GEOG 6 Resources and Energy Professor Dr JeanPaul

GEOG 6 – Resources and Energy Professor: Dr. Jean-Paul Rodrigue Topic 4 – Fossil Fuels A – Energy Transitions B – Coal C – Petroleum D – Natural Gas Hofstra University, Department of Global Studies & Geography

A. ENERGY TRANSITIONS 1. Factors Behind Energy Transitions 2. Peak Oil 3. Energy Markets © Dr. Jean-Paul Rodrigu

1. Factors Behind Energy Transitions ■ Energy transition • Shift from one dominant source of energy to another. • Fossil fuels resources remain abundant. • Transition linked with three factors: • Demand: • Growth in the amount of energy used incites finding more abundant energy sources. • Each year the world consumes one cubic mile of oil. • Price: • Function of availability and demand. • Higher prices incite finders alternative sources. • Technology: • Which types of energy forms are harnessed, processed, and delivered to the final consumers as well as where these activities take place. • Better technology enables access to a wider variety of energy © Dr. Jean-Paul Rodrigu

1. Factors Behind Energy Transitions ■ Energy Quality • Difference in the ability of a unit of energy to produce goods and services for people. • One joule of electricity is not the same than one joule of coal. • Combination of physical, chemical, technical, economic, environmental and social attributes that are unique to each form of energy. © Dr. Jean-Paul Rodrigu

1. Determinants of Energy Quality Energy Density Quantity of energy contained per unit mass or volume. Power Density Rate of energy production per unit of the earth’s area. Usually expressed in watts per square meter (W/m 2). Energy Surplus Difference between energy spent for procurement (extraction, transformation and delivery) and energy provided. Intermittency Time availability of the energy source. Spatial distribution Spatial availability of the energy source © Dr. Jean-Paul Rodrigu

1. Evolution of Energy Sources Mid 21 st Century Late 20 th Century Animal Biomass Early 20 th Century Coal Oil Natural Gas Mid 19 th Century Nuclear Hydrogen 15 th Century 0% 20% 40% 60% 80% 100% © Dr. Jean-Paul Rodrigu

1. Total World Electricity Generation by Type of Fuel, 2002 7 2 16 Coal 40 Natural Gas Nuclear Hydro Oil Other 16 19 © Dr. Jean-Paul Rodrigu

1. Primary Energy Production by Source, United States, 1750 -2009 45, 000 40, 000 35, 000 Billion BTU 30, 000 Coal Biomass Petroleum 25, 000 20, 000 15, 000 10, 000 5, 000 0 1750 1800 1850 1900 1950 2000 © Dr. Jean-Paul Rodrigu

1. Global Energy Systems Transition, (% of market) 100 Wood Coal 80 Gases Solids 60 Hydrogen 40 Liquids 20 0 Oil Natural Gas 1850 1900 1950 2000 2050 2100 2150 © Dr. Jean-Paul Rodrigu

■ Electricity • Can be seen as a natural resource. • Transformed coal, natural gas, uranium or water. • Allow non tradable energy sources (wind, sun, water) to be indirectly traded. • Intangible and cannot be effectively be stored (except as water basins). • Produced concomitantly to consumption. © Dr. Jean-Paul Rodrigu

2. Peak Oil ■ Hubbert’s peak • Geologist who predicted in the 1950 s that oil production in the United States would peak in the early 1970 s: • US oil production peaked in 1973. • Assumption of finite resource. • Production starts at zero. • Production then rises to a peak which can never be surpassed. • Once the peak has been passed, production declines until the resource is depleted. • Peak was estimated to be around 2004 -2008: • One estimate placed it symbolically at Thanksgiving 2005. • Kuwait announced around Thanksgiving 2005 that the world’s second largest oil field (Burgan) has reached its peak. © Dr. Jean-Paul Rodrigu

2. World Annual Oil Production (1900 -2009) and Peak Oil (2010) 30 2010 Peak Billions of barrels 25 Actual 20 15 10 5 0 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100 © Dr. Jean-Paul Rodrigu

