Energy Security

[Rick M]

Greetings from Canada, where I am an energy researcher for a national farm organization.

My interest is primarily in the following aspects of energy security:
- peak oil (false alarm or legitimate threat?)
- recent warnings re impending decline in oil exports
- government emergency planning for fuel emergencies

Although some of the most progressive research is coming from military/security analysts, I fear that certain aspects of energy security (and most especially the matter of fuel emergencies) are being largely overlooked by civilian and military authorities alike.

An Energy Security thread was started at Armed Forces Journal last October because I wanted to put the relevant research before a primarily military/security audience (primarily to ensure that they are aware of it, but I also hope to receive input from this audience).

To make it easier for SWC members, I will start re-posting some of the AFJ info here, but in the meantime I would invite you to examine the info at AFJ:
http://www.afji.com/forums/
Please click on General, then on Energy Security (usually the first item)

My hope is that this topic will be of interest to SWC participants.
Thanks very much for considering this.

Rick M in Ontario

[Ken White]

Timely stuff indeed.

[Rick M]

During the next few days I will post information & links regarding various aspects of energy security.
I will begin with four articles by military analysts who view peak oil as a legitimate concern.
"Peak oil" refers to the point when global oil production reaches its maximum. With current global consumption having reached a thousand barrels a second at reasonably affordable rates, any constraint to the availability of cheap oil is expected to present some significant difficulties.

The following four studies may be of particular relevance to this audience:

1. excellent Armed Forces Journal article by Commander Jeffrey Eggers:
http://www.afji.com/2008/05/3434573

2. another article in the same edition (AFJ, May 08) by Maj. Daniel Davis:
http://www.afji.com/2008/05/3466428/

3. Maj. Davis did a more comprehensive study (37 pgs) in 2007:
http://www.aspo-usa.com/assets/docum..._Precipice.pdf

4. Maj. Cameron Leckie did a concise analysis in Australian Army Journal (Summer 2007, p. 21):
http://www.defence.gov.au/Army/lwsc/...book_PRESS.pdf

There are other studies which could be included but these four are concise, focused, and properly sourced.
Please speak up if anyone sees something which they feel is less than credible.

[Dayuhan]

The “peak oil” point will inevitably be reached, and the concern is legitimate. The extensive discussion of “peak oil”, however, may distract from equally legitimate and far more immediate concerns.

We all know that the easy oil has already been exploited, and that future capacity increases will require very large investments, high production costs, and extended time lags between investment and production. In theory, high oil prices should provide both the means and the incentive to support these investments. In practice, investment is far lower than it needs to be to support probable increases in demand.

National oil companies in many oil producing countries are managed according to political, not economic, rationales. In many cases political and social projects receive priority when oil revenue is allocated, and investment in oil production is often insufficient even to sustain current production levels, let alone to bring new capacity into play. In theory private investment should be able to make up the gap, but very large investment requirements, extended recovery horizons, very high levels of political and conflict risk and generally inhospitable investment climates in areas with high potential are major obstacles to private investment.

High oil prices should drive a wave of investment, but non-economic investment constraints have distorted the process and reduced investment to a level that may not be sustainable. A very high proportion of current investment in new capacity is in the GCC, which only increases the current global dependence on a single group of producers located in an area subject to very real security threats.

This investment gap actually delays the onset of the “peak oil” point, as it leaves more oil in the ground. It also creates problems of its own. I’d hazard a guess that the next great energy crisis will not be driven by an apocalyptic “peak oil” scenario where the oil simply runs out, but by a combination of increasing demand, reduced output due to insufficient investment, and political and/or conflict-related disruptions in one or more major producers. This is not as dramatic a scenario as “peak oil”, but the potential security impact could be severe and the probability of such a scenario appearing in the short to medium term is quite high.

