Transcript Biofuels
An Overview of Global
Energy Issues
Presented by Robert Rapier
Merica International, LLC
For
Orlando Energy Conference
November 16, 2009
Outline
My Paradigm
The Easy Oil is Gone
The Global Oil Picture
• The Pressure on Prices
• What will replace oil?
• Understanding energy intensity and scale
Energy Policy in Brazil
• A model for the world?
• Brazil versus U.S. energy statistics
Energy Policy Mistakes
• Solutions that would make a difference
Building a Sustainable Platform
• Strategy
My Paradigm
The days of substantial excess oil production
capacity are over
• Oil price volatility will continue, but long term price
trends for oil are much higher
Replacing fossil fuels with biomass will be a huge
challenge
• Each year we burn >400 years of ancient biomass*
• Energy density of oil is 3 times that of biomass
Biomass costs will rise due to competition
Net BTU efficiency will become more important
• How many net BTUs can you extract?
*Burning Buried Sunshine: Human Consumption of Ancient
Solar Energy
The Easy Oil is Gone
Graphic Source: Colin Campbell
Global Oil Picture
Global oil production – 85.4 million bpd*
• On a plateau since 2005
• Some spare capacity, but…
• Projects are being delayed – setting up price surge
Oil exporters building refineries to capture more
of the value chain
• Saudi Arabia would like to ship finished products
U.S. crude oil production – 5 million bpd
• Peak U.S. production was 9.6 million bpd
• EIA predicts turnaround is just around the corner
U.S. oil consumption – 19.5 million bpd
U.S. refining capacity – 17.7 million bpd
*Source: Energy Information Administration
Global Oil Picture
The good news
• U.S. oil demand down by 1.2 million bpd from 2004-2008
The bad news
• Largely recession-induced
• Demand from China and India up by 1.9 million bpd
• Oil at $80 the new norm
How does the recession end if oil prices remain at
recession-inducing levels?
*Source: Energy Information Administration
Pressure on Oil Prices
90
World Oil Demand
World Oil Capacity
Million bpd
85
World Oil Price
80
75
70
2000
2001
2002
2003
2004
2005
2006
$40.00
$38.00
$36.00
$34.00
$32.00
$30.00
$28.00
$26.00
$24.00
$22.00
$20.00
2007
If excess capacity remains constant and
substantial, prices are relatively stable and
related to the cost of production
Cost/bbl
Oil Price Behavior with Constant Excess Capacity
Pressure on Oil Prices
Oil Price Behavior with Eroding Excess Capacity
World Oil Demand
$70.00
World Oil Capacity
Million bpd
85
World Oil Price
$60.00
$50.00
80
$40.00
Cost/bbl
90
75
$30.00
70
2000
2001
2002
2003
2004
2005
2006
$20.00
2007
However, eroding capacity means higher prices,
higher volatility, and sometimes much higher
profits for oil producers
My View in July 2007
The Next 5 Years?
$215.00
World Oil Demand
93
World Oil Capacity
92
World Oil Price
$195.00
$175.00
91
$155.00
90
$135.00
89
$115.00
88
$95.00
87
86
2008
2009
2010
2011
$75.00
2012
When spare capacity is gone, prices will
ultimately go much higher
How high? In Europe, consumers pay the
equivalent of $250/bbl* - 3x U.S. prices
*Based on Dutch gasoline price in Q1 2009
Cost/bbl
Million bpd
94
The Biomass Contribution
The “Billion Ton Study”
• Over 1.3 billion dry tons/year of biomass potential
• Enough to produce “biofuels to meet more than one-third of
the current demand for transportation fuels”
Converting to ethanol at 90 gallons/ton* yields
• 117 billion gallons
Correcting for lower energy content yields
• 77 billion gallons of gasoline equivalent
• This is <45% of the BTUs of the starting biomass
• This is not net of energy to harvest and transport biomass
Net energy unknown as no large commercial cellulosic ethanol
facilities
U.S. gasoline usage is around 140 billion gal/yr
Is that cup half full?
*Source: Private communication from POET.
Key Questions for Alternatives
Is the process enabled by fossil fuels?
Does the process impact food supplies?
Can the process operate without straining water
supplies?
Does the process lower the soil quality?
Does the process impact local biodiversity?
What are the emissions from the process?
Sustainable Alternatives?
Renewable electricity
• Biomass, solar, geothermal, wind paired up with plug-in hybrid
electric vehicles (but some technical issues need solutions)
• Micro-CHP
Biogas
• Simple systems; lower energy inputs
Pyrolysis oil
• Fast and simple
• Used for stationary power or upgraded to transportation fuel
Green diesel
• Biomass gasification or hydrocracked lipids
Ethanol in some cases
• Byproduct of sugar processing
• Corn ethanol in Iowa for Iowans?
Renewable petroleum
• Microbial or catalytic approaches
The Unsustainable Alternative
Graphic Source: Energy Information Administration
A Word on Energy Intensity
The energy balance matters
• How many BTUs of fossil fuel to produce a BTU of
renewable energy?