2. Peak Oil ■ The case for Peak Oil • Largest oil fields discovered more than 50 years ago. • The peak of oil discovery year was 1965. • Some large discoveries in the 1970 s (Alaska, North Sea), but none since then. • The last year when more oil was discovered than consumed was 1980. ■ Tar sands • Large supplies, particularly in Canada (Alberta). • A bottleneck in extraction and distribution. • Require a lot of energy to extract and transform into a usable form. © Dr. Jean-Paul Rodrigu

© Dr. Jean-Paul Rodrigu

3. Energy Markets ■ Importance • Used to be informal and locally oriented (e. g. wood). • The growth in the use of fossil fuels created large and lucrative energy markets: • Became national and global. • Increasingly capital intensive. • Contracts between suppliers and customers: • Price, quantity and time of delivery (location). • Permitted the emergence of large multinational corporations. • Large financial markets: • Financing activities such as exploration, exploitation, transportation and refining. © Dr. Jean-Paul Rodrigu

3. The World’s 20 Largest Corporations by Market Value, 2009 ($US millions) Total BHP Billiton Roche Petrobas BP Nestle IBM China Construction Bank Berkshire Hathaway Chevron Procter & Gamble Royal Dutch Shell Johnson & Johnson AT&T Microsoft China Mobile Industrial & Commerical Bank o. . . Wal-Mart Petro. China Exxon Mobil 0 50, 000 100, 000 150, 000 200, 000 250, 000 300, 000 350, 000 400, 000 © Dr. Jean-Paul Rodrigu

The Breaking of Standard Oil (1908) © Dr. Jean-Paul Rodrigu

60 20 0 Jan-71 Jan-72 Jan-73 Jan-74 Jan-75 Jan-76 Jan-77 Jan-78 Jan-79 Jan-80 Jan-81 Jan-82 Jan-83 Jan-84 Jan-85 Jan-86 Jan-87 Jan-88 Jan-89 Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 3. West Texas Intermediate, Monthly Nominal Spot Oil Price (1970 -2010) 140 120 Third Oil Shock 100 80 Second Oil Shock 1 40 A 2 B D First Oil Shock C © Dr. Jean-Paul Rodrigu

3. Major Oil Price Fluctuations Price Change Event First Oil Shock Second Oil Shock Oil counter shock (A) First Gulf War (1) Price Change Time Frame October 1973 to March 1974 April 1979 to July 1980 November 1985 to July 1986 July 1990 to November 1990 Asian Financial Crisis January 1997 to (B) December 1998 "Asian Demand Contagion" (2) "September 11 Effect" (C) January 1999 to September 2000 August 2001 to December 2001 Third Oil Shock December 2003 to June 2008 Financial Crisis of 2008 (D) July 2008 to February 2009 Cause Nominal Price Change Yom Kippur War / OPEC oil embargo Iranian revolution (1978) / Iran-Iraq war (1980) OPEC oversupply / Lower demand From $4. 31 to $10. 11 (+134. 5%) From $15. 85 to $39. 50 (+149. 2%) From $30. 81 to $11. 57 (62. 4%) From $18. 63 to $32. 30 (+73. 4%) Iraqi invasion of Kuwait Debt defaults / Non-USD currency devaluations / Reduced demand Rising demand / OPEC output cutbacks Oversupply / American recession Peak oil / Rising demand / Monetary debasement / Speculation Collapse of asset bubbles / Demand destruction / Global recession From $25. 17 to $11. 28 (55. 1%) From $11. 28 to $33. 88 (+200. 3%) From $27. 47 to $19. 33 (29. 6%) From $32. 15 to $133. 95 (+316. 6%) From $133. 95 to $39. 16 ( -70. 7%; Dec 2008) © Dr. Jean-Paul Rodrigu

