Fossil Fuels and Alternative Energy

Summer 2016

Morrigan Simpson Marran

Alex Jewell

Introduction

Oil and Gas is an essential part of the economy as well as everyday life

In recent years, questions have been raised around the effect on the environment caused by the
production and use of oil and gas

Thus, there has been a public shift in focus towards sustainable energy

Although sustainable energy holds great potential, it is important to recognize the difficulty in
lowering global emissions while maintaining quality of life and improving that of developing
countries

Fossil fuels, similar to present day, will hold the largest market share for many years to come and
be essential to the continuous prosperity of Alberta and Canada

Canadas oil and gas industry is amongst the cleanest and safest in the world but this fact
remains under recognized

Although there have been great strides in sustainable energy, many hurdles remain and until we
have a viable, inexpensive, efficient alternative, Canadas world class resources need to remain
part of the everyday lives of Canadians

Outline
Kaya Identity
Global Growth

GDP
Population
Energy Consumption

Energy Forecasts

Demand
Supply

Renewable Energy

Supply and Future Estimates

Additions and Retirements
Economics
Hurdles
Storage
Canadas Position

Pipelines and Their Benefits

Energy Education

Oil and Gas in the

Canadian Economy
Environmental Impacts

Kaya Identity
To make F equal zero, one
of the four variables on the
right must become zero
Global GDP per capita
population
Global CO2
emissions

Energy intensity

Carbon intensity

The Kaya Identity (recognized and used by the International Energy Industry)
highlights the complexity and constraints surrounding the lowering of CO2
emissions

Bill Gates developed a similar formula, stating that it would take a miracle to get
global carbon emissions to zero

Gates has created the Breakthrough Energy Coalition, which is made up of more
than 20 billionaires focused on investing in start-up companies in hopes of
achieving this miracle.

http://www.breakthroughenergycoalition.com/en/index.html
http://www.ipcc.ch/ipccreports/sres/emission/index.php?idp=50

Global Growth
Population Continues to Increase Heavily in Coming Years

Global GDP is Expected to More than Double

Driven by Emerging Asia

19% increase
Billion

8.8 billion
people

Trillion $, 2010

Developing Countries

Trillion $, 2010

BP Energy Outlook 2035, February 2015

Growth in World Economy Requires More Energy

Global Growth = Increased Energy Consumption

Billion toe*

History

Forecast

10 year average, % per annum

Energy consumption
increases by 34%
between 2014 and
2035

* Toe = Tonnes of Oil Equivalent

Today

BP Energy Outlook 2035, February 2015

Energy Forecasts
And What This Means for Consumption of Fossil Fuels in the Future

Demand Forecasts

Fuel mix is changing, but, oil and gas remain key

sources of energy growth

Renewables gaining
Oil/gas combining to hold steady growth

Renewables (including biofuels/excluding hydro) share

in primary energy on pace to rise from 3% today to 9%
in 2035.

Renewables combined with hydro will account for

roughly 15% of the worlds primary energy in 2035.

BP Energy Outlook 2035, February 2015

Emerging Countries Increasing Electricity Consumption

China/India increasing
electricity consumption

Much of the growth in energy is used for

power generation global electrification

BP Energy Outlook 2035, February 2015

Fossil Fuel Demand Breakdown

Natural Gas
Demand for Gas Grows Strongly
Driven by Increasing Consumption
in Emerging Countries

Oil
Growth in liquids demand is driven by
transport and industry helped by limited
competition from alternative fuels

BP Energy Outlook 2035, February 2015

Cause of Growth in Liquids Demand

Increased Vehicle Ownership

Billion Vehicles

Vehicles per 1000 people

Litres per 100 km

Almost all of this vehicle growth

is from emerging countries: the
non-OECD vehicle fleet more
than triples from about 0.5 to 1.5
billion 2035

Global Vehicle Fleet More than

Doubles

These vehicles emerging

in developing countries
will not be electric oil
WILL be needed
Developing Countries
BP Energy Outlook 2035, February 2015

Coal Demand Slowing, but Still Growing

Growth in Global Coal Demand Slows Sharply

Chinas Changing Energy Needs
Slowdown can be
accounted for by:
Billion toe

Billion toe

Rebalancing economy

Efforts to move away

from coal

Climate Conscious

BP Energy Outlook 2035, February 2015

Supply Forecasts

Oil Supply
Non-OPEC largest source of
supply growth shifts pattern of
supply and regional trade.

