Technology’s role in our energy future
Speaker: Ellis Armstrong
Speech date: 24 October 2006
Venue: Harvard University Energy Club
Title: GVP Exploration & Production
Speech date: 24 October 2006
Venue: Harvard University Energy Club
Title: GVP Exploration & Production
Abstract
Influenced by growing demand, and environmental and security concerns, societies of the world are seeking clean, local sources of energy that are sustainable. As the global market’s ability to supply oil and gas remains constrained by capability, and the resources become increasingly concentrated in the Middle East, Russia and West Africa, the use of advanced technology to increase the recovery of hydrocarbons in the established basins of the world, for example the United States, is becoming increasingly important in the energy mix. The International Oil Companies have a key role to play in providing this technology, as well as investing at scale in technology that will grow the proportion of alternative low carbon energy sources.
Influenced by growing demand, and environmental and security concerns, societies of the world are seeking clean, local sources of energy that are sustainable. As the global market’s ability to supply oil and gas remains constrained by capability, and the resources become increasingly concentrated in the Middle East, Russia and West Africa, the use of advanced technology to increase the recovery of hydrocarbons in the established basins of the world, for example the United States, is becoming increasingly important in the energy mix. The International Oil Companies have a key role to play in providing this technology, as well as investing at scale in technology that will grow the proportion of alternative low carbon energy sources.
Introduction
Good afternoon and thank you for inviting me to join you today. The Energy Club does a fantastic job in inspiring talented people to take an interest in our industry, and it’s great to see so many of you here today.
I know that you discuss many aspects of our business throughout the year and today I want to address a topic I believe is fundamental to the energy industry, and which I find inspiring – the role of technology.
The creation and nurturing of new technology is absorbing for its own sake. Many people dedicate their lives to this end alone. But technology in our industry is also vital for the future of the world.
During this talk I’d like to share with you why I believe this is. Firstly, by outlining my view of the energy world today, and then describing some specific examples, many of them here in the US, where technology is allowing us to unlock hydrocarbon resources we never thought possible. I’ll then finish by examining the role of technology in advancing alternative energy.
Let’s start by looking at the bigger picture. Where are we in the world’s efforts to find what people increasingly want: Clean, secure, local, energy?
Good afternoon and thank you for inviting me to join you today. The Energy Club does a fantastic job in inspiring talented people to take an interest in our industry, and it’s great to see so many of you here today.
I know that you discuss many aspects of our business throughout the year and today I want to address a topic I believe is fundamental to the energy industry, and which I find inspiring – the role of technology.
The creation and nurturing of new technology is absorbing for its own sake. Many people dedicate their lives to this end alone. But technology in our industry is also vital for the future of the world.
During this talk I’d like to share with you why I believe this is. Firstly, by outlining my view of the energy world today, and then describing some specific examples, many of them here in the US, where technology is allowing us to unlock hydrocarbon resources we never thought possible. I’ll then finish by examining the role of technology in advancing alternative energy.
Let’s start by looking at the bigger picture. Where are we in the world’s efforts to find what people increasingly want: Clean, secure, local, energy?
Global energy trends
The demand for energy has risen by 15% during the 21st century – roughly 2.5 per cent a year. And some forecasts expect this demand to have grown by 60% by 2030. This is primarily being driven by population growth and economic development. The world’s population has doubled during my lifetime, from 3 billion in 1961 to over 6 billion today. That’s as much as it’s grown since time began. And it’s expected to hit 9 billion by 2050.
For these people – and for all of us - energy is fundamentally beneficial. People with access to energy live longer. Countries with good access to energy have higher standards of living. Today, the bulk of energy demand is being supplied by hydrocarbons. But what about the future?
Some in the ‘peak oil’ school of thought believe that we are in a crisis and the age of oil is ending soon. I am actually not a resource “peakist”. The BP Statistical Review indicates that the world’s proved reserves of oil & gas continue to grow, from around 1.2 trillion barrels of oil equivalent in 1980 to over 2.3 trillion barrels of oil equivalent today. During this time the reserves to production ratio has stayed flat, in the face of increasing demand, at around 50 years of production.
