Clarence P. Cazalot, Jr., President & CEO of Marathon Oil Corporation, participated in a CEO Dialogue on The Future of Energy at GLOBE 2010. The focus of that Dialogue was on Leadership in the energy sector, which is perhaps more vital than in any other industrial sector in the global transformation to a lower-carbon economy. This article is a concise overview of the points Mr. Cazalot made during that discussion, as well as others that are important to address as we explore options for the future global energy mix. This GLOBE-Net Exclusive is presented for the benefit of our readers.' President & CEO Marathon Oil Corporation
At the risk of overstating the obvious, our global community faces some truly daunting challenges - economically, socially and politically - and how we address these challenges will have profound implications for our collective future. In this context, I believe it is vitally important we recognize and address two inextricably linked issues that are critical to the world's long-term health and prosperity: energy security and environmental sustainability.
Ask anyone and you're likely to find strong agreement that we need to transition as quickly as practical to a more secure, sustainable means for powering the planet -- a path forward that must include:
- a more diverse portfolio of increasingly cleaner forms of energy
- the ability to produce and consume energy in ways that minimize impacts to air, land and water
- energy supplies that are readily available and affordable and permit or enhance economic growth and global competitiveness
- an energy industry that creates millions of good-paying, long-term jobs with an increasing focus on the development and deployment of advanced technologies
But then the debate begins: how do we get there, how quickly, and at what cost?
The debate might be more easily resolved if there were a full appreciation of the magnitude of this challenge. To put this in context, let's consider some of the fundamental truths or realities we'll have to deal with to achieve the desired outcomes.
First, there's no question global energy demand will continue to increase, driven largely by population growth (6.6 billion people today to more than 8 billion projected by 2030, mostly in developing countries) and the desire of those countries to achieve economic prosperity and a better standard of living.
The International Energy Agency (IEA) forecasts that demand for energy will increase about 40% between 2007 and 2030, with essentially all growth coming from developing countries. That's roughly equivalent to adding two countries the size of the United States to the world's consumption.
Meeting that demand is estimated by the IEA to require investments of about US$26 trillion, with more than half the investment needed in developing countries.
In terms of oil supplies, current global production of about 85 million barrels per day will need to increase to 105 million barrels per day by 2030.
At the same time, the IEA projects that renewable sources, such as biomass, wind, solar, wave, tidal and geothermal energy, will increase from 10% of total energy demand today to 12% in 2030.
It is interesting to note that this current 10% includes 'traditional' biomass in the forms of wood and dung, which are scarce and/or dirty and need to be replaced with cleaner, more abundant sources to reduce deforestation and improve health.
It's not something people like to hear, but IEA projections show fossil fuels comprising about 80% of total world energy demand in 2030 - about the same as today. Even the agency's most aggressive case for emissions reductions shows 68% of the world's energy in 2030 coming from fossil fuels.
Why, in 20 to 25 years, will fossil fuels still represent such a high percentage of projected global energy use? It's simply the reality of the immense scale of the global energy infrastructure and the time and investment required to build assets like nuclear plants or develop renewable fuels at sufficient scale to make a difference.
Those who suggest there's a technological 'silver bullet' that will render fossil fuels obsolete and allow renewables to become commercially viable and available across the globe in the near future have not dealt with the real constraints of physical capacity, engineering and economics.
Can we overcome these challenges? Can we do better than the IEA projections? You bet.
What should be clear, however, is there are no quick fixes and solutions are inherently long-term and must transcend narrow, short-term interests and election cycles.
So what should our path forward look like?
We need a comprehensive, integrated plan to transition to an environmentally sustainable energy future that focuses on three key elements:
- Greater energy efficiency and conservation
- The need to diversify and increase the sources of our energy supplies
- The need for innovation and new technologies
For example, the greatest source of near-term greenhouse gas (GHG) emissions reductions comes from energy efficiency, which is the least expensive and fastest means of doing so.
The McKinsey Global Institute has indicated that projected global energy demand in 2020 could be reduced by more than 20 percent through energy efficiency investments that would more than pay for themselves. Such a reduction would cancel out the roughly 22% expected increase in world energy demand under baseline assumptions.
In the U.S., the new, higher CAFE or fuel efficiency standard of 36 miles per gallon for the combined U.S. fleet of cars and light trucks by model year 2020 is a step in the right direction, but further increases in the efficiency of the internal combustion engine, enhanced materials technology and greater use of hybrids could generate further reductions on an accelerated basis.
The other near-term action is greater use of natural gas. In the U.S., estimated gas resources have more than doubled - an estimated 100-year supply at current consumption levels - thanks to technology that allows us to economically develop shale-gas reservoirs. Because natural gas emits up to 60% less CO2 than coal, we could reduce GHG emissions with relatively small investment by increasing the utilization of installed gas-fired generation capacity.
It's clear we will need to significantly increase supplies of all forms of energy. However, despite an inclination to do so, it's critical that our elected leaders not pick winners and losers based on what's politically popular or expedient, but rather on a sound technical, commercial and economic basis.
Technology and innovation are also vitally important for increasing the supply of energy, moderating demand and protecting the environment. There's a tremendous amount of research and development under way in a variety of arenas, but these efforts are unfocused, and there's little coordination or sharing of knowledge. This can and should be addressed to help ensure these efforts are better coordinated and more effective.
Finally, the very serious oil spill in the Gulf of Mexico prompts intense reflection on our own industry to ensure we are taking all necessary steps to ensure this never happens again. Marathon is united with other members of the global oil & gas industry, academia, government agencies and others to enhance the long-term safety of our offshore operations.
Our Company strives every day for a zero-fatality, zero-injury work environment and we will take lessons learned from this tragic accident and apply them to our operations wherever we conduct business to ensure this indeed never happens again. This is expected of us and we expect it of ourselves.