Exporting

Importing

OPEC to maintain market

share of 40%
Shale oil production
decreases North Americas
reliance on oil imports

BP Energy Outlook 2035, February 2015

Global Supplies of Natural Gas Grow Robustly

Natural Gas Supply

Shale gas grows strongly
in the next 20 years
Shale 10% into 25%

5.6% per year

Share of shale gas in total
gas production increasing
from just over 10% in
2014 to 25% by 2035

BP Energy Outlook 2035, February 2015

Conclusion to Energy Forecast

Recap of Energy Forecast

Global Demand for Energy Continues
to Rise
To power increased levels of
activity as the world economy
continues to grow
Fuel Mix Changes Slightly
Coal losing, renewables gaining,
and oil and gas combined holding
steady

BP 2016 Energy Outlook

The Canadian Economy

The Role the Oil and Gas Industry Plays in Our Economy

Oil and Gas is Essential to the Canadian Economy

Oil and Gas provides:

$133 billion of the Canadian economy (7.5% of national GDP)

$128 billion in exports

The largest share of government revenues, which averaged $23.3 billion over the last 5
years

Economic Impacts of Crude Oil

Developments in Canada (2015-2035)

Province

$CAD Million

Alberta

845,156

British Colombia

23,759

Ontario

50,731

Quebec

15,928

Other

13,697
CERI- Western Canada Crude Oil Forecasts and Impacts

Wealth Created by Oil and Gas Benefits the Entirety of

Canada

Albertas contributions are 35% higher than

those of the next highest contributor, Ontario

Note:

https://www.fin.gc.ca/fedprov/mtp-eng.asp
http://www.theglobeandmail.com/report-on-business/industry-news/energyand-resources/oil-and-gas-vitality-is-key-to-canadas-economicsuccess/article8780664/
Western Centre for Economic Research: Alberta and Equalization:
Separating Fact from Fiction by Professor Melville L. McMillan

the scale of this graph

does not fully represent
the difference in dollar
per capita of equalization
payments.

The Oil and Gas Industry Allows Albertans and Canadians

to Live in an Incredibly Prosperous Country

In 2013, Oil and Gas contributed $81 billion to Canadas economy, which is equivalent to

The Cuban economy,

The Sri Lankan economy
A slightly smaller value than the Slovakian economy

Alberta has a total GDP of $375 billion, which is equivalent to

The economy of Austria

The economy of Colombia
The economy of South Africa

Statistics Canada

Economic Contribution Translates into Jobs for

Canadian Citizens

Albertas Oil and Gas Hiring Outlook to 2020

Net Hiring Requirements: 35,215-41,630

Oil and Gas Occupational Outlook to 2020 (top 10

occupations with the greatest hiring need in the
industry)

Total Industry Net Hiring Requirements: 46,43555,305

Environmental Impacts
The Role the Fossil Fuels Industry Plays

Water Use
Oil and gas total
9%
Oil sands
7%
Conventional
2%

Oil sands are located in low population density

areas, water demand for human use is lower
90% of the water used is recycled
Industrys use of salty water has increased 10x
over the past 20 years

http://www.oilsandsmagazine.com/oil-sands-water-usage/
http://www.geocurrents.info/newsmap/economicsnews/saskatchewans-oil-drivenpopulation-boom
2012

Greenhouse Gas Emissions Come From Many Sources

Natural CO2 flux to and from oceans and land plants: ~ 210 gigatons
Anthropogenic carbon dioxide contribution: ~ 8 gigatons (4% of the natural annual
flux)

Other: Agriculture,
Emissions Intensive and
Trade Industries, and
Waste

If Canada is to be normalized against other countries in terms of population density

and average temperatures, our per capita emissions would be lower by 30%

http://notrickszone.com/2013/03/02/m
ost-of-the-rise-in-co2-likely-comesfrom-naturalsources/#sthash.gJL1Encq.dpuf
CAPP

Global Temperature and CO2 Levels

Yes, there is a correlation between CO2 and

global temperature
Data suggests that this correlation is not
perfect

We must consider the fact that CO2 levels

have been changing over time. Today, we
are at some of the lowest levels in history

Today

Climate Change Fact and

Fiction Gary Smith
https://www.youtube.com/wat
ch?v=cFshBnvB_zU

Temperatures are rising, must consider all contributing factors

Natural factors that impact the earths

climate

The global lower atmospheric

temperature has been fluctuating

University of Alabama Huntsville , 2015

Parliament of Australia
http://www.aph.gov.au/Help/404?item=%2fabout_parliament%2fparliamentary_
departments%2fparliamentary_library%2fbrowse_by_topic%2fclimatechange
%2fwhyclimate%2ffactors&user=extranet%5cAnonymous&site=website

