Fossil Fuels Still Key to Long-Term Sustainable Development

Abstract: While world leaders seem to be pushing for a fast track to the hydrogen age, downplaying the contributions of oil and gas could equate to throwing the baby out with the bathwater.

Analysis: There's lots of talk these days about "sustainable development," particularly with regard to energy--and even more particularly with regard to energy from crude oil.

In general terms, sustainable development (SD) might be defined as that which meets the needs of the present age without compromising the ability of future generations to meet their own needs.

But when some apply this concept to the petroleum industry, it would seem that the most direct way to energy SD would be to concentrate solely on replacing crude oil energy, rather than supplementing it.

At the recent G-8 summit in Evian, France, leaders of the Group of Eight nations agreed on a plan built around promoting economic growth while securing a better quality of life for people around the world. Of a three-part initiative created at the summit, one element is to develop the following:

- Hydrogen fuel cell technology and infrastructure aimed at making fuel cell vehicles price-competitive within two decades. - Cleaner fossil fuel technologies, including cleaner coal-burning plants. - New-generation nuclear technologies.

The initiative's other parts cover promoting agricultural technologies and practices to help prevent famine, to conserve water, to reduce the application of chemicals, and to improve human health and biodiversity, as well as build a new "integrated global observation system" during the next 10 years, presumably to keep an eye on development everywhere to make sure it's sustainable without having harmful consequences that future generations would have to suffer.

A White House bulletin on the G-8 summit noted that the U.S. government is investing $1.7 billion to develop fuel cell technology and the hydrogen-powered "Freedom Car" in this country, and also is spending $1 billion on the world's first zero-emissions coal power plant. It didn't mention funding of any new-generation nuclear technologies, but that's probably in the offing, as well.

Current federal government investment in new oil and gas exploration and production technologies, which involves a mere smidgeon of that made available for the development of alternative forms of energy, suggests that Washington doesn't hold much hope for the future of oil, despite the fact that viable new tools and techniques have been developed under partial taxpayer funding. Instead, the assumption seems to be that in 20 years, we might not have to manufacture nearly as much motor fuel, since competitively priced fuel cell cars and trucks will be on the road. What's more, cheap electric power will have been fueled increasingly by emissions-free coal-fired generators and by safer new atomic power alternatives.

Maybe. But the petroleum industry isn't standing by, waiting for its pink slip. Oil and gas producers have been practicing their own brand of SD efforts for quite some time, and it's betting that 20, even 50 years hence, petroleum products will still be a major world energy source.

For a decade or so, major and independent producing companies have addressed their role in SD and its importance not only to the industry's future, but also to the advancement of the underdeveloped world.

For example, major companies like Royal Dutch/Shell, among others, have defined more clearly their perceived responsibilities with regard to global warming, even though there's still doubt as to how much responsibility they may actually have.

At a recent (March 12-13) academic SD workshop at Houston's Rice University, Sir Phillip Watts, chairman of Royal Dutch/Shell Group, said Shell has done its part in reducing not only its own greenhouse gas emissions, but those of its customers, as well, by producing more efficient, cleaner fuels. He said Shell in 2002 had reduced its overall emissions by 10 percent from 1990 levels, and despite anticipated growth, pledges to keep them at least 5 percent below 1990 levels through 2010. Watts's attendance at the Rice workshop was prompted by his position as chairman of the World Business Council on Sustainable Development, a coalition of 160 international companies from 30 countries, including some of the largest U.S. corporations. Also, Shell's U.S. affiliate is the chief donor to the university's Shell Center for Sustainability, established last year as a research and educational institute to address major SD issues. The workshop was, in fact, the Center's inaugural event.

Looking ahead, Watts mentioned two key factors in meeting the growing world demand for energy: availability of resources and innovation. As for availability, he said Shell believes that constraints on global oil and gas resources are "very unlikely" before 2025 and perhaps even some time after that.

"Energy developments have always depended on innovations as businesses respond to challenges and opportunities," he said. Such creativity, he added, has not diminished--at least at Shell--and more resources are being applied to research, made more effective by modern communications and computing. He said the industry as a whole currently is entering "a particularly innovative" period in energy technology development. This, ostensibly, should result in improved resource availability.