3. Energy Markets ■ Challenges to energy markets • Supply sources: • Low diversity of energy sources. Foreign sources. Dependence on oil. Keeping natural resources for future use. Low oil prices instead of an energy policy. • Affordability: • Economies of scale. Waste involves less profits. Market forces and profit margins. • Environmental impacts: • Lobbying against environmental legislation. © Dr. Jean-Paul Rodrigu

B. COAL 1. Characteristics 2. Coal Use 3. Challenges © Dr. Jean-Paul Rodrigu

1. Characteristics ■ Nature • Formed from decayed swamp plant matter that cannot decompose in the low-oxygen underwater environment. • Coal was the major fuel of the early Industrial Revolution. • High correlation between the location of coal resources and early industrial centers: • • • The Midlands of Britain. Parts of Wales. Pennsylvania. Silesia (Poland). German Ruhr Valley. • Three grades of coal. © Dr. Jean-Paul Rodrigu

© Dr. Jean-Paul Rodrigu

1. Characteristics Carbon content (%) 0 50 100 Lignite Bituminou s Carbon Energy Anthracite 0 1000 2000 Burned energy (1, 000 calories per kg) ■ Anthracite (7%) • Highest grade; over 85% carbon. • Most efficient to burn. • Lowest sulfur content; the least polluting. • The most exploited and most rapidly depleted. ■ Bituminous (75%) • Medium grade coal, about 50 -75% carbon content. • Higher sulfur content and is less fuel-efficient. • Most abundant coal in the USA. ■ Lignite (18%) • Lowest grade of coal, with about 40% carbon content. • Low energy content. © Dr. Jean-Paul Rodrigu

1. Main Coal Regions of the United States Lignite Powder River Basin (40%) Bituminous Lignite © Dr. Jean-Paul Rodrigu

1. Global Coal Production, 2002 (M short tons) © Dr. Jean-Paul Rodrigu

2. Coal Use ■ Coal use • Thermal coal (about 90% use): • Used mainly in power stations to produce high pressure steam, which then drives turbines to generate electricity. • Also used to fire cement and lime kilns. • Until the middle of the 20 th Century used in steam engines (“Steam Coal”). • Coking coal: • Specific type of metallurgical coal derived from bituminous coal. • Used as a source of carbon, for converting a metal ore to metal. • Removing the oxygen in the ore by forcing it to combine with the carbon in the coal to form CO 2. • Used for making iron in blast furnaces (without smoke). • New redevelopment of the coal industry: • In view of rising energy prices. © Dr. Jean-Paul Rodrigu

2. Coal Consumption, 1965 -2011 (in millions of tons of oil equivalent) 4000 Rest of the world 3500 India 3000 2500 2000 1500 1000 500 2011 2009 2007 2005 2003 2001 1999 1997 1995 1993 1991 1989 1987 1985 1983 1981 1979 1977 1975 1973 1971 1969 1967 1965 0 © Dr. Jean-Paul Rodrigu

2. Coal as % of Energy Use and Electricity Generation, 1998 United States Germany Denmark Slovakia Ukraine South Korea Electricity (%) Australia Energy (%) Czech Rep. Kazakhstan India Poland China South Africa 0 20 40 60 80 100 © Dr. Jean-Paul Rodrigu

2. Coal Costs per Ton (USD), Selected Markets 160 140 Northwest Europe market price 120 Appalachian spot 100 80 60 40 0 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20 © Dr. Jean-Paul Rodrigu

3. Challenges ■ Advantages of coal use • • • Easily combustible. Easy to store and transport. Relatively inexpensive. Wide availability of sources. Technologically simpler to use for energy generation. ■ Disadvantages of coal use • Non-renewable resource. • Combustion by-products (e. g. SO 2 and sooth). • Coal mining is generally environmentally damaging. © Dr. Jean-Paul Rodrigu

C. PETROLEUM 1. The Economic Importance of Petroleum 2. Oil Reserves 3. The Geopolitics of Petroleum © Dr. Jean-Paul Rodrigu