Glacier Shortening and Sea Levels

Glaciers:

Are shrinking in size

Data suggests that this shortening

started before hydrocarbon use

Data suggests that shortening did

not spike after heavy hydrocarbon
use (post 1950)

NYC sea level has been rising at a constant

rate. Has not spiked from heavy
hydrocarbon use

Climate Change Fact and Fiction

https://www.youtube.com/watch?v=cFsh
BnvB_zU

Gases that Comprise the Earths Atmosphere

Nitrogen: 76.55%
Oxygen: 20.54%
Argon: 0.91%
Water Vapor: 1.96%
IPCC has stated that CO2 makes up 84% of
greenhouse gases, when in reality CO2
makes 0.03% of greenhouse gases and 84%
of greenhouse gas emissions. This is a big
difference

CO2: 0.03%
Misc. Gases: 0.01%

Climate Change- Fact and Fiction

https://www.youtube.com/watch?v=cF
shBnvB_zU

Emissions Per Capita in Function of GDP Per Capita

PURPLE: developed nations

that are top oil producers
globally
PINK: developing nations
that are top oil producers
globally
ORANGE: developing, oil
producing nations
BLUE: developed, oil
producing nations

Better

Worse

The World Bank

Carbon Tax

Starting January 1st, 2017 the new

carbon levy will be applied to all
purchases of fossil fuels that produce
greenhouse gas emissions when
burned, it will cost $20 per tonne of
emitted carbon dioxide. Direct costs to
consumers will be:

Gasoline: 4.5 cents more per liter

Diesel: 5.4 extra cents per liter

Propane: 3.1 cents more per litre

Natural gas: 1.01 dollars per gigajoule

By 2020, Alberta will have the most

aggressive carbon pricing system

A typical Alberta household will pay an

additional $70-$105 in indirect costs
related to goods and services every
year
http://www.cbc.ca/news/canad
a/calgary/alberta-climate-plantombe-carbon-tax-1.3548458

Canadas Environmental Impact Needs to be Put in

Perspective

Industry

Consumer

Conclusion to Environmental Impacts

Carbon dioxide levels are increasing, as is temperature

To what extent do humans emissions contribute to the rising temperature

Data from various studies shows that carbon dioxide levels and temperature
levels have been independently fluctuating for millions of years

Public perception of Canadas environmental impacts varies substantially from

the countrys true impact

Beliefs surrounding carbon dioxide can be highly polarized

Renewable Energy
The Role Renewable Energy Holds and How it Works Together with Fossil Fuels

Future Estimates of Renewables Primary Energy Share

Share of Global Primary Energy Demand

(From Renewables)
Share of Global Primary Energy Demand

100%
80%
60%
40%
20%

13%

15%

18%

26%

0%

2011

Current
Policies
2035

New
Policies
2035

Most
drastic
Policies
2035

New Policies Takes

into account the broad
policy commitments
and plans that have
been announced by
countries Renewable
electricity generation
nearly triples from
2012 2040

450 Scenario In line

with limiting global
warming to about 2C
renewables grow even
more, by a factor of
more than 3.5
IEA
Renewable
Energy
Outlook
2013

Hurdles for Renewable Technologies

Bulletin of Various Barriers Confronting Renewable Energy Development
Technical

Intermittency
Land availability
Lack of expertise
Storage capacity
Low efficiency

Economic

Ability to produce
a profit
High upfront
investments
Subsidies
sensitive
Lack of public
finance

Environmental

Wild biodiversity
Land rights

Market

Volatile prices
Oil/gas prices
Electricity market
Public support

Institutional

Regulatory
hurdles
Lack of supportive
policies

Many countries would need renewable facilities nearly the size of their entire land mass
in order to meet the populations energy needs

Many renewable energy facilities require the burning of fossil fuels during operations

Ex: 2014, Ivanpah Solar Facility (California), emitted 46,084 metric tons of CO2 from burning
natural gas to keep output balanced

Science Direct Journals (2014)

Challenges to Renewable Energy
University of Eastern Finland

Energy to Electricity
USA Statistics

Roughly 40% of energy consumption is

from electric power generation

54% of renewable energy generated is

used for electric power

RENEWABLE BREAKDOWN
13% to Transportation
25% to Industrial
8% to Residential/Commercial
54% to Electric Power