The demand for energy has risen by 15% during the 21st century – roughly 2.5 per cent a year. And some forecasts expect this demand to have grown by 60% by 2030. This is primarily being driven by population growth and economic development. The world’s population has doubled during my lifetime, from 3 billion in 1961 to over 6 billion today. That’s as much as it’s grown since time began. And it’s expected to hit 9 billion by 2050.
For these people – and for all of us - energy is fundamentally beneficial. People with access to energy live longer. Countries with good access to energy have higher standards of living. Today, the bulk of energy demand is being supplied by hydrocarbons. But what about the future?
Some in the ‘peak oil’ school of thought believe that we are in a crisis and the age of oil is ending soon. I am actually not a resource “peakist”. The BP Statistical Review indicates that the world’s proved reserves of oil & gas continue to grow, from around 1.2 trillion barrels of oil equivalent in 1980 to over 2.3 trillion barrels of oil equivalent today. During this time the reserves to production ratio has stayed flat, in the face of increasing demand, at around 50 years of production.
Pressures on capacity
However, whilst I am not a resource “peakist”, I am a capacity “peakist”, because I believe the fundamental constraint on the industry’s ability to grow is the capacity, both human and equipment, to connect these resources to production.
This capacity declined in the late 1990’s when the oil price fell to around $10/bbl. Investment and recruitment were affected, and capacity growth in the supply chain dried up.
Since then, energy prices have risen dramatically and the industry has sought to regenerate itself at an almost exponential rate. Capital spending has risen from just over $100bn in 2001, to $200bn in 2004, and around $280bn last year.
What this means is that the supply chain, where lead times to build new equipment are 3 years, and even longer to train and develop people, can’t keep up – it can’t feed the demand growth of today. Over time this will rectify itself, but it is driving medium term shortages.
Just looking at the number and the age profile of Petroleum engineers working in the US the number who will be retiring and the number of graduates being added to the supply pool the industry is short of people and in the near term that position is likely to worsen, It’s clear that to meet the growth in demand, the industry will need a step change in efficiency or secure new sources of talent. With these dynamics, who knows, the salary for a graduating engineer may even exceed that of an MBA!
However, whilst I am not a resource “peakist”, I am a capacity “peakist”, because I believe the fundamental constraint on the industry’s ability to grow is the capacity, both human and equipment, to connect these resources to production.
This capacity declined in the late 1990’s when the oil price fell to around $10/bbl. Investment and recruitment were affected, and capacity growth in the supply chain dried up.
Since then, energy prices have risen dramatically and the industry has sought to regenerate itself at an almost exponential rate. Capital spending has risen from just over $100bn in 2001, to $200bn in 2004, and around $280bn last year.
What this means is that the supply chain, where lead times to build new equipment are 3 years, and even longer to train and develop people, can’t keep up – it can’t feed the demand growth of today. Over time this will rectify itself, but it is driving medium term shortages.
Just looking at the number and the age profile of Petroleum engineers working in the US the number who will be retiring and the number of graduates being added to the supply pool the industry is short of people and in the near term that position is likely to worsen, It’s clear that to meet the growth in demand, the industry will need a step change in efficiency or secure new sources of talent. With these dynamics, who knows, the salary for a graduating engineer may even exceed that of an MBA!
The Environment and Energy Security
Add to this mix concerns about the environment. Fossil fuel-derived energy has environmental implications and people are increasingly looking for more responsible suppliers. There is growing international debate over targets for the global rise in temperature, for carbon dioxide levels in the atmosphere, and for annual emissions. BP has been contributing to this debate for nearly a decade. John Browne, our CEO, gave his first major speech on global climate change at Stanford when I was a student there in 1997. At the time, this was an extraordinary act for the leader of an international oil company.
There are also concerns over energy security. There may be enough oil and gas – physically - but there is concern amongst consumer countries over whether their own supplies are secure. For oil and gas there is a significant dislocation between supply and demand.
This is particularly acute among major importers of energy such as the US, India, Europe and China. By 2016 it’s expected that 70% of the world’s oil and 40% of its gas will be supplied through cross border trade. And 80% of the traded oil will come from three regions, Russia, West Africa and the Middle East.
We in BP have seen this sensitivity only too vividly with the recent events in Alaska, when shutting in around 200,000 barrels of production, only 0.2% of the world’s supply, which caused concern on both a national and international front. Fortunately, there was enough global supply that prices at the pump and supplies to refineries were barely affected by the outage.