But energy efficiency is also in the plan. One of Shell's energy makeup scenarios to 2050 pictures efficiency advances in internal combustion engines and hybrids, as well as a rapid increase in natural gas use, Watts noted. Sustained expansion into renewable energy sources, however, starts only after major developments in storage at around 2025. Thereafter, as oil becomes scarcer, demand for biofuels grows and renewables eventually supply about a third of all energy.

A second scenario is a rapid switch to hydrogen, which will require a great deal of innovation, he observed. Initially, the hydrogen would come from fossil fuels, supported environmentally by greenhouse gas sequestration. Demand for hydrogen also drives an expansion of both renewables and nuclear power after 2030.

Both scenarios, said Watts, can deliver the cleaner, more diversified supplies of energy necessary to raise living standards everywhere. However, he pointed out, there are no "quick fixes" to the challenges created by either scenario.

"We may be able to rely on renewables in the long term, although that requires technological advances," said Watts. "And we can do much now to push them forward--developing the technologies, testing the practicalities, driving down costs, making them commercial...But there are many hurdles to overcome--not least significant environmental challenges--before renewables can offer the affordable mass energy the world needs."

So, like many other major energy companies, Watts said Shell sees, in addition to fossil fuel development, the pursuit of a wide array of energy alternatives--all of them viewed and treated as business opportunities--as the probable outcome of sustaining energy development into the 21st century.

But multinational cooperation in fostering common areas of agreement regarding energy, he said, also will be a key ingredient in a successful outcome. Chief among these, he noted, is a need for widespread agreement that business is part of the solution, rather than of the problem, in overall SD.

Sustainable development also was a major discussion topic at the recent (May 5-8) Offshore Technology Conference in Houston. An afternoon session was devoted to discussing the issues and implications of SD to the offshore petroleum industry.

Tom Knudson, senior vice president of government affairs and communications for ConocoPhillips, was among those who addressed the session. He, too, pointed to creativity and cooperation as part of the answer to a more sustainable future in energy.

From the creativity viewpoint, said Knudson, the oil and gas business is often regarded as an "old" industry. But in some respects, he said, it's a new industry that's riding the cutting edge of fresh technologies, such as 3-D seismic imaging, multidirectional drilling, improved extraction techniques, and advances in subsea technology. With these in hand, he said, the industry is making dramatic progress in finding and recovering new oil and gas sources and boosting production from existing ones. Meanwhile, the industry's environmental footprint has become much smaller everywhere, including offshore, and that has reduced its costs significantly. "Sustainability is not sustainability without the economic component," he said.

Perhaps the biggest threat to the industry's upstream segment may not be its ability to operate sustainably, but rather the inability of the ultimate customers for its downstream products to use them sustainably, Knudson pointed out. But there's good news even in such downstream matters. He said EPA studies have found that while the number of vehicle miles driven in the U.S. during the past 30 years has increased by more than 140 percent, vehicle emissions have declined by nearly 30 percent. This, he said, is due to creativity in improved clean fuel technologies, as well as development of more fuel-efficient vehicles.

What's more, he said, a study by MIT's Sloan Automotive Lab indicates that technology development should be capable of getting a 54 percent improvement in the efficiency of straight internal combustion engines by the year 2020, and that doesn't include the added potential of pairing those engines with electric power in hybrid vehicles.

"In short, there is every reason to believe that with the creative application of technology, fossil fuels can continue to provide sustainable energy--without harm to the environment--for years to come," said Knudson.

Cooperation also is a key to sustainable energy, he said. This includes joint research projects among energy companies themselves, a practice that's grown rapidly, particularly in solving the challenges of developing offshore reserves in ever-deeper water. But cooperation also is needed among governments, business, academia, communities, and nongovernmental organizations in finding the most practical and most equitable solutions to achieving energy SD, he said.

Collaboration between the petroleum industry and other industries could lead ultimately to such breakthroughs, for example, as making water co-produced with oil and gas a valuable resource to others, rather than being a burdensome and expensive waste to producers, as it is today in many areas of the world.

But more must be done, Knudson pointed out. The petroleum industry in particular, he added, needs to participate more actively in public dialogue about such issues as SD than it has in the past. "We need to be seen by society as part of the solution, not as the source of the problem," he noted.

"The companies that take the lead in recognizing the need for change, that work with other industries and stakeholders to find creative new solutions to global problems, and that treat sustainable development not as a threat but as an opportunity for growth, will be the winners in the 21st century," he said.