Renewables play a substantial role in the

electric power sector

EIA

Future Estimates of Electricity Generation from

Renewable Technologies

Global Electricity Generation from Renewable Technologies

Electricity Generation from Renewable Technologies

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

48%
20%

2011

25%

Current Policies
2035

31%

New Policies
2035

Most Drastic
Policies 2035
IEA
Renewable Energy Outlook
2013

Wind, Solar, and Hydro are Set to be the Largest

Contributors

Main Sources, Additions, and Retirements

of Renewables

More than 3100 GW of

capacity added over the
period
Make up more than 50%
of the capacity additions
in the power sector
Share of installed power
capacity:
2012: 28%
2035: 40%

IEA
Renewable Energy Outlook
2013

Electric Vehicles
Electric vehicle stock reached 1.26 million in 2015, 100 times more than in 2010
Over 550,000 electric vehicles sold worldwide in 2015
80% of the electric vehicles on the road worldwide are located in the USA, China, Japan,
the Netherlands, and Norway

1.3 billion petroleum-powered vehicles every year, 40 million scrapped and 90 million new
are sold global increase of 50 million petroleum-powered vehicles every year
If electric vehicle sales hit 1 million/year by 2020, internal combustion vehicles still increase
by 49 million annually
Would take 1,300 years to replace global fleet of 1.3 billion gas/diesel vehicles with electric
vehicles
1.
2.
3.

If oil prices were $100/barrel, the price of electric vehicle batteries would have to
decrease by a factor of 3
Time needed to charge these electric vehicle batteries needs to be shortened
The electricity that is fueling these vehicles will need to have sufficiently lower carbon
content than petroleum

This change may take longer than anticipated.

IEA
Global Electric
Vehicle
Outlook
2016
Peter
Tertzakian
2016

Electric Vehicles Continued

Market share of electric

vehicles in 2015:
Canada: 0.4%
China: 1.0%
Netherlands: 9.7%
Norway: 23.3%
UK: 1.0%
USA: 0.7%

IEA
Global Electric Vehicle Outlook
2016

Electric Vehicles in the Global Vehicle Fleet

Roughly 1.3 billion Combined, there are

petroleum-powered
roughly 1.2 million
vehicles
BEVs and PHEVs

EVs make up roughly

0.9% of the global
vehicle fleet

IEA
Global Electric Vehicle Outlook
2016
Peter Tertzakian, 2016, Address to
AAPG

Break-Even Oil and Battery Costs Study

Today
USA DOE current electric vehicle battery cost = $325/kWh
Price of oil/barrel > $350/bbl before the electric vehicle was cheaper to operate
In 2015, the average price of oil was approximately $49/bbl. Sudden large-scale penetration of electric
vehicles is unlikely.

Future
December 2020 oil futures price = $55/bbl
Battery cost would need to fall to $64/kWh to break even
DOE target cost of batteries in 2020 = $125/kWh
Break even price of oil = $115/bbl

**These calculations make it clear that at least for the next decade or two, electric vehicles face an uphill battle**
**Large continuing decreases in battery prices are necessary**
**Oil prices need to increase more than financial markets currently predict**

Will we ever stop using

fossil fuels?
Thomas Covert, Michael
Greenstone, Christopher
R. Knittel
Journal of Economic
Perspectives
Academic Journal
The University of Chicago
December 2015

The Renewable Energy Storage Issue

Requiring extra, large-scale infrastructure to store the energy.

Electrical grids must be able to balance supply/demand.

Wind or solar generation will increase when load levels fall (or vice versa), which creates the need for system
balancing to control supply and demand.

This may cause coal or natural gas fired plants to turn on and off more frequently to modify the renewable
output levels.

Store and
Spread Across
the Day

http://www.businessinsider.co
m/renewable-energy-storageproblem-2013-11
National Renewable Energy
Lab, 2013

Canadas Position Relating to Renewable Energy

http://www.energiesrenouvelables.org/observer/html/inventaire/pdf/15einventaire-Chap03-3.1-Intro.pdf

Canadas Position Continued

Hydro Capacity
2014: 78,359 MW installed

Bioenergy Capacity
2014: 2,043 MW installed

Wind Power
2014: 9,694 MW of installed

Solar Power
2014: 1,843 MW of installed

Government of Canada
Date Modified: June 29th, 2016

Electricity Generation in Canada

Hydro

By Source

Fossil
Fuels

Nuclear

By Province

Tidal

Fossil
Fuels

Solar

Wind
Canadian
Electricity
Association
2014

Renewable Energy Sources Require Large Amounts of

Land
The United Kingdom Powered by Renewable Technologies Would:

