy, public good/policy, energy economics, survey results, corporate policy, political inertia, real world solutions, special and policy opportunities, supply chain Size $3 trillion/year in 450 exajouls – 1018 Joules or 14 trillion watts, 86% fossil fuel (U.S. 25% of fossil fuel consumption), China’s growth of energy consumption 10%/year Output - 16 trillion KWH generated per year. This is a direct correlation between energy consumption of and GDP but there are differences in the use of energy intensity For developing countries should include learning from developed country experience and mistakes. Integrative energy and energy policy studies are needed which highlight demand by large-scale urbanization in emerging economies which should be contained.

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47

barrel. Yet other OPEC members differ and would like prices to be forced to stay high by curtailing supplies. While there are many studies and reports on various alternative energy or fuel developments, it is important to consider the combined effects of conservation, new fuel source developments, new energy saving technologies, alternative fuel and energy development, and finally large-scale use of renewable energy. Only by considering the combined effects of all these developments, proper tradeoff of comparative advantages and disadvantages, and thereby the potential of actual introduction of radical changes and new energy drivers can we obtain a balanced picture of our energy future. As a result, we present not only the new opportunities and developments but also their prospects and interaction. This, for example, also includes consideration and costs of energy or fuel transport and transmission, as in many cases attractive energy sources are available but are far from the locations of demands. A summary of energy drivers, enablers, and changers is presented in Table 10.

3.1

ENERGY SAVING DEVELOPMENTS

Since the Rio de Janeiro and more recently the Kyoto conferences, protocols, and agreements on the control of environmental impacts and particularly the greenhouse effects have resulted in major efforts to reduce carbon dioxide and other damaging emissions. Coal burning electric power plants increasingly use clean coal or coal burning technology and new types of electric, hybrid or fuel cell powered automobiles have been or are being developed. Similarly the use of renewable energy such as solar, wind or hydro power generating power plants is growing at a rate in excess of 20%/year globally. In addition domestic heating and hot water energy consumption is being greatly reduced by use of solar roof panels, heat recovery ventilation, improved insulation, and more. The growth of total global energy consumption has been reduced to just 2–3% per year and petroleum consumption has leveled off and is in fact starting to decline. As a result U.S. prices for electricity, oil, gasoline, and natural gas are expected to decline during the next 8 years. The cost of crude oil is expected to remain between $40 and $60/barrel while natural gas costs will decline from $7.2/m BTU to $6.5/m BTU by 2010 notwithstanding short-term price increases in 2003. The principal energy saving developments will be in home, residential, and commercial buildings and transportation. The first because it offers unique opportunities for capture and use of solar energy, while in transportation we should be able to greatly improve efficiencies as well as use alternative energy sources.

3.1.1

Home or Residential or Commercial Building Energy Efficiency

In Europe and the U.S., buildings consume nearly 40% of all energy or 10% more than transport, the next highest energy consumer. Building energy use also generates

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the same proportion of air pollutants as transportation. These facts have encouraged movements towards zero energy consumption, yet comfortable homes. Much of the materials and technologies towards this end actually exist but have not been employed. In Europe where energy efficiency and reduction of pollution is taken quite seriously as member countries subscribe to the Kyoto accord, many governments now issue grants and tax breaks for energy efficient buildings. In fact, the EU will require builders, landlords, and sellers of homes and apartments to show an energy efficiency certificate of energy efficiency, this in addition to energy labeling for new household appliances which is already in effect. The latter is also a requirement in the U.S. and some other countries. Near Zero Energy homes are nearing reality, and reductions in home energy consumption of 50–90% are feasible today, but capital costs for such installations are still high in comparison with prevailing fuel costs. As a result, homeowners so far hesitate investing in the new available energy saving technology. Among the most important technologies are Photovoltaic Roof Panels (PV) which convert sunlight into electricity, fluorescent light bulbs that consume only about one-third the power of incandescent bulbs, small roof wind turbines which generate electricity to feed batteries or a grid with additional power, electrochronic or “Smart” panes which automatically lighter or darken the window glass, high efficiency wall, ceiling, and floor insulation, and high efficiency combined electricity generator, heater, and air conditioning system which uses biomass, waste heat, and some fuel to provide powering needs for hot water, home appliances, and home services. All of these systems are controlled by an electronic central which manages energy supply efficiently. Such houses have been built in Britain (South London) and elsewhere. Home energy saving technology is advancing rapidly and so are its costs. Solar power, tankless water heaters, heating systems using waste and biomass are becoming more affordable now and may soon be standard equipment in new homes. The U.S. with a population of less than 4.79% of the world total emits over 3 times as much carbon per capita as the world average emission. Similarly, with the exception of the period from 1977 to 1982, the use of U.S. (residential/commercial) building energy (quads/year primary) has continued to increase at an annual rate of 0.4 quads/year since 1970 and is now equal to over 30 quads/year, with an equivalent cost of about $170 billion in energy used in U.S. residential and commercial buildings. This annual increase of about 1.35%, while in line with net population increase and just slightly below the increase in residential and commercial building space inventory, shows that little if any improvements are experienced in building energy efficiency. Although materials and technologies are available which could reduce or at least maintain U.S. building energy costs level, there is a potential to actually reduce building energy consumption from a projected growth to 41.1 quads/year in 2015 to only 28.0 quads/year or a savings of 14 quads or one third of the projected level if currently available technology is used in

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49

1. additional insulation 2. compact energy efficient light bulbs 3. efficient gas furnaces 4. efficient room and central aid conditioners 5. water and pipe insulation 6. solar hours and water heaters Additional savings of energy can be attained using fuel cells to generate electricity, heat pumps to draw heat for water or added space warming, photovoltaic roof panels to generate electricity from solar rays and more. In theory, we can now design houses that are completely energy self-sufficient in most temperate climates. If this were done, we would save about 16% of the crude oil consumed in the U.S. and about 8% of crude oil consumed globally. 3.1.1.1

Low Temperature Heat Utilization

Energy utilization is still very inefficient worldwide, with nearly two-thirds of primary energy dissipated or wasted in the conversion to useful energy. Most of this in the form of low temperature heat, which could be largely used in the production of fuels such as hydrogen (a process developed and used effectively in Iceland) or for other useful energy purposes, such as home and water heating as well as many industrial processes. Some cities in Russia were and are using such waste energy from power plants to provide domestic heating and hot water. By conservative estimates about 20% of waste heat can be efficiently converted into usable energy by direct use in such as • residential/commercial building heating, air conditioning (absorption process), hot water supply, and humidity control • low temperature energy hydrogen gas production • agricultural (hot house, etc.) low temperature plant productivity enhancement Again, low temperature heat utilization could not only save large amounts of primary fuel such as oil but also permit low cost alternate fuel production such as hydrogen and heating of agricultural, processing, and other facilities. 3.1.2

Transportation Energy Efficiency

The single most important technology contributing to improvements in living standards and redistribution of wealth is transportation technology. It permits effective distribution of food, water, energy, and other necessities of live as well as personal mobility. Advances in transportation probably contributed more to the redistribution of wealth, higher living standards, and economic growth than any other human development by offering cost effective and efficient mobility. Local shortages can be overcome, employment opportunities can be exploited, and economic growth can be generated. However, in the U.S., the transport sector is not only the major petroleum user and consumer (27% of all energy), but also produces 26% of all greenhouse gases.

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New developments in road transport powering abound from clean, efficient diesel engines to electric, hybrid, and fuel cell powered vehicles. New automotive diesel engines are efficient, responsive, and relatively clean. Common pressurized fuel rail technology has improved injection efficiency while area scrubbers and special catalytic converters significantly improve exhaust quality. Diesel engines are usually 40–80% more efficient than gasoline engines and with improved emission quality, greater operability, lower noise, and much greater operating life may soon replace most gasoline engines, first in SUVs and later in most automobiles. In Europe nearly 35% of all cars sold now are equipped with diesel engines and the trend is catching on worldwide. Fuel savings would be significant. If all the world’s automobiles were to use diesel engines today we could save well over 12.8% of all fossil fuel consumed while improving the environment, as modern diesel emissions are less polluting than those of gasoline engine. In fact, plasma devices causing electrically charged gases which convert oxygen molecules into ions in the exhaust before passing it through a catalytic converter have been found to burn off smog causing nitrogen oxides and particulates. Such technology is expected to be available for small trucks and SUVs by 2007. “The device called the ‘plasmation’ coinvented by Dr. Daniel Cohn of MIT produces a hydrogen rich gas which is injected into a catalyst to trap nitrogen oxides. The hydrogen gas reacts with and removes it.”.17 It appears that road vehicles will increasingly be powered by efficient, quiet, reliable, and long life diesel engines also in the U.S. We expect nearly half the small trucks, SUVs, etc. to be diesel powered in the U.S. by 2009. Effective diesel exhaust cleaning devices are being perfected. These use plasmas in a chamber attached to the exhaust pipe with rapid pulse electrical molecules into ions, with a catalytic converter further along the exhaust system. Such an approach could burn nitrogen oxides and particulates and may be available by 2007. Such plasma-based clean diesel exhaust systems would have to come down in price though to be attractive, which is expected to be achieved within a few years. Another development is the compressed air driven car, a lightweight short distance (120 miles) vehicle developed by Négre of France. It uses high pressure air which can be charged into a high pressure air tank at special compressor stations in a few minutes or by use of electricity using an on board compressor in about 4 hours. The “Air Car” is completely non-polluting and only consumes electric power, which is mostly generated from non-petroleum fuels. Hydraulic hybrid drive trains using compressed nitrogen are also used to store energy during braking in some vehicles. The most important developments though and the approach supported by the major automakers now are hybrid powered cars using a combination of electric power and internal combustion (IC) engines and/or fuel cells. The electric IC engine hybrids are already entering the market and some show quite impressive performance both in fuel efficiency (50 plus mpg) and attractive style. The Toyota

17

“Next Stop: Clean Diesel”, Technology Review, p. 26, March 2002.

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51

Prius and Honda Insight are a new breed of fuel-efficient automobiles, which achieve 50–70 miles per gallon or about twice the output of pure IC powered automobiles of equal size. They are quieter and have greatly reduced emissions. The electric motor drives the car at slow speed in the Prius with the IC engine providing the extra power at higher speeds; while in the Insight the electric motor assists the IC engine at higher speeds. These cars use nickel metal hybrid batteries that are constantly recharged when braking using regenerative braking. Similarly the IC engine runs at a more constant output thereby achieving a higher efficiency. Hybrid cars after a few years of public ambivalence have caught the attention of a growing number of people not just because they want to show their concern for the environment but also because these cars, such as the Honda Civic based hybrid, is solid, very fuel efficient, and drives well. In fact the costs above the price of an ICE Honda Civic are only about $4000, a sum which is easily repaid by tax incentives and fuel cost savings in as little as 1–2 years. While the production plans of Honda are not known at this time, Toyota produced about 300,000 hybrid cars in 2006. At the same time pure hydrogen using fuel cell powered electric cars continue to be developed. The major automakers have developed prototypes such as GMs Hy-Wire that can reach speeds of 90 mph. Another Toyota hybrid, the four-wheel drive Estima, only available in Japan, also couples an electric motor and a gasoline engine, but has another electric motor to power the rear wheels when needed. It also used regenerative braking. Pure electric cars such as Daimler Chryslers’ GEM and Ford’s CITY have limited appeal, range (50–80 miles), and are really not very sophisticated. Only about 10,000 are planned to be produced next year. They are primarily aimed at short distance city commuters. At the same time conventional, efficient, IC engine-powered minicars, like the SMART car, are selling well in Europe. Chrysler recently proposed a Natrium van (powered by sodium borohydride) which may offer a breakthrough in fuel cell technology. Honda’s Dualnote car is a powerful advance over the Prius with the performance of a high level traditional IC engine car. It also uses regenerated braking to supply electricity. The Prius achieves about 52 mpg and is equipped with a 1.5-liter engine, which is assisted by a strong electric motor. At this time only about 80,000 hybrid cars are operated in the U.S. but the market is expected to grow to over 300,000 by 2007 worldwide. Fuel cell powered cars like the Ford Focus FCV can travel 80 mph consuming hydrogen to generate electricity. A traction inverter module feeds electric power to the drive motors. The car also uses regenerative braking. Clean Urban Transport for Europe (CUTE) is a project introduced by nine major European cities. It uses hydrogen fuel-cell buses. The hydrogen fuel is entirely produced with renewable energy. More extensive public use of hydrogen fuel driven cars is probably a few years off although both Honda and Toyota have developed prototypes. While fuel cell technology is advancing rapidly and the price of fuel cells and electric propulsion systems is coming down, a major problem continues to be hydrogen supply and on board storage or on board production from compressed gas (LNG or methane). In

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general, hybrid cars achieve 30% greater fuel efficiency over cars with conventional gasoline engines, and about 5–10% over cars with diesel engines while significantly reducing emissions. In the interim other developments are underway. For example, there are already several million U.S. cars designed to be capable of using ethanol, a renewable fuel with cleaner emissions. Hydrogen distribution is still a major problem but solutions are being developed which include storage of hydrogen at room temperature as a solid, and other more conventional storage and distribution methods. While hydrogen fueled cars are a most important challenge, use of hydrogen as a fuel in ship propulsion and electric power generation may be close. In summary, fuel efficient, low emission vehicles are developing fast now and are expected to take over much of the traditional internal combustion engine automobile market. The sequence of developments is projected as follows 2008–2012

2012–2015

2015–2020

Clean diesel power will be used in as much as 20% of all new cars, SUVs, and small trucks. Hybrid (IC/electric) will capture about 8% of the new car market globally. Another 5% will be electric cars and minicars. Hydrogen fueled cars will become more attractive and will start to be increasingly cost competitive with ICE and hybrid cars. A significant proportion of road vehicles will use hydrogen as the principal fuel in both internal combustion engine or gas turbine-propelled vehicles18 as well as fuel all-electric vehicles.

The result is expected to be savings of petroleum-based fuel used in transportation globally of at least 20% over the next 12 years (by 2020). While hydrogen may in many cases be generated by use of gasoline, methanol or natural gas it will increasingly be produced using renewable energy sources. Considering major alternatives, the relative consumer costs are estimated to be as follows by 2007 (Table 11). Another development with great potential fore cleaner and greener road transport is the use of natural gas to fuel trucks and other large road vehicles. The main problem, as with hydrogen fuel, is the lack of an adequate network of fueling stations. In other words while the financial ownership and operating costs of hybrid and fuel cell powered cars are expected to be higher than those of gasoline, natural gas, and diesel ICE powered cars, their financial plus environmental costs are significantly lower. In addition to the move towards hydrogen use as fuel in transportation improved efficiencies in energy conversion could also be achieved by use of thermoelectric materials.

18

C.E.G. Padiu and V. Putshe, “Survey of Economics of Hydrogen Technologies”, Technical Report.

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53

Table 11. Estimated Consumer Costs of Automobile Use (2005)

Gasoline ICE Diesel ICE Hybrid ICE/Electric Gasoline/fuel cell Methanol/fuel cell LNG/Hydrogen/fuel cell Wind/Hydrogen/fuel cell

Financial Cost

Financial and Environmental Cost

100 90 105 130 120 110 120

100 80 80 95 90 75 78

Thermoelectric materials, which can directly convert heat into electricity and vice versa have been under investigation for a long time. Nanotechnology may finally offer the opportunity of creating new semi-conducting materials that could make this dream come true. Using nano films of several alternating layers, each less than 5 nano-meters thick, thermoelectric effects can be achieved with reasonable efficiency. Such thermoelectric materials could be used to convert heat in automobile exhaust into electric current or generate supplemental power from electric and fuel cell powered engines. There are similarly numerous applications in electronic devices, communications technology, and a myriad of other fields. Another development with great potential for cleaner, greener road transport is the use of natural gas to fuel trucks and other large road vehicles. The main problem, as with hydrogen fuel, is the lack of an adequate network of fueling stations. 3.1.3

Other Energy Saving Developments

Vegetable-based fuel driven locomotives of the California Sierra Railroad19 are energy efficient and have low emissions. Excess locomotives are now being used to supply electric power (about 2.2 megawatt per locomotive) to communities on its network that lack adequate power supply. With 48 diesel electric locomotives converted to alternative power supply duty, the fleet can supply as much as 100 megawatts, enough for a sizeable city. The world population is increasingly urbanized and will have as many people living in urban as in rural areas by 2007. This trend is particularly dangerous in Africa where cities generally lack adequate infrastructure. At the same time this rapid urbanization is accelerating demand for energy as city dwellers usually demand and consume a multiple of the energy consumed by people in rural areas. Globally cities now expand at a rate of 10% per year, a rate that is not sustainable. As a result, the most important priorities in energy development strategy deal with improving urban energy delivery and use, urban mass transit, and effective urban energy use efficiency developments.

19

Popular Science, October 2002.

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Many advances are available now. As noted before, many cities in Russia have long enjoyed residential and commercial real estate heating and hot water delivery using low to medium temperature cooling water from electric power plants. Roof solar heaters are now quite effective and are used in many countries. In Mediterranean countries such as Israel over 70% of heating and hot water demands are met by solar heat. Heat recovery ventilators are another development in which heat is moving in and stale air is being moved out. They are installed in basements and connected to the central air supply and air return valves. These and other methods offer significant improvements in residential or commercial real estate heating, ventilation, and cooling. In fact, new housing and commercial real estate developments in major Western countries are 50% more energy efficient than similar buildings just 25 years ago. This is the result of better design, better technology, and more effective operations. In residential and commercial buildings energy can also be saved by the use of heat recovery systems such as heat recovery ventilators designed to conserve heat while assuring effective fresh clean air in the buildings. Household appliances, office and communication equipment are other areas in which major improvements in fuel consumption have been achieved. Fuel cells are under development (5 kW) which would provide power to individual households. Several companies are working on reliable and affordable designs that would be efficient and provide for all the energy needs. These would use piped natural gas as a fuel to a reformer that extracts hydrogen rich gas that is converted to hydrogen in a cc scrubber and then fed to a fuel cell with air to produce energy and water vapor. The direct current generated by the fuel cell is transformed to AC household current in an inverter and the hot water generated by the fuel cell is used for heating, etc. The technology is available now but costs are still too high to make it attractive. It is expected that if costs per household unit can be reduced to say $5000 it will become a viable alternative in urban households with existing gas pipeline supply networks. Another issue is obviously the willingness of electric grids to accept excess electricity generated by such fuel cells. Fuel cell powered households could supply hydrogen fuel to automobiles and thereby become independent not only of electricity but also gasoline supply. In other words, such a development, which could become a reality within 10–20 years, would move us closer to a hydrogen economy where most energy needs are provided by natural gas and other sources of hydrogen. Overall, it is expected that these developments will reduce petroleum consumption worldwide by at least 30% within 20 years. 3.2

ENVIRONMENTAL EMISSIONS AND REVERSAL OF THE GREENHOUSE EFFECTS

Emissions of carbon dioxide from fossil fuels have grown greatly since the industrial revolution and have now reached environmentally unsustainable levels. Carbon emissions, which were only a few million tons/year at the turn of the 20th century,

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amount now to over 6.5 billion tons/year at the end of year 2000. These emissions have grown at the rate of nearly 100 million tons/year since 1950, a rate which was reduced only recently. In fact, since 1995 growth of carbon emissions has been halted, but this is not enough as a 6.5 billion tons/year of carbon emissions is not only unsustainable but will accelerate the rapid deterioration of the earth’s atmosphere. As a result, there is a buildup of carbon dioxide, which reached levels in excess of 370 parts-per-million, which would take decades to reduce to sustainable levels and reverse the dangerous rise of the sea levels even if all fossil fuel uses on earth were discontinued. Carbon dioxide emissions per capita vary widely. The numbers according to the Energy Information Administration (DOE) are North America European Union Eastern Europe-FSU Latin America/Caribbean Asia and Pacific Africa

5.52 2.21 2.10 0.57 0.44 0.28

tons/capita/year tons/capita/year tons/capital/year tons/capital/year tons/capita/year tons/capita/year

In other words, North America’s per capita CO2 emissions are 20 times those of Africa and over 12 times the world average. This is obviously unacceptable and needs serious action not only to prove that America is a good and compassionate world citizen but also to satisfy its own economic and political needs. Most of the emissions come from road vehicle operations in North America, which also consumes the bulk of petroleum products. Over 29% of all energy used by the world’s nations is consumed by transportation. Road transport consumes about 70% of this with air, rail, and water transport 15%, 13.3%, and 1.7% respectively. Globally the percentage of world transport energy consumed is: Asia Africa Latin America Western Europe North America Australia, New Zealand

20.5% 3.6% 8.6% 23.3% 40.9% 3.1% 100%

Source: IEA and DOE

Transport energy consumed per capita in North America is over 1.8 times as much as in Europe and about 17.1 times as much as in Africa. As a result, the most important effort at reducing fossil energy consumption must be directed towards transportation, particularly as transportation is nearly exclusively fueled by petroleum and contributes much of the greenhouse pollutants to the atmosphere.

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The problem is magnified by the fact that vehicular air pollution occurs mainly in highly congested built up areas where air pollution has little escape and as a result affects large populations. Transportation is therefore the sector of greatest concern, yet probably the one most readily corrected. Road vehicles have a comparatively short (5–7-year) life and new technology can therefore be rapidly introduced. Such technology, as described earlier, is being developed and more fuel efficient and much lower emission cars and trucks are becoming available. As their popularity increases so will sales volumes which in turn will result in economies of scale of production and price. Government can also assist with a meaningful tax policy which compensates buyers for the higher capital cost of environmentally friendly vehicles by reducing sales or other taxes and rewards users of fuel/emission efficient automobiles/trucks by lowering registration fees and fuel taxes. In fact it may be attractive to eliminate taxes on natural gas and other cleaner fuels which will herald an increased use of hydrogen. Under the Kyoto Protocol to the UN Convention on Climate Change, industrial and former Eastern block nations are committed to collectively reduce emissions of carbon and other greenhouse gases by 5.2% below 1990 levels by 2008–2012. Similarly, the European Union (ECU) is expected to impose inclusion of the environmental cost of petroleum use in the cost of electricity soon. It also requires that 22% of EU electricity be generated by renewable energy sources by 2010 (11% in 2002). While among long lived, manmade activity generated trace gases carbon dioxide has the largest impact, other gases such as chlorofluorocarbons, halons, methane, tropospheric ozone, and nitrous oxide gas are similarly detrimental in trapping the radiant heat which the earth emits also contribute to the “greenhouse” effect. These anthropogenic emissions of long-lived active trace gases are real and physical evidence shows the direct cause and effect relationships. The threat of climatic change is real and world attention is increasingly focused on this problem. The 2002 floods in Central Europe and Asia, the droughts in sub-Saharan Africa and many other unexpected developments are only a preamble of future effects of increasingly significant climate changes. There is a distinct trend in climatic changes attributed in part to the El Nino effects, which has become an annual phenomenon. In fact, in many parts of the world, radical changes in weather patterns are now discernable. At the same time we must recognize that CO2 is not only produced by combustion of hydrocarbon fuels such as petroleum but also by all kinds of other activities. It has superior heat trapping ability and is an invisible gas. We may try to control CO2 by conservation, use of lower carbon fuels, and sequestration which involves pumping the gas into the ocean where it is absorbed by plants. This method is quite inefficient and expensive. Novel processes and new methods of ocean CO2 sequestration are under development. Ways of reducing CO2 by reversing the process of combustion and turning CO3 into hydrocarbon gases such as methane, ethane, propane, butane, etc. are being studied. While such processes are feasible, they currently consume more energy than the resulting hydrocarbon gases could generate. Dr. N. Yamasaki

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of Japan20 is investigating the use of iron powder and magnetic catalysts to reduce the reaction temperature to temperatures attainable from waste heat of power plants. Such developments may permit reduction of CO2 emissions into the atmosphere. But a simple reduction, even to the level of emissions of 10 or 20 years ago alone may not be sufficient to repair. The marginal greenhouse contribution in 1985 was 46% by CO2 , 24% by chlorofluourcarbons, 18% by methane, 7% by tropospheric ozone, and 5% by nitrous oxide. The atmospheric concentrations in 1985 were 346 ppm CO2 , 0.001 ppm chlorofluourcarbons, 1.7 ppm methane, 0.02 ppm tropospheric ozone, and 0.3 ppm nitrous oxide. It is estimated that the preindustrial concentration of CO2 was 260 ppm, with no measurable quantities of the other pollutants in the atmosphere at that time. While CO2 emissions have continued to grow at an alarming rate since then, emission of some gases particularly chlorofluourocarbons (CFCs) has been drastically reduced, largely by introduction of alternatives or substitutes such as HCFC-22 which breaks down much more rapidly within the troposphere and have a comparatively short atmospheric lifetime. As a result the CFC contribution to the greenhouse effects is expected to decline within 20–50 years with adherence by most countries to the CFC clauses of the Montreal Protocol. Reversal of deforestation and reforestation is probably the most cost-effective means of reducing net carbon dioxide emissions in many countries. Destruction of forests particularly in developing countries for agricultural and livestock purposes results in an increase in carbon monoxide and dioxide as well as large new concentrations of methane release. Methane emissions from livestock activities could be greatly reduced by appropriate measures. It is estimated that currently 15% of global methane release is contributed by animal farming. Better methods must be developed to capture methane for energy conversion and to reduce emission impacts. This is difficult, as methane generation is widely distributed and often mobile in agriculture. Similarly, methane generated by organic waste often disposed of in huge dumps (above or below surface) generates large amounts of highly diffused methane. Hydrogen production by so-called solar water splitting shows great potential. Such solar hydrogen fuel cells are expected to advance the use of renewable energy in applications such as automobile propulsion. Research at the Israel Institute of Technology shows promise of resulting in a practical solar fuel cell with no polluting emissions. There is increased interest in the use of huge amounts of coal reserves in the world for use in reformation of coal to produce hydrogen through gasification, which is of particular interest in the U.S., China, and Russia. Such reformation is expensive and only competitive with methane reforming where natural gas is expensive. Using coal as a feedstock for hydrogen would release huge amounts of

20

Jim Wilson, “Exhaling Energy”, Popular Mechanics, January 2003.

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carbon to be sequestered. Emission would therefore be replaced by sequestation, which at this time is not adequately developed to permit safe disposal of carbon. Burying carbon dioxide and other fossil fuel emissions in deep saline aquifers and depleted oil and gas reservoirs is another method being explored to prevent such emissions from power plants from polluting the atmosphere. Other alternative pollution emission diversions being investigated as noted above are deep sea or undersea bed deposition or discharge of such emissions or ocean carbon sequestation. 3.2.1

Economic Impact of Environmental Degradation

Since the U.S. refusal to consider the Kyoto Protocol, as well as earlier environmental protection agreements, major discussions have emerged between environmental scientists and economists about the costs and other issues generated by the greenhouse effect and resulting global warming. The new U.S. energy policy is largely driven by the “Report of the National Energy Policy Development Group” authored by Vice President Dick Cheney and others in April 2001. The principal conclusions were that U.S. economic growth would continue to depend on increased consumption and availability of fossil fuel, this notwithstanding the findings of the Inter-governmental Panel on Climatic Changes (IPCC) reports, based on long-term studies by renowned environmental scientists. Considering the inexcusably large contribution of the U.S. to atmospheric warming and fossil fuel consumption which is completely out of line with that of the rest of the world including that of countries with an equal or even higher standard of living and per capita income more courageous government actions will be required. Many contend that higher fuel prices would anger the U.S. electorate but evidence from other industrialized countries such as Europe, Japan, etc. shows that people adjust very easily to higher fuel prices by lower consumption, particularly if the added tax revenues raised by the government for fuel are used to address urgent social needs such as health care and education, as well as to reduce otherwise large tax burdens. Similarly, large fuel cost increases resulting from non-tax factors such as political unrest in producing countries have hardly affected consumption or living standards in the U.S. In the last decade climatic changes have caused increasingly large damage to the world economy through larger and more extended droughts in some parts of the world and devastating floods and storms in others. The floods in the summer of 2002 in central Europe devastated major cities such as Dresden and Prague. These are just some of the most recent examples of the effects of climatic changes induced largely by the growing greenhouse effects. Other examples abound. Flooding in China in the north, central Yangtze region, and the southwest as well as in India, Bangladesh, and Thailand has grown significantly in the last few decades. Climatologists have measured distinct climatic changes directly resulting from the growing impact of the greenhouse effects. The most economically devastating effects are probably experienced in Africa. Sub-Saharan Africa suffers not only under increasingly severe drought in the north

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and flooding in the south, but also complete dislocations of agricultural activity, the mainstay of many African economies. The Sahara Desert is advancing southward at the rate of 2–3 km/year, and agricultural output in sub-Saharan Africa has fallen by 3–5%/year while population growth continues at a nearly an equal rate. As a result, severe starvation is experienced periodically not only in the Sudan, Europe, and Somalia, but now also in many central African countries. The economic impacts or costs of these developments are hard to measure but are nevertheless very real and huge. We know now that average adjusted per capita income and living standards in Africa, for example, are today lower than they were 50 years ago. Many countries in Africa and Asia, which were self-sustaining in food now, require massive outside food help. The same applies to some countries in South America and Asia. There are also major dislocations of fish stocks largely as a result of changing ocean temperatures and current patterns. It is difficult to estimate the total costs and economic impacts of global warming, but experts estimate them to be in the many hundreds of billions of dollars per year. These are just the direct costs and exclude secondary and consequential costs of global warming. Even more serious is the irreversibility of many of the developments caused by atmospheric pollution. The global economic impact of environmental degradation, particularly air pollution, has never been established. There is a present impact which is the cumulative effect of past pollution and the effect of current ongoing pollution and then there is the cost of future pollution which will make many parts of the earth less habitable resulting in lower crop yields and cause weather changes which endanger man and his activities. It is very hard to put an economic price tag on these developments but if history since the dawn of the industrial age is considered these costs can be expected to grow exponentially until they are not only unsustainable but also irreversible. Major parts of the globe may become uninhabitable while others unable to sustain normal human life. We have already lost 85% of the world’s forests; and deserts in Africa, Asia, Australia, and America today occupy 20% more land than 100 years ago. Fresh water supply is becoming scarce in many parts of the world and the air unhealthy for the 35% of mankind living in urban areas now, a percentage growing by 1.4% every 10 years now. Something must be done if we are to assure a world capable of providing a future for mankind. This does not mean a reduction in living standards or economic opportunities, particularly for people in developing countries, but a radical change in the way we generate and use energy. The major emitters of CO2 in the U.S. by sector are electric utilities 32%, transportation 38%, industry and agriculture 18%, residential and other buildings 11%, others 1%. In developing countries most emissions are from electric utilities and industry and agriculture. There is mounting evidence that there is a direct relationship between the management of the environment and development. If all mankind were to consume as much per capita energy and generate as much per capita pollution as the U.S., for example, the world as we know it would not be habitable within a few centuries. Some degree of equity will have to be found.

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The clock is ticking and radical changes in technology will have to be developed. The pressure to decrease per capita consumption of fossil fuel is mounting. Fortunately alternative energy sources and conversion technologies are starting to reach maturity. They will replace our wasteful and polluting methods used in electricity generation, transportation, and residential power use within 10–20 years in most countries. It is highly likely that the petroleum age of the industrial development will come to an end well before the middle of the 21st century and be replaced by renewable and alternative, largely hydrogen-based energy, sources for all needs of mankind. 3.3

DEVELOPMENTS IN ELECTRIC POWER GENERATION AND DISTRIBUTION

Electric power supplies 32% of the total energy used in the world. It is interesting to note that 50% of U.S., and 62% of global electric power generated uses coal as fuel. While China still generated 82% of its electric power from coal (2001), this is expected to decline to less than 60% by 2008, when the second phase of the Three Gorges hydroelectric dam and other large hydro, and gas powered plants come on line. Table 12 showed the great reduction in the cost of electric power generation in the U.S. between 1985 and 2000, independent of the energy source. Generally electric power generation and equally important electricity transmission is becoming more efficient. It also shows that electric power generated using alternative fuels and renewable energy sources is becoming more competitive. The average costs of electric power in the U.S. have declined steadily since the mideighties, a trend expected to continue. It cost 10 cents/KWH in 1985, 9.7 cents kWh in 1990, and 8.5 cents/KWH in 2000. It is expected to be just above 7 cents/KWH in 2010 and continue to decline thereafter, given oil and coal costs do not increase substantially or stay at $40/bl in 2007 terms; this notwithstanding that the costs of crude oil and natural gas are not expected to decline from the $25/bls for crude oil and natural gas prices of $7.0 per million BTUs in 1990 to over $50/bls for oil and $6.0–7.5/BTU for gas in 2006. Over the longer term natural gas prices are expected to decline. Fluorescent lights increasingly used in the U.S. reduce power used for Table 12. Cost of Electric Power Generation in the United States 1985, 1993, and 2000 (1993 cents per kilowatt hour) Power Sources

1985

1993

2000

Natural gas Coal Wind Solar Thermal∗ Nuclear

10–13 8–10 10–13 13–26 10–21

4–5 5–6 5–7 8–10 10–24

3–4 4–5 4–5 5–6 5–7

With natural gas as backup. ∗∗ No new plants being planned for 2000. Source: Christopher Flavin and Nicholas Benssen, Power Surge ∗

∗∗

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lighting by 70%. Similarly, efficient appliances and manufacturing processes are causing radical reductions in electric power demands. Natural gas is now the preferred fuel in power plants as, although more costly than coal, it is more efficient and cleaner. Adding environmental costs it is actually cheaper and certainly much more abundant. The power industry is increasingly subject to a free market instead of rate-based structure and may no longer be able to pass on fuel cost increases. While 53% of U.S. power plants are fueled today by coal (2003) it is estimated that power plant coal use will decline to 45% by 2020. As a result, power plants now increasingly buy fuel on the spot market and not long term. Non-utility power generation is increasing rapidly. It is largely based on natural gas and renewable sources such as wind, waste, geothermal, and hydropower energy. These plants are becoming increasingly efficient and diverse. Redundant diesel locomotives are being converted into mobile electric generating plants burning vegetable, waste cooking, and other oils with vastly lower air polluting emissions. Lighter and cheaper wind turbines are now under development, which are expected to radically reduce the cost of wind power generation. These and other developments will not only produce cheaper but also cleaner electric power and permit a large increase in private capital participation in the electric power industry. As a result we find that in the West but also now in Asia countries are seeking private investors for power development. The most important issue now is improvement in electric power transmission grids. Improving power transmission capacity, efficiency, and cost as well as the use of smart, self-regulating/routing transmission grids would open the way for the U.S. to use cheap, clean hydroelectricity from Canada and the same in Europe, Asia, Africa, and South America where cheap, renewable energy sources are abundantly available, yet effective, reliable, smart transmission grids are lacking. We must now invest in the development of efficient power transmission technology. Advances in super-conducting and possibly in future microwave power transmission may soon offer opportunities for low resistance, cheap power transmissions over large distances. While coal remains the most important fuel, natural gas and renewables assume an ever greater role in electricity generation (Table 13). Similarly, nuclear power will remain an important power source. There is a consensus that coal, natural gas, and renewables will all continue to grow, while the use of oil will decline in power generation. CO2 emissions from electricity generation will continue to grow at a declining rate of growth, level off by 2015–2020 before starting to decline. The main reasons for the decline in the use of oil and later CO2 emissions are that an increasing percentage of coal used in electric power generation will be burned as clean coal, syngas or other coal gas or coal liquid, replacing oil use, with much of the CO2 separated and sequested and sulphur removed before combustion. By 2030 we expect that about 25–30% of global electricity will be generated by renewables such as wind, hydroelectric, wave and water current, as well as solar with nuclear (10–15%), natural and coal gas (50–60%), and the rest of solid coal and oil.

