The world is not running out of energy, but it’s unlikely that conventional oil and natural gas resources alone will be sufficient to meet the anticipated growth in global energy demand through 2030, the National Petroleum Council (NPC) said in a major report issued last week.

“It is a hard truth that the global supply of oil and natural gas from conventional sources relied upon historically is unlikely to meet [the] projected 50-60% growth in demand over the next 25 years,” said the council’s report, “Facing the Hard Truths About Energy,” which was approved last Wednesday and submitted to Energy Secretary Samuel Bodman.

The United States, once the largest oil producer in the world, is now ranked behind Russia and Saudi Arabia. Domestic oil production has fallen steadily over the past 35 years, while U.S. natural gas production has been more stable. Meanwhile, the demand for both resources has risen significantly, creating a gap that is being filled by imports, the study noted. Many forecasts believe the gap will only widen over the next 25 years.

The NPC is a 175-member oil and natural gas advisory group that reports to Bodman. The study on the ability of the global oil and natural gas supply to keep pace with world demand through 2030 was requested by Bodman in October 2005.

To address the supply-demand gap for conventional resources, the United States and other countries must look to other energy resources, including nuclear, biomass, renewables and unconventional oil and gas, wrote the NPC, which was chaired by retired ExxonMobil CEO Lee Raymond. It also cited the need for increased efficiency in the transportation (fuel economy), residential, commercial and industrial sectors. This marked the first time that the NPC conceded that alternative fuels and efficiency measures will play a critical role in meeting future energy demand.

Still, the NPC stressed that oil, natural gas and coal will remain “indispensable” in supplying world energy demand. These three fuels are expected to dominate at least through 2030. The group cited the “vast potential” of unconventional oil and gas resources. It noted that unconventional resources currently account for 20-25% of domestic gas production.

NPC study participants, which included Chevron, ConocoPhillips, BP America and other major producers, called on the U.S. to step up leasing and development of unconventional resources, and to accelerate domestic oil shale and oil sands research and development and leasing. This, they estimate, could double U.S unconventional gas production to more than 10 Bcf/d over the study period, increasing total U.S. gas production by about 10%.

The study also said that if the U.S. would provide producers with greater access to federal lands, it would significantly add to oil and gas production. “Material increases to current production within five to 10 years from currently inaccessible areas could approach 40 billion bbls of oil and 250 Tcf of natural gas with current technology,” it noted.

These actions would help to “slow the inevitable decline” in domestic oil and gas production, but it isn’t likely to reverse it, according to the NPC report. The gap between U.S. supply and demand will continue to widen, particularly for oil, it said.

The NPC report expects alternative fuels to play a bigger role in future years, but they will first have to overcome a number of challenges. Biomass currently is the largest nonfossil energy source, but it still only contributes about 1% of the energy provided by oil. Before biofuels production can achieve significant volumes, it will have to increase rail, waterway and pipeline transport capacity, the report noted.

The council believes that expanded development of biomass energy resources at large commercial scale could add up to four million bbls/d of oil equivalent liquids.

Wind and solar energy also have grown rapidly and are now contributing about 1% of the world’s energy mix, according to the NPC report. Wind and solar energy are expected to continue their expansion, but they face several hurdles, such as interconnecting with the power grid.

Hydroelectric power, which now supplies about 2% of energy, is not likely to grow significantly except in developing Asia-Pacific regions. Nuclear power contributes an estimated 6% of the world’s energy, and its use is expected to increase outside the U.S., the NPC study said.

Coal currently supplies the second-largest share of global energy after oil, the report noted. In forecasts where carbon dioxide emissions are not constrained, coal is projected to increase its market share over the next 25 years. According to the NPC, remaining coal resources are far larger than for oil and natural gas; at current consumption rates, the U.S. has economically recoverable resources for at least another 100 years.

The lead participants in the NPC report last Wednesday urged Congress and other energy policymakers to use the report’s conclusions and recommendations to guide their future actions. “I hope this report will form and shape the energy debate” in Congress, said Alan J. Kelly, chairman of the coordinating subcommittee that worked on the report and former executive with ExxonMobil Corp.

“I encourage those involved in [shaping] legislation to read our report,” he said during a press briefing in Washington, DC. It’s “important that future [energy] policies are grounded in reality.”

The report imposes a duty on policymakers to take on some difficult challenges with respect to energy, said Deputy Energy Secretary Jeffrey Clay Sell, who was the report’s co-chair.

The lead participants declined to take a position on energy legislation pending in the House and Senate. However, when asked whether a contentious House energy policy reform bill that would impose new restrictions on oil and natural gas producers was consistent with the NPC report’s recommendations, Donald L. Paul, who chaired the supply task group, indicated that it wasn’t.

“If you begin to eliminate branches of opportunity today, the chances are you’re raising the risk…for eliminating the flexibility you will have to deal with uncertainties in the future,” said Paul, vice president and chief technology officer with Chevron Corp.

The final report finds that “oil and natural gas will retain their preeminent position in the hierarchy of U.S. energy supplies for some time to come,” Secretary Bodman said. “But we must be mindful of our environmental responsibilities and the [needs of] future generations, so we have to aggressively pursue new energy options and alternatives,” he noted.

“By this I mean not only solar and wind power, but among other strategies the increased use of nuclear power, environmentally responsible electricity generation through coal-fired plants that utilize carbon capture and sequestration technology, and greater reliance on biosciences and biofuels to produce fuels for use in the transportation sector,” he told NPC members.

The report finds that “all forms of energy, traditional and alternative, fossil fuels and renewables, will be needed to meet the world’s [energy] needs” through 2030, Bodman said. It recommends a number of supply- and demand-side strategies that the United States can pursue to achieve this goal. “Our goal is to do more with less, rather than to force the American people to do less because the supplies are not available,” he noted.

“I will read the report thoroughly and will consider its recommendations with great care,” Bodman said. “We are at a very critical stage in developing an energy policy for this country.” The NPC report, which he called a “landmark” effort, “requires us to soberly assess what we will look like in the future and how to plan for how we will get [there].”

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