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					An Overview of Global
   Energy Issues
  Presented by Robert Rapier
   Merica International, LLC

             For

  Orlando Energy Conference
      November 16, 2009
                         Outline
   My Paradigm
   The Easy Oil is Gone
   The Global Oil Picture
    • The Pressure on Prices
    • What will replace oil?
    • Understanding energy intensity and scale
   Energy Policy in Brazil
    • A model for the world?
    • Brazil versus U.S. energy statistics
   Energy Policy Mistakes
    • Solutions that would make a difference
   Building a Sustainable Platform
    • Strategy
                    My Paradigm
   The days of substantial excess oil production
    capacity are over
    • Oil price volatility will continue, but long term price
      trends for oil are much higher
   Replacing fossil fuels with biomass will be a huge
    challenge
    • Each year we burn >400 years of ancient biomass*
    • Energy density of oil is 3 times that of biomass
   Biomass costs will rise due to competition
   Net BTU efficiency will become more important
    • How many net BTUs can you extract?

    *Burning Buried Sunshine: Human Consumption of Ancient
      Solar Energy
                 The Easy Oil is Gone




Graphic Source: Colin Campbell
                      Global Oil Picture
    Global oil production – 85.4 million bpd*
      • On a plateau since 2005
      • Some spare capacity, but…
      • Projects are being delayed – setting up price surge
    Oil exporters building refineries to capture more
     of the value chain
      • Saudi Arabia would like to ship finished products
    U.S. crude oil production – 5 million bpd
      • Peak U.S. production was 9.6 million bpd
      • EIA predicts turnaround is just around the corner
    U.S. oil consumption – 19.5 million bpd
    U.S. refining capacity – 17.7 million bpd
*Source: Energy Information Administration
                      Global Oil Picture
   The good news
     • U.S. oil demand down by 1.2 million bpd from 2004-2008
   The bad news
     • Largely recession-induced
     • Demand from China and India up by 1.9 million bpd
     • Oil at $80 the new norm
   How does the recession end if oil prices remain at
    recession-inducing levels?




*Source: Energy Information Administration
                      Pressure on Oil Prices
                               Oil Price Behavior with Constant Excess Capacity
                     90                                                                $40.00
                              World Oil Demand
                                                                                       $38.00
                              World Oil Capacity
                              World Oil Price
                                                                                       $36.00
                     85
                                                                                       $34.00
       Million bpd




                                                                                                Cost/bbl
                                                                                       $32.00
                     80                                                                $30.00
                                                                                       $28.00
                                                                                       $26.00
                     75
                                                                                       $24.00
                                                                                       $22.00
                     70                                                                $20.00
                       2000     2001            2002   2003   2004   2005   2006   2007




   If excess capacity remains constant and
    substantial, prices are relatively stable and
    related to the cost of production
                    Pressure on Oil Prices
                              Oil Price Behavior with Eroding Excess Capacity
                    90
                             World Oil Demand
                                                                                     $70.00
                             World Oil Capacity

                    85       World Oil Price
                                                                                     $60.00
      Million bpd




                                                                                               Cost/bbl
                                                                                     $50.00
                    80
                                                                                     $40.00
                    75
                                                                                     $30.00

                    70                                                                $20.00
                      2000     2001            2002   2003   2004   2005   2006   2007




   However, eroding capacity means higher prices,
    higher volatility, and sometimes much higher
    profits for oil producers
                             My View in July 2007
                                                  The Next 5 Years?
                    94                                                          $215.00
                             World Oil Demand
                    93       World Oil Capacity                                 $195.00
                    92       World Oil Price
                                                                                $175.00
      Million bpd




                    91




                                                                                          Cost/bbl
                                                                                $155.00
                    90
                                                                                $135.00
                    89
                                                                                $115.00
                    88
                    87                                                          $95.00

                    86                                                           $75.00
                      2008                2009        2010            2011   2012


   When spare capacity is gone, prices will
    ultimately go much higher
   How high? In Europe, consumers pay the
    equivalent of $250/bbl* - 3x U.S. prices

*Based on Dutch gasoline price in Q1 2009
          The Biomass Contribution
   The “Billion Ton Study”
    • Over 1.3 billion dry tons/year of biomass potential
    • Enough to produce “biofuels to meet more than one-third of
      the current demand for transportation fuels”
   Converting to ethanol at 90 gallons/ton* yields
    • 117 billion gallons
   Correcting for lower energy content yields
    • 77 billion gallons of gasoline equivalent
    • This is <45% of the BTUs of the starting biomass
    • This is not net of energy to harvest and transport biomass
             Net energy unknown as no large commercial cellulosic ethanol
              facilities
   U.S. gasoline usage is around 140 billion gal/yr
   Is that cup half full?
*Source: Private communication from POET.
    Key Questions for Alternatives
   Is the process enabled by fossil fuels?
   Does the process impact food supplies?
   Can the process operate without straining water
    supplies?
   Does the process lower the soil quality?
   Does the process impact local biodiversity?
   What are the emissions from the process?
        Sustainable Alternatives?
   Renewable electricity
    • Biomass, solar, geothermal, wind paired up with plug-in hybrid
      electric vehicles (but some technical issues need solutions)
    • Micro-CHP
   Biogas
    • Simple systems; lower energy inputs
   Pyrolysis oil
    • Fast and simple
    • Used for stationary power or upgraded to transportation fuel
   Green diesel
    • Biomass gasification or hydrocracked lipids
   Ethanol in some cases
    • Byproduct of sugar processing
    • Corn ethanol in Iowa for Iowans?
   Renewable petroleum
    • Microbial or catalytic approaches
   The Unsustainable Alternative