[davidbfpo]

Energy security issues get irregular attention in the UK and most are blissfully unaware that North Sea oil is running out. Natural gas is now being imported, hence the need for storage facilities and the IPPR report recommends more investment. Use of coal on the previous scale (i.e. 1980's) for power generation is unlikely and UK coal is reportedly too "dirty" for current environmental standards.

Meantime let us place our heads and wallets carefully back in the sand.

davidbfpo

[Rick M]

Dayuhan,
I agree completely on your concerns re investment, which confirm the following point: price volatility may be worse than sustained high prices.

If high prices were sustained (prices would need to be sustained for at least a decade in order to achieve the following benefit) then more of the difficult oil would be brought on-stream, thus buying us some much-needed time to develop non-carbon alternatives.
However, a see-saw effect where the price dips regularly subvert such efforts will make investors reluctant to risk their money on something which cannot endure many consecutive months of losses.

But your final point about “an apocalyptic peak oil scenario where the oil simply runs out” makes me wonder if you share a common misconception about peak oil, which is to equate peaking with running out.

This is a very important distinction.
Some peak oil analysts argue that the peak (ie. point of maximum production/flow-rate) should coincide more or less with the half-way point. That is, production will peak when we have extracted about half of the ultimately recoverable reserves.
Personally, I see no causal link between the two, nor did Brent Fisher in his excellent study for the Institute for Defense Analyses (IDA).

Here is a review of his IDA study (2008):
http://www.energybulletin.net/node/49272

But the main point here is that peaking is not about running out, any more than the start of commercial extraction in 1858 (here in Canada, not in Titusville the following year) was about running out.

My bet is that we will have more than half the potentially extractable oil in the ground when we peak., so physical supply may not turn out to be the primary problem after all.
But the central thesis of the peak oil analysts is this: the troubles will start as we approach the apparent peak. It probably will matter little what combination of factors ‘causes’ the peak, and we could have serious difficulties simply from the perception of a peak, even if the perceived peak should later prove to have been a false alarm.

But I agree with everything else that you have said, including the scenario that you describe in your final paragraph.


David in the UK,
I am in regular contact with several UK analysts, both military and civilian.
Your nation seems to be awakening to the unhappy brevity of fossil fuel supply: from having little domestic production other than coal, to the sudden discovery of the wondrous North Sea oilfields, to Mrs. Thatcher’s gung-ho approach to extraction, to the sudden realization that your one-time bonanza had peaked within a generation, and finally to the stark realization that the UK will forever be an importer of oil & gas…. all of this within half a lifetime.

To the UK’s credit, at least they are taking a serious look at how one might manage fuel emergencies, which is more than we can say in North America, where fuel emergencies are barely on the radar.
Brits learned in Sept. 2000 just how problematic a liquid fuels supply problem can be, but here in Canada we have had no such experiences.
We are very complacent….

[rborum]

Rick M -

You may already have seen these. but the Center for Naval Analyses had what I thought was a thoughtful project and report on energy security last year. I didn't see it mentioned in this thread, but perhaps I missed it. Peak oil and fuel emergencies are not really my areas of expertise.

Here's a snippet:

Powering America’s Defense: Energy and the Risks to National Security is a report by CNA's Military Advisory Board (MAB) that explores the impact of America's energy choices on our national security policies. This report follows the MAB's groundbreaking 2007 report National Security and the Threat of Climate Change, which found that "climate change, national security, and energy dependence are a related set of global challenges."

This new volume builds on that finding by considering: the security risks inherent in our current energy posture; energy choices the nation can make to enhance our national security; the impact of climate change on our energy choices and our national security; and the role the Department of Defense can play in the nation’s approach to energy security and climate change.

[Rick M]

Hi, Rborum

Yes, the CNA study (May 09, 60 pgs) is very worthwhile reading.
I did not mention it in the EROEI posting because the CNA study (like so many other studies of energy security) overlooked the issue.
In fact, there is quite a bit that CNA overlooked, and since I have seen no other reviews which point out these omissions, I have undertaken such a review myself.