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Table 13. Use of Energy for Electricity Generation (2006) World

170 181 75 383 11

165 15 1000

Type of Energy

Nuclear Gas Petroleum and Products Coal Comb. Renewables and Waste Hydro Geothermal

OECD

CIS and East Europe

SubSaharan Africa

Latin America Middle East Asia and North Pacific and Caribbean Africa

241 168 59

241 352 46

35 43 49

00 494 389

27 102 66

28 129 113

379 16

232 16

666 00

69 00

636 02

30 19

130 07 10000

194 00 1000

150 02 1000

48 00 1000

161 00 1000

677 03 1000

Also an increasing percentage of electric power will be generated at the fuel or energy source and generated electricity transmitted by semi-super conducting transmission lines to major distribution centers, saving the cost of transporting fuels, which is many times more expensive than the transmission of electric power over the same distance. This approach would also significantly add to energy supply security, as multiple generating choices could be easily linked in the main power transmission network. There is increased congestion in transmission lines in Europe, America, and other regions. The need for added capacity for electricity transmission has become a major issue, but although there are numerous developers and investors ready to take it on, very little is happening, largely because of jurisdictional and regulatory bottlenecks. This must be resolved if we are to be able to make more efficient use of our existing electric power generating capacity. 3.4

EXTENDING FOSSIL FUEL RESERVES

New technology and the higher price of oil and gas have encouraged development of new sources of fossil fuel and better recovery of existing wells. 3.4.1

Deep Sea Oil Production

New technology allows production of oil and gas in deep water thousands of feet deep, and drilling a further 10–25,000 ft. to pockets of deep layered oil and gas deposits. New geological surveys indicate that there may be more than 44.5 billion blls of deposits in deep water along the U.S. Gulf Coast. Overall, it is estimated that recoverable deep water deposits with territorial (200 mile) limits of the world’s nations may contain as much as 250 billion barrels of crude.

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The most recent deep water well is expected to produce 125,000 bpd by 2008, yet deep water production is expensive. Costs of this one well are expected to exceed $3.5b. Similar deepwater discoveries were made in West Africa, Gulf of Mexico, along the U.S. Atlantic Coast and all around Russia. It is estimated that recoverable reserves in deep water will exceed 250 billion bls, and that by 2010 U.S. deep water platforms will produce over 400,000 bpd. By 2015 this number may exceed 1 million bpd. Generally, deep sea oil is expected to add over 2.3 million bpd by 2015 or account for about 2.7% of global crude production. Deep sea drilling is very expensive but can be done profitable as long as oil prices stay above $40/bl. As it is widely assumed that the oil price will not fall below $40/bl in the foreseeable future, deep sea production is expected to continue to grow and become a significant source of crude oil and later gas. One problem with deep sea drilling is the transfer of oil, as it is not feasible or attractive to lay pipelines to far offshore deep wells. Special tankers will probably be used both as on-site storage as well as transfer vessels. Deep sea oil transfer is a well developed technology, extensively used in lightering very large crude carriers (VLCCs) into smaller tankers far offshore for delivery to different refineries. Spending on Floating Production Systems has grown rapidly in recent years to over $8.3b in 2007, of which an increasing percentage is spent on deep sea drilling and support vessels. (Deep sea production systems can cost over half a billion dollars.) 3.4.2

Orimulsion, Tar Sand and Shale Derived Fossil Fuels

There are very large, often near surface depositories of fossil fuel in the form of (1) Extra Heavy Crude or Bitumen in Venezuela, (2) Tar Sands, a mixture of heavy crude and sands in Canada, and (3) Oil Shale imbedded fossil fuels in the Northwestern U.S. In recent years all three of these reserves have been developed as a result of increasing price of petroleum, unreliability of supply, and advances in technology which makes it possible to extract usable liquid fossil fuels from these deposits at a cost which is well below the world price of crude. The recoverable reserves in these three locations vary, but it is generally assumed that they together are equal or even exceed the total global recoverable reserves of traditional petroleum. The Orinoco belt or lower Orinoco basin of Venezuela contains the world’s largest known reserves of bitumen or extra heavy crude oil. Current estimates of 380 bbl of recoverable and a total exceeding 600 bbl distributed over a 50,000 Km2 area, all at comparatively shallow depth, makes this the world’s largest reserve of hydrocarbon. In fact, these reserves are larger than Saudi Arabia’s known petroleum reserves (see Figure 7). While the costs of extraction of this bitumen are expected to be low, transporting the stuff poses huge problems. Its viscosity is large and high temperatures are needed to liquefy it to achieve pumpable viscosities. Bitor21 of Venezuela has developed 21

“Bitumen Burning”, Marine Engineers Review (MER), March 2002.

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267

ORINOCO LIBYA

23

CHINA

24

USA

26

MEXICO ex. USSR VENEZUELA

51 57 62

IRAN

93

KUWAIT

94

UAE

96

IRAQ SAUDI ARABIA

100 258

Figure 7. Crude Oil and Orinoco Proven Reserves by Country Unit: billion barrels

an emulsion of 70% of natural bitumen finely dispersed in water and stabilized by a mix of specially formulated additives and named it Orimulsion. High viscosity and high water content, greater ash, vanadium, and other contents make it a difficult fuel to handle and use. (Production, emulsification, and other technical aspects are described in Appendix A.) Special fuel treatment and fuel injection systems, along with exhaust gas treatment systems, are under development to make Orimulsion a more acceptable fuel for marine propulsion and electric power generation. The problems though are its high density (>1), high water content (27–30%), potential for freezing in fuel water droplets, high sulfur content, and high metal and abrasive material contents (>300 ppm vanadium, 80 ppm nickel, and about 30 ppm sodium). Similarly the fuel has a significantly lower net calorific value of one 7000–12000 BTU. Therefore unless the costs of this fuel are significantly lower than traditional fuels, demand may he hard to generate. Typical characteristics are shown in Table 14. The natural bitumen reserves of Venezuela lie in the Orinoco Belt and cover an area approximately 4000 square Km and spread over the provinces of Macheto, Zuata, Hamaco, and Cerro Negro. The recoverable reserves of natural bitumen and heavy crudes in the Orinoco Belt are equivalent to approximately 64 billion tonnes of coal and, as mentioned, a major source of primary energy equivalent to more than Saudi Arabia’s oil reserves. Ocean terminal outlets at Jose and Bonaire and river outlets on the Orinoco at Punta Cuchillo are connected by pipeline to the production fields. The ocean terminals can accommodate VLCCs (Very Large Crude Carriers) or tankers of up to 300,000 dwt, while the river terminal is designed for a capacity of 60,000 dwt tankers. Orimulsion can be pumped at rates in excess of 3000 tons/hr. As extra heavy crude extraction is comparatively inexpensive, large-scale conversion into electricity at the site may make the unit cost of electricity much

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Table 14. Typical Characteristics of Orinoco Heavy Crude Typical Values Water Content, % w/w Median Droplet Size,  m % Droplets > 100  m Density (18 C), kgm2 Apparent Viscosity, mPas 30 C, 20s−1 (57 F) 70 C, 100s−1 (158 F) OCV, Mjkg−1 NCV, Mjkg−1 Vanadium, ppm Sodium, ppm Magnesium, ppm Flash Point,  C Pour Point,  C Ash, % w/w Elemental Analysis, % w/w Carbon Hydrogen (from bitumen) Sulphur Nitrogen Oxygen (from bitumen)

293 100 07 1010

Typical Range 27–3 8–15 0.5–1.5 900–1080

500 100 299 276 3000 300 3800 1200 30 02

400–800 90–120 29–3 27–29 270–340 15–50 300–450 115–125 2.8–3.2 0.18–0.22

600 73 28 05 02

58.0–62.0 7.2–7.4 2.7–2.9 0.48–0.52 0.19–0.21

Source: Bitor Orinoco S.A., subsidiary of PDU SM.

cheaper than when generated in developing countries such as Africa. It would also reduce the need for developing countries to invest heavily in power plants. Such an approach would be economically very attractive if efficient intercontinental electric power transmission could be provided cheaply and reliably. The major obstacle to such electric power transmission instead of fuel supply to developing countries, say in Africa from Venezuela is the lack of low cost, efficient, reliable, and safe longdistance electric power transmission, particularly across oceans. Although micro wave, wireless electric power transmission via satellite or ground level and super conducting power transmission have been proposed, these have so far not proven to be feasible transmission methods. At the same time it is recognized that more than two-thirds of the world’s petroleum reserves are not being exploited because they are – too remote – too expensive to produce – too expensive to transport Although as noted, more than 700 billion barrels or more than the total Persian Gulf recoverable reserves – lie in Venezuela’s Orinoco Basin and these reserves are exempted from OPEC production quotas, comparatively little of this oil is produced and used. The reason is that it consists of heavy, largely bituminous, crude oil which is difficult to produce, refine, transport, and burn, at least in its natural state.

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Methods for facilitation, production, transport, and burning of this fuel have been developed and are now on the verge of large-scale use. As this oil is largely located close to the surface, production costs are reasonable and as the technology is further refined and used on a large scale costs should decline appreciably. The major problem, the maintenance of fluidity for transportation and the development of effective combustion methods have been solved. As a result, this fuel could become the low cost energy source for developing countries whose major energy needs are for electric power for which this fuel is ideal. Furthermore, recent advances in producing a stable emulsion from Orinoco heavy crude that can readily be transported by tanker without onboard heating equipment is a breakthrough that will make this fuel an attractive alternative to petroleum-based residual fuels currently used in electric power generation in many parts of the world. To recover extra heavy crude, the primary recovery method available today involves injecting steam at around 315 C into the well to reduce the viscosity of the crude around the well and thereby permit higher extraction rates. Steam can also be injected into adjacent wells to stimulate deposits in other wells. In this case, the steam is often injected into a well surrounded by producing wells that are to be stimulated. This is often done in a cyclical manner to generate a pulsing drive which assists in both improving the viscosity and flow rate of the oil in the producing wells. Results of recent tests have shown that these new recovery enhancement techniques should allow production rates in excess of 2 million barrels per day and recoverability of at least 250 billion barrels of hydrocarbons. This would practically double the world’s economically recoverable oil reserves at current prices. These fuels provide a unique opportunity to redress the balance in fossil fuels. When low cost, high capacity, long distance electric power transmission becomes a reality, this most abundant of fuel sources may prove to be an even more important source of energy. It may also encourage construction of environmentally clean, mega-power plants at the fuel site, with efficient long distance transmission of power. Similarly, it may cause major power consuming resource reduction facilities, such as alumina plants, steel mills, and others to be located there. South America is a major source of bauxite and iron ore. Cheap electric power may allow the continent to add value by reducing these ores before exports. Orimulsion can be fired directly in power stations and other installations, utilizing today’s technology. Conventional and well-proven flue gas abatement processes can be used with Orimulsion to meet today’s stringent environmental legislation. Orimulsion is applicable to future technologies for electricity generation such as Integrated Gasification Combined cycle (IGCC) turbine plants. Here Orimulsion is converted to a combustible gas. Then the Orimulsion gas is burned in a gas turbine to generate electricity and the gas turbine exhaust gas is used to raise steam in a heat recovery boiler. The steam can then drive a conventional steam turbine for additional electricity generation. The main benefits of IGCC with Orimulsion versus coal are

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• higher thermal efficiency • lower capital costs • lower fuel handling and conditioning costs Orimulsion exports started in 1989 when 155 K ton were exported (about half to Europe and half to Japan). By 1993 the volume increased to 5000 K ton with about 2/3 to Europe and the rest to Japan. Since then, exports have increased at a compound rate of over 20%/year, with an increasing percentage going to Japan and South East Asia. The major advantages offered by Orimulsion are • consistent fuel specification compared to coal or petroleum enabling users to optimize with precision fuel handling, boiler operations, and emissions control equipment • security of supply from a major resource base • stability of price and long-term supply contracts permitting – the effective planning of plant operations – competitive generation of electricity Canada’s oil sands largely in the province of Alberta are very abundant and can be converted into crude petroleum at costs of $25–40 per bl. In 2006 over 1.2 million barrels per day of crude were extracted from Canadian Tar Sands, a quantity expected to double by 2010 and again by 2015 and level off at about 5–6 million barrels per day, given the world price of crude remains well above $40 per barrel. Estimates of recoverable reserves vary but are generally assumed to be as large as Venezuela’s Orinoco basins. In the U.S. unconventional oil is imbedded in oil shale, largely concentrated in the Green River Formation in Colorado, Utah, and Wyoming. Recoverable reserves in the American oil shale formations are even more abundant and are estimated at 800 billion barrels, according to a recent Rand Corporation study or about triple Saudi Arabia’s. Various techniques for the safe and economic extraction of crude from shale are under development. A major problem, which also affects Canada’s tar sand oil extraction, is the environmentally safe disposal of waste. Turning tar sands into oil requires • mining of the tar sands • crushing the ore and mixing with water • hydro transport • separation by aerating bitumen • froth holding – stripping air • froth treatment – naptha thinning • upgrading • filtering and settling A similar but more complex process is required in extracting crude from shale, which as a result is also somewhat more expensive. At the same time, the extraction technologies are advancing and increased demand will permit larger scales to be used, which in turn will both advance technologies and reduce costs.

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Clean Petroleum Product Demand and Supply

Clean petroleum product particularly gasoline trades continue to grow worldwide but particularly in the U.S. where clean product imports increased from 1 to 1.25 mbd over the period of 2000–2002, and then to nearly 1.9 mbd in 2005. Gasoline imports alone grew from 0.5 to 1.4 mbd. U.S. clean product imports come largely from the Caribbean/Venezuela, Virgin Islands, and Canada (16%, 10%, and 22%, respectively), while the rest comes from the U.K., Mediterranean, Brazil, and others. This trend is expected to continue with U.S. product imports growing to over 2–3 mbd by 2010. The U.S. is the world’s largest consumer of gasoline a phenomenal 8.47 millionbpd followed by Japan with 0.99 million bpd (year 2000 figures). In fact the U.S. consumption of gasoline is equal to the combined total of the next 23 most important gasoline-consuming nations. Even at a modest average growth rate of 1.35% per year for the next decade, projected U.S. consumption will be 10.07 million bpd in 2010. U.S. refinery capacity is inadequate to meet this demand. At the same time, U.S. refiners had to upgrade to meet the reduced sulfur specification of 30 parts per million that came into effect in 2004. This required investment in upgrading existing refineries reduces funds refiners might otherwise have spent on new capacity, which led to a greater need to import refined products. European nations have successfully induced automobile owners to buy diesel rather than gasoline-powered automobiles through differential taxation on diesel fuel and gasoline. Spare gasoline refinery capacity in Europe can therefore provide gasoline to the U.S. market. As long as gasoline remains at present prices, there is little incentive in the U.S. to conserve gasoline consumption. Similarly, with excess refinery capacity readily available there is little inducement to expand U.S. refinery capacity. This is not only a U.S. problem but one that also affects other countries or regions such as West Africa, a major source of crude oil. Yet, basically all products consumed in the region are imported, mainly from Europe. While the U.S. supply replaces crude imports by product imports, West Africa actually ships its crude to Europe to have some of it refined and returned as product to West Africa. Product trades are expected to continue to increase to satisfy the increasing imbalances of product supply and demand. 3.4.4

Coal Supply

Coal, the world’s most abundant fossil fuel, is making a resurgence as a result of new developments in mining, processing, transport, and burning of coal. Its environmental impact and high cost of production, storage, and transport had in the 1960s and later in the 1990s caused major reduction in the use of coal, but this trend is now being reversed as shown in Figure 9 which shows a 50% increase in internationally traded steam coal between 1990 and 1999, a trend which continues until today in 2007. Among new developments which make coal production and use more attractive now are coal bed methane production, clean coal developments, and other ways to

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make coal less pollutant. Fuel sources considered unrecoverable in the past such as coal bed methane are now significant and economic sources of energy. This unlike oil shale beds which after decades of major efforts have not become economic sources of fuel. Coal bed methane is not only an economic and readily extractable fuel but recent research shows that deep reserves of methane are often seeping upwards and refill or recharge coal bed reservoirs. The same applies to oil and gas reservoirs that appear to be replenished by natural upward seepage. Global coal production has remained essentially constant at about 2000–2300 million tons of oil equivalent per year since 1980 and in fact has seen a gradual decline from 2300 million tons of oil equivalent in 1996 to about 2000 million tons in 2000. But this downtrend has now been halted, largely because of improvements in clean coal fuel burning technology. Recent research at Los Alamos National Laboratory to develop a zero emission coal program (ZECA) is aimed at a process which would extract hydrogen from coal and water which would then be used as gas powering fuel cells. Coal, water, and lime combine in two chemical reactions to produce hydrogen, limestone, and waste ash. The hydrogen is then used to produce electricity, water and heat, with the water used for the coal gasification. The heat generated drives the chemical reaction separating limestone into lime and CO2 . The lime is returned and only the CO2 is left to combine with powdered soapstone to produce magnesium carbonate. ZECA claims a 70% efficiency potential. This would be double current coal fired power plant efficiency. The fuel cell technology for this process is still under development, but the process if it succeeds would permit the U.S., China and other large coal producers to efficiently and cleanly use this most abundant fuel. Another clean coal technology under development by “Great Point Energy” of Cambridge, Mass., USA turns coal into a vapor that is 99.5% methane or natural gas in a special type of reactor. Great Point, according to an article in the Boston Globe (March 19, 2007) uses as a potential catalyst a low-cost metallic compound that reacts with coal and steam to produce natural gas and non-hazardous solid waste products. They claim that the same process can be used to turn petroleum coke, a byproduct of oil refining, into natural gas. They claim that at current prices for coal, the process could produce natural gas at $2.91–2.98 per m BTU or about only 40% of the current (2007) price of natural gas. Steam coal demand has in fact started to increase in recent years and internationally traded steam coal is now over 330 million tons/year (2007), up from 250 million tons in 1995. At the same time the market price of internationally traded steam coal, which had declined from $46/ton to $28/ton between 1995 and 2001, increased again to over $60/ton by 2007. While these price swings are large, they are not as large as those experienced in oil and gas where prices can deviate by 100% in a comparatively short period of time. Coal supply is expected to grow by 2–3%/year as cheaper production, clean coal technology, and lower cost transport develop until 2010 and then grow at a rate of 3–4% as new clean coal technologies come on line, which permit the economic production or conversion of coal into syngas and liquid fuels.

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Coal, now in 2007, supplies 24% of the world total energy demand, a percentage which is expected to grow to 28% by 2015, largely as a result of an increase in the use of coal in the U.S. and China. Fifty-percent of the United States and 66% of China’s electric power was generated by coal fired power plant in 2006. Although technology for carbon sequestration is advancing and aimed at zero emission coal use, most of the advance in coal use will be the result of increased conversion of coal into syngas and liquid fuel. According to the IEA, China will become the world’s largest source of carbon dioxide emission in 2009, overtaking the U.S. much earlier then previously anticipated. China has the world’s second largest reserve of coal, enough to meet its electric power energy requirements for more than 100 years, but it recognizes that it must increasingly utilize clean coal technology. It is rapidly developing gasification which transforms coal hydrocarbons into synthesis gas, often called syngas (mainly CO and H) which can be burned quite clearly as SO2 can be readily removed and disposed of. Coal gasification can also produce liquid fuels for use in transportation by converting coal gas into synthetic oil. China is planning to develop the Shenfu-Dongsheng 31,000 square Km coal field in Inner Mongolia (estimated recoverable near surface reserve 223b tons of coal) into a major center for the production of liquefied coal or synthetic oil for use by road vehicles. The direct coal liquefaction process developed by China produces more liquid fuel per unit of coal than the older Fischer-Tropsoh (German) synthesis which converted it first into syngas and then used it to general liquid fuel. The major problem with this process is the large amount of fresh water needed by it. China is making a great effort to reduce its dependence on oil imports. It is now also introducing integrated gasification combined cycle (IGCC) plants which are fueled with syngas from integrated coal gasification plants (Figure 8). As shown in Figure (9), worldwide gasification capacity is continuing to grow rapidly. Coal fired power plants now produce megawatt-hours for about $55 or about 10% more than expensive nuclear power plants, excluding the costs of CO2 sequestration. There are as yet no large power plants using gasified coal. Pulverized coal plants with sequesting facilities have been built and produce power at about $65 per megawatt hour. An important use is obviously the impact of potential carbon taxes. 3.4.5

Natural Gas Supply

Global use of natural gas has grown from only 444 million tons of oil equivalent in 1960 to over 2300 million tons of oil equivalent in 2000 or 5.18 fold versus use of coal which grew only by a factor of 1.36 and oil by a factor of 3.27. In fact use of gas overtook coal as a fuel in 1999 and is expected to overtake oil by 2008 notwithstanding the availability of clean coal energy plants and increasingly abundant oil. The reasons are that world total fossil fuel consumption has leveled off at about 7650 million tons of oil equivalent per year and gas has not only become more available but as it is usually piped can be transported from production field much less expensively. Natural gas now (2002) provides 25% of world commercial

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energy, still far behind oil with 41% but rapidly catching up. U.S. energy is supplied 22.4% by coal, 23.33% by natural gas, 37.91% by oil, 8.01% by nuclear, and 6.9% by wind, hydro, solar, and other renewable energy sources. Natural gas is not only the cleanest of fossil fuels but as recent discoveries seem to indicate also the most abundant and probably most accessible. New recoverable gas reserves have recently been found in Canada, Alaska, Eastern Gulf of Mexico, offshore Florida, and in many foreign countries such as Bolivia, West Siberia, Malaysia, India, Central Asia, Caspian Sea, and many other places. While some of these are also large oil producers, many of the newly discovered gas reserves are pure gas plays. New gas pipelines are under construction or planned from Central Asia and the Caspian Sea fields to Europe, the Indian Ocean, and China, and from the Northwest Territories (Canada), Alaska, to the U.S. At the same time many new offshore gas fields have been discovered and are actively being explored or exploited. For example, the Gulf coast, offshore Florida, Texas, and Louisiana are deep but offer large potential for natural gas production. Because of environmental concerns, much of the 5.9 million acres of offshore area in shallow waters were not offered for sale to explorers and most of the area offered in the concessions is in waters with depths of 2000 m or more. Even this smaller area contains 1.25 trillion ft3 of natural gas and 185 million barrels of oil. Overall U.S. Gulf oil production was over 600

Figure 8. Coal Gasification and Its Uses

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Figure 9. Worldwide Gasification-Capacity Forecast Sources: UTILIS ENERGY AND THE U.S. DEPARTMENT OF ENERGY

million barrel of oil equivalents per year in 2001 and is expected to top 1200 million barrels per year by 2006. Deep-water fields offer about 9 times the reserves of those in shallow waters in the Gulf. There are now 32 active deep draft platforms operating in the area. With U.S. oil consumption rising by 10–20%, gas consumption by 50%, and electric power by 45% over the next 20 years, the exploitation of the Gulf deepwater reserves is essential and new production platform technology is required. There is an urgent need to procure oil and gas floating storage tankers and shuttle tankers as they cost less, provide better market access, and are more flexible than pipelines in serving dispersed deepwater production sites to shore transport of gas. New deepwater production platform technology has advanced greatly in recent years and now includes – fixed platforms – compliant towers – tension leg platforms – mini tension leg platforms – spar platforms – floating production systems with submerged well head platforms – subsea systems We are now able to effectively produce in water depths in excess of 2000 m. A new generation of gas storage and shuttle tanker vessel is now under development. This will allow more deepwater gas production and distribution. To transport gas from remote deepwater offshore wells, use of floating liquefied (super cooled) natural gas plants are proposed which can transfer the liquefied

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gas to LNG (Liquefied Natural Gas) carriers for transport ashore. This method may be cheaper and more flexible than the use of pipelines, which could be very expensive when wells are remote and in very deep water. While the level of known global recoverable oil reserves has increased on average by 2% per year since 1995, gas reserves have increased by over 5% per year, a rate expected to further accelerate. Another interesting development or discovery is that oil and gas reservoirs may be refilling themselves as they are being exploited. Texas A&M researchers found a change in the chemical composition of oil and gas that indicates that deep reserves are seeping up into depleting reserves and are thereby recharging them as they are being exploited. 3.4.5.1

Prospects of Gas Hydrate

An exotic and fascinating form of solidified natural gas, called gas hydrate, exists in huge quantities around the world. The quantities are so large as to dwarf known petroleum reserves and offer enough energy to “keep the world’s fossil fuel-based economy humming for centuries”22 . Gas hydrate, a clathrate or crystal lattice, constitutes a molecular trap for methane or natural gas which permeates upwards from underground reservoirs. U.S. Geological Surveys estimated in the mid 1990s that U.S. gas hydrate deposits alone held over 200,000 trillion cubic feet of natural gas or more than 100 times conventional U.S. gas reserves. Gas hydrates are expected to be found in many places and not just in the Arctic and other cold places. The U.S. Department of Energy, for example, plans to conduct gas hydrate tests in the Gulf of Mexico as well as in Alaska. Prospective hydrate deposits at reasonable depths of 1000– 2000 m below the surface are everywhere in the permafrost and offshore regions worldwide. At this time there are 10 actively investigated development sites in the Bering Straits Matik site, and on/offshore around Alaska. Confirmed or suspected gas hydrate deposits are found all over the Arctic permafrost as well as at offshore locations worldwide. Therefore the problem is extraction, as the gas is only released from its frosty hold at near room temperature. It needs energy to free the methane from gas hydrates. This method of natural gas production may be expensive and non-competitive for some time to come. Yet test wells drilled at the edge of the Arctic Ocean tapped gas from hydrate deposits with stable deep underground hydrates decomposing at room temperatures. Another issue is obviously transportation. Gas pipelines will be required to transport the gas to consumption centers and these, as shown by the Prudhoe Bay pipeline project, can be expensive as permafrost makes pipelaying and operations a complicated task. At the same time the long-term potential for the use of this environmentally clean and abundantly available fuel must be considered as we rapidly wean ourselves from the use of solid and liquid fossil fuels such

22

Hayden, Thomas, “Fire and Ice”, U.S. News and World Report, May 27, 2002.

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as coal and petroleum. Technology for inexpensive production and conversion of gas hydrate into gas is under development and may be available in a decade from now. This would revolutionize fossil energy demand as such gas would be environmentally much cleaner and could be easily used to fuel hydrogen production for use in transportation, among other applications. At the same time gas hydrate reserves are by and large close to the major fossil fuel consumption areas which would greatly reduce transport and distribution costs. Finally, such development could make North America, East Asia, and possibly Europe largely independent of Middle Eastern petroleum imports. Norwegian technology can be used to produce dry hydrate blocks for long distance transport as well as hydrate slurry. The technology is expected to be particularly attractive in exploiting small gas fields. At the same time, the method requires a larger volume than liquefied natural gas (3 to 4 times larger), and therefore requires larger investments in storage and pipeline transport facilities.

CHAPTER 4

DEVELOPING THE ENERGY FUTURE

While as noted there are many opportunities to improve on our supply and use of energy, demand for energy will continue to grow while concerns with the damage caused to the environment by our increasing use of fossil fuel will escalate. Similarly, concern with the security of energy supply is mounting. As a result, we are now exerting major efforts not only to discover new sources of fuel and energy, but also replacement of existing sources, particularly of fossil fuel by cheaper, more accessible, and secure supplies. 4.1

DEVELOPMENT OF ALTERNATIVE ENERGY SOURCES

Alternative, non fossil fuel based energy sources are now under intense development with great success in the improvements in generating as well as delivery technologies. Among the major alternative energy sources are nuclear power, biofuels, and hydrogen based energy uses. 4.1.1

Nuclear Power

Although nuclear electric power generation has been in decline in the U.S. and no new nuclear power plants have been constructed in over 25 years, nuclear power generation continues to play an important role worldwide. Power reactors under construction in year 2007 numbered 37, and the number of reactors in operation in the world has remained essentially constant at 435–445. Similarly, the total output of nuclear power plants has remained virtually constant in the last 20 years. Globally, nuclear power generated a bare 20 gigawatts in 1970, but its output had grown to over 320 gigawatts by 1990. Since then the growth of nuclear power has slowed and by 2000 had grown to 384 gigawatts. While nearly no new nuclear power plants are planned in Western Europe and very few in North and South America, nearly 100 are planned in Asia, 22 in Eastern Europe, and about the same number in Africa. Although France remains most reliant on nuclear energy in year 2000 with 76.4% of all electricity generated (Table 15), the U.S. with nuclear generation of 64.9 billion kWh remains the largest user of nuclear power. The world nuclear power use is shown in Table 16. 75

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Table 15. Nuclear Electricity Generation by Selected Country/Nations Most Reliant on Nuclear Energy Nuclear Energy Generation by Selected Country, May 2001 Argentina Armenia Belgium Brazil Bulgaria Canada China

05 03 35 08 18E 45 11E

Czech Rep. 10 Finland 15 France 298 Germany 132 Hungary 11 India 16E

Japan 252 Korea, S 91 Lithuania 06 Mexico 04 Netherlands 04 Pakistan 02

Romania Russia Slovakia Slovenia South Africa Spain

05 96 12 01 13 58

Sweden 56 Switzerland 25 Taiwan 25 Ukraine 54 UK (1) 65 USA 649E

(1) Data for the United Kingdom is the total for a 4- or 5-week reporting period, not the calendar month. Generation for the month, in billion kilowatt-hours: E = estimate. Source: Energy Information Administration, U.S. Department of Energy, Monthly Energy Review, August 2001.

Nations Most Reliant on Nuclear Energy, 2000 France Lithuania Belgium Slovak Republic Ukraine Bulgaria South Korea Hungary Sweden Switzerland

76.4% 73.7% 56.8% 53.4% 47.3% 45.0% 40.7% 40.6% 39.0% 38.2%

Note: Nuclear electricity generation as % of total electricity generated. Source: International Atomic Energy Agency, September 2001.