Add to this mix concerns about the environment. Fossil fuel-derived energy has environmental implications and people are increasingly looking for more responsible suppliers. There is growing international debate over targets for the global rise in temperature, for carbon dioxide levels in the atmosphere, and for annual emissions. BP has been contributing to this debate for nearly a decade. John Browne, our CEO, gave his first major speech on global climate change at Stanford when I was a student there in 1997. At the time, this was an extraordinary act for the leader of an international oil company.
There are also concerns over energy security. There may be enough oil and gas – physically - but there is concern amongst consumer countries over whether their own supplies are secure. For oil and gas there is a significant dislocation between supply and demand.
This is particularly acute among major importers of energy such as the US, India, Europe and China. By 2016 it’s expected that 70% of the world’s oil and 40% of its gas will be supplied through cross border trade. And 80% of the traded oil will come from three regions, Russia, West Africa and the Middle East.
We in BP have seen this sensitivity only too vividly with the recent events in Alaska, when shutting in around 200,000 barrels of production, only 0.2% of the world’s supply, which caused concern on both a national and international front. Fortunately, there was enough global supply that prices at the pump and supplies to refineries were barely affected by the outage.
We have learned the hard way that in today’s world, society has high expectations of us to be a reliable supplier of oil and gas. With the unexpected corrosion of the flowlines at Prudhoe Bay we failed to meet that expectation. We are determined to learn from this and other incidents. We have added a further $1 billion to the $6 billion already earmarked over the next four years to upgrade all aspects of safety at US refineries and to repair and replace infield pipelines in Alaska.
Accessing hydrocarbons
Despite these pressures, the short to medium term energy mix will continue to be dominated by hydrocarbons, and finding and developing the oil and gas the world needs remains a huge challenge.
So what are we, as the US’s largest supplier of oil and gas, doing about these challenges?
The Worlds’ Reserves
International Oil Companies do not have access to the bulk of the world’s reserves. Between them, the Super Majors hold only 3% of the world’s oil and gas reserves, yet produce 13% of its production. This means, for the IOCs, making the most of what we have is hugely important in the world energy mix. We must continually recover and produce more from our established positions to meet today’s energy needs.
Accessing hydrocarbons
Despite these pressures, the short to medium term energy mix will continue to be dominated by hydrocarbons, and finding and developing the oil and gas the world needs remains a huge challenge.
So what are we, as the US’s largest supplier of oil and gas, doing about these challenges?
The Worlds’ Reserves
International Oil Companies do not have access to the bulk of the world’s reserves. Between them, the Super Majors hold only 3% of the world’s oil and gas reserves, yet produce 13% of its production. This means, for the IOCs, making the most of what we have is hugely important in the world energy mix. We must continually recover and produce more from our established positions to meet today’s energy needs.
BP’s profit centre progress
In reservoirs around the world we have around 200 billion barrels of oil equivalent initially-in-place in what we like to call our “incumbent positions”. Approximately one third are here in the US.
When you have a resource base of this scale, the stakes are high. A 1% increase in recovery factor in BP fields around the world is equivalent to finding two billion barrels of oil equivalent – that’s the same as access to four new “giant” discoveries.
Of the 200 billion barrels, we have already produced around 38 bn boe, equivalent to an average recovery factor for the portfolio of just 19% but we have a track record of increasing oil recovery. For example in Prudhoe Bay, where we have increased the projected recovery factor from around the 40% envisaged at the time of first production, to over 60% today.
It is here I believe that technology is the key to the future. It is the most effective tool our industry has to fulfil its role in society to supply secure, sustainable energy.
In the longer term, many of the resources held today by the National Oil Companies (NOCs) will also be more in need of advanced recovery technology. So developing technology to make the most of what we as IOCs have today, is not purely about today, it is about building capability so that when the 75% of the world’s oil and gas that is held by the NOCs needs this advanced recovery, the technology is there and we can work together with them to bring it to bear.
In reservoirs around the world we have around 200 billion barrels of oil equivalent initially-in-place in what we like to call our “incumbent positions”. Approximately one third are here in the US.
When you have a resource base of this scale, the stakes are high. A 1% increase in recovery factor in BP fields around the world is equivalent to finding two billion barrels of oil equivalent – that’s the same as access to four new “giant” discoveries.