I hope to have the review posted on Energy Bulletin early next month.
Two other military-related papers have also been submitted to EB which should be posted next week.
The links will be posted here once they are available.

As for peak oil and fuel emergencies not being your area of expertise, we are all learners and things are constantly evolving.
I think the PO concept has been rather misunderstood (and therefore inaccurately portrayed).
As for fuel emergencies, I think that the general public (and even many emergency planners) see this thorny issue as a very remote possibility, not on anyone's priority list in the near term.
I also believe that we now view as remote, even far-fetched, could in fact catch us by surprise, unprepared.

Thanks for your interest on this issue.

[rborum]

Your review sounds very interesting and like a useful contribution. Good luck with it and please let us know here when it's complete. - Randy

[Rick M]

Hi, Randy

One of the two documents which will be posted on EB is a bibliography of publicly-available studies which have been conducted by researchers from the military/security community (War Colleges, CNA, etc) on the issue of energy security.
The listing will identify those studies which address the issue of peak oil and which find it to be a credible near-term concern.

One item which I plan to include separately at the end (separately because it was done by the International Energy Agency, which of course is not part of the military/security research community) is the most recent World Energy Outlook (Nov. 08).

There is probably some merit in offering it now, since it really does not belong in that bibliography. Similarly with the Hirsch Report, yet both are so central to the issue, and both have such credibility, that they would surely be included in any serious analysis of the peak oil issue.

Here is what I intend to say about the WEO:

This WEO marks a significant departure from the IEA’s traditional confidence in future oil supply.
Its opening sentences state, “The world’s energy system is at a crossroads. Current global trends in energy supply and consumption are patently unsustainable…. “
It then warns of “dwindling resources in most parts of the world and accelerating decline rates everywhere (p. 3). The WEO calls for “an energy revolution” and concludes, “Time is running out and the time to act is now” (Executive Summary, p. 15).

This sudden tone of concern is confirmed by subsequent verbal statements made by IEA Chief Economist Fatih Birol.

In a videotaped interview with George Monbiot, Birol states, “The reason we are asking for a global energy revolution is to prepare everybody for difficult days and difficult times. I think we should be very careful….”
This interview is available here:
http://www.guardian.co.uk/environmen...george-monbiot

Despite this recent tone of concern and the evidence which the WEO presents, the IEA remains very reluctant to state that the peaking of global oil production (whatever combination of factors “cause” the constriction) will present some very serious challenges, that effective mitigation will require decades of cooperative effort, and that that the world appears to be most unprepared for this event.

To provide some context, it should be noted that only four years ago IEA Executive Director Claude Mandil referred to peak oil analysts as "doomsayers" and went on to say that "none of this is cause for concern."
But barely 1000 days later, the IEA has suddenly told the world that "time is running out...."
As I said previously, this issue is constantly evolving, perhaps nowhere more rapidly than at the IEA.

The complete WEO is 578 pgs and must be purchased.
The Executive Summary (15 pgs, no graphs) is available here:
http://www.worldenergyoutlook.org/do...es_english.pdf

There are two WEO graphs in particular which I would like to post here and which are highly illustrative, if I could only figure out how to do it (I am hopeless with computer stuff, much to my brother's amusement).

[Rick M]

IEA chief economist Fatih Birol continues to sound the alarm on oil supply, most recently in an interview published this morning in The Independent (UK).

Mr. Birol’s key points include [these are quotes from the article]:
- the public and many governments appear to be oblivious to the fact that the oil on which modern civilization depends is running out far faster than previously predicted [emphasis added].
- Global production is likely to peak in about 10 years – at least a decade earlier than most governments had estimated.
- We will have the risk that the [economic] recovery will be strangled with higher oil prices.
- The UK Government, along with many other governments, has believed that peak oil will not occur until well into the 21st Century, at least not until after 2030. The IEA believes peak oil will come perhaps by 2020. But it also believes that we are heading for an even earlier “oil crunch” because demand after 2010 is likely to exceed dwindling supplies.