Notwithstanding public concerns with nuclear power there were, as mentioned before, 33 reactors under construction in September 2000 (Table 16) adding about 8% or 28,656 MW to existing nuclear reactor capacity. One reason may be that nuclear reactor capacity factor (actual to potential output) achieve a very high 90% compared to 61% for coal fired electric power plants. Another reason is that production costs of electricity by nuclear plants averaged 1.83 cents/kWh in 1999 as opposed to 2.07 cents/kWh for coal, and 3.18 kWh for gas fueled power plants. Since then the cost differential widened with the large increase in fossil fuel costs. At the same time, nuclear power plant capital costs continue to be very high at $2200/KW compared to $1500/KW for coal plants, $800 for an oil fired and $575/KW for a natural gas fired power plant. The major problem in nuclear power generation remains the safe disposal of nuclear waste, primarily spent reactor fuel. No long-term effective technology has been developed for the reprocessing and/or safe disposition of such waste. While reactor safety levels have been vastly improved and no serious accidents occurred since Chernobyl

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DEVELOPING THE ENERGY FUTURE Table 16. World Nuclear Power Summary Country

Argentina Armenia Belgium Brazil Bulgaria Canada China Czech Rep. Finland France Germany Hungary India Iran Japan Korea, S Lithuania Mexico Netherlands Pakistan Romania Russia Slovakia Slovenia South Africa Spain Sweden Switzerland Taiwan Ukraine United Kingdom United States TOTAL

Reactors in Operation

Reactors under Construction

No. of Units

Total MW(S)

No. of Units

Total MW(s)

2 1 7 2 6 14 3 5 4 59 19 4 14 – 53 16 2 2 1 2 1 29 6 1 2 9 11 5 6 13 35 104 438

935 376 5 712 1 855 3 538 9 998 2 167 2 569 2 656 63 073 21 122 1 755 2 603 – 43 491 12 990 2 370 1 360 440 425 860 19 343 2 405 576 1 600 7 512 9 432 3 192 4 884 11 207 12 966 97 411 381,327

1 – – – – – 8 1 – – – – 2 2 3 4 – – –

692 – – – – – 6 420 912 – – – – 900 2 111 3 190 3 820 – – –

1 3 2 – – – – – 2 4 – – 33

650 2 825 776 – – – – – 2 560 3 800 – – 28,868

Nuclear Electricity Supplies in 2000

TW(s)h (1) 573 184 4540 605 1818 6668 1600 1359 2180 39600 15960 1418 1421 – 30487 10360 840 792 370 108 605 11965 1648 454 1299 5930 5480 2495 3700 7240 7830 75390 2,449.90

% of Total 726 3300 5675 187 4500 1180 119 2006 3215 7840 3057 4060 314 – 3382 4074 7368 386 400 165 1086 1495 5343 3736 658 2763 3900 3618 2364 4728 2194 1983 –

Total Operating Experience to Dec. 31, 2003 Years

44 33 170 19 113 433 23 58 57 1 169 591 62 181 – 962 169 30 17 56 29 4 671 85 19 32 192 276 126 118 240 1 236 2 599 9,818

Months

7 3 7 3 2 2 5 9 4 2 1 2 5 – 8 2 6 11 0 10 6 6 0 3 3 2 1 10 1 10 4 8 11

Source: International Atomic Energy Agency, Sept. 2001 (1) Terawatt-hour (TW(s)h = 106 megawatt-hours (MW(s)h). For an average power plant 1 TW(s) = 0.36 megatons of coal equivalent (input) and 0.23 megatons of oil equivalent (input).

in the Ukraine, concerns with old reactor safety remains, particularly with reactors using graphite moderation. At the same time, major advances in reactor technology have been achieved which are expected to revive interest and confidence in nuclear reactors as a primary source of electric power.

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Percentage

Lithuania France Belgium Ukraine Switzerland Hungary Japan South Korea Germany Finland Spain UK USA Canada Russia Mexico Netherlands India Brazil China

81 75 60 47 41 40 35 33 32 30 29 27 20 14 13 7 2 2 1 05

Among the most attractive developments now are pebble bed reactors (South Africa) which are simple, inexpensive to operate, and safe. Here fuel is encased in graphite pebbles. Pebble beds are cooled by helium gas that allows higher temperatures than water-cooled and a smaller scale. As mentioned nuclear reactor fuel waste is still a problem although silicon carbide and graphite coating of fuel rods may stand up better as containment. Until a safe and inexpensive nuclear waste disposal method is developed, nuclear power will remain suspect. However, nuclear power remains an attractive potential and 30 developing countries, including Algeria, Indonesia, Nigeria, Iran, Egypt, and others, seek IAEA guidance in the development of nuclear energy. As shown in Table 17, there are now 20 countries with active nuclear power energy plants producing various percentages of their energy needs. China is planning extensive expansion of nuclear generating plants, with 3 new reactors under construction (2007), and 14 planned to be built by 2015, by which time it will have 25 plants in operation with another 16 plants to be completed by 2020. China is pioneering pebble bed (graphite-uranium) reactors for future use or after 2010 which will be hotter, more efficient gas cooled reactors. They expect to build and employ most of these reactors in the coastal region, using modular design as small combinable units and with waste heat largely used for hydrogen production. Overall, it is estimated that 66 gigawatts (44 big reactors) will be built worldwide by 2020. The reasons for this reemergence of nuclear power are that capital costs,

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though still very high, have come down, operating (fuel) costs are much lower than those of competing power plants. An interesting development is Russia’s plan to supply power to its Arctic lands by nuclear reactors placed on ice strengthened barges. This would be attractive not only because of the mobility the concept provides, but also the comparatively low cost of the site. The major problem with nuclear power remains our inability to safely dispose of nuclear waste. It is now stored in lined salt mines, deep undersea boring holes, and many so-called temporary depositories at or near nuclear power plant sites. Major effects are underway to develop safe nuclear fuel reprocessing methods and facilities. Under the new Global Nuclear Partnership (GNEP) project, technology would be developed to process spent nuclear fuel which would transform it into more nuclear fuel and greatly reduce the amount of nuclear fuel waste. Disposal has been the principal factor in delaying larger scale use of nuclear power generation. According to Dr. P. J. Finck23 , Associate Director of the Argonne National Laboratory, 100 times more energy could be extracted from uranium as is now produced if new fuel reprocessing technology could be effectively employed. If then all American power plants were replaced by new nuclear power plants, about one third of CO2 emitted in the U.S. could be eliminated, while at the same time significantly reducing nuclear fuel waste and potential for its (plutonium) use to nuclear weapons manufacture. Today we have 441 nuclear power plants worldwide and may have 1000 by 2050 if these new technologies work out. There is enough uranium available based on current estimated to fuel 1000 reactors for at least 40 years and more would probably be discovered if the current depressed price for the mineral were to improve. A new type of “Fast Reactor” has been developed which uses different coolants such as molten metal for example sodium, to make neutrons more effective and enough powerful to split some U-238 as well as transuranic isotopes. We must also keep in mind that fusion reactors are considered a far out hope today, yet they at least theoretically offer unique opportunities for the future. 4.1.2

Towards a Hydrogen Economy

Hydrogen is the most abundant element in the world. It can be combined with oxygen to generate power in fuel cells and produces no emissions but water. Although a common element, production of hydrogen requires energy as it is rarely available as pure hydrogen. It can be produced from other fuels such as hydrocarbon fuels, particularly natural gas. It can also be extracted by electrolysis from water at a large cost in energy. Hydrogen could be produced on a large scale at central facilities and distributed using high pressure pipelines or it could be produced at and as part of the energy conversion process, say from gas or gasoline in an automobile which is electrically powered by a fuel cell converter. While

23

Wald, M. L., “The Best Nuclear Option”, Technology Review, July/August 2000.

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hydrogen offers opportunities for clean energy generation, it poses major problems of hydrogen generation, distribution, and conversion into useful power. Recent research and development show that hydrogen as fuel may provide the answer to U.S. energy needs using only 1% of current water use. Hydrogen is an ideal fuel. It is clean, readily available or produced, and non-polluting. Hydrogen generators do not require scale and can therefore be placed next to demand, however small. Hydrogen distribution is expected to be cheaper than electricity transmission and can be performed by inexpensive pipeline networks. Land requirements for hydrogen converters are reasonable and require no special preparation. Hydrogen conversion may provide means for converting wind, solar and low head hydro energy into an easily stored and distributed form of energy or fuel. In 1874 Jules Verne predicted that water (hydrogen) would be the coal of the future. His dream or prophecy may become true in the next two decades. Today automobile manufacturers are investing $2b into fuel cell R&D, though many players in the field prefer the power generation market. Some manufacturers (Ballard, International Fuel Cell, etc.) are already offering fuel cells as reliable power supplies (PC25 – 200 kW) using hydrogen as a fuel. The PC25 converts natural gas in a fuel reformer into hydrogen that is then pulled into contact with a catalyst-coated electrolyte and later combined with oxygen to form water efficiency achieved as 40%. The price of such units is high, $4 m per 800 kW versus $2 m for a comparable gas turbine. Yet notwithstanding the higher costs fuel cells are becoming reliable backup generators. They also permit use of waste heat, which increases overall energy efficiency. Other major advantages of fuel cells are the elimination of transmission and distribution costs. The main problem for their use in automobiles is cost which at $100-150/KW are 2–3 times those of internal combustion engines and a much larger weight. A method for production of hydrogen developed at the University of Wisconsin recently24 used a platinum-based catalyst to break down the carbohydrates in glucose (sugar) into carbon monoxide CO and hydrogen gas, with the CO reacting with water to produce carbon dioxide and more hydrogen. This is achieved at a low 400 F in one container. Glucose often produced from corn or biomass waste is a readily available renewable resource. The economics of the process look attractive, but several issues such as fuel delivery have to be solved. Global annual hydrogen production is now about 400 billion m3 , which is equivalent to 360m tons of oil (10% of total consumed). Hydrogen is mainly produced in refineries or chemical plants using steam to reform natural gas. Steam-methane-CH0 reforming is the cheapest method for hydrogen generation. Only 4% of the world’s hydrogen production is by electrolysis versus 200 billion m3 by steam reformation in which methane, the major component of natural gas, is heated in a catalytic reactor with steam added to the process to free additional hydrogen.

24 J. Dumesic, R. Cartright, and R. Davda of University of Wisconsin reported in Popular Science, February 2003.

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A renewable energy hydrogen cycle uses photo-electrolysis to break water down into O2 and H2 , which is stored and delivered, to fuel cells where it produces energy and water. Use of electrolysis from renewable energy (solar, wind, etc.) for hydrogen production is currently more expensive than producing hydrogen from natural gas, but recent developments show potentials for major cost reductions. Electrolysis also has environmental advantages over natural gas reformation, which usually uses steam-methane or other gas transformation. Hydrogen may also provide an ideal storage medium for renewable energy. Of the 400 billion m3 of H2 fossil fuel base produced in refineries, only 5% is used to produce energy while the rest is used in refineries and chemical plants to produce fertilizer, plastics, resins, solvents, etc. A typical hydrogen energy system is shown in Figure 10. There are various methods of storing hydrogen available today including the use of underground or surface tanks to store: • liquid hydrogen • compressed gas • metal hydrides • carbon nanotubes Similarly among methods of transporting hydrogen are • long distance pipeline for liquid-compressed gas∗ • short distances – tank trucks – rail cars – liquid – compressed gas∗ • metal hydrides∗

Figure 10. Hydrogen Energy Systems

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The main types of fuel cells are (electrolytes) • phosphoric acid • molten carbonate • solid oxide • direct methanol converters • alkaline • Proton Exchange Membrane (PEM) and others with efficiency of up to 65% achieved at least in small-scale applications. Iceland with abundant geothermal energy is probably the first country to announce a plan for a total conversion into a hydrogen-based economy in which petroleum and its products will be replaced by hydrogen as an energy source before the middle of this century. Other examples of hydrogen use as an energy source start to multiply in Europe, Japan and the U.S. where a first full-time hydrogen-powered bus route was recently inaugurated in southern California. There are many other new applications of hydrogen as a fuel both on a small as well as a large scale. Hydrogen is not really a fuel like fossil fuels which exist and can be combined with oxygen to support combustion which releases heat or energy. It does not exist as such in nature but must be released from natural compounds such as water or hydrocarbons by the use of some energy. As such, hydrogen is therefore an energy carrier and not a fuel, though once separated it does serve as a fuel. It provided an effective means of storing and moving energy. Hydrogen in combination with other elements is most abundant. It can be derived from water, among others, using nearly any type of energy, most importantly abundant energy such as solar, wind, and biomass. At this time, though hydrogen is most commonly produced from fossil fuels such as natural gas because of the simplicity of the reduction process. We must recognize though that producing hydrogen by any process requires more energy than available in the finished hydrogen. Therefore, only if the energy used in its production is a clean renewable form of energy such as waste heat, solar, wind or hydro do we actually gain environmentally. While hydrogen is basically safe, it can leak through many substances and leaks are hard to detect. Leak-proof high pressure storage design may therefore be a major challenge. Storing hydrogen for use as a fossil fuel has always been a problem. Now a nanosponge material which works on the molecular level25 and discovered by Xuebo Zhao and other researchers at the University of Newcastle upon Tyne and the University of Liverpool can be loaded with hydrogen gas at high pressure without releasing it when the pressure drops, acting essentially as a molecule-sized pressure seal. This discovery may offer the opportunity for fuel cells using hydrogen to power portable electronic and other devices. Hydrogen, if used as the exclusive automotive fuel in the U.S., could eliminate the need for petroleum imports into America; yet we must recognize as noted before

25 Synopses, Technology Review, March 2005. Zhao, X. et al, “Hysteretic Absorption and Description of Hydrogen in Nanoporous Metalogical Frameworks”, Science, pp. 506, 1012–1015.

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that hydrogen is an energy carrier and not an energy source as it requires other energy or fuel to be produced. In fact, in 2006, 8% of American produced natural gas was used to make 95% or most of the hydrogen manufactured in America. Hydrogen packs much more power per unit volume than gasoline and therefore requires less space. It also does not explode in free air but burns with a turbulent diffusion flame. As it is much easier to ignite than gasoline, it may provide more efficient operation. To produce hydrogen from coal which is of major U.S. interest, the safe economic disposal or sequestration of huge amounts of carbon dioxide which would be a byproduct of such a process must be developed. Gasification, in which coal is exposed to oxygen and steam under high pressure and temperature produces synthetic gas (syngas), a mixture of hydrogen and carbon dioxide from which hydrogen, can be easily extracted. Ongoing research shows signs of the imminent (2010) development of economic methods of production of hydrogen in large quantities to be seriously considered as an automotive fuel. 4.2

FUEL CELL TECHNOLOGY DEVELOPMENTS

“Tonight I’m proposing $1.2 billion in research funding so that America can lead the world in developing clean, hydrogen-powered automobiles   Join me in this important innovation to make our air significantly cleaner, and our country much less dependent on foreign sources of energy.” – US President George W. Bush, 2003 State of the Union speech

Fuel cell power plants whose exhaust product is water vapor without CO, CO2 , NOx , SOx or particulates, which internal combustion engines emit, have been shown to be twice as energy efficient as conventional internal combustion engines. Fuel cells operate like a battery and generate D.C. current but unlike a battery they deliver continuous power as long as fuel is supplied. While the U.S. commitment of $1.2 b in 2003 for fuel cell research was significant, it was dwarfed by Japan’s $2.4 b fuel cell development program started in 1993. Similar but smaller programs have been initiated in Europe, China, and Iceland. As noted, Iceland actually leads the way in development of hydrogen filling stations and replacement of IC engines with fuel cells on buses and fishing vessels. It is expected that fully fuel cell powered cars will come to market in 2010. The main problem today is that IC engines cost only about $35/Kw versus the $200/Kw cost of a fuel cell engine. Another issue is that hydrogen, while abundant, is not a primary energy source but must be derived as noted before from hydrogen rich materials such as gas, fossil fuels, methanol, garbage, etc. and energy (though low temperature energy) must be spent to extract the hydrogen by a reforming process. This can be an electrolytic, thermal, chemical or bacterial process. In many parts of the world clean renewable energy such as geothermal, wind or solar energy is available for such processes. The principal types of fuel cell under development are listed in Table 18. In fuel cells, hydrogen fuel pumped in is chemically split into electrons and protons with the electrons diverted into electric cables creating electric current while the protons travel through a membrane where they are recombined with electrons to

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Table 18. At-a-Glance, Five Principal Fuel Cell Types in Development Abbreviation

AFC

PEMFC

PAFC

MCFC

SOFT

Type

Alkaline

Phosphoric Acid

Molten Carbonate

Solid Oxide

Electrolyte

Dry: Potassium Hydroxide

Proton Exchange Membrane Dry: Solid Polymer

Liquid: Phosphoric Acid

Dry: Ceramics, often Zirconia

Operating Temperature Fuels

120–200 F 175 F 50–90 C 80 C H2 Pure H2

Power Range

Low to 5 kW

Liquid mix: Lithium, Sodium and/or Potassium Carbonate 1 200 F 650 C Include Marine Diesel, Methane, CO, H2 to 2 MW

to 250 kW

300–400 F 150–200 C Include Gasoline, Methane, LNG, H2 to 1 MW

1 800 F 1 000 C Include Methane, LNG, H2 to 220 kW

Source: ABS “Surveyor”, Spring 2003.

form hydrogen which is then bound with oxygen from the air to form water. There are many different types of fuel cells dependent on the electrolyte used. The most common and readily available uses are phosphoric acid as electrolyte and natural gas or propane as fuel. Other fuel cell types use solid oxide, molten carbonate or methods such as proton exchange membranes, direct methanol or alkaline. Among major fuel cell applications, Ballard is supplying 200 kW fuel cell modules for buses to be delivered to major European cities for transit service. Fuel cells produce electricity through a continuous chemical process in which the hydrogen proton is allowed to pass a membrane while its electron passes through a coil generating electricity before reuniting with oxygen to produce water. Aker Kvaerner, Norske Shell, and Stat Kraft are to cooperate in the development of a natural gas fueled fuel cell producing 10–20 MW. Such a large fuel cell would truly revolutionize energy conversion and make fuel cells effective alternatives for diesel and gas turbine electric generating plants. It is expected that this technological breakthrough could be achieved by 2010. An even more immediate successful development is the ’hot’ fuel cell operating at 1200 F developed by Daimler Chrysler as a Hot Module. It is said to achieve a 42% efficiency, which is nearly twice the efficiency achieved by gas turbines used in utilities today. The Hot Module Fuel Cell emits steam and not water, which is used to generate additional power in an exhaust-mounted steam turbine which may result in an overall efficiency of an astounding 65%. A 250 kW Hot Module was operating at a Mercedes-Benz plant in Tuscaloosa (USA) in 2003. Production of hot modules for industrial use is planned for later.26

26

Popular Mechanics, March 2001.

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Attempts are also underway to develop fuel cell technology for use on board commercial marine vessels. The San Francisco Bay Area Water Transit Authority is actually working on the development of a hydrogen fuel cell powered ferry. At this time there are no large enough reliable fuel cell generators available but banks of fuel cell or hybrid systems could be used to advance alternative energy power on board commercial vessels. Siemens of Germany is supplying fuel cells for conventional (non-nuclear powered) submarines as well as submarines with fuel cell technology main propulsion systems (PEM fuel cell) which supply the energy for air independent propulsion when the submarine is submerged. Existing fuel cell systems vary from several hundred KW up to 5 MW, and are therefore currently not large enough for most marine propulsion requirements. At the same time, currently available systems could be used to replace diesel generators and auxiliary power units, particularly for use in ports where environmental impacts or pollution are of particular concern. The cost of fuel cells has declined rapidly in recent years, a trend that is expected to continue. Cost per KW in 2001 were $300 but went down to $80 in 2006. By year 2010 we expect a cost of $42/KW and in 2020 a cost of $25/KW (all in 2006 dollars). This compares to a cost of $25–35 per KW for typical internal combustion engines. Fuel cells can use any hydrocarbon, hydrogen, methane, and syngas as fuel. The Proton Exchange Membrane27 acts essentially to only allow protons and not electrons to penetrate, forcing electrons to pass through an external circuit thus yielding electric output. GE fuel cells use solid oxide instead of platinum as electrolyte provides cheaper yet reliable power generation. There are now wide ranging new applications of fuel cell technology. For example, Tokyo Gas offers homeowners a lease of a residential system to extract hydrogen from natural gas to be used in a fuel cell to generate electricity and thereby reduce emissions. Fuel cell technology is advancing rapidly now and will make a major impact on future power generation for transportation and other uses. Applications of fuel cells as power sources are accelerating now and their wide use in industry, transportation, and building is predicted to occur within the next 10 years. 4.3

HYDRO, WAVE, AND CURRENT ENERGY SUPPLY

Large new hydroelectric generators being installed in China, Norway, the U.S., and elsewhere will increase hydroelectric output from 9% of global electric power to 13% by 2010 when mammoth plants like the Three Gorges hydroelectric power plant is expected to be nearly complete. This dam, the largest infrastructure project of modern times, is expected to cost $60-70b and produce 28,000 MW of electric

27 PEM Proton Exchange Membrane also Permasyn or permanent magnet electric motor with polymer electrolyte membrane.

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power, when the last and third phase of the project is completed. The dam, 174 meters high and 1900 meters wide will produce nearly 100 billion kWh of electricity, about 1/10th of the Chinese consumption in 1995. There are other large hydroelectric dams such as Turukhansk (Russia) 20,000 MW, Itaipu, Brazil/Paraguay 13,320 MW, Grand Coulee, U.S. 10,830 MW, and Guri, Venezuela 7,260 MW. The world installed hydroelectric capacity has grown from 6149 × 103 MW in 1990 to over 8220 × 103 MW in 2001, 8480 × 103 MW in 2006, and is expected to exceed 10000 × 103 MW by 2010. North America, which led installed capacity with 1568 × 103 MW in 1990, followed by Europe with 1150 × 103 MW, have both been overtaken by East Asia which grew from 1213 × 103 MW in 1990 to over 1731 × 103 MW in 2001 and is expected to reach 1982 × 103 MW by 2010. Similarly hydroelectric output of 2 113 × 106 MWH in 1990 is expected to increase to well over 3 250 × 106 MWH by 2010. Most new hydroelectric projects have multiple purposes. In addition to generating power, they often serve flood control, irrigation, navigation, and water diversion requirements. The adverse environmental effects of large dam hydroelectric projects have led to the development of low head-in stream hydro power turbine generators. 4.3.1

Low Head Water Turbines

Great advances have recently been made in low head or free flow water turbines that generate power efficiently in ocean currents and rivers or streams, without the need for dams. Efficiencies of up to 35% of the water energy in the stream can now be achieved by a helical type of Darius turbine developed by Professor Alexander Gorlov of Northeastern University in the U.S. The turbines are reversible and can therefore be used in tidal current domains.28 These and similar efficient vertical low current velocity bi-directional hydraulic turbines now generate about 320 megawatts of power in the U.S. alone, at an investment cost of about $1400/KW and operating costs of 14–16 cents/KW hour. Consideration is now being given to the use of such turbines in coastal currents, tidal currents, and more. Other countries, such as South Korea and China, have also introduced such machines and consider the technology highly attractive. In total over 1000 MW of power are now installed worldwide using this technology. 4.3.2

Wave Power

Ocean waves, mainly wind driven, have for a long time been considered a potential source of power generation. Wave generators in Scotland generate an average of 500 kW but these installations are still considered highly experimental, and very expensive. There are several mechanisms designed to capture wave energy such as • tapered channel systems that funnel waves into a turbine • underwater turbines using wave induced underwater currents 28

Tidal currents of 2.5 m/sec permit efficient use of metal or fiberglass blades.

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• float systems that rise and fall driving pistons • oscillating water columns forcing trapped air into a turbine There are at this time no commercial wave energy generators supplying constant energy, but the potentials are great and wave power is expected to become economically viable in remote locations within a few years. 4.3.3

Solar Energy Supply

Solar energy has a huge potential and is being used in many parts of the world as both a primary and a secondary energy source. In its most basic form, solar collectors are used to heat water for domestic water use and home heating, but low intensity solar energy conversion has an unlimited potential for providing low temperature energy for hydrogen generation in a hydrogen-fueled global economy. Solar energy conversion is also receiving a boost through the development of electrically conducting plastics and direct heat electricity conversion technology. Solar collector technology has advanced rapidly in recent years with developments such as: • solar mirrored troughs (Luz, etc.) • parabolic solar dishes with stirling engines mounted at the focal points of the dishes • solar voltaic cells using thin film and achieving 10% efficiency now at a cost of about 10–12 cents/KWH • solar voltaic cells using triple junction technology using three semi-conducting layers sandwiched between a grid of metal contacts and a surface covered with antireflective coatings. The layers are composed of gallium indium, phosphide, gallium asenide, and germanium. Efficiencies of 20% are expected to be achieved. New lightweight voltaic panels producing 150 watts per panel have been developed by Siemens. These panels are easily installed and can be readily connected to form a bank of panels producing several KW, enough for an ordinary house in southern locations. Electricity is produced by these solar panels which offer a 35% increase in power output and higher generating efficiencies under lower sunlight conditions to produce electricity. While low temperature solar heaters are used extensively for domestic heating and hot water, there are other uses such as solar ponds in which thermal currents are used to generate power. Voltaic cells are used quite often in space and specific applications but not to generate large volumes of power for consumers. Satellite solar power (SSP) has become a subject of intense interest. The hundreds of satellites in use as well as the space station all obtain the bulk of their energy from solar power generators.29 Research is underway in developing safe reliable space-to-earth transmission. Laser and microwave beams were considered but are

29 Glaser, P.E., Davidson, F. P., Csigi KI editors “Solar Satellites: A Space Energy System for Earth”, Vol. 42, Chicester, Wiley/Praxis, 1998.

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too hazardous in large-scale use. Mitsubishi Electric Corporation is working on a satellite solar electric power generator called “Solarbird” which is designed to beam power to earth via microwaves. The satellites would be in geostationary orbit. Transmission of power from clusters of such satellites by accurate microwaves to specific isolated sites on earth requires high frequency devices and development of new transmission, reception, and amplification technologies to assure the high degree of accuracy and thereby safety of the transmission. Solar energy use currently provides about 3.1% of the world’s energy consumption. At the same time domestic heating, hot water and other low temperature energy requirements require over 5.8% of all global energy consumption, of which solar energy provides less than 10% at this time. Installation and maintenance costs are usually low and over 70% of these domestic energy demands could readily be supplied by solar energy. World photovoltaic energy production was 350 MW in 2006 and is growing at a rate of 9 MW/year. The rate of growth may increase as costs per watt, $6 in 1990 and $3 in 2000 continue to decline. In addition, solar energy provides a low cost service of low temperature heat for hydrogen separation which can then be used as fuel in transportation and elsewhere. Other proposed uses are solar powered aeroplanes (Helios, 2001) or mirror focused solar beams to drive gas expansion/contraction generators. Similarly, building integrated photovoltaic (BIPV) solar energy is an important development among new renewable energy electricity-generating technology advances. It has the potential of greatly reducing building operating and construction costs in both urban and rural areas. BIPV is already economically competitive with traditional electric power supply in countries such as Brazil, even without accounting for the benefits of reduced pollution and other climate changing effects. Using BIPV walls, roofs, and screens, much of the power needed by communities can be derived from solar energy, with waste heat used for heating or in summer to power absorption scheme air conditioning systems. For BIPV to be economically viable and effective, a sunny environment competent building construction technology and local support are important. Though substituting electricity generating solar photovoltaic panels for other roof, wall, and division surface treatments may on occasion require a change in attitude, the views are pleasant and easily accepted. The cost of PV sheathing is about $20/ft2 and just a little higher than conventional metal or glass sheathing. Such BIPV sheathing electric power generating capacity is about 6 watt/ft2 but is expected to double in 5–10 years. With reductions in costs and improvements in power capacity costs of $1.25/watt are expected to be achievable in 5 years. Payback periods for added costs are now of the order of 3–5 years after which building would be largely supplied with required electric power at zero costs. Solar panels are now often installed to cover roofs or parking lots of buildings providing much if not all the power required not only for climate controls but also for electric and other services. New developments include nano-solar-cells and printed solar cells. The latter could then power portable devices such as cell forms. In the same vein, the future may allow individuals to carry very small panels which

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can generate electricity for climate control of other functions. Solar energy is so abundant that we could meet all of the world’s power demand by harnessing a small fraction of the sun’s energy impacting on the earth. Worldwide photovoltaic production has grown from just 50 megawatts in 1990 to over 1,820 megawatts in 2005. In 2005 Japan led the world with over 1000 megawatt, followed by Europe with 500 megawatts, the U.S. with only 220 megawatts and the rest of the world just 100 megawatts. 4.3.4

Wind Power Supply

World wind energy generating power exceeded 26,000 megawatts at the end of 2001, 33% over 2000 and over double that at the end of 1999. Wind-generated electric power is now in 2006 15 times that generated in 1990. It is the most rapidly advancing electric power source in percentage terms and wind power output is now growing at over 18% per year worldwide. Wind power is increasingly becoming competitive with conventional thermal power plants in most parts of the world. Large new wind power-generating plants will generate power at less than 3.5 c/kwh (Washington/Oregon border plant). Recent UK wind power plants generate power at 2.4 p/kWh or about the same cost as efficient coal or gas fired power plants. Wind power generation started seriously to grow in 1980 and took off in 1990. Since then annual additions to world wind energy generation has grown from 200 megawatts in 1990 to 4200 megawatts in 2000, and 16900 megawatts in 2005, and over 2000 megawatts in 2007. Although global wind energy generating capacity is still only 0.2% of world total electricity generated, many countries are generating much higher percentages of their electric power needs by wind energy. Europe with 17241 megawatts (2001) installed capacity led the world. The U.S. with just 4,258 megawatts (2001) lagged far behind. The major European wind-energy users were in 2001Germany 8,754 mw, Spain 3,337 mw, and Denmark 2,417 mw. Since then European wind power generation has more than quadrupled (2006), with a total installed capacity exceeding 85000 MW. The major wind turbine producers are Vestal and NEG Micon and costs per installed kW are now as low as $1000. Wind turbines are highly efficient and reliable, with availabilities in excess of 95%. Typical units today generate 500– 1000 kW. Wind generating capacity is as yet highly underutilized. The potential for wind power generation as a percentage of total electric power demand is: 7–26% of demand in Europe 4.6% of demand in U.S. 10–12% of demand in Egypt 6–10% of demand in China Globally 10–14% of electric power demand could be wind generated by 2020 if oil, gas, and coal prices continue recent trends and environmental concerns encourage greater investment in sustainable renewable and non-polluting energy generation. It could then account for 3–6% of total global energy output.

