IHS CERA chairman Daniel Yergin, whose expertise about all things energy has made him a go-to authority, said Tuesday the world's energy supply and demand picture is less clear today than it was a year ago.
Yergin was keynote speaker at the World Energy Council's Houston Business Forum. His recently published book The Quest is a follow up to The Prize, the 1992 Pulitzer Prize-winning nonfiction bestseller about the quest for oil and gas.
"I finished The Prize a few days after Saddam Hussein invaded Kuwait. That was in the age of oil, two decades ago. A great deal has happened since then." Like unconventional natural gas, for instance. "Shale gas, nobody talked about it then. It was called 'uneconomic gas,' and nobody thought it was ever going to be produced."
Shale gas production constituted about 2% of total North American output in 2000. "Today it's now probably over 30%...We're not importing any substantial liquefied natural gas...Shale is changing the whole energy economics. And it's having political consequences."
Shale's success isn't confined to gas. In the United States shale oil "is the hottest story right now. The application of shale gas techniques to oil is why North Dakota is today the fourth largest oil producing state. Indubitably it's because of shale," he said.
"To give you a sense of what's happening, [U.S.] tight oil production in 2000 was 200,000 b/d. Today it's 900,000 b/d. It could be 29 million b/d by 2020. There will be declines elsewhere and question marks about the offshore. But when you add it all up, you come to the conclusion that the balance is shifting on world oil."
The United States won't see a "100% shift and not 75% but it will be significant...[LNG] imports will be much lower than they currently are."
Politics also are playing a big role in how quickly shale oil and gas can be produced in the United States, Yergin said. Earlier this year he was appointed by Energy Secretary Steven Chu to serve on the Secretary of Energy Advisory board Natural Gas Subcommittee to make recommendations about shale and hydraulic fracturing (fracking); the preliminary report was issued in August (see Shale Daily, May 9).
"We looked at it and...we found most problems are most unlikely," he said. "The issues are produced water and how to manage it. That is an industrial activity that has to be managed properly...The issues with diesel machines, methane are greatly overstated."
Questions still need to be answered "about what's true or not." A final report from the panel is expected in about two weeks, he told the audience.
IHS CERA "sees some countries moving ahead quickly" on shale prospects, but it's a mixed picture globally. Argentina, Poland and Ukraine are among those countries pursuing projects. France, however, has banned fracking.
"The other thing is the map of world oil," said the IHS CERA chief. "We are really starting to have a new map of world production." For instance, the "Arab spring" of civil revolts probably will be an "Arab year," or be even longer. In the western hemisphere, more countries are finding oil and gas resources that they didn't know they had. "It started with Brazil...In the 1970s Brazil didn't have oil and that's why it developed ethanol. It turns out it has a lot of oil..."
Because of "technological breakthroughs and advances in capabilities," IHS CERA now is estimating that Brazil could be producing as much as 5 million b/d of oil by 2020 "if things go right, if the right decisions are made." That rate of production "would be twice that of Venezuela..."
Another breakthrough is in Canada's oilsands, once considered a "fringe resource," said Yergin. Canada's oilsands today are producing more oil than Libya was producing before its civil war, he noted. If Canada makes the "right decisions," it could be producing 3 million b/d in 2020 from oilsands alone, based on IHS CERA projections.
Yergin said he doesn't understand the controversy surrounding TransCanada Corp.'s Keystone oil pipeline project, which would carry oil from northern Alberta to Gulf of Mexico refineries. The U.S. government has yet to approve or disapprove the project, which has garnered protests from coast to coast.
"We don't understand some of the accusations" by protesters, said Yergin. "There are charges out there that just don't make sense of environmental apocalypse...A number of barrels in the United States add the same amount of carbon. You wouldn't know it from the dialogue out there.
"This is a 1,700 mile pipeline. We have 168,000 miles of liquid pipelines. This would add 1% to the U.S. pipeline system. It's as if we've never built a pipeline in the United States."
Canada's oilsands, from an energy security point of view, "is a phenomenal resource development."
And that calls into question where future Canadian oil and gas supplies may be marketed, said Yergin. The United States has long been Canada's only market for oil and gas but that could change.
"In Canada the question is, will it be a more south flow [to the United States] rather than an east-west flow...to the Middle East, to Asia? There is a very big change that is unfolding."
IHS CERA is forecasting that worldwide, "the overall energy mix will grow 35% over the next 20 years," said Yergin. "It seems to us, based on what we know today, that the mix of resources won't be too different from what it is today. Oil, gas and coal constitute 80% of today's energy supply and in 20 years they will comprise 70-80%. Renewables require long lead times...but there will be more efficient use of energy in 20 years.
On the supply question, "to me, what's so striking is how the map of world oil has changed...how the geography has changed," said Yergin. "In 2000 two-thirds of the world's energy demand was in the developed world and one-third was in developing nations. Today it's 50-50...from growth in China and the Middle East.
"Like other commodities, oil has dominated what's happening in China. Twenty million people a year are moving from the countryside to the cities. And now they are taking more and more to the road...What's so striking is that in 2000 in the United States there were 17 million cars sold and less than two million sold in China. Last year 17 million cars were sold in China and 11 million in the United States. It clearly shows the changing balance of oil."
There's no shortage of oil and gas, however.
"I take the view that the supplies are there. We hear a lot about running out of oil, to which I say, this is the fifth time the world has run out of oil," Yergin said, noting that the "first time" oil was said to have peaked was in the 1880s when Standard Oil claimed that there was no oil west of the Mississippi.
"Analytically, at IHS CERA we see a much larger resource base than other people see. We see that as being very significant..." However, "there are plenty of things that can happen above ground," such as political events that can delay or prevent production.
"I mean, if you look at it, on an annual rate the permits for drilling in the Rocky Mountains today are running at a rate of 6% of what they were four years ago. That's not geology. That's politics that is preventing it."