Mr. Birol also mentioned the fact that oil is essential for our global food system and that it “is a strategic asset for the military.”

This morning’s Independent article is here:
http://www.independent.co.uk/news/sc...t-1766585.html

It also contains the link to a related article by Jeremy Leggett who asks, "Why haven't more people in government, and the oil industry itself, seen this particular crisis coming? Why aren't they acting proactively to soften the blow?"

[Dayuhan]

Rick,

Back to this after a while away... I don't always keep track!

Too much to bite off all at once, but on this IEA report...

This WEO marks a significant departure from the IEA’s traditional confidence in future oil supply.
Its opening sentences state, “The world’s energy system is at a crossroads. Current global trends in energy supply and consumption are patently unsustainable…. “
It then warns of “dwindling resources in most parts of the world and accelerating decline rates everywhere (p. 3). The WEO calls for “an energy revolution” and concludes, “Time is running out and the time to act is now” (Executive Summary, p. 15).

This sudden tone of concern is confirmed by subsequent verbal statements made by IEA Chief Economist Fatih Birol...

Despite this recent tone of concern and the evidence which the WEO presents, the IEA remains very reluctant to state that the peaking of global oil production (whatever combination of factors “cause” the constriction) will present some very serious challenges, that effective mitigation will require decades of cooperative effort, and that that the world appears to be most unprepared for this event.

To provide some context, it should be noted that only four years ago IEA Executive Director Claude Mandil referred to peak oil analysts as "doomsayers" and went on to say that "none of this is cause for concern."
But barely 1000 days later, the IEA has suddenly told the world that "time is running out...."
As I said previously, this issue is constantly evolving, perhaps nowhere more rapidly than at the IEA.

There are two WEO graphs in particular which I would like to post here and which are highly illustrative, if I could only figure out how to do it (I am hopeless with computer stuff, much to my brother's amusement).

As far as posting graphs, I haven't tried it on this site, but you probably have to save the graph (right click on the image, then "save image as"). Then you upload it to a photo hosting service, like Photobucket, and paste a link into your post.

For the IEA study, it seems to me that reading the executive summary creates a rather different picture than the quotes you post. According to the summary, the IEA projects a rise in production to 106 mb/d in 2030 - they certainly do not see a "near peak" in production. They explicitly state that the main hazard is not insufficient resources, but the possibility of insufficient investment - pretty much exactly what I said in a previous post.

Examples

The world is not running short of oil or gas just yet. The world's total endowment of oil is large enough to support the projected rise in production beyond 2030.

and

The volume of oil discovered each year on average has been higher since 2000 than in the 1990s, thanks to increased exploration activity and improvements in technology

To the above I would add that increased exploration activity since 2000 has obviously been driven by higher prices: nobody commits major resources to exploration during a glut.

I see nothing here at all that supports the "near peak" hypothesis: quite the opposite. The EA Executive Summary suggests that the peak oil scenario is alarmist, and that the immediate hazards referred to are shortfalls in production due to underinvestment, political and security-related constraints on investment, and the impact of increasing hydrocarbon use on climate change.

I'm not saying a production peak will not occur: it obviously has to. According to this IEA report, and similar data from EIA, it would occur sometime after 2030, not in 2005 as much of the "peak oil" literature insists. What we have seen in the 2005-2008 production plateau is a peak in the production capacity of currently installed infrastructure, not an absolute peak in production.

That does NOT mean there is no problem. There are serious potential problems. I don't want to go into the climate change stuff, but the underinvestment risk is severe and the potential for security related supply disruptions is huge... and of course the peak does eventually come.

To me the single most important move that needs to be undertaken is a concerted effort to keep prices at a sustained high level. A spike to $140 doesn't do much, but 10 years at an average of $100 and you have a real incentive to explore, to invest in new production, to reduce consumption, and to invest in alternative energy sources. No matter how much we talk and how many alarms we raise, this is not gonna happen if oil is cheap.