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Installation of offshore wind turbine farms has become extremely attractive and is now a high technology operation with specialized installation vessels (TIVs) capable of installing such turbines in coastal waters under various soil and environmental conditions. The vessels act as variable solid jacking devices and can operate in 3 m waves on jacks and sustain 100-year storms (Beaufort force 12) and 50 year (14 m) waves. It can operate in 35 m depth and with a transit draft of 4 m such vessels can operate over a whole range of coastal waters. Such offshore installations are now under construction in the North Sea, China Sea, Indian Ocean, and other places. They offer tremendous potentials and may help to accelerate the rate of wind power generating output even further. A new 80 turbine ($245 m) wind farm off the Danish coast is the world’s largest. Many other coastal regions are under consideration for the construction of wind farms. The cost of wind turbines is usually about $1 m/MW compared to about $0.6 m/MW for a conventional gas/oil fired power plant. Though lack of fuel costs makes up some of the investment cost gap, fossil fuel power plants are still more economic but the gap is closing rapidly. Lower weight, lower cost wind power turbines are expected to reduce capital costs by 30% within a few years when wind power will indeed be more economical than fossil fuel power plants even if fossil fuel cost returns to levels of $30–40/bl. It is generally accepted that by 2020 wind power will produce 8–10% of world electric power and 2–4% of total global energy production. Worldwide wind energy produced 4000 MW in 1995 and 36,000 MW in 2006. Over one third of installed wind power is in Germany, followed by Spain (16%), Denmark (8%), and the U.S. with 16%. The U.S. lags far behind Europe and even Asia in wind power capacity and technology. For example, a new 600 ft. tall, 200 ft. length carbon fiber blade (5 megawatt) turbine is to be erected off the coast of Germany, generating enough power for 5000 homes. In Europe, wind power has become a major success and European wind turbines generate now in 2007 the equivalent of 40–50 coal fired electric power stations. By 2020, wind power is planned to generate 12% of Europe’s power. Among developing countries, India and China are far ahead. Both countries have large programs to generate significant amounts of wind power to assure fuel savings, provide power to remote areas, and improve the environment. There are now many developments of stand alone plug-in home or building wind power generators of a few kilowatt capacity which can not only provide electricity to remotely located buildings or services, but also provide safety of supply and major cost and environmental benefits. Wind power is expected to maintain its 25–30% annual growth rate, which may accelerate as other countries join the bandwagon, costs of investments come down and public objection recedes. Public objections are usually concerned with visual and audible pollution of the environment. One approach to overcome such objections is to place wind farms offshore and out of sight from land, by locating them on floating foundations anchored to the bottom of the sea. An example is the Arklow Bank wind farm in Ireland which is located

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6 miles offshore in the Irish Sea. This installation is designed to supply 16,600 homes or 1% of Ireland’s electric power, saving about 15,000 tons of oil per year. There is a potential to supply 20% of U.S. electric power demand by wind power. While it is still expensive at 5 cents/kwh (including federal tax credits), it is becoming rapidly competitive with coal, gas, nuclear, oil, and hydro). Theoretically winds blowing off the eastern slopes of the Rocky Mountains could supply all American power needs if cheaper transmission technology were developed. To overcome visual objections and improve wind farm efficiencies, new types of modular-rotating cylinder types of wind power generators are being developed which may offer improved efficiencies and greater flexibility. Annual additions to world wind energy generating capacity are now accelerating. In 2006 more than 1500 megawatts were added worldwide, a trend which as noted will continue to grow by nearly 20% per year. Wind power investments are large and long term and will continue to grow. This vital source of energy, which is ultimately derived from the sun, will make an increasingly important contribution to the growth of renewable energy. 4.3.5

Other Natural Phenomena Energy Opportunities

There are many other natural resources and phenomena which may offer opportunities for energy generation. Among them are outflows from above surface and subsea volcanoes, ocean temperatures, gradients, geysers, earth crack and fissure emissions, subsea currents, and more. Indonesian active volcanoes, for example, emit about 100 times more energy than this large nation consumes. Similarly, seven active submarine volcanoes between Sicily and Tunis in the central Mediterranean have active plasma upflows from craters hundreds of meters in diameter which have kinetic and potential energies which could provide all of Europe’s power needs 100 or more times over. Therefore, if we could design very slow, large ceramic turbines which could be placed in 1500–2500 m deep water into the upflow from these underwater craters, they could generate these huge amounts of power even if efficiencies were as low as a few percent. There are similarly many natural outflows in Yellowstone National Park and Iceland, among others. Iceland is using a very small fraction of this natural energy for power generation, heating, and production of hydrogen as fuel. Tidal flows have not been effectively used though there have been some attempts at capturing some of these flows of energy. Opportunities for harnessing energy from nature abound and many are available close to major centers of energy demand. The reason for the lack of use of these renewable natural resources are that investment requirements are usually very large and environmental impact difficult to project. However, their use would be a tremendous help in solving the energy crisis that we will face if we continue to rely on fossil fuels. Another, as yet untapped, opportunity is the generation of electric power by harnessing underground heat imbedded in buried rock which underlies most of

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North America and other continents. According to recent geological surveys30 , temperatures six miles below the surface of the continental U.S. vary from 100 C to over 572 C. This heat could be mined by a variety of techniques such as drilling of injection wells, collection chambers, and return pass which bring heated high pressure water back to a surface steam power plant. Steam could be generated below ground and brought to the surface under pressure or high pressure; high temperature water flows could be brought to the surface to generate steam in a surface boiler before being returned to the bottom well. Such a system would not only generate electric power but also huge amounts of lower temperature waste heat, which could be used for the production of hydrogen fuel, home heating, and other purposes. While the highest temperature rock formations are in the western part of North America, largely underlying the Rocky Mountain range, there are enough heat reservoirs elsewhere. 4.3.6

Bio Fuel Developments

There are huge amounts of cheap readily available sources of biomass in the world waiting to be exploited. Agricultural waste which now costs money to dispose could become a major revenue source for farmers. In addition, there are many crops in addition to corn which can readily be converted into bio fuels. The most common product is now the production of ethanol fuel from bio mass, which in some countries is a mandatory additive to gasoline and diesel fuel, while in others such as Brazil it has become the principal road transport fuel. This not only saves the import and costs of fossil fuel, but also reduces the environmental impact. Ethanol can be made biologically by fermenting sugars from food crops, such as sugar canes, or cellulose residues of wood, grass, and agricultural wastes, among others. Sugar cane is usually milled and mashed, with the resulting liquid filtered, fermented, and distilled. U.S. taxes foreign ethanol imports 54 cents/gallon and 2.5% duty, discouraging cheaper sugar cane based (Brazil, etc.) ethanol from being imported into the U.S. The law also requires 4 billion gallons of ethanol to be blended into U.S. gas since 2006, growing to 7.5 billion by 2012. Freer trade in ethanol would reduce U.S. gas costs at the pump. (Some Caribbean nations are exempted for up to 7% of total U.S. demand.) U.S. agribusinesses benefit and object to any change in this law. As a result, U.S. ethanol costs $1.00 more per gallon than gasoline (2006). Fuel ethanol requires fossil fuel for its production but should succeed as a fuel additive and/or alternative on its own merits. Currently (2006) the U.S. produces 5b gallons/year of ethanol from corn. This is expected to grow to 15b gallons/year by 2015. Total U.S. gasoline consumption in 2006 was 150b gallons. On the other hand, corn prices in the U.S. shot up to $4.24 a bushel, largely as a result of demand from ethanol makers. Ethanol makers now compete with livestock, food and export markets. 30

Cook, Gareth, “The Power of Rocks”, Boston Globe, Health Science, January 27, 2007.

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An alternative biofuels to ethanol is bio butanol which can be added in volumes of up to 16% to gasoline without requiring any changes in the engines, as its energy content is much closer to that of gasoline than ethanol. In addition, unlike ethanol, it can readily be transported by pipeline. Flexible fuel vehicles (FFVs) are increasingly popular and their use is now encouraging the establishment of a so-called Midwest Ethanol corridor with E85 ethanol available at many gas stations. In the U.S. ethanol is produced near exclusively from corn starch, an inefficient and expensive process, which has to compete with other uses of corn. It could also be produced from wheat, rice, grass, switch grass, corn cobs, and other agricultural wastes, and most importantly leaves, which if adopted would increase the yield per acre appreciably. The process usually consists of 1. reducing the matter into glucose and other sugars 2. fermenting the sugars into ethanol These processes also occur in nature where the sugar in cellulose is fermented using enzymes. Global ethanol production has grown from 5b liters in 1980 to 15b liters in 1990, 16.2b liters in 2000, and then shot up to 35b liters in 2005. It is expected to double again by 2010. With corn ethanol producers expanding everywhere, new more efficient methods for ethanol production are in great demand. One approach with great potential recently developed process based on the use of a fungus to make fuel from about every type of cellulose waste such as waste paper, wood, corn cobs, straw, grass, leaves, and more. As long as the material is rich in cellulose, it can be reduced. America has 60 million acres of grassland, which alone could produce 100b gallons, which could reduce American gasoline consumption by half (75 billion gallons of gasoline). Cellulose-based biofuels provide a unique opportunity of not only reducing dependence on fossil fuel, but also improve the environment. In parallel, with the ethanol developments is the rapid growth of bio diesel fuel, initially produced from soybean, canola and other materials. America produces very little bio diesel fuel. In fact, Germany and the EU are the only significant producers, each with an output of about 1m tons in 2004 versus America’s and Brazil’s output of ethanol of 3.5b and 4.0b gallons respectively in 2004. Advances in metabolic engineering offer the potential for large-scale production of bio diesel at a fraction of today’s costs. This may finally revolutionize road transport and greatly reduce its environmental impact. Parallel efforts are underway to produce bio diesel from algae, which is not only bountiful all around the globe but can be collected from huge coastal areas all around the world in very large easily harvested. Bio diesel can also be produced from vegetable oil (canola and other sources), which is then blended with regular diesel fuel to provide a cleaner fuel for diesel engines. One question is really how much energy is needed to grow, harvest, and convert corn, for example, to ethanol. In other words, is there a positive energy gain in the process? The answer is that there is a marginal gain, but the gain is much larger with ethanol produced from agricultural waste and weed or wild crops and in converting soy beans to bio diesel. The difference is that corn ethanol only yields

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a 25% energy gain versus a 93% gain for bio diesel. Similarly, bio diesel produces only about half the greenhouse gases than corn grain ethanol. Bio fuels are expected to become cost competitive with gasoline and diesel within a few years, probably by about 2012, when large-scale conversion of agricultural waste, weeds, grasses, algae, paper, and wood into fuel will have reached maturity in age and scale of operation. Total output is difficult to project but is expected to replace about 5 million bls/day or about 30% of world total consumption of gasoline and diesel fuel. This will impact not only the oil market but also reduce the strain on the world’s petroleum refiners who currently have difficulties meeting global demand. It will also assist in the disposal of agricultural and some other waste. Brazil, the first country in the world replacing most of its fossil road transport fuel with biofuels, has experienced a significant drop in oil imports, increase in oil reserves, and improvements in environmental quality since 2002, when the decision was made to use mainly biofuels. 4.3.7

Energy Future Impacts

The rapid and unjustified escalation of the price of oil, the increasing security concerns of oil delivery from the major OPEC suppliers, the increase of politization of the global oil supply market, and the growing evidence of the major environmental damage caused by greenhouse gases has resulted in determined efforts at developing a different, more reliable, affordable, and cleaner energy future during the last 10–20 years. The results of these efforts are slowly but surely coming to fruition and will have a lasting, irreversible effect on the world. While it is difficult to project exactly when and how oil and other fossil fuels will supply much of the energy required by mankind, it is evident that a decline, first in the use of oil, later solid coal, and other fossil fuels will happen. Equally imminent is the decline of demand for Middle Eastern oil, as new sources of fossil fuel are discovered and developed by new technology, deeper offshore wells, and new discoveries. Most importantly though will be the now rapid development of alternative and renewable energy supplies. Some such as orimulsion and tar sand derived oil are already committed irreversible developments which will replace at least 4% of current world petroleum supplies within 10 years and 6% by 2025. Similarly, other new oil field developments will add another 4–6% of new supplies by that time. If we add the large-scale development of alternative fuels for transportation, particularly waste heat generated hydrogen and biofuels, then we may save an additional 8% of current (2007) oil demand by 2025. Adding the effects of renewable energy applications, such as waste and solar heat warming of buildings which are expected to reduce oil consumption globally by 2–3% to wind, hydro and other renewable sources, we can expect an overall reduction in oil consumption of about 20–25% by 2025. This would be equal to all the oil supplied by the Middle East, which is the furthest and probably least reliable of supply sources in the world, and would as a result probably be the source most affected by these energy future developments.

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CLIMATIC AND ENVIRONMENTAL IMPACT REMEDIATION OR SAVING THE WORLD FROM SELF-DESTRUCTION

Emissions of carbon dioxide from fossil fuels have grown greatly since the industrial revolution and have now reached environmentally unsustainable levels. Carbon dioxide emissions, which were only a few million tons/year at the turn of the 20th century, have grown to over 6.5 billion tons/year at the end of 2000 and are expected to grow to 17 billion tons/year by 2020 unless severe restraints are introduced. Since 1995 the rate of growth of carbon emissions has been reduced by various measures but carbon emissions will continue to grow and even at a lower rate of growth will accelerate the rapid deterioration of the earth’s atmosphere. The buildup of carbon dioxide in the atmosphere which reached levels in excess of 370 parts-per-million average would take decades to reduce to sustainable levels and reverse the dangerous rise of the sea levels even if all fossil fuels used on earth were discontinued. Carbon dioxide emissions per capita vary widely. The numbers according to the Energy Information Administration (DOE) (2006) were North America European Union Eastern Europe-FSU Latin America/Caribbean Asia and Pacific Africa

5.52 2.21 2.10 0.57 0.44 0.28

tons/capita/year tons/capita/year tons/capita/year tons/capita/year tons/capita/year tons/capita/year

In other words, North America’s per capita CO2 emissions are 20 times those of Africa and over 12 times the world average. This is obviously unacceptable and needs serious action not only to prove that America is a good and compassionate world citizen but also to satisfy its own environmental economic and social responsibilities. Most of the emissions come from road vehicle operations in North America, which also consumes the bulk of petroleum products. Over 29% of all energy used by the world’s nations is consumed by transportation. Road transport consumes about 70% of this with air, rail, and water transport 15%, 13.3%, and 1.7% respectively. Globally the percentage of world transport energy consumed is: Asia Africa Latin America Western Europe North America Australia, New Zealand Source: IEA and DOE, 2006

20.5% 3.6% 8.6% 23.3% 40.9% 3.1% 100%

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Per capita, North America consumes over 1.8 times as much energy for transport as Europe and about 17.1 times as much as Africa. As a result, the most important effort at reducing fossil fuel energy consumption in America must be directed towards transportation, particularly as transportation is nearly exclusively fueled by petroleum and contributes much of the greenhouse pollutants to the atmosphere. The share of CO2 emitted by transportation is now over 25% of total emitted. Road transportation alone contributes over 75% of that or about 19% of the total. The problem is magnified by the fact that vehicular air pollution occurs mainly in highly congested built up areas where air pollution has little escape and as a result affects large populations. Transportation is the sector of greatest concern and probably the one most readily corrected. Road vehicles have a comparatively short (5–7 year) life and new technology can therefore be rapidly introduced. Such technology is being developed and more fuel efficient and much lower emission cars and trucks are becoming available. As their popularity increases, so will sales volumes that in turn will result in economies of scale of production and price. Government can also assist with a meaningful tax policy which compensates buyers for the higher capital cost of environmentally friendly vehicles by reducing sales or other taxes and rewards users of fuel/emission efficient vehicles by lowering registration fees and fuel taxes. In fact, it may be attractive to eliminate taxes on natural gas and other cleaner fuels which will herald an increased use of hydrogen as a transport vehicle fuel. Under the Kyoto Protocol to the UN Convention on Climate Change, industrial and former Eastern block nations are committed to collectively reduce emissions of carbon and other greenhouse gases by 5.2% below 1990 levels by 2008–2012. Similarly, the European Union (ECU) is expected to impose inclusion of the environmental cost of petroleum use in the cost of electricity soon. It also requires that 22% of EU electricity be generated by renewable energy sources by 2010 (11% in 2002). While among long lived, manmade activity generated trace gases carbon dioxide has the largest impact, other gases such as chlorofluorocarbons, halons, methane, tropospheric zone, and nitrous oxide gas are similarly detrimental in trapping the radiant heat which the earth emits also contribute also contribute to the “greenhouse” effect. These anthropogenic emissions of long-lived active trace gases are real and physical evidence shows the direct cause and effect relationships. The threat of climatic change is also real and world attention is increasingly focused on this problem. The 2002 floods in Central Europe and Asia, the droughts in sub-Saharan Africa and many other unexpected climatic developments such as the melting of polar and Antarctic ice are only a preamble of future effects of increasingly significant climate changes. There is a distinct trend in climatic changes attributed in part to the El Nino effects, which has become an annual phenomenon. In fact, in many parts of the world, radical changes in weather patterns are now discernable. At the same time we must recognize that CO2 is not only produced by combustion of hydrocarbon fuels such as petroleum but also by all kinds of other activities. It has superior heat trapping ability and is an invisible gas. We may try to control

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CO2 by conservation, use of lower carbon fuels, and sequestration which involves pumping the gas into the ocean or into deep wells where it is absorbed by plants, life forms or simply contained. This method is quite inefficient and expensive. Novel processes and new methods of ocean CO2 sequestration are under development. Ways of reducing CO2 by reversing the process of combustion and turning CO3 into hydrocarbon gases such as methane, ethane, propane, butane, etc. are being studied. While such processes are feasible, they currently consume more energy than the resulting hydrocarbon gases could generate. Dr. N. Yamasaki of Japan31 is investigating the use of iron powder and magnetic catalysts to reduce the reaction temperature to temperatures attainable from waste heat of power plants. Such developments may permit reduction of CO2 emissions into the atmosphere. But a simple reduction, even to the level of emissions of 10 or 20 years ago alone may not be sufficient to repair the past damage. The marginal greenhouse contribution in 1985 was 46% by CO2 , 24% by chlorofluorocarbons, 18% by methane, 7% by tropospheric ozone, and 5% by nitrous oxide. The atmospheric concentrations in 1985 were 346 ppm CO2 , 0.001 ppm chlorofluorocarbons, 1.7 ppm methane, 0.02 ppm tropospheric ozone, and 0.3 ppm nitrous oxide. It is estimated that the preindustrial concentration of CO2 was 260 ppm, with no measurable quantities of the other pollutants in the atmosphere at that time. While CO2 emissions have continued to grow at an alarming rate since then, emission of some gases particularly chlorofluorocarbons (CFCs) has been drastically reduced, largely by introduction of alternatives or substitutes such as HCFC-22 which breaks down much more rapidly within the troposphere and have a comparatively short atmospheric lifetime. As a result the CFC contribution to the greenhouse effects is expected to decline within 20–50 years with adherence by most countries to the CFC clauses of the Montreal Protocol. Reversal of deforestation and reforestation is probably the most cost-effective means of reducing net carbon dioxide emissions in many countries. Destruction of forests particularly in developing countries for agricultural and livestock purposes results in an increase in carbon monoxide and dioxide as well as large new concentrations of methane release. Methane emissions from livestock activities could be greatly reduced by appropriate measures. It is estimated that currently 15% of global methane release is contributed by animal farming. Better methods must be developed to capture methane for energy conversion and to reduce emission impacts. This is difficult, as methane generation is widely distributed and often mobile in agriculture. Similarly, methane generated by organic waste often disposed of in huge dumps (above or below surface) generates large amounts of highly diffused methane. Hydrogen production by so-called solar water splitting shows great potential. Such solar hydrogen fuel cells are expected to advance the use of renewable energy

31

Jim Wilson, “Exhaling Energy”, Popular Mechanics, January 2003.

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in applications such as automobile propulsion. Research at the Israel Institute of Technology shows promise of resulting in a practical solar fuel cell with no polluting emissions. There is increased interest in the use of huge amounts of coal reserves in the world for use in reformation of coal to produce hydrogen through gasification, which is of increasing interest in the U.S., China, and Russia. Such reformation is expensive and only competitive with methane reforming where natural gas is expensive; yet, as noted, using coal as a feedstock for hydrogen would release huge amounts of carbon to be sequestered. Emission would therefore be replaced by sequestation, which at this time is not adequately developed to permit safe disposal or large quantities of carbon. Burying carbon dioxide and other fossil fuel emissions in deep saline aquifers and depleted oil and gas reservoirs is another method being explored to prevent such emissions from power plants from polluting the atmosphere. Other alternative pollution emission diversions being investigated as noted above are deep sea or undersea bed deposition or discharge of such emissions or ocean carbon sequestation. 4.4.1

Economic Impact of Environmental Degradation

Since the U.S. refusal to consider the Kyoto Protocol as well as earlier environmental protection agreements, major discussions have emerged between environmental scientists and economists about the costs and other issues generated by the greenhouse effect and resulting global warming. The new U.S. energy policy is largely driven by the “Report of the National Energy Policy Development Group” authored by Vice President Dick Cheney and others in April 2001. The principal conclusions were that U.S. economic growth would continue to depend on increased consumption and availability of fossil fuel; this notwithstanding the findings of the Inter-governmental Panel on Climatic Changes (IPCC) reports, based on long-term studies by renowned environmental scientists. Considering the inexcusably large contribution of the U.S. to atmospheric warming and fossil fuel consumption which is completely out of line with that of the rest of the world including that of countries with an equal or even higher standard of living and per capita income more courageous government actions will be required. Many contend that higher fuel prices would anger the U.S. electorate but evidence from other industrialized countries such as Europe, Japan, etc. shows that people adjust very easily to higher fuel prices by lower consumption, particularly if the added tax revenues raised by the government for fuel are used to address urgent social needs such as health care and education, as well as to reduce otherwise large tax burdens. Similarly, large fuel cost increases resulting from non-tax factors such as political unrest in producing countries have hardly affected consumption or living standards in the U.S. In the last decade climatic changes have caused increasingly large damage to the world economy through larger and more extended droughts in some parts of the world and devastating floods and storms in others. The floods in the summer of 2002 in central Europe devastated major cities such as Dresden and Prague. These are just

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some of the most recent examples of the effects of climatic changes induced largely by the growing greenhouse effects. Other examples abound. Flooding in China in the north, central Yangtze region, and the southwest as well as in India, Bangladesh, and Thailand has grown significantly in the last few decades. Climatologists have measured distinct climatic changes directly resulting from the growing impact of the greenhouse effects. The most economically devastating effects are probably experienced in Africa. Sub-Saharan Africa suffers not only under increasingly severe drought in the north and flooding in the south, but also complete dislocations of agricultural activity, the mainstay of many African economies. The Sahara Desert is advancing southward at the rate of 2–3 km/year, and agricultural output in sub-Saharan Africa has fallen by 3–5%/year while population growth continues at a nearly equal rate. As a result, severe starvation is experienced periodically not only in the Sudan, Europe, and Somalia, but now also in many central African countries. The economic impacts or costs of these developments are hard to measure but are nevertheless very real and huge. We know now that average adjusted per capita income and living standards in Africa, for example, are today lower than they were 50 years ago. Many countries in Africa and Asia, which were self-sustaining in food now, require massive outside food help. The same applies to some countries in South America and Asia. There are also major dislocations of fish stocks largely as a result of changing ocean temperatures and current patterns. It is difficult to estimate the total costs and economic impacts of global warming, but experts estimate them to be in the many hundreds of billions of dollars per year. These are just the direct costs and exclude secondary and consequential costs of global warming. Even more serious is the irreversibility of many of the developments caused by atmospheric pollution. The global economic impact of environmental degradation, particularly air pollution, has never been established. There is a present impact which is the cumulative effect of past pollution and the effect of current ongoing pollution and then there is the cost of future pollution which will make many parts of the earth less habitable resulting in lower crop yields and cause weather changes which endanger man and his activities. It is very hard to put an economic price tag on these developments but if history since the dawn of the industrial age is considered these costs can be expected to grow exponentially until they are not only unsustainable but also irreversible. Major parts of the globe may become uninhabitable while others unable to sustain normal human life. We have already lost 85% of the world’s forests; and deserts in Africa, Asia, Australia, and America today occupy 20% more land than 100 years ago. Fresh water supply is becoming scarce in many parts of the world and the air unhealthy for the 35% of mankind living in urban areas now, a percentage growing by 1.4% every 10 years now. Something must be done if we are to assure a world capable of providing a future for mankind. This does not mean a reduction in living standards or economic opportunities, particularly for people in developing countries, but a radical change in the way we generate and use energy.

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The major emitters of CO2 in the U.S. by sector are electric utilities 32%, transportation 38%, industry and agriculture 18%, residential and other buildings 11%, others 1%. In developing countries most emissions are from electric utilities and industry and agriculture. There is mounting evidence that there is a direct relationship between the management of the environment and development. If all mankind were to consume as much per capita energy and generate as much per capita pollution as the U.S., for example, the world as we know it would not be habitable within a century. Some degree of equity will have to be found. The clock is ticking and radical changes in technology will have to be developed. The pressure to decrease per capita consumption of fossil fuel is mounting. Fortunately, as noted, alternative energy sources and conversion technologies are starting to reach maturity. They will replace our wasteful and polluting methods used in electricity generation, transportation, and residential power use within 10–20 years in most countries. It is highly likely that the petroleum age of the industrial development will come to an end well before the middle of the 21st century and be replaced by renewable and alternative, largely hydrogen-based energy, sources for all needs of mankind. 4.4.2

Carbon Taxation

Since Norway enacted a carbon dioxide tax in 1991, other nations have followed with various indirect and direct taxation or penalty measures to reduce carbon dioxide and in some cases other detrimental emissions. It not only penalizes polluters, but also encourages development of effect sequestration or other remediation developments, as well as selection of low or zero emission fuels and processes. In the U.S. the major successes in air quality measures were the complete elimination of lead, 80% of particulates, 50% of smog, carbon monoxide and sulphur dioxide, and 20% of nitrogen oxide from the atmosphere (Clean Air Status Report, 1970–2003). Carbon Emission Management varies among countries. While a few adopted direct taxation just as Norway, others set limits which must not be exceeded. This led to the establishment of a market for pollution credits where plants exceeding regulatory limits may buy credits from other often new plants which operate below regulatory limits and therefore have credits which they can sell. Some argue that such commercialization of environmental management defeats the purpose and goal of having everyone do the utmost in keeping the environment clean. But it seems to at least provide incentives for new plants to invest in pollution prevention in excess of minimum requirements. Similarly, gasification, sequestration and other facilities offer to accept carbon dioxide for disposal at a price. In some gases sequestration may actually benefit the service provider if as in the case of Dakota Gasification Company the carbon dioxide is injected into deep old oil deposits to reduce the oil’s viscosity32 and thereby allow further extraction. 32

“Carbon Dioxide for Sale”, Technology Review, July 2005.

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4.4.3

Carbon Sequestration and Catalytic Reduction

Carbon sequestration is a method of depositing carbon dioxide permanently, usually in deep underground reservoirs which were depleted of natural gas or oil. The technology has been well developed and there are usually no indications of leaks from such underground geological formations. As Europe has a carbon-tracking system, various companies have established carbon capture and storage facilities which are offered in the market. Large-scale projects to capture and store carbon dioxide have been established or are planned as shown in the following Table 19. 4.4.3.1

Selective Catalytic Reduction – SCR33

Emission, particularly from diesel plants such as NOx . CO, HC, and particulates can be significantly reduced by use of Selective Catalytic Reduction (SCR). The Swiss Hug Engineering AG produces SCR equipment for powers between 100– 50,000 MW for both stationary and ship power plants. NOx reductions of 95% plus without NH3 with SCR units are combined with diesel particulate filters (DPF). Such filters use materials such as ceramic-oxide, silicon-carbide, metal or glass fibers with mesh sizes of 0.001 to 0.5 micrometers, arranged as monolithic honeycombs. As back pressure of the exhaust gas rises, filter elements must be regenerated. 4.4.4

Energy Balance

What are realistic projections of future energy sources and uses? There are many new fuels and energy conversion or generation methods under development. Some of these, as noted, are already in use; others only offer prospects. Yet many are for real and will before long prove economic, clean, convenient, and secure. We will attempt to develop a realistic projection of our energy future and come up with a meaningful estimate of future energy demand and supply by a whole array of Table 19. Sampling of Proposed Large-scale Projects to Capture CO2 Company or consortium (location)

Fossil fuel

Fate of CO2

Possible opening

BP (Scotland) BP (California) Statoil/Shell (Norway) FutureGen (U.S.) RWE (UK and Germany) Monash (Australia) Vattenfall (Germany)

Natural gas Petroleum coke Natural gas Coal Coal Coal Coal

Enhanced oil recovery Enhanced oil recovery Enhanced oil recovery Sequestration Sequestration Enhanced oil recovery Sequestration

2009 2011 2011 2012 2014 and 2016 2015 2015

Source: MIT Laboratory for Energy and the Environment.

33

Reuss, Hans-Juergen, “SCR and Filters”, The Motor Ship”, September 2005.

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energy or fuel sources. The results are astounding and show that in the long run our dependence on fossil fuel will end. Some major oil producers such as Saudi Arabia have recognized the danger of keeping oil prices significantly above $50 per barrel, as this encourages large-scale investment in alternative fossil fuel and renewable energy sources. The facts speak for themselves. Since 2002 over $22.4b has been invested in deep sea, tar sand, orimulsion, and similar alternative oil producing activities. These investments are expected to pay off in the production of at least 5 m bpd by 2010, growing to 10 m bpd by 2025 or about 10% of the global supply of petroleum. On the demand side, we also expect major changes as oil consumption for electric power generation will continue to diminish and become minimal by 2025, with only isolated power plants and small remote utilities using oil as a fuel. Transportation, the largest consumer of oil, is also going to undergo a radical change, with bio diesel fuels, other bio fuels, hydrogen, gas and compressed air are increasingly used as fuels in hybrid, electric, fuel cell, and other powered cars, and trucks. Global consumption of liquid fossil fuel is expected to decline by 30% by 2025 and 60% by 2050 from levels in 2007. The result will be radical changes in the world petroleum markets, with the most remote, least secure sources such as Persian Gulf suppliers experiencing the blunt of these changing market conditions.

CHAPTER 5

POLITICAL AND SOCIO-ECONOMIC EFFECTS OF THE NEW ENERGY FUTURE

We are on the verge of entering a completely new energy environment, which as discussed was for long dominated by petroleum as the principal fuel. It is important to understand all the factors and forces which influence the energy and as a result the petroleum market, particularly now when petroleum moves from the center of energy production into a lesser role in global energy supply. Global petroleum use is not only leveling off but is now on the decline, a trend expected to accelerate as more energy alternatives become available and environmental impacts are better understood with a consequent rise of concern with the impact of fossil fuel burning. Petroleum actually became a popular fuel only 60–70 years ago. In fact, at the outbreak of World War II petroleum supplied a comparatively small proportion of our energy (Figure 11). Most power plants were fueled by coal or hydropower. The demand for petroleum was largely driven by the emergence of the automobile and the introduction of internal combustion engines in agriculture and transport. In fact over 70% of all ships in 1935 were driven by steam engines or turbines with steam generated by coal. During World War II conversion from coal to oil-fired boilers took place and only after World War II did oil fuel in internal combustion engines become a major factor in ship propulsion. The reason was largely that oil-fired steam ships and internal combustion engine-propelled vessels requires less labor and could be more quickly refueled. Furthermore petroleum was actually cheaper, both to purchase and transport. As a result, it rapidly replaced other fuels in rail and water transportation as well as in many power plants while dominating road transport. As noted before, the use of petroleum peaked globally in the early 21st century. The increased costs of petroleum has attracted developments of many alternatives from clean coal technology to the use of hydrogen as a fuel or use of alternative energy such as wind, solar, wave, current, and other renewable sources. The reason for major efforts underway to develop alternative energy sources and technologies are not only the high cost of petroleum and the large environmental impact of burning petroleum but also reliability and safety of supply, this notwithstanding the fact that OPEC’s supplies a declining share of world petroleum demand. 103

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Figure 11. The Role of Petroleum in Global Energy Supply

Oil supplies come from many different countries. Sources of supply have grown since the end of the Soviet Union. Many of the former Soviet republics as well as Russia itself have become major producers who have or are developing pipelines and ports to gain access to the Western and East Asian markets. These developments are accelerating now and the export of petroleum and gas from these countries is expected to more than double between 2002 and 2010 when these exports may reach as much as 15% of total world import demand, largely replacing Persian Gulf supplies. Russia and the former Soviet republics in central Asia need the oil and gas export income to develop their economies, particularly their infrastructure. With the center of the world economy moving towards the Pacific basin, these countries whose oil and gas reserves are mainly in central and eastern Asia are well positioned to become the major supplier of oil and gas to China, Japan, Southeast Asia, Korea, and the west coast of the U.S. In the next ten years, most of these countries are expected to receive the bulk of their oil and gas imports from central and East Asia as well as Indonesia and Malaysia. Little if any Persian Gulf oil will be needed to meet their demand. While production costs in central and east Asia are higher than those in the Persian Gulf, transport costs and security of supply considerations are expected to assure them of these markets. At the same time West African production is expected to increase with Western Europe receiving more oil and gas by pipe from Russia and the Caspian oilfields and the U.S. relying more on African and Caribbean crude

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as well as Alaskan and Canadian oil and gas supplies. Persian Gulf petroleum will lose much of its market with declining petroleum demand. 5.1

POPULATION GROWTH, SOCIAL FACTORS, AND FUEL IMPACTS

A major factor affecting energy use in the past was population growth, which has largely halted in most parts of the world. We live in a changing environment. The dire predictions of a population explosion by the Club of Rome just 35 years ago are proving wrong. According to the UN Population Division data, the average number of children per woman (2.7 in 2002) continues to decline worldwide and is converging on the 2.1–2.5 children per woman in a lifetime (depending on particular mortality rates) which is a rate at which population size remains constant; though there are still countries with huge fertility rates such as Nigeria with 5.6 children/woman and Pakistan with 5.1 children/woman. Others like India and Bangladesh have reduced their fertility rates from 4.7 and 5.0 children/woman in 1980 to 3.15 and 3.20 respectively in year 2000. Similarly Indonesia’s rate has dropped from 4.0 to 2.2 during the same period. The world’s population is now growing by 77 million people per year, a rate that is expected to drop to less than 50 million/year by 2010, and 20 million/year by 2020. More than 60 countries with a combined population of over 2 billion have fertility rates below replacement levels (Europe, North America, East Asia, and South East Asia). In other words, the prediction of exponential population growth made in the 1970s has proven wrong. At the same time there remain huge differences in fertility rates. They remain inversely correlated with per capita income, education, and health care standards, which together appear to be the principal factors influencing population growth in different parts of the world. It is evident that these factors also influence social behavior, consumption patterns, as well as political developments. Democracy cannot be established and flourish without an acceptable level of per capita income, basic education, and health care, as well as personal freedoms. Without these, people will always fall prey to dictatorial exploitation and religious as well as political fanaticism. Africa and much of South Asia continue a trend of high levels of illiteracy, disease, and religious and tribal prejudice, combined with a lack of skill developments and often irrational social self-destruction and non-cooperative behavior. Meaningful economic and social progress is impossible under such circumstances. Even with their huge fertility rates, population growth is comparatively small, as life expectancy is short. In Africa and South Asia, life expectancies average 46 and 55 years, lower or hardly higher than 40 years ago when countries in these regions gained independence. Obviously the spread of diseases such as AIDS are a major contributing factor, particularly in Africa. From an energy-consumption point of view, these people consume a very small fraction of the world average on a per capita basis and the rate of growth of energy consumption is therefore much smaller than that projected on the basis of fertility rates or population growth.