1. The Economic Importance of Petroleum ■ Nature • Formation of oil deposits (biotic perspective): • Decay under pressure of billions of microscopic plants in sedimentary rocks. • “Oil window”; 7, 000 to 15, 000 feet. • Created over the last 600 million years. • A-biotic perspective. • Exploration of new sources of petroleum: • Related to the geologic history of an area. • Located in sedimentary basins. • About 90% of all petroleum resources have been discovered. • Production vs. consumption: • Geographical differences. • Contributed to the political problems linked with oil supply. © Dr. Jean-Paul Rodrigu

1. The Economic Importance of Petroleum ■ Use • Transportation: • The share of transportation has increased in the total oil consumption. • Accounts for more the 55% of the oil used. • In the US, this share is 70%. • Limited possibility at substitution. • Other uses (30%): • Lubricant. • Plastics. • Fertilizers. • Choice of an energy source: • Depend on a number of utility factors. • Favoring the usage of fossil fuels, notably petroleum. © Dr. Jean-Paul Rodrigu

1. Petroleum Production and Consumption, 2002 (M barrels per day) © Dr. Jean-Paul Rodrigu

1. World Oil Consumption, 1965 -2009 (1000 s of barrels per day) 90, 000 80, 000 70, 000 60, 000 50, 000 40, 000 30, 000 20, 000 19 6 5 19 67 19 69 19 71 19 73 19 75 19 77 19 79 19 81 19 83 19 85 19 87 19 89 19 91 19 93 19 95 19 97 19 99 20 01 20 03 20 05 20 07 20 09 0 North America South and Central America Europe & Eurasia Middle East Africa Asia Pacific © Dr. Jean-Paul Rodrigu

1. Factors of Oil Dependency Occurrence Localized large deposits (decades) Transportabilit Liquid that can be easily transported. Economies of y scale Energy content High mass / energy released ratio Reliability Continuous supply; geopolitically unstable Storability Easily stored Flexibility Many uses (petrochemical industry; plastics) Safety Relatively safe; some risks (transport) Environment Little wastes, CO 2 emissions Price Relatively low costs © Dr. Jean-Paul Rodrigu

2. Oil Reserves ■ “Scarce Abundance” • The world oil production is currently running at capacity: • Limited opportunities to expand production. • 20% of the world’s output comes from 14 fields. • Ghawar: • • • The world’s largest oil field; been on production since 1951. Produces approximately 4. 5 million barrels of oil per day. 55 to 60% of Saudi Arabia’s production. Expected to decline sharply (use of water injection). Could be 90% depleted. • OPEC countries may have overstated their reserves: • Production quotas are based upon estimated reserves. • The larger the reserves, the more an OPEC country can export. • In the 1980 s, most OPEC reserves doubled “on paper”. © Dr. Jean-Paul Rodrigu • Extraction continues while reserves remain the same(? ).

2. Proven Oil Reserves, 1980 -2009 (thousand million barrels) 1400 1200 1000 800 600 400 0 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 200 North America South and Central America Europe & Eurasia Middle East Africa Asia Pacific © Dr. Jean-Paul Rodrigu

20 05 03 20 20 01 19 99 19 97 19 95 19 93 19 91 19 89 19 87 19 85 1 19 83 19 81 Costs of finding oil ($ per barrel) 2. Cost of Finding Oil, 1981 -2006 9 8 7 6 5 4 3 2 Domestic Foreign 0 © Dr. Jean-Paul Rodrigu

2. The World’s Largest Oil Fields, 2005 Oil Field Output (MBD) % of national output Status Ghawar (Saudi Arabia) 4. 5 Possibly declining Cantarell (Mexico) 2. 0 (1. 7; 2007, 60% 1. 04; 2008) Declining Burgan (Kuwait) 1. 7 68% Declining Da. Qing (China) 1. 0 40% Possibly declining 40% © Dr. Jean-Paul Rodrigu

