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How About that Fossil Energy!

Global Look at Long-Term Trends

By KATHY SHIRLEY
EXPLORER Correspondent

The ever-increasing global demand for energy is fueling debate on future worldwide energy supplies -- and in Dallas, it will provide the fuel for a forum that aims to tackle the subject head-on.

Officials from industry, academia and government will be featured in a forum at the AAPG Annual Meeting titled " The Future of Global Energy -- Technical, Environmental, Economic and Policy Issues."

The forum, chaired by Scott Tinker, director of the Bureau of Economic Geology, the University of Texas at Austin, and Pinar Yilmaz with ExxonMobil in Houston, will be held Tuesday, April 20, from 1:25-5 p.m., in the Dallas Convention Center's Ballroom C1/C2.

Tinker said the forum was an outgrowth of work at the BEG and within major oil companies on the future of fossil energy and the long-term trend toward natural gas in a global context. Questions to be considered include:

• What types of economies are developing via industrialization today?
• What advancements are occurring in developed countries?
• What does it mean in terms of energy and the associated impact on the environment?

The forum will primarily cover the U.S. perspective on the future of global energy, Tinker said, and will feature a panel of speakers with varying perspectives but broad knowledge on various topics facing the energy industry today.

They include, as the keynote speaker, C. Michael Smith, assistant secretary of fossil energy with the Department of Energy, who will discuss U.S. fossil energy policy for the 21st century, according to Tinker.

Also on the panel will be:

• William Fisher, director of the Jackson School of Geosciences at the University of Texas at Austin, who will discuss decarbonization, the concept of moving from solid fuels to liquid fuels to natural gas and eventually to hydrogen (see related story).
• James Farnsworth, vice president of worldwide exploration for BP, who will talk about balancing energy and the environment globally in the 21st century.
• Rusty Riese, with BP, representing the recently released National Petroleum Council report to the secretary of energy.
• Julio Friedman, with Lawrence Livermore Laboratory, and Susan Hovorka, a BEG research scientist, will discuss carbon sequestration as it relates to enhanced recovery potential, and how to capture, move and store carbon dioxide. They will focus primarily on geologic sequestration.
• Vello Kuuskraa, president of Advanced Resources International, will give a summary of a National Research Council workshop held last spring on the future of natural gas supply, demand and technology.
• In addition, a senior ExxonMobil official has been invited to participate in the forum panel.

Official Reports, Official Problems

BP's Rusty Riese served on the committee charged with assessing North American resources for the NPC report, which had its origin in March 2002, when Energy Secretary Spencer Abraham asked for an analysis of the U.S. gas market in terms of supply, demand, distribution and consumption through 2025.

Abraham also sought policy recommendations that could assure natural gas supplies and mitigate market volatility.

The report was released last September, and Riese, who was involved in the supply aspect of the study, said there are several highlights that are of interest to the industry.

"First, there is a huge resource base in North America, but the size of accumulations are getting smaller -- it is highly unlikely we will find many more billion barrel of oil equivalent fields," he said.

"However, in spite of that resource abundance, we will not be able to meet our domestic natural gas demands with indigenous supplies," he said. "Gas will have to come in from other places."

Riese indicated that the study uncovered some concerns with the traditional resource assessments. For example, fundamental assumptions about the log normality of resource endowment curves warrant further study; the largest fields in a play type may not always define the points from which the endowment should be projected, but may instead represent discrete populations.

Likewise, truncations of the upper limits for resource endowments need to be scrupulously observed.

One concern Riese had with the NPC research process is the need to start virtually from scratch on each new study.

"The NPC process is wonderful in that it brings together representatives from scores of companies and agencies, but the work is all volunteer and often under great duress for people juggling many projects and the work is not always preserved," he said.

Riese said the group did two things from the supply side that were uncommon:

• They recommended and used multiple models.
• They made considerable effort to preserve the work that we did so it can be maintained by the government agencies and be a starting point for the next study group, " who can then build a more robust picture than might otherwise be possible," he said.

"I would have liked the study to address projections on the cost of gas, which is important to many groups," he added. "The study only gave a huge range of possible prices from $3 to $7 out through 2025, with no discrete line plotted through the range. I feel we really didn't give the ultimate consumer as much information as we could have concerning future gas prices."

Also, he said, some of the revisions in resource numbers did not make it into the calculations for the published report.

"Another shortcoming was that we were asked to focus only on the United States, but by 2025 as much as 10 to 12 percent of our gas supply will come from LNG," he said. "The report would have been conspicuously stronger if it had been able to consider world gas markets.

"Unfortunately, that would have been too much of an undertaking to be feasible."

Riese said another issue that is not fully addressed in the study, but will likely impact natural gas supply in the coming decades, is the impact of LNG imports on exploration in the United States.

"If indeed we can land LNG in this country for $3.50 to $4 per MCF, it will certainly suppress development of some North American resources," he said. "That has a ripple affect through the rest of the economy. We did not have the time to pursue those issues in this report, and may not have been able to pursue them adequately due to our limited understanding of overseas markets."

Environmental Concerns

The BEG's Susan Hovorka noted a growing U.S. and international concern is the release of carbon dioxide in the atmosphere -- and she said the industry can either ignore the problem or look for solutions.

"We, the subsurface reservoir community, have the expertise to solve this problem," she said. "The tools are in our kit, the skills are in our skill set and, in fact, there are economic opportunities for carbon sequestration at many scales that are not incompatible with our traditional way of doing business."

For example, she suggested, sequestration can be linked to enhanced oil recovery.

"What we know about the performance of two phase fluids in the subsurface significantly addresses the environmental community's concern of whether the CO₂ will stay down once injected," Hovorka said. The answer is straight up, two-phase flow in the subsurface.

"We know a tremendous amount about carbon sequestration," she said, "and we need to communicate to people our expertise. We can do environmental work with energy expertise and an energy perspective."

Typically three environments are mentioned for CO₂ re-injection:

• Sorb it on to other organics, such as coal.
• Inject it into high volume, high permeability formations below, hydrologically isolated from fresh water.
• Use the CO₂ in enhanced oil recovery for pressure maintenance and for miscible floods.

"The oil industry has been using CO₂ for enhanced oil recovery for years, but it has never been important to document what the ultimate fate of the CO₂ that is not cycled out is in these applications," she said. "That is one area we do need to address so we can insure that CO₂ is not being released to the atmosphere at unacceptably high rates.

"However, once those types of issues are solved, we feel there is an economic opportunity in the United States and elsewhere around the world to use CO₂ in many other oil fields -- not just West Texas and a few other locations where it is being injected today," Hovorka said.

"There could potentially be a whole network of pipelines to transport as much CO₂ as possible and put it to beneficial use," she said. "It won't be free, because there is a cost for transportation and compression to get it back in the ground -- but if we want the energy from fossil fuels and we don't want to pay the environmental costs of CO₂ build up in the atmosphere, then we have to look at ways to deal with the CO₂."

Hovorka pointed out that carbon sequestration is " important on a global basis.

"We Americans can export successful technologies that allow a much more closed loop in energy than we have experienced in the past," she added.

"Pre-industrial times people used surface water for virtually all their needs," she said. " But as industrialization occurred the impact of that was unacceptable, and today we don't use surface water in the same way. The stream goes by the factory untouched.

"Today we are using the atmosphere much like we used to treat our streams," she continued. "Carbon sequestration offers a new method to change that trend.

"The petroleum industry has a significant piece of the expertise to develop this new technology, and we need to stand up and be heard."