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Population Explosion and the Growth of Hatred of the West

Among the most worrisome developments of recent years are the rampantly high birth rates of Muslim states that will in the long run and not so long run represent a population bomb potentially much more devastating than any car bomb, suicide bomber or even plane bomb such as used against the World Trade Center in September 2001. Many Third World Muslim states radicalize their youth instead of educating them in useful skills and establishing job opportunities for them. Saudi Arabia, together with Yemen, etc., maintains fertility rates of 6.3 to 7.3 per woman. Moslem countries in which government supports or at least tolerates radical organizations have a population of about 300 million and are among those with the highest birth or fertility rates. Malthus, the famous social economist, maintained long ago that the large population growth is the principal cause for the lack of equal opportunity and social justice for most of humanity. According to him, the rate of growth of mankind will be slowing, but this decline will be mostly in developed countries. Many underdeveloped countries will continue to grow their population without regard to sustainability in economic and social terms. This population growth is exerting both antagonism against and immigration pressure towards more affluent countries and pressure of negative growth on the countries of origin, true to Mattus’ prediction. Declining living standards, illness, and thrive, often expressed as disastrous local wars are often the result and together somewhat contain population growth. The Arabian Peninsula, Egypt, and Algeria, in addition to the Saharan African and Southern Asian, Moslem nations mostly continue their high fertility rates of 6–8 births per woman. At the same time, some Moslem countries such as Iran, Jordan, Lebanon, etc. have recently experienced a rapid decline in fertility rates to 2.1–3.4 or just above the replacement rate, largely as a result of rising living and educational standards. Saudi Arabia has a population of 23.7 m though only 17.3 m are locals. The rest or about 5.8 m are non-nationals; mostly guest workers who make up 70% of the total workforce of 7.7 m or 34% of the population. Most of the 2.3 m Saudi nationals who work are employed by government and government agencies or enterprises. In other words, only 16% of Saudi nationals work. This is largely due to the fact that 50% of the Saudi national population is under the age of 18. High birth rates and resulting rapid population growth, particularly of people under 30, causes problems amplified by high unemployment and lack of opportunities in most developing countries. This problem is magnified in Third World Muslim countries as well as in Saudi Arabia where religious fundamentalism radicalizes the population and provides an ever-growing army of disillusioned young men and women who are taught that it is all the fault of the Western world. Saudi Arabia, Yemen, and other Gulf states34 with 6.3 and 7.1 births per women in 2000 (only slightly lower than 20 years earlier) are typical examples but North 34

N. Eberstadt, “Fanatics and Fertility”, Forbes, November 12, 2001.

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African and even Saharan Moslem countries from Somalia and Nigeria to Mauritania experience a similar fertility explosion. To a large extent this is due to the subservient position of women in these societies, with few opportunities for education and careers open to them. Countries in which terrorism has recently found fertile ground, in many of which even governments directly or indirectly support or tolerate terrorist movements, vary from low to high fertility rate countries and include Algeria, Egypt, Iran, Iraq, Lebanon, Saudi Arabia, Libya, among others. High fertility and resulting young, futureless population pressure is a contributing but not the basic factor driving the hatred of the West. With basic education anchored firmly in Madrassas controlled by fundamentalists concentrating largely on doctrinaire religious teaching, many students become zealots or even bigots without an ability or desire for rational evaluations. Madrassa terrorism is increasingly an expression fostered by lack of self esteem, hopelessness, disgust with corrupt dictatorial government, demise of Moslem culture and art, and an overall feeling of impotence to cause change. Arab leaders particularly in the Middle East devote their major attention toward diversion of public opinion. America has not only become the world economic leader and military superpower but the country whose culture and way of life lead the ambitions and hopes of most of the world’s disadvantaged and continues to be a magnet for emigrants from many countries including those of the Middle East. Arab clerics and particularly Wahhabists teach their disillusioned young students in tens of thousands of Madrassas and Mosques the evils of American and Western culture. The teachings also thrive on the notion of Muslim persecution, particularly by the West, to foster hate. To a large extent hate of the West and resulting terrorism as the expression of this Arab or Moslem rage is really a reflection of self hate, inferiority complex, and disillusion with their way of life. Madrassas, which are the only schooling many Moslem men obtain in most Islamic countries, do not provide an education but narrow indoctrination in the Koran as interpreted by Wahhabi-type clerics. Many Moslem and particularly Arab country rulers and governments depend on clerics for popular support and ultimately their power. As a result, governments in Egypt, Saudi Arabia, Syria, Palestine, and others have two distinct policies; one directed towards the outside world particularly the West and the other towards their own population. In other words, foreign and domestic policies are distinctly different and usually conflicting. On the outside they support the West or the outside world, but to their own people they express the exact opposite. When caught in these conflicting policies, they will usually explain it to their domestic supporters as the way to outsmart the Western infidels and that such two-faced approaches are all in the name and interest of Islam. It is not just a god given right but command to outwit and thereby ultimately defeat the infidels. The large number of unemployed, dissatisfied youth in many of the oil-producing countries in the Middle East and North Africa, particularly the Persian Gulf, have a major impact on the reliability or safety of the oil supply from that region. All

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of these countries are ruled by non-representative leaders who, as noted before, are diverting this dissatisfaction towards the West and particularly America. They blame the West for their economic and social ills and for undermining Islam. Nowhere is this more evident than in Saudi Arabia, the cradle of Wahhabism, and the world’s largest oil exporter. The country is really a social bomb ready to implode at any time. For the world to continue to rely on Saudi Arabia for much of its economic well being or reliable supply of oil as long as petroleum continues to be a major energy source is not only short-sighted but ultimately strategic and political folly which may backfire and put Western economies at risk. Most importantly, there are both short- and long-term alternatives which permit a gradual weaning away from reliance on Persian Gulf and particularly Saudi oil, while different, cleaner, and renewable energy sources are being developed. Use of alternative renewable energy, hydrogen-based energy generation, greater use of Russian, Caspian, Central Asian, and West African crude oil as well as greater use of gas and large-scale adoption of energy efficient technology will gradually reduce and ultimately eclipse the market for Persian Gulf oil. While these developments are advancing with an irreversible or unstoppable inertia, most Persian Gulf oil producers continue to live in their selfstyled cocoons and the assumption that the world will indefinitely remain dependent on their oil. The day of reckoning may be sooner than anyone expects. When this happens, the Persian Gulf countries will suddenly find themselves under a falling sky without any shelter for protection. 5.2

EFFECTS OF THE NEW ENERGY ENVIRONMENT

The energy world of the future will be distinctly different from that which dominated the energy markets during the last 50 years. There will be an increasing supply surplus, particularly of petroleum, and oil markets will become increasingly competitive. The end of the Iraq war and the imminent reentry of Iraq as a major oil producer, in parallel with new West African, Sakhalin (Russia), Central Asian, and other developments of new crude oil sources, as well as the construction of new pipelines in European and Asian Russia and from the former Russian Asian republics to Europe and the Pacific introduce new sources of supply of millions of barrels per day into the world and particularly the North Atlantic and East Asian markets which now import much of their requirements from the Persian Gulf. The U.S. is looking at an estimate of 25% of U.S. oil imports from West Africa by 2010. This will cause radical changes in the world oil (and tanker) markets that in turn will affect in particular the economies of Persian Gulf countries; this not only because they are the furthest from the major oil markets but also because they are among the most volatile of suppliers. Furthermore African oil producers, except Nigeria, are not OPEC members. Among new African producers are Equatorial Guinea, Chad, Sao Tome, and Principe, in addition to existing producers such as Nigeria, Gabon, Angola, and others. Venezuelan orimulsion and Canadian Tar Sand oil, with reserves of hundreds of billions of barrels, are starting to become a major source of power plant fuel.

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Similarly, alternative energy technologies, both hydrogen-based and renewable, are advancing rapidly. In transportation alone we expect that as early as 2010 we will see a rapid introduction of clean diesel, hybrid, and pure fuel cell driven cars, trucks, and buses, with a saving of 15% of gasoline consumption by 2010, 25% by 2015, 40% by 2020, and 60% by 2025. As transportation accounts for the bulk (60–75%) of global petroleum consumption, this technological revolution may reduce world petroleum demand by as much as 22–24% or 20–25 mb/d by 2025. This is more than the whole Persian Gulf supply or even production capacity. In addition, petroleum demand for other uses such as electric power generation, industry, agriculture, and building services is also expected to decline by as much as 20% by 2025 as alternative energy and fuel sources are introduces. This notwithstanding the development of new energy demands by developing countries in Africa, South Asia, and South America, as they will find alternative energy sources more economic, easier to access, and more reliable. Most importantly, recent weather and meteorological phenomena, such as the European and Asian floods of 2002 and radical climatic changes are increasingly affecting public acceptance of change. In fact, there is a growing clamor for radical change in our energy policies to save the environment and assure economic and political security. This is giving politicians not just in the West but globally the incentives to support changes in energy policy and decision making which in turn drives large-scale support for changes in vehicle propulsion. Billions of dollars are now spent by governments and industry to develop new, clean or non-polluting energy or power sources and the results are an imminent change, particularly in automobile propulsion. Gasoline consumption by automobiles has leveled off and is expected to decline 2–4% per year now on a global scale. This is important, as automobiles have become the largest petroleum consumer worldwide. Yet automobile consumption of petroleum may decline by over 25% within 20 years, reducing global petroleum demand by nearly 18%. Solar, wind, wave, and current power or heat generating systems have also been perfected and become a common sight in many parts of the world. The new energy future is here to stay and its impacts must be recognized, particularly by the major petroleum exporting countries such as Saudi Arabia. Unless they start to reorganize their economies towards this new energy future, they will let down their populations and move towards an economic and political abyss. So far, with few exceptions, they have done little to prepare for the inevitable eclipse of petroleum as the world’s principal energy or fuel source. There is little time left to correct the situation and prepare for the new energy future. 5.3

POLITICAL UPHEAVALS, CHANGES, AND IMPACT ON THE OIL MARKETS

Major changes in the political environment and resulting ownership, operations, and marketing of oil and gas by some important players has caused not only concern in the energy markets but also resulted in some outright changes in energy

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policy, investment, and market strategies by the Western nations who are the largest consumers and customers. Venezuela’s, Bolivia’s, Ecuador’s, and Russia’s reassertion of nationalization of oil and gas production facilities and politication of marketing by these nations is causing both uncertainty and concern among their major customers. Many of these are trying to play it safe and are aggressively opening up new sources and alternative sources of supply. This trend and the resulting actions will in most cases be irreversible, and may impact on the long-term market opportunities of these oil and gas exporters. Most importantly, the major oil and gas importers are moving most of their energy investments from traditional suppliers to domestic production, as well as alternative and renewable energy sources. Only Saudi Arabia, among the OPEC producers, seems to have recognized that political obstacles, supply insecurity, and high prices are in the long run counterincentive and a sure way of driving customers towards alternative sources of energy and fuel supply. This is happening now in 2007 and may soon be irreversible. The Saudis now recognize that a price per barrel of oil of $50 is a sustainable level in 2007 for both producers and importers and that a much higher level such as $78 a barrel of crude oil is not sustainable and leads to a rapid change in direction and investment in alternative energy. The damage though may have been done already as noted in our discussion of commitments to whole arrays of new and alternative energy sources.

CHAPTER 6

ARABIA: THE CENTER OF THE PETROLEUM WORLD

It looked like a night wonderland    stars shining brightly and thousands of flames underneath as I flew from London to Kuwait and later Riyadh in Saudi Arabia. There were fires everywhere, as far as the eye could see. More fires than the stars in the sky. The night before I had met my hosts or consulting clients, all government executives, in a London hotel from where we went to a number of posh clubs to eat, drink, enjoy girls, and gamble. I met them again at the airport in the First Class lounge, a luxury I have rarely experienced. They were all bleary-eyed from hangovers and sleepless sex adventures. They tried to cure the effects of the nights’ debauchery with additional drinks, with one jokingly mentioning that one should never have breakfast on an empty stomach. The party continued on the flight of Kuwaiti Airlines until about one hour before landing. Suddenly all my hosts vanished and reappeared in Arab Galabias and headdress, and all smelled of strong mouthwash. They scrambled to check their hand luggage of any alcohol or other discriminating articles that they quickly disposed of. On arrival they all made sure not to be seen as cozy or friendly to me. This was distinctly different from their behavior in London. When meeting me at my hotel the next morning, they were remote and kept very much to themselves    no handshakes, backslapping or even polite or personal conversation. They similarly refused all foods not just ham, bacon and pork, but any that may have been associated with Western-style cooking, contrary to their preferences in London. This hypocrisy went much further. The same men who not just ogled and manhandled scantily dressed girls in London commented that western women in sleeveless dresses eating in our hotel restaurant were immoral and should not be allowed to behave in such a manner. Saudi Arabia is a young country and was only unified after World War I. It is actually a huge peninsula of 829,000 square miles or about one quarter the size of the U.S. or for that matter China. Yet with a population of barely 23.7 million, its population density (27/square mile) is among the lowest in the world. It is ruled by a self-styled extended royal family of thousands of ‘princes’ and 30,000 members, who essentially control the wealth of the country and govern it. Most ministers, ambassadors, and senior officials are members of the royal family, which essentially 111

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runs the country as an extended family fiefdom. A council of appointed ministers makes all the important decisions and appointments. As noted, the country has the world’s largest known oil reserves (260 billion bbls plus) or 25% of the world total (1999) and produces about 10% of the world’s oil output. Yet with all its wealth and oil revenues, much of which have been wasted, squandered or misused over a period of over 30 years, the economy of the country is sputtering. Per capita income has declined from $15,000 in 1981 to under $7,000 in 2001. Petroleum income provides the bulk of the countries’ export revenues. Its GDP reached $191 million in 1999 and has since increased with the increase of the price of oil. However, the increase in the population has been larger than the increase in the GDP and therefore per capital income has continued to fall. Eighty-percent of the Saudi population lives in Riyadh, Jeddah, and Damman. Unemployment among the middle class is 25% and among under 25 it is a staggering 50%. There are over 5–7 million guest workers in Saudi Arabia, which cost the country 35% of export revenues. The Saudi economy, like that of most Persian Gulf countries, is largely dependent on oil and most of the Saudi oil and gas is found and produced along the Persian Gulf coast. Its daily crude exports were 8.4 m bbls in 2002. Oil exports constitute 90–95% of the value of all exports, 70% of state revenues and 40% of GDP. U.S. crude imports though come mainly from other non-OPEC oil producers. Only 46.4% or 5.1 m bbls/day of U.S. crude imports came from OPEC members in 2002, of which Saudi Arabia contributed 1.5 m bbls/day or 29% of OPEC imports to the U.S. and 13.6% of total U.S. crude imports of 11 m bbls/day which constituted 60% of U.S. consumption in 2002. These amounts could easily be made up from other sources such as Russia, which is expected to increase crude exports from 2.52 m bbls/day in 2000 to over 3.85 m bbls/day by 2005. The cost of production of petroleum in major producing countries such as Saudi Arabia and other Gulf producers is and will remain well below that of most other oil producers and a small fraction of the world price of petroleum or the cost and price of other competing sources of energy. The question is therefore how alternative fuels and sources of energy will displace petroleum. Traditionally, market prices are determined by, availability, and reliability of supply, demand/supply balance and competing fuel or energy prices. During the last 30 years OPEC has tried to affect prices by controlling supplies. But we now face increasing pressures to consider other factors and indirect or economic cost in our procurement decisions. The imponderables in relying on Saudi and for that matter Persian Gulf crude oil supply are the reliability or security of supply, the cost of shipping to market, and the political costs of relying on essential supplies on such a volatile and basically anti-American country or countries. Saudi Arabia and other Gulf countries have maintained a long-standing love-hate relationship with the West and particularly with the U.S. In the past, dependence on Saudi and Gulf oil has reduced U.S. and Western leverage in the region, but this is about to change. Dependence of the Gulf States on the U.S. has grown over many years, despite a policy of depicting America as an enemy by most Arab leaders

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and governments. For Kuwait it made the difference between independence and becoming a province of Iraq. Egypt received and receives billions of dollars annually for public infrastructure and other projects as well as in support of its military, which keeps its government in power. The Saudi regime relies on the American protective umbrella to guard it against intrusion by its neighbors, while supporting vehemently anti-American and Western Wahhabi clerics and their disciples. Notwithstanding its great dependence on oil exports, Saudi Arabia and other Middle Eastern countries have essentially not diversified their economies. Most Arab, including many Persian Gulf, countries have been left behind in globalization, trade, and direct foreign investment. In part this is due to their political structure and economic policies. They did not open up to direct foreign investment and support overstaffed government and state companies. Recent cautious approaches to privatization in Saudi Arabia, for example, which would any way be impossible without reform of labor and banking laws, did not meet WTO standards. To attract foreign investment they would need to free their markets, liberalize their economies, and assure greater transparency and legal protection. There is also a need for meaningful enforcement of human rights if these countries wanted to participate in globalization and free trade. In other words, their economies should have to become open, market oriented, and democratic to effectively join the family of free market nations. 6.1

SOCIO-ECONOMIC POLITICAL DEVELOPMENT

Saudi Arabia is among the most conservative countries in the world. Not only is it not secular, but free press, democratic institutions, human rights, individual freedom, and freedom of religion are all considered Western conspiracies and are largely outlawed. Most Arab and particularly Saudi leaders lack not only popular support but also a popular mandate. They similarly failed to establish effective political models and therefore rely on archaic, non-representative governance structures that perpetuate the impotence of the electorate. Lebanon among all Arab countries is the only real pluralistic state. As a result, the present social, economic, and political conditions of most Arabs and particularly those in Saudi Arabia are of their own doing and responsibility. At the same time some Arabs such as Hazem Saghiyeh, a columnist of “El Hayat” in London suggested35 that the West has a responsibility to reduce poverty and inequality so endemic in the Middle East. This attitude is increasingly popular. On one hand, Arabs thrive and benefit from the large number of Arab states formed between the Atlantic and the Indian Ocean, while simultaneously blaming Western colonialism for fragmenting the “old Moslem empire”. They are bitter, particularly towards America, for reinstating the Shah of Iran and assisting in the toppling of an “elected” government, while at the same time relying on American protection from Bosnia to Pakistan. America is considered

35

Time, October 15, 2001.

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anti-Moslem. They do not want to recognize that America and the West gave its people and treasures to protect Bosnian and Kosovo Moslems from the Serbs, Kuwaiti Arabs from the Iraqi’s, among many others. America’s fight against the unprovoked terrorism of September 11th is considered anti-Moslem notwithstanding the fact that this atrocity was perpetuated by Moslems, mostly Saudis. In fact, there are many political, religious, and cultural leaders of Islam who until today and notwithstanding irrefutable evidence still claim that others such as the Jews perpetuated these horrid crimes. This is in line with the traditional attitude of many Arab leaders and governments to abdicate any responsibility and present themselves as the victims, even when all the facts show otherwise. There is no self-criticism in Arab culture, and no freedom of expression or of the press. Lack of freedom of expression has led to self-deception which in turn converts all lies to truths or outright hypocrisy. On one hand many Moslems hold the West responsible for their protection in Bosnia, Kuwait, Saudi Arabia, and more, while simultaneously claiming that these same foreigners called in for their own protection are infidels who defile the Holy Land, particularly in Saudi Arabia. Evidently Moslem radicals want to throw out infidels from Islamic countries to be able to more easily overthrow existing regimes and develop a Pan-Islamic nation, stretching from Indonesia to Morocco, which can confront the West and other infidels. In the meantime, a silent invasion of the West is in progress. Millions of Moslems have emigrated (legally or illegally) to Europe and North America, and now represent sizable percentages of their population. While Westerners usually restrict their family size to improve the opportunities of their children, Moslems in their midst often continue to grow huge families. I experienced this phenomenon first hand when working for an international organization which imported a secretary from one of these countries to assure cultural balance. I soon found out that not only did the ‘secretary’ not know how to type or even write beyond a fourth grade level but that she had brought with her seven children, a husband, two additional wives, respective parents, brothers, sisters, and their offspring. The extended family numbered 27. The cost of “home leave” travel to which they were entitled every two years alone costs more than 10 times the annual salary of the secretary. Adding educational subsidies, rent support, health care, and other expenses, the total cost of that hire was over 18 times the cost of a secretary hired locally. Although my experience was in Washington, similar cases occur all over Europe and North America. The cost of social and other support services for Moslem immigrants in Western Europe are usually a multiple of the average costs. Many Muslims living in countries such as France or even the USA do not accept the concept of a secular democratic republic with liberal values and man-made laws, freedom of expression, behavior, dress, and customs. As noted before, Saudi Arabia is governed by the Saudi clan in alliance with Wahhabi clerics. Wahhabism was initiated by the renowned Moslem scholar Muhammed Ibn Abd el Wahab in 1744. Wahhabism has been the basis of the political and ruling structure of Saudi Arabia ever since, even when much of the country was under foreign (Turkish, etc.) rule. Followers of el Wahhab, known as

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Wahhabis, follow a strict interpretation of Islam and denounce as infidels not just non-Moslems but also non-sect Moslems. They reject modern music, modern dress for men and women, decorations of mosques, graves and even public buildings. They use religion as a justification for political confrontation and violence. The Saudi governments and the royal family by extension are vulnerable to the intense internal pressure exerted by the clerics and the whole religious establishment that controls not just the mosques and the religious life of the nation, but also much of the educational and health care system. In fact, much of the social services are under the control or influence of the ulemas or clerics, particularly in Saudi Arabia. This is largely because it is from these self-appointed guardians of Wahhabi faith or puritanical Islam that the Saudi royalty derives much of its legitimacy. In the 1970s the Saudi society was moving towards a more open, more secular society, but after fanatics stormed the Great Mosque of Mecca in 1979 the Saudi government stopped these moves towards liberalization. Muttawas or religious police were given increasing powers, which were sometimes used with devastating results. Ulamas or Wahabi clerics supposedly learned in Islam have largely diverted their knowledge to narrow, often self-serving, parts of Islam. In fact these fundamentalists have largely diverted from the fundamentals of Islam and abused its basic teachings. The Saudi government is not a secular institution like most governments and has lost control of much of the normal government functions. The Saudi government should recapture control of the educational and other social systems so as to broaden its social and political base. It cannot continue to depend on Wahhabi clerical control of most of the social institutions. The deal is that Wahhabi clerics support the monarchy and the government lets the clerics set up mosques, social services, schools, and thereby radicalize the youth. As a result, the Saudi royalty is now to some extent an anachronism, isolated and not in touch. There is no long-term stability. They are unwilling to learn or change, and with a steadily shrinking economy and per capita income, as well as standard of living, combined with known corruption, have become the embodiment of a regime under increasing internal attack. The use of the 1973 oil embargo price increase (oil weapon) launched the historically largest transfer of wealth from the West to the oil producing nations (mainly the Arab states). For the Arabs this served not only to turn the 1973 defeat by Israel into a victory but it also served as a revenge against Western nations who after the defeat and dismemberment of the Ottoman Empire reneged on many of their promises to their Arab “allies”. The new oil wealth ruptured the established social system of the Arab Peninsula. Small cliques gained all the riches and left the bulk of the population behind to be vowed by Wahhabi clerics who were trained to blame the West for the lack of economic progress of the masses. Saudi Arabia has become a country of very rich and poor, with hardly any middle class. While thousands of royals lead extravagant lives, money does not trickle down to the basic population, and many people are worse off in Saudi Arabia than in many poorer nations. In the past 30,000 so-called royals traveled free on the

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government-owned national airline and many of them receive commissions on arms deals and other government contracts. At a recent interview, Saudi’s ambassador to Washington Prince Bandar bin Sultan admitted for example that as much as $50b out of $400b spent on development could not be accounted for. At the same time, the government takes care of the holy shrines in Mecca and Medina and spent over $25b constructing mosques and facilities for pilgrims. Islamic universities in the Persian Gulf but particularly in Saudi Arabia turn out thousands who learn about Islam but little if any science, technology, world literature, history, medicine or social sciences. Many cannot find jobs because they have no marketable skills or knowledge. Similarly, the ban on satellite dishes reduces access to information. Schools and universities often use run-down facilities with much of their budgets lost to corruption. At the same time, clerics pose a real obstacle to liberalism in teaching and the teaching of modern science. Also Saudi Arabia has become resistant to change by the Ulema and sees many Western concepts and approaches as heresy. Considering the Saudi economy, all interests of business and government are blurred by money and not socio-economic needs or by what is good for those in power and not the Saudi people. Women are basically considered inferior to men and are excluded from many social, job, and other opportunities. They also have fewer rights, may not drive, and leave the country or even their city without their husbands or senior male family members’ permission, which may be a son or younger brother. Women are not provided with identify cards and many often face rape, beatings, incest, and emotional abuse. They have little if any recourse to the law particularly when most of these injustices are performed by a close relative or with his consent. Even foreign female visitors or dependents of foreign workers are subject to many of these restrictions on women. In other words women in Saudi Arabia live essentially in an apartheid, separate and unequal society. It is ancient social desert codes, with little religious basis, that rule behaviors toward women. When a fire broke out at girl’s school No. 31 in Riyadh recently, zealous vigilantes (muttawa’s) did not allow the girls out of the burning school without their head scarves on which were in class rooms engulfed in flames from which the girls had fled. The result was a large unnecessary loss of innocent life. Muttawas are a law unto themselves in this hypocritical society. But it is not only Saudi women who suffer. Foreign women who work in Saudi Arabia are not only subjected to highly restrictive practices, but they are usually treated more like slaves, with little if any freedom, long working hours, and horrid living conditions. Foreign wives in mixed marriages similarly have no rights to their children. Saudi Arabia is the only place in the world where a foreign born and foreign national wife cannot leave without her husband’s consent. This notwithstanding Prince Saud al Faisals’ recent announcement that American women who wanted to go would be allowed to do so. Even if a woman is allowed to leave, her children must be left behind. In Saudi Arabia there is no chance for any normal custody arrangement; divorce is solely at the discretion and with the consent of the husband.

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Currently under Saudi Arabia’s strict system of Islamic justice, a husband is held guilty by association for any crime committed by his spouse or for which his spouse is accused. It does not matter if he is far away, had no possible knowledge and/or involvement in the supposed crime, he will be punished. Similarly, females are not allowed to travel, accept jobs, apply to universities or obtain any type of legal document without the permission of the husband or father in case of an unmarried female. Basically, as noted, females are considered inferior beings whose principal function is to serve males, have children, and be subjects for male pleasures. All of these factors result in a highly unstable situation with a steadily shrinking economy and rapidly growing, increasingly restless population. Yet in recent years, the Saudi government in particular has tried ad campaigns in the U.S. and other Western countries to portray it and other Arab states as peace loving, enlightened, and modern nations who are supporting all values of modern civilizations that exist in the USA and other modern countries. The Islamic world has the intelligence, culture, and history that could result in a renaissance of Islam as a center and leader of civilization. To achieve this will require a radical change in values and priorities as well as a reconsideration of self. But to accomplish this it must stop blaming the rest of the world for its wows, particularly self-imposed problems such as the lack of equitable economic participation by all its citizens as well as a more open participatory government. 6.1.1

Islam and Democracy

Samuel Huntington36 , a Harvard political scientist, predicted that after the Cold War we would experience a clash of civilizations and religious groupings. Later researchers such as Professor Ronald Inglehart37 addressed the compatibility of Islam and democracy. The issue is not only important now when the U.S. and Britain are attempting to replace the dictatorial regime of Saddam Hussein with a freely elected, democratic government in Iraq, but because none of the ArabMuslim countries has or has ever had a representative form of government. This is largely because of Islam’s distrust of secular rules or even more importantly secular law, particularly when it affects the traditional perceived prerogatives of the Islamic clergy. Inglehart suggests that this Muslim world may modernize without secularizing or democratizing. It would simply keep the theocracy in power but introduce modern technology and weapons. Many Muslims, and particularly Wahhabists, believe democracy leads to decadence and is only fit for non-believers. They similarly disagree with many of the tenets of democracy, which assume that gender plays no role in professional and decision making or governing competence. In other words, men and women 36

Samuel Huntington, “Clash of Civilizations”. Ronald Inglehart, “The Sexual Clash of Civilizations”, Foreign Policy and Cambridge University Press. 37

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are not only different but have different roles assigned by God in society which people cannot overcome with laws. Equal rights and freedom of choice are gender related and females have a narrow pre-assigned role in society, which does not include ruling or governing. Yet as noted by Nobel Laureate (2003) Shirin Ebadir Islam and human rights are not a contradiction. Similarly, Islam does not dictate a subservient role for women. Muslim and particularly Arab-Muslim countries have proven highly intolerant to deviations from their cultural traditions and view any attempt at introduction of a secular, capitalist democracy an affront not only against their religion but also culture. This may pose a near insurmountable problem in the democratization of the Middle East. There is obviously shining example of secular democracy in one Muslim country, but Turkey boasts a very different history and culture from the Arab-Muslim countries. Most importantly, the founding father of modern Turkey accepted secularism and the need for the separation of faith or church and state in a modern democracy as well as the need to provide equal opportunities for all citizens independent of gender to marshal the full capabilities of the nation. Arab culture is very different. It has remained a largely tribal society ruled by people anointed throughout history by clerics. This is not only so in Arabia where Wahhabi clerics have long supported the Saudi rulers but also in other Arab countries. Religion in many Arab countries is not just a faith but a duty that often supersedes rational decision making and may lead to violent acts which would be considered criminal everywhere else. Radical Islamic groups from Morocco to Arabia, Indonesia and the Philippines share one objective – to rid the world of infidels and establish a global Islamic fundamentalist order subject to strict Islamic law or the sharia. Any method to achieve this goal is justified, without concern for basic humanitarian values. The main immediate objectives are to overthrow Western-type democratic governments and replace them with Islamic fundamentalist regimes. Their hatred, while directed mainly at America and Israel, now really encompasses all infidels, which means any non-Moslem. Killing of innocent people is justified by their belief that only a jihad or holy war will rid the world of infidels. Under a jihad killing of any infidel, child, woman or man is justified in the name of Allah. Militant Islam is trying to reverse thousands of years of Moslem civilization that evolved systems of peaceful coexistence of people with different beliefs and values. This must not be allowed to happen. It is particularly disturbing that radical militant Islam emerges largely in the cradle of Western civilization, the Tigris-Euphrates area and Arabia – where for thousands of years human civilizations developed and cultures flourished, which accepted diversity. Other as well as western societies prosper because they are open and emphasize work, knowledge, and freedom of expression. This leads not only to higher productivity but also greater inventiveness. It provides incentives to all and not just the few. While Middle Eastern cultures provided some of the most important contributions to civilization, such as the alphabet, astronomy, and basic science, only open and free Western-type society could put human knowledge to effective use and

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develop the technological and other applications that represent the mainstay of the modern world and the foundation of the socio-economic revolution and its rewards, most of the world enjoys today. Similar to Saudi Arabia, many of the major oil producing countries, particularly in the Middle East and Africa, are authoritarian and suffer under rampant unemployment as well. They also provide lower levels of social services. Many of these dictatorships provide basic services such as police, defense, health care, and education without taxation using oil revenues for these expenses. As there is no taxation they usually can oppose popular representation. Similarly, concentrating oil revenues in government hands permits payment for large, loyal security forces and administrators. As oil revenues cover most government needs, there is little incentive for government to encourage economic development and particularly foreign investment to advance economic growth and employment. In many of these oil rich countries authoritarianism goes together and often feeds widespread government corruption and a polarized society with distinct ethnic, cultural, and economic lines defined by whomever controls the oil revenues. In most of these countries oil production is controlled directly or indirectly by government. Foreign investment is usually only allowed in peripheral activities such as accommodation of pipelines, refineries or terminals. As a result, the government makes all decisions affecting the economy. As shown in Table 15, most of the major producers in the Middle East and Africa export little else and therefore their economies are nearly totally dependent on oil revenues for foreign exchange. Few also produce much else and there is little, if any, investment both domestic and foreign in productive enterprises. As oil production and related activities are not labor-intensive, there are few employment opportunities, particularly as most oil industry employment goes to foreign experts or labor. As a result, most of these oil rich countries suffer under enormous unemployment, particularly among the young. Similarly, the oil bonanza distorted economic development. It inflated the local currency that makes exports of locally produced goods non-competitive in the international markets while making it cheaper to import goods than to produce them at home. Even agriculture and food processing is barely active in these countries and many traditional crafts have disappeared. 6.1.2

Development of Arab or Muslim Civilization and Confrontation with the West

The future of the Persian Gulf countries and particularly Saudi Arabia will be more affected by the growing trends of globalization than other nations with more diversified economies and more representative governments. Trading blocks and economic cooperation among nations are on the increase and international trade is becoming a growing force in economic development. But to participate in these opportunities requires more open, equitable societies. In most Gulf countries the educational systems fail to meet the demands of a modern society. Saudi Arabia is an example of a society moving narrowly forward

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economically and backward culturally and politically, all at the same time. The threat of political and social instability are woven into the fabric of Saudi society that tries to advance technologically while maintaining narrow religious and social intolerance. Supporting religious fanaticism had been cheap for the Saudi government in financial terms and beneficial in political terms. Yet the Saudi government does not seem to understand that in the broader world direct or indirect financial support of terrorism is as objectionable as terrorism itself. There is an increasing pressure on the Gulf countries and Saudi Arabia in particular to become more democratic in line with the approaches taken by fellow Arab kingdoms such as Jordan. But Saudi economic mismanagement, a swelling restless, youthful population which is largely unemployed and often uneducated and a powerful radical Wahhabi religious cleric establishment make this a formidable task. Furthermore, Saudi debt now equals its GDP and much of its accumulated wealth has been squandered. It therefore is no longer the rich and powerful country it once was. There is also a lack of transparency and accountability, both of direction are essential for democratization. The bombings of Saudi targets by extremists that killed and injured mostly Arabs seems to have finally convinced the Saudi government to take action against extremists. But this alone may not lead towards greater democratization or even more transparent, accountable, and representative government, as many powerful interests would be affected. Saudi Arabia may be taking a first and not irreversible step toward reform and inching towards what may be a gradual introduction of some form of election. This may give the Saudi people some role in their society but this role is undefined and probably will not include free election of a government. The average Arab and particularly Saudis know that they have been deprived of freedom and self-government. But few have any idea of or experience with freedom of expression, choosing representative government or socio-political responsibility. There is an urgent need to educate the Saudi people in political processes and an understanding of the social role and political rights of individuals in a free society. Arabs and particularly Saudis may be interested or could be convinced to embrace principles of democracy, not necessarily using Western models or structures. But to move in this direction will require wider and more liberal education, an increasing role by the people in government from the bottom up, and willingness of the hereditary rulers to at least share power. Democracy has not evolved or caught on in Moslem countries in general and Gulf countries in particular. There are many reasons for this. Secularism or separation of religion or state, liberal and professional education, freedom of expression, the role of women, equality of opportunity, and rights by all citizens are largely foreign concepts in Arab and particularly Saudi culture. Until this changes and Saudi Arabia enters the modern age not just in technological but also cultural and political terms, democracy in Saudi Arabia may be an elusive dream. Most civilizations have reconciled the relationship between philosophy, science, and rational thinking and theological or religious thought based largely on the scriptures of the faith. The teaching of the scriptures in the major monotheistic

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faiths is largely based on its interpretations and interpreters who often differ widely in their explanations of their meanings and the resulting obligations of the faithful. Thus, for example, the caliphs or successors of the prophet who succeeded him both in the East (Mecca, Damascus, Baghdad, etc.) and the Wet (Cordoba, Toledo, Fez, etc.) all encouraged not only tolerance and support of adherents of other monotheistic faiths like Christianity and Judaism but actual appreciation of the cultural contributions of these sister “peoples of the book”. Some of the most revered scholars, philosophers, and interpreters were Jews like Maimonides, Judah Halevi, and Moses of Leon who wrote the Kabala or Michael Scot who translated many of the major works of Greek philosophers and Muslim or Arabized scholars from Arabic which between 700–1200 AD had become the principal language of civilized communications around the Mediterranean and Middle East. It is interesting to note how the three monotheistic faiths dug deeply into the philosophical and scientific discoveries and learnings of pagan Greece and adopted many of the findings of Plato and Socrates among others for the development of a basis for civilization. There was therefore a distinct trend towards reconciliation between faith bound beliefs and rational philosophical or scientific discovery as a basis for civilization. In the centuries following the Prophet’s death, his legal successors therefore recognized the importance of a rational incorporation of secular and faith-based understandings into a balanced civilization. It is disturbing that many modern Muslim clerics reject this reconciling and civilized approach and insist on a narrow, purely faith-based and often distorted interpretation of the world. While ancient Islam vigorously pursued and encouraged fundamental creative freedoms, pursuit of knowledge, and the teachings of philosophy and science within monotheistic Islamic teachings, some branches of modern Islam discourages all approaches and uses of free thinking and what may be called modernity and individual liberty. Doctrinaire narrow and usually fallacious interpretations of the Koran are used to indoctrinate millions of young Moslems all over the world, in Madrasas run by narrow-minded, politically motivated clerics, uninterested in broadening the mind and educating their student or teaching of potentially useful skills. As noted, Muslims were the example of tolerance for many centuries. They applied the “dhimma” or covenant, part of Islamic law, that requires Muslims to protect the two other monotheistic religions or “Peoples of the Book” meaning Christians and Jews living in their midst and under their rule. Muslims, Christians, and Jews are not separate cultures or for that matter religions but are essentially all part of an evolving monotheistic culture based on a shared history and similar religious traditions. Saladin, Sultan of Egypt, was chivalrous, generous, and tolerant. He encouraged other religions and cultures and protected them. Crusaders on the other hand were barbarians, brutal, intolerant, and ruthless. Massacre in Jerusalem (Godfrey and Tancred). Pope Urban II promised salvation through violence (1095– 1578). “To Arabs crusaders were illiterate barbarians for whom physical force was a supreme virtue.