2. Oil Production of Some Declining Regions, 1973 -2009 10, 000 North Sea United States Mexico 8, 000 Cantarell Oil Field 7, 000 6, 000 5, 000 4, 000 3, 000 2, 000 1, 000 9 20 0 7 20 0 5 20 0 3 20 0 1 20 0 9 7 19 9 5 19 9 3 19 9 1 19 9 7 9 19 8 5 19 8 3 19 8 81 19 9 19 7 7 19 7 5 19 7 3 0 19 7 Thousands of barrels per day 9, 000 © Dr. Jean-Paul Rodrigu

2. Major Crude Oil Reserves, 2009 (Thousand Million Barrels) Azerbaijan Norway Mexico Algeria Brazil Angola China Qatar US Canada Nigeria Kazakhstan Libya Russian Federation United Arab Emirates Kuwait Iraq Iran Venezuela Saudi Arabia 7. 0 7. 1 11. 7 12. 2 12. 9 13. 5 14. 8 26. 8 28. 4 33. 2 37. 2 39. 8 44. 3 74. 2 97. 8 101. 5 115. 0 137. 6 172. 3 264. 6 0 50 100 150 200 250 300 © Dr. Jean-Paul Rodrigu

2. Estimated Oil Reserves, Selected OPEC Countries, 1980 -1991 (billions of barrels) 260 240 220 200 180 160 140 120 100 80 60 40 20 0 Iran Iraq Kuwait Saudi Arabia Venezuela 198019811982198319841985198619871988198919901991 © Dr. Jean-Paul Rodrigu

2. Remaining Proven Oil Reserves for “Middle Eastern Five” According to Major Assessors, 2005 UAE S. Arabia Bakhtiari's Estimate Colin Campbell Kuwait BP Statistical Review Oil & Gas Journal Iraq Iran 0 100 200 300 Billions of barrels © Dr. Jean-Paul Rodrigu

2. Global Oil Reserves, 2003 © Dr. Jean-Paul Rodrigu

2. Export Land Theory 2. 5 Production (-5% per year) Consumption (+2. 5% per year) Millions of barrels per day 2. 0 1. 5 1. 0 0. 5 0. 0 0 1 2 3 4 5 6 7 8 9 Time (years) © Dr. Jean-Paul Rodrigu

2. Crude Oil Production and Consumption, China, 19802009 (in 1, 000 of barrels per day) 10, 000 9, 000 8, 000 Production Consumption 7, 000 6, 000 5, 000 4, 000 3, 000 2, 000 1, 000 20 08 20 06 20 04 20 02 20 00 19 98 19 96 19 94 19 92 19 90 19 88 19 86 19 84 19 82 19 80 0 © Dr. Jean-Paul Rodrigu

2. Petroleum Production, Consumption and Imports, United States, 1949 -2009 8 100 Production 90 7 80 70 5 60 4 50 40 3 30 2 Dollars per barrel Millions of barrels 6 Consumptio n 20 1 10 0 19 4 19 9 5 19 2 5 19 5 5 19 8 61 19 6 19 4 67 19 0 73 19 7 19 6 7 19 9 8 19 2 8 19 5 88 19 9 19 1 94 19 9 20 7 00 20 3 0 20 6 09 0 © Dr. Jean-Paul Rodrigu

3. The Geopolitics of Petroleum ■ The Seven Sisters • Petroleum has for long been the object of geopolitical confrontations. • The ability to fix the price and the production of oil was first established in 1928 by the Achnacarry Agreements. • Between the “seven sisters” forming an oil oligopoly. • Major oil multinationals (Exxon, Texaco, British Petroleum, Shell, Gulf, Standard Oil and Mobil Oil). • Invested massively in extraction infrastructures, especially in the Middle East. • Several producing countries, most of them in the Third World, wanted to have a more important share of the incomes of this lucrative market. © Dr. Jean-Paul Rodrigu