[sappeur]

Good evening. Just endeavoring to post my first thought to this blog and try it out. I'll keep it short. I believe it is not wise for DoD to bifrucate its energy policy between OSD-Installations, Energy and Environment and OSD-Operational Energy.

[Bill Moore]

Ken and Rick,

The arguments I have heard presented by the so called experts is we're past peak oil for the easy/cheap oil. Now the majority of oil will require advanced methods to recover, deep water drilling, special techniques to extract the oil, etc. Regardless of whether we hit peak oil or not, the rise of the rest and the corresponding greater demand for oil and other natural products will no doubt move us much more rapidly to peak oil and beyond. At least there "seems" to be a fair amount of investing in alternative energy forms, but unless I'm missing it there seems to be an under investment in energy efficiency (vehicles MPG rating, smart grids, new materials for tranferring energy, etc.).

[Rick M]

Welcome, Sappeur
I don't know enough about the inner workings of DoD to say whether the current structure is wise or not, but Andy Bochman & Dan Nolan run a website which is very thorough in examining DoD's approach to energy use (in terms of departmental organization, mandates, budgets, implementation, etc... just in case you aren't aware of it):
http://www.dodenergy.blogspot.com/

Bill,
I agree.
Again, DoD is a leader in both research and in application when it comes to energy conservation. At the 2010 ASPO conference, RADM Larry Rice said that he felt DoD was doing its part (and mentioned several efforts by USN) and that the civilian sector needs to get serious/on board as well.

[Misifus]

http://www.economist.com/node/14548839

[slapout9]

Link to the Rocky Mountain Institues newest Energy project called Reinventing Fire, pretty interesting stuff.

http://rmi.org/reinventingfire

[Dayuhan]

Not for lack of oil...

http://www.economist.com/node/14548839

I'm curious on this... is there tangible evidence of significant currently unknown reserves in Mexico? I've always suspected that there's a lot of potential, simply because PEMEX is so thoroughly inept (they obviously haven't caught up with the "reserves must be replaced" mantra) and so little effective exploration has been done, but I've no hard evidence to back that suspicion up. I'm sure your opinion is better informed than mine... what do you think?

[Dayuhan]

My worry is that the NATO allies might not uphold their obligation if Putin turns their gas off.

Putin can't cut the gas off. He needs the money. At this point Putin is just as concerned with overdependence on Europe as a buyer as Europe is with overdependence on Russia as a seller.

Russia is dependent on pipelines for exports. That makes them vulnerable: a pipeline is not a tanker; it can't be diverted to another destination. It only goes to one place, which means Putin sells to Europe or to nobody. He can't sell to nobody, because his government depends almost entirely on energy revenue. Europe would hurt if the energy trade with Russia stops, but Russia will hurt more.

The Russians are pursuing new pipelines that will allow them to send more gas and oil to Asia, but it will be years before they are ready. Europe will probably be able to diversify supply faster than Russia can develop new outlets, but for now, Russia and Europe are stuck with each other.

[Maeda Toshiie]

Putin can't cut the gas off. He needs the money. At this point Putin is just as concerned with overdependence on Europe as a buyer as Europe is with overdependence on Russia as a seller.

Russia is dependent on pipelines for exports. That makes them vulnerable: a pipeline is not a tanker; it can't be diverted to another destination. It only goes to one place, which means Putin sells to Europe or to nobody. He can't sell to nobody, because his government depends almost entirely on energy revenue. Europe would hurt if the energy trade with Russia stops, but Russia will hurt more.

The Russians are pursuing new pipelines that will allow them to send more gas and oil to Asia, but it will be years before they are ready. Europe will probably be able to diversify supply faster than Russia can develop new outlets, but for now, Russia and Europe are stuck with each other.

I don't really want to derail this thread into one on energy, but there are claims that the US can replace Russia with gas from fracking to supply Europe. Do calculations actually bear out? (If this has been discussed before, link(s) to relevant thread(s) is/are appreciated)