Of the 200 billion barrels, we have already produced around 38 bn boe, equivalent to an average recovery factor for the portfolio of just 19% but we have a track record of increasing oil recovery. For example in Prudhoe Bay, where we have increased the projected recovery factor from around the 40% envisaged at the time of first production, to over 60% today.
It is here I believe that technology is the key to the future. It is the most effective tool our industry has to fulfil its role in society to supply secure, sustainable energy.
In the longer term, many of the resources held today by the National Oil Companies (NOCs) will also be more in need of advanced recovery technology. So developing technology to make the most of what we as IOCs have today, is not purely about today, it is about building capability so that when the 75% of the world’s oil and gas that is held by the NOCs needs this advanced recovery, the technology is there and we can work together with them to bring it to bear.
BP’s technology approach
To bring this to life for you I’d like to talk about some recovery technologies in action.
As I said, BP’s strategy over the last 15 years has created large incumbent positions.
Core to our strategy of exploiting this “incumbency” are the technologies that unlock those resources from discovery through to production.
We build detailed basin models, collect seismic data, gather real time reservoir information and apply a variety of drilling, fracturing and injection techniques. This allows us to be very competitive in accessing incremental opportunities quickly and economically - and in some cases uniquely. I’d like to share with you some of the ways we do this.
To bring this to life for you I’d like to talk about some recovery technologies in action.
As I said, BP’s strategy over the last 15 years has created large incumbent positions.
Core to our strategy of exploiting this “incumbency” are the technologies that unlock those resources from discovery through to production.
We build detailed basin models, collect seismic data, gather real time reservoir information and apply a variety of drilling, fracturing and injection techniques. This allows us to be very competitive in accessing incremental opportunities quickly and economically - and in some cases uniquely. I’d like to share with you some of the ways we do this.
Seismic imaging for exploration – wide azimuth
Many of you will already be aware of the importance of seismic technology in exploration and production but you may not know about the range of new seismic techniques that are developing.
BP believes that this technology is so critical we have invested in developing an outstanding team of seismic technologists in Houston and one of the most, if not the most, powerful computing centre outside of the US government.
We have recently enjoyed extraordinary results from large scale experiments of BP’s proprietary wide azimuth survey technique in the Gulf of Mexico. In the Gulf of Mexico many of the hydrocarbon resources are “invisible” below thick canopies of salt. This salt prevents conventional seismic from working and creates an image like looking through frosted glass.
Wide azimuth surveys involve using multiple sources and boats instead of just one to collect information from many different angles and build up a more compete picture – like by moving your head from side to side, so the brain can form an image of what is behind the glass.
When we combine and process the data, we can see much more clearly beneath the salt layer. Our approach in BP is to pick technologies like this that are critical and to test them at scale. We moved Wide Azimuth from design to proof of concept in under 12 months and our computing centre now enables us to process vast quantities of data to complete the new images in a few weeks.
Whilst Seismic imaging is critical to the discovery process, it is also important in producing fields. Good seismic images enable better field development plans; they allow increased recovery and lower drilling costs and risk.
Many of you will already be aware of the importance of seismic technology in exploration and production but you may not know about the range of new seismic techniques that are developing.
BP believes that this technology is so critical we have invested in developing an outstanding team of seismic technologists in Houston and one of the most, if not the most, powerful computing centre outside of the US government.
We have recently enjoyed extraordinary results from large scale experiments of BP’s proprietary wide azimuth survey technique in the Gulf of Mexico. In the Gulf of Mexico many of the hydrocarbon resources are “invisible” below thick canopies of salt. This salt prevents conventional seismic from working and creates an image like looking through frosted glass.
Wide azimuth surveys involve using multiple sources and boats instead of just one to collect information from many different angles and build up a more compete picture – like by moving your head from side to side, so the brain can form an image of what is behind the glass.
When we combine and process the data, we can see much more clearly beneath the salt layer. Our approach in BP is to pick technologies like this that are critical and to test them at scale. We moved Wide Azimuth from design to proof of concept in under 12 months and our computing centre now enables us to process vast quantities of data to complete the new images in a few weeks.
Whilst Seismic imaging is critical to the discovery process, it is also important in producing fields. Good seismic images enable better field development plans; they allow increased recovery and lower drilling costs and risk.