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This tolerance, understanding, and respect led to unsurpassed advances in literature, science, and technology, and a golden age in cultural achievements and understanding among peoples. The period of 700–1100 AD in Spain or Al-Andalus was the crowning period of Muslim civilization, which continued for a few more centuries, but then deteriorated into an abyss of self destruction. Since the fall of the Ottoman Empire in 1918, Muslim influence and power has been declining in economic, political, and military terms. In the last few centuries the dominance of non-Muslim powers, particularly largely Christian Western powers has been unchallenged. Furthermore, the economic and technological emergence of Asian non-Christian nations who all chose to use a Western approach to advance is illuminating. This is expanding the gap between Muslim nations and the rest of the world even more. Today the Western-oriented world includes China, Japan, South and Southeast Asia, and even Central and South Asian Moslem countries. As a result, North African and Middle Eastern, mostly Arab Muslim countries, are increasingly isolated, a fact amplified by Muslim militancy, isolationism, and mostly undemocratic government. These countries, while trying to take advantage of technological advances, abhor modernization, democratic processes, and human freedoms. A major problem in many of these countries is that many were able to achieve and maintain their economies by sheer luck of being located on huge reserves of petroleum and other fossil fuels. This permitted them to advance or at least maintain their economies without having to introduce modern education, personal freedom, and other vestiges of modern civilization. While Turkey has modernized economically and politically, the Arab countries that formed part of the Ottoman Empire have all lapsed into largely corrupt dictatorships, many wholly dependent on fossil fuel exports that may before long no longer be needed in some cases and will be exhausted in others. What will happen to them and particularly the Persian Gulf countries when the world’s dependence and reliance on oil in general and Middle Eastern oil in particular starts to decline and ultimately vanish? These economies will lapse from their current rather unjust distribution of wealth and income to a general state of desolation. There will be no escape from this downward spiral which leadership in these countries is trying to hide by diverting the increasing feeling of helplessness and rage into hate of the outside world and particularly the West. Instead of self-appraisal and reevaluation, the West is blamed for the increasing poverty, impotence, and lack of social and economic progress. While most Arabs live in independent Islamic states and the majority of these states apply Islamic law as interpreted by today’s’ clerics, few have achieved any prominence in literature, science, technology or even philosophy, economics, the arts or architecture. It is discouraging that Islam as interpreted by Arabs which was between 700 and 1300 AM the cradle of civilization in all these areas of human advance, has since declined into self-incrimination, and most importantly lack of intellectual contribution. This cannot possibly be blamed on differences in

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intelligence but appears to be squarely the result of the decline of Moslem culture, education, and most importantly human freedom. Arabs have lost leadership in civilization and culture as a result of their increasingly dogmatic spirituality and retreat from modernity that they cloak as a need to assure adherence to the faith. Modernity, with all its scientific and technological advances, which in turn affect lifestyle, is perceived by most as perverting Westernization; this notwithstanding the fact that it was Muslim science and technology that led civilization until about 500 years ago. Acceptance of Western-style modernization by the rest of the world from South Asia and East Asia to much of Africa and South America, and by peoples who are predominantly not Caucasian or JudeoChristian is a fact. Muslim retreat from modernity is a major factor in the present disillusionment of many Muslims, their anti-Western attitudes, and hate of infidels. This has become a nomer not just for people who are not monotheists or Muslims but anyone who aspires to a more open, free, and tolerant society. What is often called modern or Western civilization and abhorred by many Moslems is actually an amalgam of the teachings and findings of many cultures and religions. It is based on Greek, Egyptian, Roman, and Iraqi paganism, Judean Christian, and Islamic monotheism, medieval Moslem and Spanish literature, art, architecture, and science from many parts of the world. While the cultural penetration by the West in economic terms or commerce has been distinct, Muslims in general and in the Middle East in particular did not accept or even appreciate Western literature, music or the arts in sharp contrast to Far Eastern and South Asian peoples who wholeheartedly introduced these aspects of Western culture, recognizing their integrating influence and the necessity of learning Western culture in its entirety to benefit from its technological and commercial or economic advances. The failure of Muslims to appreciate the need for understanding of the whole of the Western cultural domain has resulted in a distinct failure of mutual understanding. Muslims living in Western countries do not just demand religious freedoms like others as provided by most Western countries’ constitutions, but are quite often opposed to secular types of government and societal systems that separate church and state. They try to undermine these basics of free Western democratic societies and therefore cannot find a proper place in these environments without undermining them while using the democratic means and freedoms provided to them by the same systems. It is not Muslim versus Western culture or influence. There is no more a Western culture but a modern civilization and culture that has been developed and is being used by all people, from Europeans, Americans, Africans, Caucasians, Chinese, and Japanese to Indians, Thais, and Filipinos. This civilization crosses many religions from Christianity, Judaism, Hinduism, Buddhism, Taoism, and more, and makes no claim of religious universality or demands adherence to a common faith, but offers freedom of belief, spirituality and expression, as well as understanding of the human needs for dignity, understanding, social, and physical support.

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OPPORTUNITIES FOR ARABIAN DEVELOPMENT

Many Saudi schools teach Western/US hatred. 30,000 Wahhabi religious schools and mosques worldwide call not just for the destruction of the U.S. and Western values, democracy, and religions but for replacing it with totalitarian Islamic regimes and fundamentalist societies. Saudis refused most U.S. and Western demands to arrest known perpetrators. Some of the Saudi press praises and supports terrorist activities. Some Saudis actually rewarded families of suicide bombers. Men and women are separated in all public places and women must wear veils and are forbidden to drive. Special decency police patrol shopping malls searching for women with loose scarves and forcing shop owners to shut during praying times. Every Friday there was a public spectacle in Riyadh Square when blindfolded criminals are beheaded. If Saudi Arabia and for that matter many other Arab countries are to become modern, vibrant nations with a long-term future, buoyant economies and healthy social systems, they must recapture their educational systems and expand the base of government beyond the anachronistic traditions. There is a need for economic liberalization, political opening, and expansion of opportunity. They must start to build hope and not just build on the frustration, particularly of the young, by diverting the blame to the West or infidels in general. Unfortunately, for too long have governments and royals been insulated by the clerical establishment which tries to drag the country backwards. There is a need for long-term solutions and not just temporary fixes. Radical changes based on solid needs and leading to real opportunities must replace quick handouts. It is too late to plug leaks of the system. They need a complete redesign and reconstruction. Saudi and other Gulf countries’ economies would collapse if foreign experts and workers were to leave. This is not due to lack of local labor but the fact that Gulf Arabs are basically unwilling to do physical or even professional work, preferring to work for the government or survive on generous government handouts. In many countries they are furthermore shut out of the job market by better-qualified and cheaper expatriates. In Saudi Arabia some preacher teachers even issued fatwas approving the killing of Americans and other Westerners whose cultures are called lewd. They also call for the killing of Westernized Saudis, many of whom have received death threats. To ‘protect’ themselves many, including Prince Sultan, are giving huge sums to Islamic charities accused of links to Islamic terrorism. Some content that this is not a unique example but state policy. Traditionally, Saudi’s deflect internal criticism at the West but this only isolates the ruling cliques. Also directing popular anger at the West may serve as a temporary safety valve, but the pressure will mount over the longer run and backfire, particularly as the disadvantaged recognize that the interests of business, government, and clerics are all blurred by money. Diverting public unrest and opinion by blaming the outside world only works so far. Similarly public displays of so-called justice such as public flogging and executions ultimately disgust the populace and are counterproductive in stemming

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crime. The Saudi government still has an opportunity to take charge and use its huge oil income to develop an effective, just, and liberalized secular and representative society that provides opportunities for its citizens. To achieve this it will have to cut its umbilical cord to the clerics and provide greater freedom of expression, human rights, and meaningful representative government. Only this way will the kingdom be able to survive the dual threat of loss of oil income and popular dissatisfaction and uprising, as the old diversions of unrest start to fail. Saudi Arabia still has a few years and a few hundred billion of dollars to put things right but its government will have to make the right decisions with determination and conviction. The blame game they have practiced for so long will soon unravel not only because of bin Ladens’ disciples who are also interested in toppling the royals in Saudi Arabia and similar governments in other Arab and Moslem countries, but also because an increasing number of young, educated Saudis and Arabs either from abroad or other Arab countries will demand greater representation and accountability. Even if oil incomes hold up under increasing competition and larger supply-demand imbalances, the increase in population, global inflation, and the need to repair, rebuild, and expand on ill-maintained infrastructure, as well as demand for better public services will make it difficult to meet the expectations of the Saudi population. Another issue is that most Saudis, particularly Saudi royals and the rich elite in Saudi Arabia invest largely abroad. As an example, Prince Alwaleed bin Talal al Saud, one of the richest of the royals, has a reputed $11 billion in U.S. holdings. Overall, Saudi investments in the U.S. are estimated conservatively at over $190 billion. In addition, there are sizeable investments by Saudis in Switzerland and the EU. This is a sign of lack of confidence in and concern for the local economy. The high costs of support of the clerics, corruption, and the special benefits to various sectors will have to be reduced if Saudi Arabia is to succeed in its transition to a more balanced economy that assures its citizens and particularly its young a future of opportunity. Unless this is done, per capita income will continue to decline. There is increasing pressure in and on Washington to reduce American dependence on Saudi and for that matter Persian Gulf oil, for political, strategic, and economic reasons. The global energy future looks very bright, not just in terms of reduced reliance on unstable and increasingly expensive Persian Gulf or OPEC petroleum supply, but also because of the rapid development of more environmentally friendly, reliable, economic, and often renewable energy sources as discussed before During the Gulf War of 1991, oil prices shot up to $40/bbl in 1990 terms even though there were 5 million bbls/day of excess capacity. Today’s excess capacity is even greater and sources of supply more diverse and less cartelized. The high price of oil can probably not be maintained in the long run, and under pressure of competing energy supplies. Overpricing of oil has encouraged new developments and competition, including development of higher cost production, which could not be justified at lower prices. Yet once in place there is an incentive for high cost producers, usually financed by consumer countries, to maintain a higher price to amortize their new investments.

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Saudi Arabia will have to diversify rapidly into value added activities such as petrochemicals, refining, fertilizer production, alumina refining, and various manufacturing and service industry sectors. Yet this will require a large, skilled workforce and management cadre which the country does not have. It cannot be done with foreign workers and managers alone. It will also require a radical change in the social structure, human freedoms, and elimination of the behavioral restrictions imposed by the Umulas. You cannot have a modern economy in an environment and under the restrictions of an out dated regime. Some of the other Persian Gulf states have succeeded in partially diversifying their economies and opening them up not only to foreign investment but also service and industrial activities. Oman, Qatar, and the United Emirates are typical examples. With all the bonanza of the world’s largest petroleum reserves and production, the economies of the Middle East did not fare very well. Excluding Egypt, Syria, Jordan, Lebanon, and Israel, the oil producing Arab countries of the Middle East with a combined population of 72.653 m had a total product of $390.6 in 2002 or $5,372 average per capita income. Israel, with no petroleum or other major natural resource exports, achieved a per capita income 3.4 times as large or $18,300/capita. The answer is largely that most of these petroleum producing countries in the Middle East on average obtained 93% of export income and 43% of the GNP (or $182 b) from petroleum sales and no other economic activity. The economies of the Persian Gulf countries are diverse in terms of per capita annual income, as shown in Table 17. There is an unsustainably large unemployment, 25% in Saudi Arabia, 30% in Yemen, and 15% in Bahrain. At the same time, the region suffers under a lack of foreign direct investment. For nearly 50 years regimes in the region wasted their huge oil and gas revenues instead of building up infrastructure and institutions to offer employment and opportunities to a rapidly growing population. Their economies are nearly stagnant while their populations grow at an unsustainable rate. Countries in the region lack non-oil or gas-related exports and most importantly investment capital. Arab governments tried liberalization of their economies but the effort came to a virtual half in the late 1990s. After selling off a few profitable state enterprises, privatization has essentially stopped in most Gulf countries. Government bureaucracies continue to grow and to impede foreign economic participation, banking reform, as well as privatization. Egypt’s civil service is supposed to number 7 million or 10% of the population according to the Economic Research Forum, a Cairo research group. The percentage is even larger in many Gulf countries. All of this bodes ill for countries with a rapidly growing and increasingly younger population that is loosing faith in its future. Investment in infrastructure and expenditures for social and public services in Gulf countries was, on average, a dismal 26% of GNP, compared to over 50% for the U.S. and a global average of over 38%. As a result, most of the countries in Arabia are unprepared for a post-petroleum age economy and have done little to accumulate reserves or productive and human assets to deal with the new energy

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future. There are some exceptions, as noted before but the major producers, Saudi Arabia, Yemen, and Kuwait, as well as pre-war Iraq certainly did little to diversify their economies as well as prepare themselves for the new, globalized world markets. Belatedly, Saudi Arabia is slowly moving to open some economic sectors (telecom, insurance, etc.) to foreign investment, supposedly to revitalize the economy. Unfortunately this appears to be largely a publicity stunt, as the required changes in the laws and regulations to make this work have not yet been passed. The oil rich nations in the Middle East have a larger percentage of poor and unemployed as well as a much higher fertility than other nations with an equal per capita income. They also have large numbers of unemployables and large-scale political disenfranchisement. All this must be corrected if they are to successfully survive in the post-petroleum economy. However, an even more important issue is their ability to join the forces of globalization. Globalization has been largely led by OECD, East, and South East Asian countries. It has resulted in a diffusion of capitalist markets, and western ways of life. It has also influenced personal lives by reducing the effects of local culture, religion, and government on individuals. It introduces economic interdependence, which in turn makes economic reprisals ineffective. Globalization outsourcing and increasingly open global markets have become a fact of life and nations that do not adapt to this new environment are simply being left out. This is what is increasingly happening in Persian Gulf countries and particularly in Saudi Arabia, Yemen, etc. Globalization does have many drawbacks and often discriminates against the poor in the short run. However, in the long run, it provides new opportunities. Arab nations have a lot of catching up to do. Their only hope is their young generation, which must learn to look at itself, at the hopelessness of their condition, the hypocrisy of their elders and rulers, and identify true opportunities for their future. They must recognize and work towards opportunity which will not materialize by channeling their emotions and hate toward the outside world, primarily the West. They must identify the real causes for their poverty and lack of opportunity, which are largely the artificially imposed constraints on economic and personal development. Much of the population in Arab countries feels alienated and disenfranchised, yet impotent, to do anything about their condition. Their resentment though is directed by their leaders toward secularism and modernity not their own often corrupt leadership and elite which is often the cause of their troubles. Christians, Jews, Buddhists, Hindus, and others learn to love all others in their religious studies, something that the Koran also advises. Arab nations, particularly those on the Arab Peninsula, now face a time of decision to either join the world at large or continue to stagnate. The end of the petroleum bonanza is at hand and a radical change in attitude and approach is needed. Political stagnation may soon be followed by economic stagnation. Ultimately most Arab economies and political systems will become unsustainable unless radical changes are introduced soon. They must not only change their political structure and assure effective representation but develop a modern society with modern education, health

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care, social care, business opportunities, media and related services. In other words, they must develop a truly popular participatory society not necessarily modeled after Western democratic systems but one in which people are really involved and feel a part of. Countries such as Oman, United Arab Emirates, Qatar, and Bahrain have all made major efforts at diversifying their economies, include their populations, and allow more freedom of expression, movement, and participation in the economy and government. The laggard in this process has been Saudi Arabia which only now at the end of 2006 starts to recognize that it must change as well.

CHAPTER 7

THE GLOBAL ENERGY FUTURE

We are on the verge of a major change in the way energy is produced, distributed, and used. More and more renewable and environmentally friendly fuels and energy conversion methods will become available. Use of most fossil fuels and particularly petroleum and solid coal will be reduced and ultimately phased out within a few decades. Global solid and liquid fossil fuel consumption (coal and oil) was 3824 million tons of oil equivalent in 1970. This figure grew to 4894 million tons in 1980, 5212 million tons in 1990, 5287 million tons in 1995, 5360 million tons in 2000, and has since leveled off at an estimated 5680 million tons in 2006. More importantly, oil consumption reached 2968 million tons in 1990 and has since barely increased. In fact, global oil consumption has essentially been flat at 3069 to 3300 million tons between 1995 and 2006. Natural gas consumption has leveled off at 2100–2300 million tons of oil equivalent. It appears that as shown in Table 10 not only did oil consumption reach a peak a few years ago but more importantly it contributes a declining percentage of fossil fuel consumption and an even more declining percentage of total energy consumption. Even though wind and solar power contribute only a very small percentage of global electricity supply now, their contribution is growing at the rate of 20% per year. With very slow growth (2%/year) of global electric power demand, wind and solar energy are expected to contribute as much as 10% to the global electricity grid by 2020. Similarly, nuclear power generation has remained nearly constant over the last 10 years, while hydroelectric power generating capacity now at about 850 gigawatt is expected to grow to well over 1000 gigawatt by 2010 when the Three Gorges Dam in China (30 gigawatt) and other large new hydroelectric projects come on line. Overall liquid and solid fossil fuel consumption in electric power generation has started a gradual decline. This trend is expected to accelerate and reduce total liquid and solid fossil fuel used in world electric power generation by about 20% within the next 20 years. Most of the reduction will be in oil, as clean coal technologies mature, and because coal is usually cheaper, more readily accessible and supply more secure. Similarly, use of liquid fossil fuel used in transportation will decline 129

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both because of improved technology such as use of hybrid/electric cars as well as the introduction of hydrogen fueled cars using natural gas etc. for regeneration. Most experts agree today that a decline in global petroleum consumption is inevitable. This decline may be as little as 1% or as much as 3% per year after 2010. At the same time significant new petroleum supply sources (Russia, Central Asia, Deep Sea, Alaska, etc.) are expected to come on line. Efficient transport systems (pipeline, shipping, etc.) to the major European, North American, and East/Southeast Asian markets are already under development. It is expected that by 2010 global excess petroleum production (supply) capacity will have grown to 25% and by 2020 to over 40% above demand. In other words, excess supply will greatly exceed the combined capacity of all Persian Gulf producers. While it may not significantly affect the world price of petroleum immediately, as many of the new suppliers are higher cost producers, they can all profitably deliver oil to world markets as long as the price per barrel remains above $40. Saudi Arabia and other Persian Gulf producers may then find themselves in a quagmire. They all need prices above $40/barrel to sustain their economies. However if the prices are kept at such a level, they would still be marginally profitable to higher cost producers, Western buyers will prefer purchasing from such more reliable and safer sources of supply. This particularly as many of the oil majors such as BP, Exxon-Mobil, Shell, etc. not only have large stakes in new sources of supply, but also because they control much of the refining, distribution and retailing business. Saudi Arabia as a result may find itself in a dilemma controlled by a restricted buyer market. This may force OPEC to reevaluate its production and pricing strategies. It may even result in the departure of some OPEC members from the cartel. The global energy future and particularly the future of petroleum as the world’s principal fuel is expected to change radically as sources of supply of petroleum and other fuels become more diverse and alternative fuel and renewable energy technology advance. Although the U.S. did not accept or act on the Kyoto Protocol, American grass root organizations of environmentally concerned citizens are making an impact on U.S. policy and will influence both future policy as well as or more importantly manufacturers of energy conversion or producing technologies particularly in transport equipment or vehicles. As a result, we expect a gradual decline in U.S. petroleum consumption in U.S. electricity generation and transportation. As the U.S. and its transportation sector are the largest petroleum consumers, the effect will be acceleration in the decline of global petroleum consumption. The roles of major energy sources in global energy supply are projected and show the increasing contribution of alternative and/or renewable energy sources in electric power, building, transportation, and other energy uses. It shows clearly that the fossil fuel and particularly the petroleum age on our globe will be coming to an end. This may encourage a renaissance in human and economic development worldwide, and provide for a more equitable access to clean energy and thereby economic opportunity to all mankind. This may be just in time as the ecological damage caused by 50 plus years of irresponsible use of fossil fuels, its finally showing devastating results in our

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changing weather patterns, growing deserts, declining wildlife and fish populations, melting polar ice, unhealthy polluted air, and more. It has also caused major strategic, social, and economic problems by encouraging inequities in society and among nations. We may be emerging from our fossil fuel addiction just in time, lest future generations be left with a desolate, less habitable world and life prospects. 7.1

A NEW ENERGY HORIZON

It is evident from our discussions that the use of fossil fuels and particularly oil will start to decline and increasingly be replaced by renewable energy within the next two decades. Improvements in energy use efficiency will also play an important role in reducing the need for fossil fuels. Similarly, a major increase in the use of natural gas and coal gas (driven by clean coal technology) will reduce demand for oil. Global oil demand has or is expected to peak soon and begin its gradual decline. Nuclear power supply will remain essentially constant, with quite a number of new nuclear plants installed in the next 20–30 years, replacing older plants. The world population which exploded in the last two centuries, thanks largely to medical advances, healthier and readily available food and better living conditions, grew from 1 billion in 1800 to over 6.20 billion by 2000 and about 6.40 by 2007. We are now experiencing a declining growth in global birth rate from an average of over 2% in 1965 to less than 1.2% in 2002. In fact, birth rates are expected to fall below 1% by 2015. This will affect the increase in demand for energy as the high energy consuming countries are among those with the smallest or even negative population growth. In other words, population growth, a major factor in the rise of energy demand in the past, will no longer be an issue and may in fact become a negative factor in energy or oil consumption if the world population starts to decline in 20 years, as projected by many, contrary to the dire Club of Rome predictions. Until recently and during the population bubble of the last 40 years, world energy consumption grew roughly in line with population growth and per capita annual oil consumption rose from 3.0 bbls/capita in 1960 to nearly 5.5 bbls/capita in 1978, but has since declined to below 4.5 bbls/capita, a level which has remained nearly constant between 1982 and 2006. Yet the decline is expected to resume as • oil is used more efficiently (more diesel use in transport, better building insulation and services, efficiency) • alternative energy sources become available and competitive particularly natural gas, solar energy, etc. which can usually be used with greater efficiency • environmental impact regulations are tightened and people became more educated, aware of and concerned with the importance of energy savings • hydrogen energy conversion (fuel cell) technology is perfected and its costs are reduced by mass production, particularly of automobile propulsion systems All this notwithstanding the hopefully soon to be achieved improvements in living standards in South Asia, China, Africa, and other poor developing regions of

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the world. The increase in per capita consumption of energy and particularly oil in developing countries is expected to be more than balanced by savings in oil consumption in developed countries. In fact, global annual oil consumption is expected to decline to 3.5 bbls/capita by 2020, 3 bbls/capita by 2040, and continue its decline at a more gradual rate during the rest of the 21st century. In parallel, new or expanding oil producers in Central Asia, Siberia, Africa, and more are expected to bring more than 10 mb/d of new oil production capacity onto the world market by 2010–2015, largely replacing demand for Persian Gulf oil. These supplies will have more ready access to the principal markets, largely as a result of perceived greater supply security and shorter distance. For example, Russia used to produce over 11 mb/d in 1987. Its output declined with the fall of communism and fell to 6.0 mb/d in 1995 and only started to make a comeback in 1999. It reached 7.5 mb/d in 2001 but could, according to Lukoil, one of Russia’s major oil firms, raise from its current (March 2006) production of 9.2 mb/d to over 12.9 mb/d by 2012 if large-scale investments in production and transport infrastructure are really made. Starting with British Petroleum (BP) $6.0 b investment announced in June 2003, other major investments are now being made, particularly in Siberia. Russia’s oil exports could then rise from the current level of 5.7 mb/d to nearly 9.0 mb/d by 2010–2012. Russian energy industry developments have become the focus of the energy world and massive investments have and are being made by the global energy companies in Russia’s oil giants such as Yukos-Sibneft, Lukoil, and TNK-BP and in Russia’s gas giants such as Gazprom which not only controls access to much of Russia’s gas reserves, by far the world’s largest, but also has major interests in gas transport, distribution, and marketing operations. Yet recent announcements of planned restrictions of foreign ownership of oil and gas production in Russia, among other national resource assets, may reduce badly needed foreign investments and technology transfer to the Russian oil and gas sectors. Among the major production developments is Sakhalin, the 700 mile-long island just 20 miles north of the northern tip of the Hokaido island of Japan. Sakhalin is expected to offer tens of billions of barrels of recoverable petroleum reserves and its oilfields are being developed in cooperation with a group of industry majors, such as Shell, BP, Exxon Mobil, and Chevron Texaco jointly with TNK and Rosneft of Russia to supply Japan, China, South Korea, and the U.S. West Coast. BP (British Petroleum) has invested $7.7 billion in TNK and is also negotiating the purchase of a 25% stake in Yukos-Sibneft. Similarly ExxonMobil and Chevron Texaco are positioning themselves in a deal with Yukos-Sibneft valued at $12 billion. While most of the new investments are aimed at expanding existing or developing new petroleum production, large investments are also being made in petroleum logistic and downstream facilities such as pipelines, terminals, refineries, distribution, storage, and retail outlets. The massive new investments in oil and gas production and logistics facilities in Russia, Central Asia, West Africa, and the Americas are bound to radically affect the petroleum and gas markets, particularly as the major investors are among the

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world” largest distributors. Within 5–10 years Russia and Central Asia will supply the bulk of Far Eastern oil and gas demand and become significant contributors to the U.S. energy market. This will result in excess petroleum supply at a time of diminishing demand. With over $12 billion invested or committed to new pipelines and terminals in Russia and Central Asia, the logistic problems faced in the past will be resolved and these large producers will be able to efficiently serve their markets to the detriment of their Persian Gulf competitors. These developments have an inertia of their own and will not be affected by OPEC output or pricing decisions. There are some who consider Russia also an unreliable supplier of oil and gas, particularly after the increasing confrontation between the Kremlin and the major oil and gas company management and owners with the Russian government trying to curtail their power as well as the increasing cross-ownership and cooperation with Western interests. While we are experiencing setbacks, such as the jailing of Yukos CEO and principal shareholders on tax evasion charges, foreign investments in and the expansion of the oil and gas production and delivery systems in Russia will continue as this is essential for Russia’s emergence into the global market place. The team of Yukos-Sibneft, Lukoil, and TNK-BP, for example, has also joined forces to build a pipeline to a deep water terminal at the ice free port of Murmansk, while Yukos-Sibneft is building a new pipeline from the Angask oil field to Daqing in China. Similarly, TNK is looking for an alternative to Nahodka as a terminal to supply Japan. Yukos-Subneft already owns the Lithuanian refinery and tanker terminal of Mazaikiu Nafta as well as Slovakia’s Transpetrol and may compete with TNK-BP and Tutneft for Turkey’s Turpas terminal and TNK-BP over Czech Unipetrol distribution system. TNK-BP are also bidding for Romania’s Petrom and are vying for Ukranian Ukrtatneft. In the U.S. Lukoil purchased Getty Petroleum’s 1500 strong retail network and associated facilities. Although Lukoil was not successful in a deal with Hellenic Petroleum, Croatia’s INA and Poland’s Gdanska, it is well established in Ukraine, Romania, and Bulgaria, as well as with a 79.5% share of Serbia’s Beopetrol in the former Yugoslavia. It is also trying to expand its operations in the Balkan’s, as are other Russian oil companies. Although much smaller, Romania’s Rompetrol is setting up operations in Moldavia, Bulgaria, and Turkey. U.S. and various European companies are competing for initiatives in energy cooperation with Russia to diversity supplies away from the Middle East and to build greater economic links with the world’s second largest oil supplier and the owner of the world’s largest natural gas reserves. Russia’s oil exports now exceed 5.7 m b/d but could more than double within 10 years. As noted, although the U.S. is the world’s largest natural gas producer Russia, with vastly greater reserves, is expected to overtake the U.S. within 5–10 years. U.S. production of 19.1 trillion ft3 in 2000 is expected to grow by 50% to 28.5 trillion ft3 in 2020. But demand of 22.8 trillion ft3 in 2000 and 33.8 trillion ft3 forecast for 2020 will continue to outstrip domestic supply. The shortfall now met by Canadian, Algerian, and Mexican production may in future have to be

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supplemented by imports from South America, such as Trinidad, and particularly Russia. Large LNG terminals are under development at Quintana Island (Texas) and planned near Boston for this purpose. Russia’s largest gas producer Gazprom is expanding its production, logistics, and distribution/ marketing facilities at a rapid rate now. Gazprom (Russia’s and the world’s largest LNG producer) acquired Hungary’s Bosad Chem and is trying to make acquisition of gas industries in Moldova and Belarus and Ventspils is also buying a controlling stake in Lithuania’s Lietuvos Dujos and shows interest in Greek’s Depa facilities. It is similarly planning the development of a 3000 Km ($6 billion) Baltro (Vyborg-Germany) gas pipeline in cooperation with Ruhrgus and Eon with a capacity of 19–38 billion m3 . The Baltic (submerged) pipeline is to provide an alternative route to the existing UkraineEast European pipeline which suffers from theft and political instability. Gasgiant Gazprom also bought Hungary’s Borsod Chem and is trying to acquire gas industries in Belarus and Moldova as well as buying control of Lithuania’s Lietuves Dujos. The new Murmansk terminal (2 mb/d capacity) will be serving Western Siberian oil fields and can accommodate VLCC (Very Large Tankers) year round. This $4–5 billion project is scheduled for completion by 2008 and would open new Russian oil supplies to Western Europe and the East Coast of the US. Other Russian pipelines from Western Siberia to China with a 0.4–0.6 mb/d capacity are expected to be completed by 2008. In addition, there are various pipeline developments in the Caspian Sea area and between Central Asia and China. Altogether these new oil supplies would add delivery capacity roughly equal to about 5 m bbls/day by 2010 and probably double that by 2015. This, as noted, is a large percentage of total Persian Gulf production. The new energy horizon is projected to consist of a declining global demand for oil after 2010. An increasing proportion of this demand will be increasingly satisfied from newly developed production in Russia, Central Asia, and West Africa, in addition to the traditional supplies from Venezuela, Mexico, Nigeria, North Sea, U.S., Indonesia, etc. This new oil and gas or total energy horizon will have an increasing supply/demand imbalance. This will put pressure on petroleum prices. This will have a large impact on the political, economic, and social developments in the countries of the Middle East; most of which have relied nearly exclusively on increasing their oil and gas revenues, which may not materialize in future, and exert great pressure on their economies and as a result socio-political stability maintained for long by energy incomes. 7.2