Graphic Source: Energy Information Administration
     A Word on Energy Intensity
   The energy balance matters
    • How many BTUs of fossil fuel to produce a BTU of
      renewable energy?
   If production costs are high because energy inputs
    are high, you have a receding horizon problem
    • Cost position may worsen as oil prices increase
   The problem of receding horizons
    • "Oil Shale Development Imminent” – headline circa 1900
    • When oil was $20/bbl, oil shale needed $40/bbl
    • At $80/bbl, oil shale still not economical
   Two high-profile examples of energy intensive
    processes in the renewable energy world
    • Cellulosic ethanol
    • Algal biofuel
                       Understanding Scale
                           U.S. Ethanol Production Versus Total Petroleum Demand

                    25.0        Ethanol Production
                                                                              25.0
                                Total Demand
                    20.0                                                      20.0
      Million BPD




                                                                                     Million BPD
                    15.0                                                      15.0

                    10.0                                                      10.0

                     5.0                                                      5.0

                     0.0                                                      0.0
                        1994                     1999     2004            2009


   While we have been successful at rapidly ramping
    up corn ethanol, it barely registers on the scale of
    our petroleum demand
          Energy Policy in Brazil
   Sugarcane ethanol has long been a cornerstone of
    Brazil‟s energy policy
   Can be produced from byproduct molasses – food
    and fuel
   The key to the process is bagasse
    • A readily available energy source for fueling boilers
    • Minimal fossil fuel inputs relative to corn ethanol
    Can the World Emulate Brazil?
   “As a result [of ethanol], Brazil has virtually stopped
    importing expensive foreign oil.” – Dan Rather in The Ethanol
    Solution

   “If Brazil can do it, so can we.” – Bill Clinton, promoting
    California‟s Prop 87

   “As Brazil's „energy independence miracle‟ proves, an
    aggressive strategy of investing in petroleum substitutes like
    ethanol can end dependence on imported oil.” – Vinod Khosla
    and Tom Daschle in Miles per Cob (a New York Times
    editorial)

   “I'm driving a Chevrolet in the middle of Brazil on ethanol,
    pure ethanol, not a drop of oil, imported oil in this tank. And
    here is the stuff grown all around us that is the fuel. So I'm
    thinking, why can't I do this in America? Why aren't we doing
    it?” – Frank Sesno in CNN‟s We Were Warned
                         Reality Check
     Annual ethanol usage in Brazil: 0.33 barrels* per
      person
     Annual oil usage in Brazil: 4.4 barrels per person
     Oil still supplies more than 90% of Brazil‟s
      transportation needs
     Brazil celebrated energy
      independence in 2006
       • Brazilian President Luiz da Silva
         made the announcement on the
         P-50 oil rig in the Albacora Leste
         field in the Atlantic Ocean



* Barrels of oil equivalent (BOE)
      Reality Check – It Gets Worse
     Annual oil usage in US: 23.4 bbl/person*
     Annual oil usage in Brazil: 4.4 bbl/person
     Annual oil production in US: 8.1 bbl/person
     Annual oil production in Brazil: 3.5 bbl/person
     U.S. supply imbalance: 15.3 bbl/person
     Brazil‟s supply imbalance: 0.9 bbl/person
     Consumption and production are:
      • Grossly unbalanced in the US
      • Fairly balanced in Brazil
     So, how can the US emulate Brazil?
      • By cutting oil consumption by 2/3rds
      • Or by tripling oil production
* Consumption and production figures are from 2008
           Energy Policy Mistakes
   Leaders mislead the public
    • “We can be just like Brazil”
    • Can create demand for a pseudo-sustainable solution
   Leaders change energy policy every year
    • Uncertainty of tax policies inhibits investment
    • Lack of long-term planning is detrimental
   Leaders attempt to choose technology winners
    • Which is influenced by:
          Misleading arguments from various „experts‟
          Vested interests
          Desire to please constituents
             Suggested Solutions
   Cease the delusions of „cheap gas for everyone‟
    • Cheap gas encourages fossil fuel consumption
   Trade off fossil fuel taxes for income taxes
    •   Rebate income taxes to make it revenue neutral
    •   Encourages energy conservation
    •   Encourages alternatives
    •   Encourages mass transit
   Encourage behaviors that reduce energy
    consumption
    • Rebates for solar water heaters, fuel efficient cars
Vision of a Sustainable Platform
   The Forestry Leg
    • Managed forest plantations
    • Utilize trees that can improve soil quality
    • By managing the biomass, we
          Manage the sustainability
          Ensure our supplies
   The Logistical/Trading Leg
    • Moves biomass from forestry leg to conversion leg
    • Potentially sources 3rd party biomass as appropriate
   The Conversion Leg
    • Utilizes appropriate conversion technologies that fit the
      local biomass resource and local energy need (e.g.,
      torrefaction to displace coal)
   The Distribution Leg
    • Gets fuel into the marketplace
                         Strategy
   Assess the energy profile of a location
    • Liquid fuels – gas, diesel, jet fuel
    • Electricity – coal-fired, liquid fueled, natural gas
    • Heating
   Assess the potential renewable resources
    • Biomass, solar, wind, geothermal, hydropower, etc.
   Evaluate the conversion technologies
    • Is there a match between the biomass, the conversion
      technology, and the demand?
   Conduct the life cycle assessment
   Engage the community
    • Will local jobs be created?
    • What are the land use impacts?
   Execute
    • Lots of “good ideas” are executed poorly
Thank You

				
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