If production costs are high because energy inputs
are high, you have a receding horizon problem
• Cost position may worsen as oil prices increase
The problem of receding horizons
• "Oil Shale Development Imminent” – headline circa 1900
• When oil was $20/bbl, oil shale needed $40/bbl
• At $80/bbl, oil shale still not economical
Two high-profile examples of energy intensive
processes in the renewable energy world
• Cellulosic ethanol
• Algal biofuel
Understanding Scale
U.S. Ethanol Production Versus Total Petroleum Demand
20.0
Total Demand
20.0
15.0
15.0
10.0
10.0
5.0
5.0
0.0
1994
25.0
Ethanol Production
1999
2004
Million BPD
Million BPD
25.0
0.0
2009
While we have been successful at rapidly ramping
up corn ethanol, it barely registers on the scale of
our petroleum demand
Energy Policy in Brazil
Sugarcane ethanol has long been a cornerstone of
Brazil’s energy policy
Can be produced from byproduct molasses – food
and fuel
The key to the process is bagasse
• A readily available energy source for fueling boilers
• Minimal fossil fuel inputs relative to corn ethanol
Can the World Emulate Brazil?
“As a result [of ethanol], Brazil has virtually stopped
importing expensive foreign oil.” – Dan Rather in The Ethanol
Solution
“If Brazil can do it, so can we.” – Bill Clinton, promoting
California’s Prop 87
“As Brazil's ‘energy independence miracle’ proves, an
aggressive strategy of investing in petroleum substitutes like
ethanol can end dependence on imported oil.” – Vinod Khosla
and Tom Daschle in Miles per Cob (a New York Times
editorial)
“I'm driving a Chevrolet in the middle of Brazil on ethanol,
pure ethanol, not a drop of oil, imported oil in this tank. And
here is the stuff grown all around us that is the fuel. So I'm
thinking, why can't I do this in America? Why aren't we doing
it?” – Frank Sesno in CNN’s We Were Warned
Reality Check
Annual ethanol usage in Brazil: 0.33 barrels* per
person
Annual oil usage in Brazil: 4.4 barrels per person
Oil still supplies more than 90% of Brazil’s
transportation needs
Brazil celebrated energy
independence in 2006
• Brazilian President Luiz da Silva
made the announcement on the
P-50 oil rig in the Albacora Leste
field in the Atlantic Ocean
* Barrels of oil equivalent (BOE)
Reality Check – It Gets Worse
Annual oil usage in US: 23.4 bbl/person*
Annual oil usage in Brazil: 4.4 bbl/person
Annual oil production in US: 8.1 bbl/person
Annual oil production in Brazil: 3.5 bbl/person
U.S. supply imbalance: 15.3 bbl/person
Brazil’s supply imbalance: 0.9 bbl/person
Consumption and production are:
• Grossly unbalanced in the US
• Fairly balanced in Brazil
So, how can the US emulate Brazil?
• By cutting oil consumption by 2/3rds
• Or by tripling oil production
* Consumption and production figures are from 2008
Energy Policy Mistakes
Leaders mislead the public
• “We can be just like Brazil”
• Can create demand for a pseudo-sustainable solution
Leaders change energy policy every year
• Uncertainty of tax policies inhibits investment
• Lack of long-term planning is detrimental
Leaders attempt to choose technology winners
• Which is influenced by:
Misleading arguments from various ‘experts’
Vested interests
Desire to please constituents
Suggested Solutions
Cease the delusions of ‘cheap gas for everyone’
• Cheap gas encourages fossil fuel consumption
Trade off fossil fuel taxes for income taxes
•
•
•
•
Rebate income taxes to make it revenue neutral
Encourages energy conservation
Encourages alternatives
Encourages mass transit
Encourage behaviors that reduce energy
consumption
• Rebates for solar water heaters, fuel efficient cars
Vision of a Sustainable Platform
The Forestry Leg
• Managed forest plantations
• Utilize trees that can improve soil quality
• By managing the biomass, we
Manage the sustainability
Ensure our supplies
The Logistical/Trading Leg
• Moves biomass from forestry leg to conversion leg
• Potentially sources 3rd party biomass as appropriate
The Conversion Leg
• Utilizes appropriate conversion technologies that fit the
local biomass resource and local energy need (e.g.,
torrefaction to displace coal)
The Distribution Leg
• Gets fuel into the marketplace
Strategy
Assess the energy profile of a location
• Liquid fuels – gas, diesel, jet fuel
• Electricity – coal-fired, liquid fueled, natural gas
• Heating
Assess the potential renewable resources
• Biomass, solar, wind, geothermal, hydropower, etc.
Evaluate the conversion technologies
• Is there a match between the biomass, the conversion
technology, and the demand?
Conduct the life cycle assessment
Engage the community
• Will local jobs be created?
• What are the land use impacts?
Execute
• Lots of “good ideas” are executed poorly
Thank You