IMPACT ON ARABIA AND THE PERSIAN GULF

It is interesting to note that while the rest of the world is rapidly committing to the new energy horizon by the development of alternative energy sources, more efficient energy use, and new oil and gas production sources, Persian Gulf countries, and particularly Saudi Arabia, appear to maintain business as usual. There are some small movements in their “anti-terrorist) activities and slight accommodations in

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adjusting oil supplies to demand requirements, but little is being done to reverse or correct some of the fundamental problems. There is a need for political, social, and economic reforms which, while guarding the needs of an Islamic culture and faith, assure equitable political, economic, and social developments with basic freedoms, broad political and economic participation, and effective education, medical, and other social as well as public services. A society that recognizes the fleeting opportunities of a narrow-based petroleum economy and the importance of developing a broad economy based on a productive, well-educated population. Quality of human capital is the only lasting assurance of prosperity. Time is running out though as unlike discoveries of new oil fields, development of a new generation of wellqualified, educated, freethinking, and productive individuals takes 20 or more years. But there is no choice. Youth unemployment and with it political unrest, particularly in Saudi Arabia, is going to grow from the current unsustainable to a really dangerous level. To reverse this condition requires a complete reconstruction of the social, educational, and economic system with modern, largely secular, primary and secondary schools replacing many of the Madrassas for basic primary education. Similarly, trade schools and universities must encourage teaching of engineering, science, information, and communications technology, transportation, medicine, manufacturing, and other essential skill developments needed by a modern economy. Gulf state governments must also change the values associated with different jobs and encourage their citizens to replace many of the 10 million or more foreign workers in their midst with local talent. The current approach not only makes their economies wholly dependent on foreigners but also costs their economies tens of billions of dollars per year. It similarly perpetuates youth unemployment. Incentives should be provided for both men and women to enter the real labor market and to contribute to the economy in a productive way as well as in assisting the modernization of their societies. This does not mean a rejection but a reemphasis of Islam as a most vibrant, peaceful, and enlightening religion that encourages peaceful coexistence with and respect for peoples of other faiths. It also expects the faithful to contribute to their society and mankind economically, socially, and culturally through their work, good deeds, and cultural advancements. To achieve this requires a complete restructuring of Arabian society, particularly in Saudi Arabia, in political, economic, and social terms. The country will have to work toward universal participation of its citizens in political processes, develop a more liberal and opportunity-oriented education system, permit more private and foreign ownership, introduce greater freedoms of expression, movement and behavior, open economic opportunities, and in general provide greater transparency. It must diversify from a one sector to a multiple sector economy. Unless they move in this direction, the future looks bleak. If oil prices remain at current levels, even with an increase in new sources of global supply, yet with a declining world demand for petroleum after 2010, Saudi Arabia will not only lose market share but more importantly suffer under a continued decline of its gross national and per capita income. The latter already has declined by nearly 50% over a 30-year period. Its economy will continue to slide and it will be confronted by a

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rapidly expanding and increasingly restless young population. This is a formula for disaster that can only lead toward “Sands over Arabia” or a return to a very basic Bedouin-type economic and social lifestyle into which the Kingdom may sink. Yet todays’ Saudis are no longer equipped to endure such a lifestyle, notwithstanding the fact that they have been ruled by its edicts for long. A decline in their national income will undermine the foundations of the artificial regimen under which Saudi society is ruled and lives. Departure of foreign workers who can no longer be afforded would undermine the socio-economic fabric of Saudi life as most Saudis are neither willing nor able to perform the bulk of basic tasks and services required. It is then that the tent will not be in each Saudis’ home but be his home again. This may also affect other Persian Gulf producers, many of whom relied heavily on foreign workers, and with highly imbalanced economies may find themselves in increasingly precarious conditions, as demand for their oil and even their gas starts to dry up before the middle of the 21st century. It is unfortunate that the Persian Gulf countries and Saudi Arabia in particular relied for so long on oil as an economic, political, and strategic clout and not as a God-given opportunity for the betterment of their people through economic, social, and educational development. They have largely squandered these valuable resources over a period of 50 years when oil was king and access to cheap, producible oil offered unique opportunities to capture market share, form alliances, build up infrastructure and productive assets, as well as develop an educated, advanced, and productive population capable of leading this heart of the Muslim world into the 21st century while maintaining the traditions of Islam and reestablishing it as a major force in advancing human civilization to which it so admirably contributed major advances through the caliphs who followed the prophet for nearly 600 years into the Middle Ages. This opportunity may now be lost as the role of petroleum or fossil fuel, particularly that produced in the Persian Gulf and Saudi Arabia, is going to decline before the middle of this century and with this the opportunity to again make Arabs leaders in civilization and culture. There are many reasons for this missed opportunity, which could still be salvaged by a determined effort but time is of the essence. Attempts at large-scale emigration, particularly to Europe, may provide some relief, particularly for young unemployed. But unless these immigrants adapt to their new surroundings, this will fail as well. The main problem appears to be that many Moslems do not recognize the advantages of separation of church and state or a free democratic system and modern egalitarian lifestyles with opportunities for all. Unless these concepts are renounced as they were in Turkey by Attaturk more than 80 years ago the confrontation will continue. The imminent decline of economic power of the Gulf States will lead to an increased pressure on countries, particularly in Europe, to accommodate growing numbers of immigrants, not just to provide economic refuge but to establish a growing Islamic presence. With the high birth rate of Moslems in Europe, it is just a matter of time before Moslems gain political power in countries like France, Belgium, and Germany, which may affect the future policies of these countries.

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Our conclusions are consistent with those reached by Richard Heinberg38 . He also concludes that global oil production will peak within a few years and then decline indefinitely. In our globalized world, there is little need for the traditional role of pre-petroleum Arabia to serve as a crossroad for trade between Europe and Asia. If oil and gas exports from Arabia decline and lose markets, there is little this area can produce to sustain its population and way of life unless a radical change in social and economic policy is introduced without delay. Gulf Arabs will then again, as insinuated before, become Bedouins, which was really implied by naming these people Arabs 1300 years ago. The alternative, as mentioned, is to accept a radical change, introduce effective and universal education, freedom of speech, equality of sexes, and tolerance of other people’s religions and cultures. Fundamentalist Islam, which has dominated many Arab countries directly or indirectly in recent years, will invariably lead to greater economic decline in Arabia, and ultimately confrontation with the rest of the world. At the same time many Moslems including Arabs are making major contributions in science, art, technology, medicine, and architecture in the world at large, a clear sign that the social, cultural, political, and economic restrictions imposed by nonrepresentative governments and political systems are the prime cause for the lack of progress and dismal outlook of many Middle Eastern countries from Libya and Egypt to the Persian Gulf. It is time for Moslems and particularly Arabs in these countries, long suppressed by an unelected few with the help of cooperating clerics to assert their rights. There are many models or examples of representative government that could fit the Middle Eastern culture and environment and satisfy the long suppressed aspirations of people of the region and reestablish the glorious contributions Moslems and particularly Arabs made throughput pre-renaissance history. The alternative is continuing economic, cultural, and political decline from which a return to prosperity and world influence would be difficult. Arab countries’ plans for infrastructure and asset developments only seldom consider social and employment impacts. The problem posed is much wider and deeper. It requires fundamental social, educational, and behavioral changes, development of real long-term opportunities, and large-scale diversification of the economy. Most importantly, emphasis must be placed on a healthy balance in socio-economic progress, based on new technological, scientific, social, economic, and political realities. 7.3

NEW DRIVING FORCES OF THE ENERGY FUTURE

Alternative sources of traditional, new and renewable energy are on the verge of a global take-off. Climate, security, and economic concerns are driving many new and aggressive initiatives to generate new technology, develop more disciplined

38

The Party is Over: Oil, War and the Fate of Industrial Societies, Richard Heinberg.

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use of energy, and effective use of natural energy resources. The UN 2007 Paris Conference on Climate Change, which brought over 2000 international experts together, concluded that there is a 92% probability that human activities are responsible for the increasingly devastating greenhouse effects and that unless radical changes in energy generation and use are introduced, these effects will not only become worse but also more and more unmanageable, never mind reversible. Global effects such as Arctic and Antarctic icecap meltdowns, increases in ocean levels, ocean temperature rises, and resulting reinforcement of hurricanes and ocean strengthened storms, depletion of fish stocks and polar wildlife, as well as a general degradation of air quality among others. While globalization has opened up new opportunities for many, and particularly for previously poor parts of the world, such as South Asia, Middle East, South America, and Africa, most of whom have joined the bandwagon of development it encourages new and often large-scale increases in energy use. Development and globalization must be managed for the good of mankind and the earth in general. The world has become a smaller place and whatever is done increasingly affects all of us. In fact, globalization is no longer just an economic or trade issue in an increasingly borderless world where people invade other’s homelands and try to introduce or even impose their or new norms and values. Crime, corruption, and terrorism have become general global problems. Invasions by newcomers into old traditional nations, whom they try to not only convert but invert has become a worldwide issue, though it largely affects affluent secular countries. Human rights and freedom of expression are increasingly used to undermine the very cultures which invented and upheld these rights. So-called refugees are often emerging from their role of victims admitted to assist their safety to that of underminers and aggressors who aim to change and topple the very systems that allowed their escape from misery and even persecution. In a way we experience a confrontation between irrationality and rationality, between secular freedom and demagoguery. As a result, we face problems of environmental, political, and human confrontation and degradation. This makes dealing with the physical or climate changes much more difficult because it is often seen or interpreted as an attempt at delaying or negating opportunities for development. We face a two-sided dilemma. Any attempt at curbing continued increases in the use of fossil fuels undermines the socio-economic and political strength of the major oil and gas producers, particularly in the Middle East; yet encouraged the reorganization of the socio-economic priorities in the affluent, mostly Western world. At a time when extremists are trying to subvert free, secular societies and undermine the social and cultural values developed over a long time, using the very freedoms those same societies afforded them, the physical conditions of our earth are declining and the stability of its environment is increasingly under question. The extremist challenge to western, often secular, civilization is becoming a real economic and security threat, which often now diverts attention from the really

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important decisions facing us today. There is very little rationale for much of the extremist views and attacks in any intellectual sense, except as a reflection of their own shortcomings. As they cannot or do not want to respond to their problems at home, they use the hospitality of their hosts to attack the principles and values which have made their hosts succeed. In a way it is like cutting the nose to spite your face, but in this case the nose is not theirs but that of their hosts and protectors who offered them a haven, economic support, and political freedom which they often misuse. The increasing volatility and nastiness of extremist terrorism and the lack of effective response by most Middle Eastern regimes make it imperative to rapidly develop energy alternatives by discovery of new sources of fossil fuels, conversion to alternative energy technology, and renewable energy improvement and use. As most extremists’ homelands are dependent on income from fossil fuel production and as they historically used the oil weapon for political and strategic purposes, the civilized world has no choice and a very major incentive for the rapid development of a new lasting, secure, and environmentally clean energy future. In fact, the situation may become so acute as to pose the challenge for the rational world of economically successful nations to achieve a new energy future or due, not just because of the decline in global physical but also human environment, dominated by increasing irrational, self-serving, extremism. We must cut loose dependence on fossil fuels and the chains it brings with it. Oil and gas production has emerged as a weapon yielded not for socio-economic advantage, but as a political, extremist faith and ultimately terrorist tool. The incentives for a new energy future are clear and our work is laid out. We have the tools and much of the scientific and technological know how to rapidly move towards fossil fuel independence and thereby greater freedom from irrational extremist attack or even potential domination. With Russia, Venezuela, and other fossil fuel producers now joining constraining and often politically motivated cartels or groupings, we must become even more motivated in reorienting our energy future. 7.4

A NEW ENERGY FUTURE

The new energy future is finally picking up steam, and after decades of bickering and stalling, seems to finally take off with the determined support of all the major players, both from among the industrialized and newly developing nations. Large new recoverable fossil fuel deposits have been discovered in Alaska, American coastal waters, Russia, Central Asia, Africa, and elsewhere which nearly double the recoverable reserves estimated to exist a bare 10 years ago. The large increase in the price of oil has made it economically feasible to extract petroleum from bitumen, tar sands, and oil shale deposits, and convert coal into clean coal products such as coal gas and liquid coal. Most importantly, though, it has provided incentives for massive improvements in fossil fuel use and the development of renewable energy. We always assumed that oil prices are too high, demand growth and ultimately demand for oil would be reduced, and development of alternative energy sources

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would be encouraged. However, oil consumers are like dope addicts who are easily hooked as long as they can afford the oil. Producers are usually much smarter and reduce their price just before a critical level is reached. Oil consumption in 2002 in mbls/year by major consumers was equal to U.S. Japan China Russia Germany

7191 1935 1935 985 949

Similarly, U.S. imports came from Saudi Arabia Mexico Canada Iraq Nigeria Venezuela Other

17% 16% 16% 5% 6% 13% 27%

Except for Russia and China, major oil consumers are now stabilizing their consumption and the decline in their oil use is expected to equal increased consumption by Russia, China, India, and other developing countries. As a result, total global oil consumption can be assumed to stay in the 83–88 mbls/day range until about 2015, when it is expected to decline at a rate of 1–3% per year and reach a level of less than 40 mbls/day by 2050. 7.4.1

Energy Consumption

It is only in recent years and since the large increase in the price of oil that serious efforts were made to decrease per capita energy and particularly oil consumption. In 2001 industrialized countries used 4.7 tons/capita of oil equivalent (toe), while developing countries used only 0.8 toe per capita, with a world average of 1.7 toe per capita. Energy use depends only in part on the GDP/person, as countries such as Norway and the USA for example with similar GDP/person have vastly different consumption of energy in toe/person terms. Norwegians only consume about 66% or 2/3rds of the energy an average American consumes. At the same time, Canadians are even more wasteful than Americans, this to a large extent due to an inordinately large consumption of electricity by Canadians with 15,200 Kwh/capita versus 11,90 Kwh/capita for the U.S.A. and about half as much for most European nations. On the other hand, Chinese, Mexicans, and East Europeans consume only about a quarter as much electricity per capita as Americans. At the same time, the growth rate of primary energy use in the Middle East, Asian Pacific, and developing

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countries in general is 2.6–4.6% versus just over 1.1% per year for OECD countries. Yet the hopeful sign is that energy/GDP by OECD countries has declined by 20% between 1971 and 2001. This trend started to accelerate between 2001 and 2007 and decline is now over 1.2% per year. Considering GDP growth (averaging 1.7%) and population growth in OECD countries which is close to zero, this implies that by 2007, total energy growth will be near zero and start to decline soon thereafter. In fact, growth of total energy use by OECD countries should start to be negative by 2012 and globally by 2025, as energy saving technology catches on and becomes economically attractive. Similarly, energy waste will finally come under control as nations adopt effective tax and other incentives to battle energy waste. For example, the “Human Development Index”, a measure of human well being, reaches its maximum at about 4000 Kwh of annual electricity use per capita39 , one third of that used in the U.S. per person. This obviously indicates not only inefficient but wasteful use of electric power in the U.S., among others. This could be rectified by many of the approaches discussed before, which show that more than half the energy as well as electric power used in an average American home and about one third of electric power and total energy used in American commercial buildings could be saved by better construction, insulation, energy management, and energy saving lighting, heating, cooling, and ventilation technology. In fact, most of the residential housing (54% individual housing) could greatly benefit from the use of solar (photovoltaic power generation, solar hot water heaters, etc.) and in more isolated cases compact wind power to become nearly self-sufficient in energy, saving about 15–22% of total U.S. energy consumption or about 5–8 mbls/day oil equivalent. As noted, primary energy use in developed countries has declined by 20% per unit of GDP over the last 30 years, but opportunities abound for much more radical conservation. Road transport and particularly automobile consumption (Appendix B) could readily be reduced by 20–30% over the next 10–15 years by adoption of hybrid, clean diesel, and other new fuel saving technologies, even accounting for the 3–4% year increase in global automobile ownership and use. To achieve these consumption savings will require discipline and more importantly economic (tax) incentives. Consumption and even more importantly emission taxes will have to become the rule and emission credits or debits should be tradable nationally and internationally to provide true economic benefits. 7.4.2

Renewable Energy

Renewable energy sources are on a rise now with solar and wind energy generation growing globally at a rate of 21.6 and 29.7% per year, respectively. Similarly, biomass, hydro power, and geothermal energy generations are growing albeit at a slower rate but from a much larger base. 39

Pasternak, A.,“Lawrence Livermore National Laboratory Report No. USRL-1D-140773”.

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Hydroelectric power is receiving major additions with the completion of the Three Gorges hydroelectric plant which supplants the output of 30 coal fired power plants. Overall, global hydroelectric power output is expected to double by 2015. Wind and hydropower provide the least cost renewable energy with generating costs of 3–5 cents and 2.4–7.7 cents per kilowatt hour, respectively. Similarly, their external costs (environmental, emission, etc.) are among the lowest, yet solar energy while not cheap to install can be very attractive. The same applies to biomass, particularly if generated from agricultural waste and not corn, soybean or other food grains. Total renewable energy use accounted for just 15% of world energy40 and 19% of electric power generating energy in 2000 and 2001, respectively, excluding nuclear power. This is expected to nearly double by 2035 when 30% of world and electric power and energy respectively are expected to be generated using renewable energy. (Primary energy use in 2001, in billions of tons of oil was equivalent to 7.93 b tons fossil fuels, 1.37 b tons renewables, and 0.69 b tons nuclear.) Annual global investment in renewable energy which amounted to just $100b in the ten years between 1995 and 2004 are expected to reach $100b per year by 2012 and then continue to grow at 15–20% annually. Countries have announced various targets, but in general developed countries aim at generating at least 20% of their energy using renewables by 2015. Both BP and Shell41 predicted that renewable energy sources could account for 33–50% of world energy consumption by 2050. Renewable energy use is a most if we are to contain and ultimately reverse the effects of greenhouse gases. This is not a choice but something that must be done if we are to maintain a habitable earth for future generations. 7.4.3

New Fossil Fuel Sources

Recoverable reserves of new fossil fuel sources such as bitumen, tar sands, oil shale, and new offshore and inshore reserves are vastly greater than the recoverable reserves of the traditional oil and gas producers. As noted before, these “new” reserves account for well over a trillion barrels of oil equivalents and mounting. In fact, adding recent discoveries in Eastern Siberia, Central Asia, Africa, and Alaska to the known reserves and the new fossil fuel sources, we may well have more than 2 trillion barrels of recoverable oil reserves or seventy years worth of production at current consumption rates, assuming no further discoveries. But this is irrational as not only do we make new discoveries, but also our recoverability is continuously improving. There are also many new natural gas sources in the Middle East (Qatar, Iran, and more), Russia, Bolivia, Alaska, and more. In fact, the amount of recoverable natural gas has nearly doubled since 1990. Finally, coal reserves seem to continue to grow 40

Global Renewable Energy Use in 2000, 62.4 exajoules/year out of 422.4 exajoules total. Goldenberg, Jose, “The Case for Renewable Energies”, Thematic Background Paper 1, International Conference for Renewable Energies, Bonn, Germany, 2004. 41

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and with new clean coal (coal gas, liquid coal, etc.) technological advances, more and more coal or coal derived fossil fuel is expected to replace oil. The amount of coal reserves is staggering and equal, if not larger, than global oil reserves. There is therefore little likelihood of running out of fossil fuel in the next century or more. Considering that the massive use of fossil fuel and oil in particular is less than 100 years old, and that our fossil fuel use has apparently reached a peak and is poised towards a decline, consumers of fossil fuel will be able to be increasingly selective in their choice of fossil fuel and its origin. With increasing improvements in energy use efficiency, pressure to use renewable fuels or energy, large reserves and many new sources of supply put both pressure on price and on share in the fossil fuel markets. These trends are bound to accelerate. This may, before long, result in a serious decline in the rate making and production or supply powers of oil and in future gas producer cartels, particularly as global oil production capacity is expected to continue to grow to over 100 mbbls/day by 2010 compared to 86 mbbls/day in 2005, with new supplies mainly from non-OPEC countries such as Angola, Azerbaijan, Kazakhstan, and more. New oil and gas pipelines are being built in many parts of Russia and from Central Asian produces to both the West and to Chinese refineries. Refineries are now the weak link in the petroleum production chain and few new refineries are being built because of the uncertainties of future demands. This may further aggravate the petroleum market. Refining capacity rose to 80 mbbls/day in the early 1980s, yet consumption did not grow as expected and therefore in 1980–2000 there was excess refinery capacity and as a result no new refineries were built. When oil consumption rose again, inadequate refinery capacity and unsuitable refining capability caused major dislocations. As a result, Europe today suffers under a surplus of gasoline but a deficit in diesel fuel refining capacity. The U.S. on the other hand has an overall lack of adequate refinery capacity (20% deficiency of domestic demand). Also strict U.S. state-by-state quality regulation of gas quality adds to the problem. 7.4.4

Future Markets and Sources of Energy

Energy futures will undergo radical changes as a result of both rapidly changing demands and increasingly diverse supplies. With the leveling off and future decline in oil demand, new suppliers and expansion of production by existing producers, the global oil markets are expected to become more competitive within the next 5–10 years. At the same time, increased concerns with the effects of climate change and other impacts of pollution and determined efforts by many governments to curb carbon emissions and as a consequence oil and coal combustion is finally having an effect on the use of these fuels, particularly in developed countries though China, Thailand, and other developing countries are also using incentives to curb carbon emissions. China, for example, is trying to reduce the traditional large-scale dependence on coal as the principal fuel for electric power generation, as is India to a somewhat lesser extent. At the same time, both of these emerging

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economic powers suffer under large-scale growth of automobile use and consequent air pollution. However, overall better education, greater concern, awareness, and government disincentives keep the growth of emissions in reasonable check. The future sources of energy will be more local, renewable, and novel. Most fossil fuels will be produced locally or nearby and processed into clean liquid or gaseous fuels before combustion to reduce carbon and other detrimental emissions. Renewable energy will supply a significant proportion of energy and energy will be used much more efficiently. In fact, energy efficiency will be mandated in most countries independent of the source of energy or fuel. Waste heat will be used to generate fuels such as hydrogen or to heat buildings, grow fish or used for other productive purposes. In this way, energy conversion efficiencies would be increased significantly above those achieved now. Energy markets will deal not just in fuels, processed fuels, and electric power, but also carbon and other emissions, energy and fuel conversions, power sharing, power and fuel storage, waste energy, and other energy uses. These markets will be global and permit worldwide exchange. Surpluses and deficits will be exchanged, and effective balances in fuel and energy generation and use encouraged, assuring good use of capacity during off-season by providing efficient, inexpensive, long distance transmission using low resistance superconducting or microwave technology. This should greatly reduce capital investment; assure more effective use of capacity year round; and, operation, generation or conversion at maximum efficiency.

CONCLUSIONS

BIG IS NOT SYNONYMOUS WITH BEAUTIFUL OR MUCH WITH CIVILIZED Americans have become the most wasteful consumer society on earth. Consumption has become the locomotive of the American economy and accounts for the bulk of its Gross Product. The consumer in America is now the bell weather of American economic, social, and even political well being. As a result, America has become wasteful, overweight, unhealthy, sluggish, and addicted. Even though leaders know that this condition must lead to ultimate demise, few dare challenge what has become associated with and is proudly proclaimed as Americanism. This road to self-destruction is most evident in American use or misuse of energy in all its forms. Americans continue to live in homes that are too large (twice the European average), drive cars which on average weigh and consume 50% more than those in Western Europe, consume on average 30% more calories than the average European, and 50% more than the average Japanese. They buy twice as much clothing (albeit usually of lower quality) and discard 2–3 times as much waste by weight as the average European and 3–4 times as much as the average Japanese. Most Americans are not effectively educated in the harm their lifestyles pose to their health (and health care costs), the environment, and ultimately their economic future. Costs of petroleum and gas imports into the U.S. account for the bulk (60% plus) of its trade deficit. Its major exports are now services, technology, food, and waste products; yet the rest of the world is catching up and increasingly cut into the American services and technology markets. In many ways, America has become a mirror image of the one sector or narrow economies of the Middle East in reverse. This situation is not only unsustainable as well as economically, socially, and politically unhealthful, but it is also undermining America’s claim to global leadership. Its foreign debts are rising at an enormous rate. Should the dollar continue its decline, foreign creditors may move their investments elsewhere. American leaders claim that this is not probable, as there are no other stable markets big enough to absorb that wealth, but things are changing and with economies such as China’s growing at double digit rates per annum, returning or investing capital back in China may before long be a real threat. Americans may have to reevaluate their values and priorities to allow them to maintain their standards of living, economic, political, and strategic leadership. Much of it was attained through the sheer size or power of its assets; yet it appears that China, which is expected to overtake Japan as the world’s second largest economy soon, may overtake that of the U.S. within 15–20 years or sooner. America 145

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has become a nation of gluttons. This may have been fine though unhealthy when it drew largely on its own resources. But the situation has changed and wide open globalized trade forces it now to revalue its priorities and status. Concerns for the environment and security of fuel or energy supply have caused major changes in world public opinion, economic and political policies, as well as global trades in recent years. This trend is expected to accelerate decisions and commitments which may affect the energy markets for good. The European Union committed itself to reduce carbon emissions by 20% by 2020. It also issued a challenge that if the USA would join this effort, it would increase its CO2 emission reduction to 30%. With cleaner diesels and a 2–3%/year reduction of emissions by transportation in Europe, these objectives seem achievable. In parallel, Japan and now also China and Korea are joining the CO2 emission reduction campaign. According to the IEA, Japan’s energy consumption as a percentage of its GDP is the lowest in the world. Japan has been a leader in improving energy conservation and reducing greenhouse gases without impacting on comfort, standard of living or its economy. There are many valuable lessons America can learn from its experience which has resulted in Japan using less than half the amount of fossil fuel per capita than America, while maintaining an economy which is in many ways more advanced and more luxurious than that experienced by Americans. Japanese enjoy more advanced communications and electronic services, more effective transportation and services. They usually have smaller houses and offices, and use smaller cars, but these in turn are often equipped with more convenience or luxury features than the larger American homes, offices or vehicles. Japanese use cell phones with GPS maps, enjoy higher tech appliances and tools as well as greater service access than do most Americans. They enjoy luxuries; yet are not wasteful. They recognize that proper recycling and energy saving is in everyone’s interest. Their government provides meaningful incentives to conserve energy and maximize use of renewable energy, such as solar (photovoltaic) panels, electric toilets, and hydrogen fueled fuel sells for domestic power. As a country wholly dependent on fuel or energy imports as Japan has little or no fossil fuel reserves, the Japanese are conscious not only of their dependence on insecure fuel supplies, but also the socio/environmental impact of this dependence on a very densely populated series of islands in a hostile Pacific Ocean in an earthquake prone area. Ten years ago Japan made a commitment in Kyoto of a 6% annual reduction in greenhouse gases to achieve a 20% reduction below 1990 levels within 10 years. Japan, with the world’s second largest economy, is showing that responsible management of energy and the environment do not contradict or impede economic success and social well being. In fact, Japanese claim that environmental management actually enhances the quality of life, by assuring a cleaner environment, water, and air, and as a result, a healthier life. It also helps enhance national pride and social consciousness. While some may claim that this is largely supported by Japanese traditions or customs and would be hard to introduce in the U.S. or even Europe, the fact is that most Americans and Europeans are convinced

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by now that climate changes are largely manmade and that we must work towards assuring a reduction of greenhouse gases. It is largely certain business interests and overcautious politicians who are afraid of any changes which might affect traditional American freedoms. However, the popularity of hybrid cars and other energy saving devices indicated broad public support for measures towards a cleaner environment particularly if, as shown by the Japanese, such measures do not affect but enhance the standard of living and quality of life. The problem is not really public acceptance. The American public is increasingly inclined to work towards reduction of harmful emissions and wasteful use of energy. The problem is really economic. American automobile manufacturers, as one example, developed large trucks, SUVs, and other fuel guzzlers as profit leaders. Their profit margins from these vehicles far outweigh those achievable from sales of fuel efficient small vehicles, particularly as these have to compete with small imports. Notwithstanding this strategy, the three major U.S. automakers have become unprofitable, both because of the small profit margins on those profit leaders, and losses on some other models, as well as their health care and other benefit commitments to workers. The problem was magnified by major foreign automakers, relocation of manufacturing to the USA, where they paid American wages but had lower overhead such as health care and pension costs than their U.S. competitors. There are many other examples which indicate that the problem is largely one of lack of recognition by Americans that their leadership is being challenged. American management techniques are no longer supreme, and even its productivity no longer leads the world. Americans work more hours than Europeans and many others, but this alone may not assure economic advantage. America will have to recognize that not only are its and global resources limited, but as a leader it must show even greater restraint than less endowed nations, particularly when much of what it consumes comes no longer from its own resources or endeavors. Only thus will it be able to continue to claim leadership. Americans do not save and are used to living on credit which is increasingly credit extended by foreigners. The same applies to CO2 and other greenhouse emissions. Here again, Americans have lived too long on the ‘emission credits’, low energy consuming nations provided. In our increasingly more egalitarian world, this will not be possible any longer.

POSTSCRIPT

Fossil fuel and petroleum in particular has been the fuel of choice during the second half of the 20th century. Yet today there are increasing constraints on fossil fuel use introduced by concern with global warming, health impacts of air pollution, dependence on foreign, often unreliable suppliers and increasing costs. Various options are being developed such as new and often remote sources of production of coal, petroleum, and gas. Deep ocean drilling, subarctic, and other sources of fossil fuel are under development with natural and coal gas production growing at an increasing rate. More attractive approaches of increasing interest are developments of alternative as well as renewable energy sources as well as biofuels. These may be more expensive in the short run but may offer more acceptable, reliable, and ultimately more economic solutions to energy generation and fossil fuel substitution. We are well on the way toward achieving energy technology developments that will be cleaner or clean, often renewable, effectively usable, and more reliable or secure. The state of development of alternative energy sources as described and their impact on traditional fossil fuel use affects Middle East oil and gas producers more than others, both because of their comparative remoteness from major markets as well as real or perceived insecurity of supply. At the same time, we recognize that many producers of fossil fuels are using their assumed market powers for political, strategic, and economic ends. In fact, energy or fossil fuel supply has become a geo-political and strategic weapon of choice, wielded by producers in the Middle East, Russia, South America, and elsewhere. While this is not the first time that assumed market domination in a strategic economic sector such as energy is used thus, it comes at a particularly sensitive time when the world faces global terrorism, fundamentalist Islamic extremism, and other challenges to the established globalized world socio-economic and political order. As a consequence, the move towards alternative fuel and energy sources and particularly renewable energy has accelerated and received a huge boost in the last few years. The green revolution which had been opposed by major economic interests, particularly America, which for long did not recognize the need for implementation of the Kyoto Protocol has now gained steam and more universal acceptance. Huge amounts of money and resources are being devoted to finally veen mankind from dependence on oil as the primary fuel. We are at this time at the start of a real economic revolution with major political and strategic implications which will change the global environment. Even though oil only accounted for about 6–8% of the gross global product, it had become a geo-political weapon of choice for many producers, particularly Russia and OPEC. The resulting uncertainties have played 149

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a major role in driving moves towards alternative fuels and sources of energy and may soon kill the goose that laid the golden eggs for major oil producers. We will then face a different world devoid of the long-term strains that oil politics imposed not only on the globalized economy but also on international relations. Oil and gas supply controls and revenues have been used for some time now to gain political and strategic leverage and force adoption of otherwise unacceptable or disadvantageous conditions. The future will hopefully be more benign and permit rational socially and environmentally beneficial economic development. Otherwise the world at large would find itself economically dependent and socio-politically beholden to irrational extremists who are trying to suppress the hard won freedoms the secular world has achieved with huge sacrifices in labor and societal developments, such as restricted family size, hard work, discipline, and openness. We cannot permit all these achievements to be sacrificed to the whims of medieval regimes simply because they were naturally endowed with fossil fuel reserves. We must regain a measure of rational socio-political and economic balance which would be greatly enhanced by less dependence on fossil fuel, particularly from the Middle East. Another yet overriding issue is the impact of fossil fuel use on the environment, which is now accepted as a fact we must confront. It is not something we cannot just assume away. Similarly, large polluters such as the U.S. will soon be overtaken by China and maybe before long by India. The U.S. will have to lead the world in a determined effort to reduce pollution. There is a notion, particularly among developing countries, that every country should have the same per capita rights to pollute. This as advocated by India’s Moutek42 is perfectly legal and theoretically just. However were this to happen and China plus India with a combined population of 2.4 billion or 7.5 times that of the U.S. would emit as much pollution per capita as America, it would take very few years before a climatic disaster would strike our globe affecting all of us and the future of the world as we know it. We have to understand that we are interdependent and cannot continue unilaterally in most areas of human activity, but most importantly in energy use. America’s irresponsible energy policy must change lest it becomes the lynch pin of a global disaster. The world is looking for America’s response. Europe, Japan, and other developed nations are already leading effective efforts in reducing fossil fuel pollution. America must not just follow but reestablish itself as a most responsible party in the global war on greenhouse gases and thereby convince newly developing nations not to use their pollution credits but join the environmentally responsible. Notwithstanding China’s and India’s position that they have contributed little to the greenhouse effect in the past and as a result should not have to pay dearly for clean energy, such as expensive pollution prevention measures, costly alternative fuels, and renewable energy, they and other developing countries are in general assuming a responsible stance in their energy policies. China, for example, plans to

42

Zakaria, Fareed, “Preiew of a Post-U.S. World”, Newsweek, February 2007.