3. The Geopolitics of Petroleum ■ OPEC • Venezuela, Iran, Iraq, Saudi Arabia and Kuwait founded the Organization of Petroleum Exporting Countries (OPEC) in 1960 at the Baghdad conference. • Several other oil-producing nations joined thereafter the organization: • Qatar (1961), Indonesia (1962), Libya (1969), Algeria (1970), Nigeria (1971), Ecuador (1973 -1992, left the organization in order to avoid production quotas), The United Arab Emirates (1973) and Gabon (1973 -1994). • From its foundation until the beginning of the 1970 s, OPEC was unable to increase oil prices. • Production was very important in non-member countries. • Difficulty of OPEC members to agree on a common © Dr. Jean-Paul Rodrigu

3. OPEC Members and Countries with more than 10 Billion Barrels of Oil Reserves © Dr. Jean-Paul Rodrigu

3. Major Oil Flows and Chokepoints, 2005 -6 © Dr. Jean-Paul Rodrigu

3. The Geopolitics of Petroleum ■ A perfect storm? • Booming oil prices after 2004. • Prior oil spikes linked with short lived geopolitical events. • The situation has changed at the beginning of the 21 st century. • A production issue: • Petroleum extraction appears to be running at capacity. • Demand, especially new consumers (China), is going up. • A distribution issue: • Limited additional tanker and pipeline capacity. • A refining issue: • Limited additional refining capacity. • No refineries were built in the US since 1974. © Dr. Jean-Paul Rodrigu

0 2009 2007 2005 2003 2001 1999 1997 1995 1993 1991 1989 1987 1985 1983 1981 1979 1977 Storage (in millions of barrels) 700 600 120 500 100 80 400 60 300 40 20 0 100 Fill Rate (in millions of barrels per year) 3. United States Strategic Petroleum Reserves, 19772009 160 140 -20 -40 © Dr. Jean-Paul Rodrigu

D. NATURAL GAS 1. Nature and Use 2. Availability and Distribution © Dr. Jean-Paul Rodrigu

1. Nature and Use ■ Natural gas formation • Thermogenic: converted organic material into natural gas due to high pressure. • Deeper window than oil. • Biogenic: transformation by microorganisms. ■ Composition • Composed primarily of methane and other light hydrocarbons. • Mixture of 50 to 90% by volume of methane, propane and butane. • “Dry” and “wet” (methane content); “sweet” and “sour” (sulfur content). • Usually found in association with oil: • Formation of oil is likely to have natural gas as a by-product. • Often a layer over the petroleum. © Dr. Jean-Paul Rodrigu

1. Nature and Use ■ Use • Mostly used for energy generation. • Transition in use: • Previously, it was often wasted; burned off. • The major problem is transporting natural gas, which requires pipelines. • Now more frequently conserved and used. • Considered the cleanest fossil fuel to use. • Gas turbine technology enables to use natural gas to produce electricity more cheaply than using coal. © Dr. Jean-Paul Rodrigu

2. Availability and Distribution ■ Reserves • Substantial reserves likely to satisfy energy needs for the next 100 years. • High level of concentration: • 45% of the world’s reserves are in Russia and Iran. • Regional concentration of gas resources is more diverse: • As opposed to oil. • Only 36% of the reserves are in the Middle East. © Dr. Jean-Paul Rodrigu

2. Proved Reserves of Natural Gas Indonesia 201 1 Iraq Australia Algeria Nigeria Venezuela United Arab Emirates Saudi Arabia US Turkmenistan Qatar Iran Russian Federation 0 5 10 15 20 25 30 35 40 45 50 © Dr. Jean-Paul Rodrigu

2. Global Natural Gas Reserves, 2003 © Dr. Jean-Paul Rodrigu

2. Natural Gas ■ Liquefied natural gas (LNG) • Growth of the global demand has created needs to move natural gas over long distances. • Liquid form of natural gas; easier to transport. • Cryogenic process (-256 o. F): gas loses 610 times its volume. • Value chain: • • Extraction. Liquefaction. Shipping. Storage and re-gasification. © Dr. Jean-Paul Rodrigu