September 29, 2011 at 8:25 pm #2116
Energy, Water and Food
09/26/2011 OGJ Volume 109/Issue 39
Routine analysis of future oil and gas markets amounts to reductionism. It begins with projections of broad factors like population and economic activity. Next it forecasts total energy use, which it apportions among various forms. Then it addresses more-particular questions: How much gasoline will be needed in North America or diesel in Europe? How much supply will be available from countries outside the Organization of Petroleum Exporting Countries? How much crude oil will OPEC members be able and willing to produce?
Less typical is analysis that expands from oil instead of deducing to it. The exercise can illuminate possibilities about future conditions under which oil will be produced, processed, and consumed that might otherwise stay in the dark.
Royal Dutch Shell developed an expansionary view of oil as it grappled with what it can’t know about future energy markets. Chief Executive Officer Peter Voser described the process in a Sept. 5 speech in The Hague to the Harvard Business School Club of the Netherlands and Ivy Circle.
What Shell can’t know is how the market will handle a diversion between projected supply and demand if the values grow under “business-as-usual” conditions. By 2050, that notional gap, which Shell calls “the zone of uncertainty,” could be about the size of the entire energy system in 2020. The question isn’t whether the market will close the gap; it will. Supply and demand must balance. The question is how supply and demand must deviate from current projections to allow balance to occur.
Thinking about oil’s zone of uncertainty led Shell to recognize that the concept applies to “other socio-ecological systems,” Voser said. “As a result, we are looking at how these systems are interconnected-particularly water, energy, and food.”
The interconnections, he noted, are obvious. Moving and treating water uses energy. Almost all forms of energy production need water. And producing food requires energy and water.
“There’s a growing awareness that the path to a more sustainable energy future will require society to take a more-integrated approach that considers all three of these systems and how they relate to one another,” Voser said.
Like oil, water and food raise supply questions. Population growth and urban sprawl could lead to crises with both, the Shell executive said. He cited a World Economic Forum warning that current trends point to a global shortfall of 40% between freshwater demand and supply by 2030 if current trends continue. Over the same period, food needs might grow by 40-50%.
Shell is giving special attention to the connection between energy and water. Energy is important to water supply, purification, distribution, and treatment. Energy, Voser said, represents 75% of the cost of water in the US. And energy producers are among the largest industrial consumers of fresh water.
Shell leads a project examining these relationships in partnership with the World Business Council for Sustainable Development. The project is studying water use associated with different energy types on a lifecycle basis. “What we can say from our early findings is that technology is the key differentiator, whether you’re talking about tight gas production, power generation, or biofuels production,” Voser said.
The oil and gas industry hasn’t ignored water issues. Raising treatment efficiency and lowering water use in the production of oil and gas from unconventional reservoirs are prominent areas of technical and economic advance. Improvements have been impressive and will continue.
But placing the issues in a broader context, as Voser discussed, raises new questions. Will limits on water supply and treatment capacity constrain development of oil and gas in shale? How is the answer to that question affected by competition for water supply from the growing needs of food production? How does the production of biofuels from food grains affect these balances?
Such questions are crucial to future energy supply. They don’t yet have good answers. But, as Shell makes clear, it’s not too soon to ask them.
September 29, 2011 at 8:29 pm #4911
Here is another good article from OGJ about Shell’s new way of projecting supply & demand values by evaluating the interconnecting systems of Energy, Water & Food.
Short read is that Energy requires great deal of water for production, and major cost of water in US is of course Energy. The production of food requires a great deal of both energy & water.
This makes a natural fit for US Gulf Coast production of all three – since there are huge concentrations of Oil & Gas reserves, Major river (Mississippi) as well as US largest Acquifer in Texas and of course tropical climate and extended growing seasons for area.
The details & study of overlapping elements also help highlight future limits on critical limits from any specific one – which are already impacting many other regions in US. Ethanol impacts on food have spiked prices, and caused famine in less developed countries already. Water is already in critical supply in most of the world and any major impact from spills or contamination bring it into sharp relief – the fracturing for Natural Gas in shale areas has caused major issues in the US.
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