POSTSCRIPT

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build as many as 26 nuclear reactors (Areva, Westinghouse among other suppliers) by 2020 to reduce coal fired power plant pollution and dependence on oil. These together with the vast expansion in hydroelectric power plants will reduce the percentage of electric power generated by steam coal fired plants from 72% to less than 43% by 2020, if all these programs are implemented. At the same time, though, automobile generated emissions in China are expected to triple by 2020, largely negating these greenhouse effect savings. There is though hope that technological improvements in automobile technology and fuels will result in large reductions in automobile emissions. The U.S., as the largest polluter, must lead the way in radically reducing harmful emissions to convince the new global economic powers to follow suit and adopt a similar strategy, particularly if such an approach is not only environmentally beneficial but also economically attractive. We are now at a threshold of a new energy age which, if accepted and managed effectively, offers mankind a more healthy, sustainable, and equitable development revolution in which globalized trade, economic, social, and cultural developments thrive for the betterment of people and their environment. This may be just on time as the energy future is now being shaped by many political and economic factors which force a completely new approach by Western energy suppliers and users. Russia, for example, which since 1992 has encouraged large-scale investment and technology transfer from the West, particularly to advance its oil and gas production, is now in 2007 demanding shares or participation in all these ventures, often at highly discriminating or even confiscatory terms which make its claim of an open market economy a mockery. In fact, many of these 2006/2007 government takeovers are really renationalizations, often with inadequate compensation. Globalization and energy conservation in developed countries will result in a radical change in the global energy consumption patterns. While in 2000, 80% of world energy consumption was used by 20% of the people, by 2012 we expect 85% of all energy will be consumed by 50% of the people, a major change in development. This in turn will result in a radical change in the energy, particularly fossil fuel markets, and assure greater social equity.

FINALE

In the mid 21st century, America had sunk into a state of dependence. Much of its economy, particularly what remained of manufacturing, major real estate, and large tracts of land were now owned and used by foreign interests. By 2020, American foreign debt had reached 60% of its Gross Domestic Product and foreign creditors started to lose faith in U.S. Government securities and the U.S. dollar, which had lost value consistently and was by 2020 only worth about half a Euro. With no other large-scale investment opportunity within and without America, foreign creditors went on a massive purchase binge in America after 2020 and started to buy up U.S. real assets. Now by mid century, many of the most prestigious American firms, real estate, service, and infrastructure assets were largely or wholly owned and operated by foreign interests. Chinese, Japanese, and other Asian investors were mainly involved; though some Europeans were also participating in buying up U.S. assets. Unemployment in America reached 10%, and living standards were declining as the middle class was decimated and Americans were increasingly engaged in low wage service jobs, while much of the executive positions were filled by foreigners. The country could no longer afford large military and foreign aid expenditures, and had lost much of its international standing in economic, strategic, and even intellectual or cultural terms. Its major opportunities were now in natural resources and agriculture, a return to the state of the country 150 years earlier. Americans could no longer indulge, and American consumers were forced to concentrate largely on buying essentials. America had lost its prowess and was trying desperately to at least maintain a semblance of its old glory in a world where most economic and even technological advances occurred in Asia. Increasingly Asian companies outsourced services and even manufacturing to American companies, and many skilled Americans emigrated to find better jobs, primarily in Asia. European nations also suffered loss of economic prominence and leadership in many areas in which they had ruled supreme, such as luxury goods in apparel, jewelry, cosmetics, and automobiles. The clock had really gone full circle. Asia, which had been an economic backwater for long after offering some of mankind’s major scientific and technical advances long ago, had reemerged as the global economic and technical center. Largely isolated from the violent and costly confrontations between the major Abramaic faiths, Islam on one side and Judeo-Christianity on the other, which in many ways devastated Middle Eastern and North African countries and resulted in major downturns of Western economics, Asia emerged as the new global center. We are well on out way towards this scenario. 153

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FINALE

A major factor endangering America’s future is the lack of recognition of the impact of energy insecurity, as well as its economic and environmental costs on America’s future, this not only as a global leader but also as a wealthy, free, secular, democratic society. It was not solely the high direct and indirect costs of indulgent energy and particularly fossil fuel consumption but also the lack of consideration for the long-term effects. Temperature zones have recently consistently crept northwards, with major desertification of formerly fertile lands in Texas, Arizona, and other southern states. These developments may significantly reduce future American agricultural outputs. Americas refusal to ratify and implement the Kyoto Protocol, continued selfgratification by its people without serious concern for the global environmental and socio-economic implications and large-scale ignorance by the American public of global issues, all have become a formula for loss of respect for America. Selfgratification has become a major American concern, this combined with a lack of global moral responsibility diminishes any claim for American moral superiority. America’s energy addition and half-hearted attempts at fossil fuel conservation or reduction appear in many ways as dysfunctional responses to global demands for American leadership in rationalizing energy management. America’s claim of moral superiority must be backed up by action and example without delay. Its status and respect by others is now at a historic low. Self-gratification, as noted, seems to be the major concern, with little consideration for global moral responsibility. America must wean itself from its “supersizing” habits, its litigious attitudes or approaches, and reemphasize the building of an educated, moral, free, and cooperative society. Globally 94% of all lawsuits are filed in the USA. Litigation or the threat of it has made American health care and other social services the most expensive in the world with quality often relegated to a low priority. America may yet prevent its low of leadership and much of its economic and strategic prowess by radically changing its priorities. Greater discipline, lesser greed, and true applications of its own historic guiding principles, and moral values, which for long served America in becoming great and a guiding light for mankind, must be rekindled to save the country from sinking into abyss.

APPENDIX A

PRODUCTION, EMULSIFICATION, TRANSPORTATION, AND USE OF ORIMULSION43

While typical Orinoco Belt wells are about 1,000 meters deep, many deposits are much closer to the surface. High-pressure steam is periodically injected into the well head to heat the reservoir and liquefy the heavy crude so that natural bitumen can be pumped to the surface using an established lifting technique. Once it reaches the surface the bitumen is degassed and the water contained in the bitumen, which has a high salt content, is removed in dehydration and desalting processes. The dry bitumen is then stored and handled at 85 to 90 C. To transport the bitumen, it is next emulsified. The objective of the emulsification process is to pulverize and disperse the natural bitumen in fresh water (27% to 31%) and make it viscous enough to be pumpable at reasonable temperatures. MAIN FEATURES The emulsification process is usually performed in two stages, using a series of dynamic and static mixers that produce a very stable emulsion. The emulsion produced must satisfy strict specification limits. To achieve this small amounts of non-ionic surfactants are added (phenol ethoxylate group). The water in the emulsion acts as a carrier of the bitumen to facilitate its handling and transportation at 20 to 30 C. As a result, the emulsion called Orimulsion becomes pumpable and can also be stored for reasonably long periods in transit or at the loading/unloading points. (Storage and handling conditions of orimulsion are summarized in Table A.1.) Orimulsion is a stable dispersion of pulverized natural bitumen in water. There are certain adjustments required to facilitate the burning of Orimulsion on existing plants. These can usually be readily be made by existing fuel delivery, storage, and handling systems. In general only minor adjustments to the heating and pumping facilities are required. Similarly design specifications of existing handling systems need to be evaluated for the greater throughput of Orimulsion, particularly to ensure

43

Largely Based on Bitor Orinoco – Orimulsion Publication, 1996.

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APPENDIX A

Table A.1. Storage and Handling Conditions GENERAL

Temperature

Shear and pressure drop

Contamination with other materials

Orimulsion is a shear thinning non-Newtonian fluid and thus exhibits different handling characteristics from Newtonian fluids such as heavy fuel oil. The main factors to be considered when designing plants for firing Orimulsion are temperature, shear, pressure drop, and contamination Orimulsion should be maintained at between 5 C and 70 C. A temperature above 80 C the effectiveness of the surfactant to maintain a stable emulsion is reduced, hence it is recommended the surface metal temperatures in contact with the Orimulsion do not exceed 78 C. Excessive shear due to high shear pumps or excessive fluid turbulence may cause deterioration of Orimulsion and should be carefully considered during the design or retrofit phase. Instantaneous pressure drops across values or other restrictions should never exceed 7 bar. Orimulsion is not compatible with liquid fuels normally handled in power stations. The level of contamination of Orimulsion with other fuels should therefore not exceed 2% w/w.

OPERATIONS Delivery vessel transfer pumps

Delivery pipework

Storage

Strainers and filters Heating facilities

Existing tanker and barge pumps are considered satisfactory for unloading Orimulsion. Both positive displacement and single state centrifugal pumps have been used successfully for tanker and barge unloading. It is acceptable to use the same delivery pipeline for both heavy fuel oil and Orimulsion. Displacement of heavy fuel oil by Orimulsion and vice versa has been carried out successfully for trial operations, characterized by a definite interface between the two fuels and minimal contamination of either fuel. The Orimulsion remaining in the pipeline will only need to be emptied if the ambient temperature is low and there is no form of trace heating. Any trace heating system should be operated in such a way as to ensure that the surface metal temperature does not exceed 80 C. Storage tanks previously in heavy fuel oil service are suitable for Orimulsion storage although they may require desludging of tank bottoms. The storage tank should be kept at a temperature which will assist the handling of Orimulsion and ensure that it arrives at the burner front at the desired temperature. Typical storage temperatures are 20–30 C and it is recommended that storage temperatures do not exceed 55 C. Duplex type or similar coarse filters as used for heavy fuel oil, having a mesh size of 740  m or larger should be installed in accordance with normal oil firing practice. For any type of heating system in static locations (tank coils, outflow, heaters, etc.) it is recommended that a heating medium such as hot water is used to ensure that surface metal temperatures do not exceed 80 C. For dynamic installations (fuel recirculation, final stage heaters, etc.) Orimulsion may be heated with low pressure saturated steam (maximum pressure 3.5 barg), hot water or thermal fluid.

PRODUCTION, EMULSIFICATION, TRANSPORTATION, AND USE OF ORIMULSION Pumping facilities

Valves

Flow materials

157

All constant volume positive displacement pumps (screw, vane, gear, etc.) are suitable for Orimulsion service. Fixed speed transfer pumps that spill back to storage can be used provided the discharge pressure is below 7 barg. For high pressure installation it is recommended that the pumps are fitted with variable speed drives to control fuel flow by varying pump speed rather than by high pressure spill-back. Standard valves can be used with Orimulsion, the shear rate through the value in the fully open position should be less than 500s−1 . Valves which impart pressure drops in excess of 7 bar should not be used without careful evaluation. Non-intrusive meters (Coriolis, magnetic inductive type, etc.), positive displacement and turbine meters can be used with Orimulsion. Direct reading devices (orifice plates, area meters, ventures, etc.) should not be used due to their high shear characteristics and risk of blockage.

that temperature and pressure safeguards required are met. Similarly burners and boilers may require minor modification but boiler performance will be virtually unchanged. Boiler modifications such as the addition of soot-blowers to an oil-fired boiler may be required if not already available. In the last 12 years (since 1991) a number of users and potential users have gained experience with Orimulsion as shown in Table A.2. Similarly typical performance of Orimulsion in commercial plants is summarized in Table A.3.

Table A.2. Trials by Potential Users Combustion of orimulsion has been proven in large-scale trials successfully conducted in a wide range of power generation and industrial plants around the world. These trials have established orimulsion as a competitive fuel for electricity generation and use in industry, with its reliability, consistency and environmental performance fully tested. Aalborg Portland Cement UNICEM RMC Aughinish Alumina Townsend Hook Paper Mill New Brunswick Power Powergen

Electricidade de Portugal EVS SK Power Florida Power & Light ENEL Chubu Electric

Denmark Italy England Ireland England Canada England England England Portugal Germany Denmark U.S.A. Italy Japan

Cadola Cement

Dalhousie Ince Richborough Grain Setubal Marbach Worcester, U.S.A. Sanford Sulcis Nagoya

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APPENDIX A Units Operating on a Commercial Basis Several companies are successfully using the fuel on a commercial basis. Start of Operations Osaka, Kansai Electric Mitsubishi Kagaku Kashima Kita Dalhousie, New Brunswish Power Ince, Powergen Richborough, Powergen Asnaes, SK Power

Japan Japan Japan Canada U.K. U.K. Denmark

1994 1992 1991 1994 1992 1991 1995

Table A.3. Typical Performance of Orimulsion on a Commercial Plant The Plant: The project was carried out on Dalhousie Unit No. 1 by New Brunswick Power, Canada. A total of 178,000 tonnes of Orimulsion was consumed. A summary of the unit characteristics and results are detailed below. Capacity: 100MWe Tangentially fired boiler, designed originally for coal Steam generation: 313,000 kg/h 540 C/140 barg Storage available for Orimulsion: 27,000 tonnes MODIFICATIONS Storage Tank: Insulation with fiberglass Heaters: Storage tank heater and in-line heater switched from steam to glycol/water (70 C) Burners: Mechanically atomized burners, replaced with high swirl steam atomized burners Precipitator: One chamber, three field precipitator added to the system COMBUSTION was performed with the following characteristics. Excess combustion air requirement as low as 0.2% O2 at the boiler exit. Very stable clean burning flame at full load operation. Infrared flame scanners performed very well. Reduction between 30 and 140 C on flame temperature ending up with an overall reduction in heat absorption by the waterwall. Increase of 85 C on the furnace exit temperature maintaining the full rated steam generation. Carbon conversion efficiency higher than 99%. Fly ash re-injection not necessary to achieve high levels of carbon conversion. which resulted in Maximum long-term sustainable load opMWe due to back-end temperature limitation of the Unit. A load greater than 100MWe was achieved for four days with a clean boiler condition. Reduction of 2.7% on boiler efficiency based on Gross Calorific Value. Increase of 6% on mass gas flow rate. EMISSIONS (normalized at 3% O2 for 90MWe) Dust loading: 250 mg/NM3 at 20 C SOx : (corrected 3% O2 ): 6500–6750 mg/NM3 Stack capacity: Less than 20% (with ESP)

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FLY ASH CHARACTERISTICS Resistivity: 3–5 x 1011 ohm-cm Particle size: 98% w w < 10 m 50% w w < 03 m Density: 80–160 kg/m3 Ash density: Carbon 2% Sulpher 16% Sodium Vanadium 1% Others Iron 1%

Magnesium 3% 55%

12%

FOULING AND CORROSION EFFECTS Fouling was observed in the primary super heater and economizer areas. Adding a suitably located soot blower will counteract this effect since deposits are easily removed. No evidence of corrosion was observed from boiler inspection and corrosion probe analysis. The magnesium in the fuel, equivalent to a MG/V ratio of 1.3, was adequate to inhibit the corrosive potential of the vanadium in the fuel.

APPENDIX B

THE FUTURE OF THE AUTOMOBILE AS THE MAJOR OIL CONSUMER

Road and particularly passenger automobile transport is a major consumer of petroleum products. Globally about one quarter of oil is consumed by road transport and the percentage is rising as automobile use expands in newly developing countries such as China and India. At the same time, the world automobile and truck industry is making determined efforts to improve the efficiency and reduce the environmental impact of road vehicles. Better engines, hybrid and clean diesel power plants, hydrogen natural gas, and other cleaner and efficient fuels are being introduced. Similarly, fuel cells and photovoltaic energy converters may offer plant alternatives. Reduction in vehicle weight and various energy saving devices are also being introduced. During the last 10 years, automobile fuel efficiency has on average improved by over 25% for new cars in the market. Compact cars performing 55–60 mpg are available now and even traditional gasoline internal combustion engine compact cars now average well over 30 mpg. Diesel power cars popular and common in Europe usually achieve 30–40% more miles per gallon. As road transport in the U.S. contributes 26% of greenhouse cases, consumes 27% of total energy and 78% of oil, it is under the most severe pressure to improve its performance. It produces 40% of volatile organic compounds, 77% of CO, 49% of NOx and SO2 , and most of the particulate matter emitted into the atmosphere. The major initiatives in this direction are: 1. Vehicle weight reduction and improved aerodynamics – carbon fiber composite cars with half the weight of steel body cars 2. Improved engines with variable valve and inactive cylinder operations 3. Use of continuously variable transmission 4. Gasoline – electric hybrids 5. Direct injection diesel – electric hybrids 6. Rotary recycling use of exhaust heat to intake air for better combustion and mileage 7. Natural gas powered cars 8. Hydraulic braking energy storage devices 9. Fuel cell powered cars (hydrogen fuel) 161

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APPENDIX B

10. Electric cars using new (nickel-ion batteries) storage giving automobile range of 300 miles 11. Hydrogen burning internal combustion engine powered cars (less expensive than fuel cell powered electric cars, Ford) 12. Nickel metal hydrate storage of hydrogen (solid) 13. High pressure hydrogen tanks for cars 14. Other initiatives Although there will be about 40% more cars on the roads by 2015, the average mileage per gallon could be two to three times what it is today, resulting in road transport fuel consumption savings of at least half the fuel consumed by road transport today, with an even larger reduction in CO2 and other greenhouse gas emissions. NEW INITIATIVES In 2004 Toyota sold 150,000 (Prius) hybrids and the number is expected to reach well over the 300,000 sold in 2006. The price of the Prius is $4–5,000 higher than a comparable simple gas car, yet the price of such hybrids is expected to come down as the demand increases and volume production benefits are achieved. A new Civic GX, developed by Honda, is a natural gas powered car with a carbon fiber-aluminum lined fuel tank. It is fueled by a CNG pump and can also be fueled from a fuel maker (www.fuelmaker.com) installation at home (cost $3,400). This fills such a Civic GX for about $1.30/tank at 2006 natural (home) gas prices. The pump can be safely installed at home/garage by a plumber into an existing natural gas line. (It takes 16 hours to fill up, unless a gas compressor is also installed.) The French automaker Citroen is developing a C4 hybrid HDi with a 1–6 liter direct injection diesel assisted by a single electric motor which achieves 69 mpg and emits 25% less CO2 than a similar sized gas-electric hybrid. It is expected to be available in 2010. Also Opels Astra diesel hybrid with two electric motors and a 1.7 liter turbo-diesel, paired with a two-mode hybrid system is expected to be available in 2009 and achieve 62 mpg. Then there is the proposed hydrogen hyper car with an Ultralight, low drag body, gas electric, and a 100 mpg capability. Both Honda and Toyota appear ready to market hydrogen fuel cell ultra lightweight cars by 2010. Hydraulic technology offers opportunities to store (vehicle) braking energy by use of pressurized fluids which can then be released to generate power. This may increase vehicle fuel efficiency by 20–40%, particularly for vehicles in urban stop-and-go traffic which constitutes the bulk of developed country vehicle consumption. Hydraulic devices such as hydristors have been developed for heavy equipment for this purpose, but may in future also find application in smaller road vehicles and automobiles. Fuel cell powered cars are expected to hit the roads by 2012–2015 and may by then be competitively priced and perform effectively. The most important near term development though with mass appeal will be clean diesel cars. Clean diesel technology is based on the combination of (1) cleaner diesel fuel, (2) advanced

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engine technology, and (3) emission control systems. Cleaner fuel has sulfur dramatically reduced. Ultra low sulfur diesel (ULSD) has less than 15 ppm and is available since early 2007. Electronic controls, high pressure common rail fuel injection, variable injection timing, improved combustion chamber design and turbo charging assures cleaner, quieter, and more efficient diesel engines. Finally, ULSD permits more efficient emission control systems which trap particulates and use oxidation catalysts to reduce harmful emissions from diesel engines by 90% or more. These developments are attracting diesel car use which, as noted, is common in Europe, to the U.S., Japan, and elsewhere. Clean diesel cars convert some NOx into ammonia that recombines with remaining NOx to make nitrogen. Diesel cars get better gas mileage than hybrids with emissions on par with gasoline engines (diesel Honda Civic 55.4 mpg). Diesel cars have smaller added costs than hybrids, have a much longer life, and lower scrapping costs and impacts. We have not started to use bio-diesel fuel derived from various plants such as palm oil, corn, etc., which further improves emission standards of diesel. The 1998 bio-diesel life cycle study sponsored jointly by the U.S. Departments of Energy and Agriculture concluded that bio-diesel reduces net CO-B2 emissions by 78% compared to petroleum-based diesel fuel due to bio-diesel’s closed carbon cycle. The CO-B2 released by bio-diesel is recycled by growing plants which are later processed into fuel. Bio-diesel emissions also have less harmful effects on human health, as they have lower levels of polycyclic aromatic hydrocarbons and nitrated compounds (PAH). These compounds were reduced by 75–85% with the exception of benzo anthracene which was reduced by 50%. Similarly, targeted nPAH were also reduced with 2-nitro-fluorine and 1-nitropyrene reduced by 90% with the rest the nPAH compounds reduced to only trace levels. The EPA has issued new 2009 diesel emission standards of 0.02 g/mile of particulates and 0.2 g/mile of NOx . Using bio-diesel (particularly soy based), these standards can be easily met. Overall, as noted, there has been a great improvement in mileage of passenger cars. Even traditional gasoline engine powered car mileage is now appreciably better than just a few years ago. In parallel with bio-diesel fuel, ethanol and other plant derived or bio-fuels are extensively used. Ethanol, a gasoline substitute, has nearly replaced petroleum-based gasoline in Brazil. Ethanol is being added to gasoline (10% in 2006) in the U.S. to improve emission quality and reduce petroleum consumption, although the cost of ethanol is higher than that of gasoline (Europe $0.67/liter, U.S. $0.40/liter, and Brazil $0.27/liter). On the whole, ethanol is costly and delivers only about 75% of the mileage of gasoline. There are moves underway now to produce ethanol from agricultural waste instead of food crops. This would not only reduce costs, eliminate competition for food crops, and ultimately supply much larger amounts of ethanol, as agricultural waste is 4–6 times as large in weight and cellulose as food grains such as corn, soy beans, etc.

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INDEX

Abraham, 5 Africa, 2, 3, 4, 6, 10, 25, 33, 35, 39, 42, 44, 53, 55, 56, 58, 59, 61, 63, 65, 68, 75, 78, 95, 96, 99, 104, 105, 106–108, 109, 119, 122, 123, 131, 132, 134, 138, 139, 142, 153 “Air Car”, 50 Aker Kvaerner, 84 Alaska, 3, 16, 19, 27, 71, 73, 105, 139, 142 Alberta, 67 Al Qaeda, 8 Angola, 108, 143 Arabia, 6, 9, 14, 25, 46, 111, 118, 124, 126, 130, 134, 137 Arctic Ocean, 73 Argonne National Laboratory, 79 Arklow Bank, 90 Assyrians, 5 Attaturk, 136 Azerbaijan, 5, 16, 34, 143 Babylonians, 5 Baghdad, 5, 7, 121 Bahrain, 126, 128 Ballard, 80, 84 Bangladesh, 58, 99, 105 Bering Straits, 73 Bitor, 63 Bitumen, 39, 45, 63, 64, 67, 139, 142, 155 Black Sea, 16, 26, 34 Bolivia, 18, 27, 71, 110, 142 Bonaire, 64 Bosad Chem, 134 Bosnia, 113, 114 Brazil, 38, 68, 86, 88, 92, 93, 94, 163 British Petroleum (BP), 132 Building Integrated Photo Voltaic (BIPV), 88

Caliphs, 7, 121, 136 Canada, 3, 16, 27, 61, 63, 67, 68, 71 Carbon nanotubes, 81 Caribbean, 10, 68, 92, 104–105 Caspian Sea, 3, 16, 25, 34, 41, 71, 134 Catalytic reduction, 101 Cerro Negro, 64 Chad, 108 Changes (IPCC), 58, 98 Chernobyl, 76–77 China, 13, 15, 16, 17, 20, 27, 32, 34, 35, 37, 38, 41, 44, 46, 57, 58, 60, 69, 70, 71, 78, 83, 85, 86, 89, 90, 98, 99, 104, 111, 122, 129, 131, 132, 133, 134, 140, 143, 145, 146, 150, 151, 161 Chlorofluorocarbon, 56, 96, 97 Christianity, 5, 121, 123 Clean coal, 21, 23, 27, 39, 47, 61, 68, 69, 70, 103, 129, 131, 139, 143 Club of Rome, 20, 105, 131 Cohn, Daniel, 50 Combined cycle, 66, 70 Cordoba, 7, 121

Daimler Chrysler, 51, 84 Dakota Gasification Company, 100 Damascus, 71, 121 Damman, 112 Darius turbine, 86 Deepwater production platform, 72 Denmark, 11, 89, 90 Diesel Particulate Filters (DPF), 101

Ebadir, Shirin, 118 Eco-tax, 23 Egypt, 6, 7, 9, 78, 89, 106, 107, 113, 126, 137

169

170

INDEX

“El Hayat”, 113 Electrolysis, 79–81 EPA (Environmental Protection Agency), 36, 163 Equatorial Guinea, 108 Euphrates, 5, 118 Europe, 2, 7, 10, 23, 26, 27, 29, 34, 35, 36, 38, 41, 46, 47–48, 50, 51, 55, 56, 58, 59, 61, 62, 67, 68, 71, 74, 75, 82–84, 86, 89, 90, 91, 96, 98, 99, 101, 104, 105, 108, 114, 134, 136, 137, 143, 145, 146, 150, 153, 161, 163 Exxon Mobil, 16, 130, 132

Iceland, 49, 82, 83, 91 India, 7, 13, 20, 37, 38, 44, 58, 71, 90, 99, 105 Indian Ocean, 71, 90, 113 Indonesia, 13, 37, 78, 91, 104 Inter-governmental Panel on Climatic, 58, 98 International Atomic Energy Agency (IAEA), 23 International Fuel Cell, 80 Iraq, 5–10, 13, 15, 37, 107, 108, 113, 114, 117, 123, 127 Israel Institute of Technology, 57, 98 Itaipu, 86

Faisal, King (of Syria and Iraq), 6 Flexible fuel vehicles (FFVs), 93 France, 7, 75, 114, 136 Fuel Cell, 4, 21, 39, 41, 47, 49–54, 57, 69, 79–82, 83–85, 97–98, 102, 109, 131, 161, 162

Japan, 2, 23, 38, 51, 57, 58, 67, 68, 82, 83, 89, 97, 98, 104, 122, 123, 132, 133, 145, 146, 150, 163 Jose, 64 Judaism, 5, 121, 123

Gabon, 108 Gazprom, 7, 132, 134 GDP (Gross Domestic Product), 10, 13, 38, 42, 112, 120, 140, 141, 146 Germany, 23, 85, 89, 90, 93, 136 Global Nuclear Partnership, 79 Glucose, 80, 93 Gorlov, Alexander, 86 “Great Point Energy”, 69 Greece, 34, 41, 121 Greeks, 5 Gulf of Mexico, 63, 71, 73 Gulf States, 40, 106, 112, 126, 136 Gulf War, 125 Guri Dam, 86 Halevi, Judah, 121 Halons, 56, 96 Hamaco, 64 Hashemite, 6 Hazem Saghiye, 113 Heinberg, Richard, 137 Honda, 51, 162 Hot Module, 84 Hug Engineering AG, 101 Huntington, Samuel, 117 Hybrid cars, 51–52, 147 Hydroelectric power, 15, 85, 129, 142, 151 Hydrogen, 4, 21, 36, 39, 41, 49, 50–54, 56, 57, 69, 74, 75, 78, 79–85, 87, 88, 91, 92, 94, 96, 97–98, 100, 102, 103, 108, 109, 130, 131, 144, 146, 161, 162 Hydrogen economy, 36, 54, 79–83

Kabala, 121 Kassites, 5 Kazahkstan, 34 Kosovo, 114 Kurds, 10 Kuwait, 9, 42, 111, 113, 114, 127 Chevron Texaco, 132 Kvaerner, 84 Kyoto Protocol, 56, 58, 96, 98, 130, 149, 154

Lebanon, 5, 9, 106, 107, 113, 126 Libya, 7, 9, 42, 107, 137 Los Alamos National Laboratory, 69 Louisiana, 71 Lukoil, 132, 133

Macheto, 64 Madrassa, 107, 135 Maimonides, 121 Malaysia, 71, 104 Mesopotamia, 5, 6 Methane, 56, 57, 68–69, 73, 80, 85, 96–98 Mexican Gulf, 10, 27 Mitsubichi Electric Corporation, 88 Moldova, 134 Molten carbonate, 82, 84 Morocco, 6, 114, 118 Moses of Leon, 121 Muhammad, 5, 6, 7, 11 Murmansk, 26, 34, 41, 133, 134 Muttawa, 115, 116

171

INDEX Nasser, Gamal Abdel, 6 NEG Micon, 89 Negre, 50 Nigeria, 12, 16, 18, 37, 78, 105, 107, 108, 134 Nitrogen oxides, 50 Nitrous oxide, 56, 57, 96, 97 Norske Shell, 84 Northwest Territories, 71 Oil Shale, 39, 45, 63, 67, 69, 139, 142 Oman, 42, 126, 128 OPEC (Organization of Petroleum Exporting Countries), 1, 3, 4, 14, 16, 21, 23, 24, 25, 26, 35, 37, 42, 43, 44, 47, 65, 94, 110, 112, 125, 130, 133, 149 Orimulsion, 37, 39, 63–64, 66–67, 94, 102, 108, 155–159 Orinoco, 63–67, 155 Ottoman, 6, 7, 9, 115, 122 Pakistan, 105, 113 Parabolic solar dishes, 87 Paris Conference on Climate Change (2007), 138 Pebble bed reactors, 78 Persian Gulf, 2, 5, 9, 10, 14, 25, 26, 36, 41, 42, 44, 65, 102, 104, 105, 107–108, 109, 112, 113, 116, 119, 122, 125–127, 130, 132, 133, 134, 136, 137 Petrom, 133 Phosphide, 87 Plato, 121 Pope Urban, 121 Primorsk, 34, 41 Prudhoe Bay, 16, 73 Punta Cuchillo, 64 Qatar, 42, 126, 128 Rand Corporation, 67 Rompetrol, 133 Rosneft, 132 Russia, 2, 3, 15–18, 25–27, 29, 34, 35, 40, 41, 42, 44, 49, 54, 57, 63, 79, 86, 98, 104, 108, 110, 112, 130, 132, 133, 134, 139, 140, 142, 143, 149, 151 Saddam Hussein, 117 Saharan Africa, 39, 56, 58–59, 96, 99, 106 Sakhalin, 17, 108, 132 Saladin, 7, 121

Sao Tome, 108 Satellite Solar Power (SSP), 87 Saudi Arabia, 6, 9, 10, 12, 13, 15, 16, 20, 25, 26, 29, 35, 40, 42, 46, 63, 67, 102, 106, 107, 108, 110, 111–113, 114–117, 119–120, 124, 125–128, 130, 134–136 Shell, 130, 132, 142 Shenfu-Dongsheng, 70 Shiite, 5, 6 Siemens, 85, 87 Socrates, 121 Solar mirrored trough, 87 Solar voltaic cells, 87 Solid oxide, 82, 84, 85 Somalia, 59, 99, 107 Soviet Union, 104 Spain, 7, 89, 90, 122 Stat Kraft, 84 Stirling engine, 87 Strategic Petroleum Reserve (SPR), 1, 24 Sudan, 59, 99 Sumerian, 5 Sunni, 5, 6 Syria, 5, 6, 9, 10, 107, 126 Tajikistan, 25 Tar Sands, 20, 21, 45, 46, 63, 67, 139, 142 Texas A & M, 71, 73, 134, 154 Thailand, 58, 99, 143 Three Gorges Dam, 38, 129 Tigris, 5, 118 TNK-BP, 132–133 Tokyo Gas, 85 Toyota, 50, 51, 162 Tunis, 91 Turkey, 10, 16, 34, 41, 118, 122, 133, 136 Turks, 6 Turpas, 133 Turukhansk, 86 Ukraine, 77, 133, 134 Ulamas, 115 Umayyad, 7 United Arab Emirates, (UAE), 128 Ur, 5 U.S. geological survey, 28, 73 USSR, 25, 26, 29 Utah, 67 Venezuela, 16, 18, 27, 63, 64, 65, 67, 68, 108, 110, 134, 139 Ventspils, 134

172 Very Large Crude Carries (VLCC), 36, 37, 41, 63, 64, 134 Vestal, 89 Virgin Islands, 68 Wahhabi, 6, 9, 12, 25, 107, 108, 113, 114–115, 117, 118, 120, 124 West Africa, 2, 3, 10, 16, 63, 68, 104, 108, 132, 134 Western Wahhabi Cleric, 113 Wind Power, 39, 61, 89–91, 141 Wind turbine, 41, 61, 89, 90

INDEX World Bank, 29 World Trade Center, 106 Wyoming, 67 Yangtze, 58, 99 Yellowstone National Park, 91 Yemen, 106, 126–127 Yukos-Subneft, 132–133 Zero emission coal program (ZECA), 69 Zuata, 64