Cost over 870 billion pounds

Cover over 77,000 km2

David MacKay
Sustainable EnergyWithout the Hot Air
2009

Further Restrictions

Black areas most likely

excluded as well because of
the need to protect tranquil
places from industrialization

2km-radius exclusion zone

from villages/towns. White
areas would be excluded
from wind farm development

David MacKay
Sustainable EnergyWithout the Hot Air
2009

Example of a Public Consultation

Social Implications

After an example of a public consultation,

David MacKay believes the maximum
output Britain would ever get from
renewables is 18 kWh/day per person.
The average British consumption is 125
kWh/day per person.

That is only 14.4% of total consumption

David MacKay
Sustainable EnergyWithout the Hot Air
2009

Conclusion to Renewable Energy

Renewables show significant growth, still represent a small share of energy

generation and consumption. Fossil fuels maintain a large market share in the
energy industry.

There are many hurdles facing renewable energy, primarily social, financial, and
geographical

Each country will face its own unique challenges in implementing renewable
energy infrastructure

Canada is an under-recognized world leader in renewable energy and generates

huge amounts of hydro electricity

Canada is also making clear progress with other renewable energy sources
(wind/solar)

Pipelines
Important for Canadas Economic Future

William H. Willis, Governor of Vermont State and Hon C.D. Howe, Minister of Munitions and Supply (1941)

Pipelines are a Safe, Profitable Way to Transport Much

Needed Oil and Gas

$25-billion in oil revenue was

lost in 2012 due to a lack of
pipeline infrastructure

Pipelines use the latest

technology, such as

24/7 computerized monitoring,

aerial patrols
x-ray and ultrasonic testing of welds
durable coating systems
increased pipe wall thickness
properly spaced safety control valves

Transporting oil via pipeline is

five times safer than
transporting it by rail

Over 70 percent of pipeline

occurrences result in spills of 1
m or less

https://www.fraserinstitut
e.org/sites/default/files/s
afety-in-thetransportation-of-oil-andgas-pipelines-or-railrev2.pdf
CEPA

Pipelines are Needed to Transport Oil and Gas that is

Amongst the Cleanest and Safest in the World

CEPA

Every barrel that doesnt come from Canada will be replaced

typically by a less regulated country that does not hold itself
to the environmental and human rights standards

Of the worlds top 15 oil exporting countries, only Canada,

Norway and the USA are considered free according to
Freedom House

From 2012 to 2015, Canada spent almost $100 billion on

foreign oil imports

After the United States, Canada imports much of its oil from
OPEC members, including Saudi Arabia, Iraq, and Angola

Energy Education
The Extensive Role Oil and Gas Plays in Everyday Life

Fossil Fuels are Vital to Everyday Life

Uses of coal: the most common use of coal is electricity generation, it is used to make
steel and cement, it is the cheapest source of energy

Uses of natural gas: source of energy for heating, cooking, and electricity generation,
used to make fertilizer, antifreeze, plastics, and fabrics, as well as natural gas vehicles.
When burned, natural gas releases up to 50% less CO2 than coal and 20-30% less than
oil

Uses of oil: primarily transport (gasoline, diesel, and jet fuel) aspirin, toothpaste, hand
lotion, clothing, glasses, contact lenses, dentures, roofing, shampoo, electronics and
various plastics, synthetic materials, and chemical products

Albertans Benefit from the Oil and Gas Industry Everyday

Most Albertans do not know how much they benefit from the oil and gas industry

Many Canadians take advantage of mutual funds to grow their savings, most of these
funds have invested in the oil and gas sector

The Canadian Pension Plan, for example, holds some $2.8 billion in stock from
companies involved in oilsands production. The Ontario Teachers Pension Plan also
has at least $1 billion invested in oil sands companies Vancouver Sun, Kenneth
Green

Closing Statement

The oil and gas industry is aware of carbon emissions, the environment, and the
growing concern of the general public for lower emissions

The oil and gas industry has been a large contributor towards research and
development of renewable technologies

The industry is constantly enhancing its own technology to lower environmental

impact

The Industry recognizes that renewables and fossil fuels must coexist to supply the
world with a constant source of energy far into the future

This will require collaboration to be achieved in the long term, as the renewable
energy transition will not be sudden, innovation in both the renewable and fossil
fuel industries carry the world forward

Thank you for your time