In the Caspian’s giant ACG field, BP is deploying permanent ocean bottom seismic monitors on the sea bed to monitor the reservoir over the producing life of the field. These sensors send data to a control centre that enables us to see in real time where the oil, gas and water are moving in the reservoir.
To recover oil from Azeri we simultaneously inject water into the base of the oil column, and gas into the gas cap. This squeezes the oil out of the oil producing areas. We achieve this by strategic positioning of the wells and fine-tuning of the rates of oil production and water injection. It’s a balancing act to optimise the flow. The technique allows us to improve recovery of resources, which on a super giant field such as ACG of 5.4 billion barrels, has a huge impact.
Relate this to what I said earlier about supply and demand. Production from the Azeri field is being piped to world markets along the newly opened BTC pipeline and is the largest new source of non OPEC supply that has come to world markets for 15 years.
The fact that we’ve opened up the Caspian bears out the fact that while oil and gas resources are plentiful, they are increasingly found in challenging locations – such as inhospitable arctic regions and deeper and deeper water – or in challenging forms such as heavy oils or what’s known as tight gas.
I’d now like to move on to a technology area that is central to the extraction of resources like this – advanced drilling technology.
To recover oil from Azeri we simultaneously inject water into the base of the oil column, and gas into the gas cap. This squeezes the oil out of the oil producing areas. We achieve this by strategic positioning of the wells and fine-tuning of the rates of oil production and water injection. It’s a balancing act to optimise the flow. The technique allows us to improve recovery of resources, which on a super giant field such as ACG of 5.4 billion barrels, has a huge impact.
Relate this to what I said earlier about supply and demand. Production from the Azeri field is being piped to world markets along the newly opened BTC pipeline and is the largest new source of non OPEC supply that has come to world markets for 15 years.
The fact that we’ve opened up the Caspian bears out the fact that while oil and gas resources are plentiful, they are increasingly found in challenging locations – such as inhospitable arctic regions and deeper and deeper water – or in challenging forms such as heavy oils or what’s known as tight gas.
I’d now like to move on to a technology area that is central to the extraction of resources like this – advanced drilling technology.
The drilling envelope
To access deeper, higher pressure, higher temperature resources we are continuously pushing back the technical limit. We are operating in ever deeper water and deeper reservoir horizons around the world. Take the Gulf of Mexico. 10 years ago we could drill in 1,000 ft of water to reservoirs 5,000 ft deep. Today we are drilling in water depths of up to 9,000 ft to reservoirs up to 30,000 feet deep, at pressures of 15,000 psi and temperatures approaching 500 degrees Fahrenheit. Working at the technical edge will continue to be a challenge, as we have found with the recent difficulties with the Thunder Horse project in the Gulf, which is right at the edge of this technical envelope today.
Looking forward, we are only in the first stage of the journey in the Gulf of Mexico, we estimate only one third of the basin’s resources have been discovered, but that more and more of future resources will be at this edge.
Extending the envelope of what is technically possible is often not the result of one big breakthrough, but of engineers and technologists in BP applying their skills to a common problem, with the opportunity to push the limit every day. It has recently allowed us to start drilling deeper Miocene and Paleogene reservoirs in the Gulf of Mexico and produce discoveries such as our recent substantial find at Kaskida, one of the larger discoveries in the Gulf in recent years.
To access deeper, higher pressure, higher temperature resources we are continuously pushing back the technical limit. We are operating in ever deeper water and deeper reservoir horizons around the world. Take the Gulf of Mexico. 10 years ago we could drill in 1,000 ft of water to reservoirs 5,000 ft deep. Today we are drilling in water depths of up to 9,000 ft to reservoirs up to 30,000 feet deep, at pressures of 15,000 psi and temperatures approaching 500 degrees Fahrenheit. Working at the technical edge will continue to be a challenge, as we have found with the recent difficulties with the Thunder Horse project in the Gulf, which is right at the edge of this technical envelope today.
Looking forward, we are only in the first stage of the journey in the Gulf of Mexico, we estimate only one third of the basin’s resources have been discovered, but that more and more of future resources will be at this edge.
Extending the envelope of what is technically possible is often not the result of one big breakthrough, but of engineers and technologists in BP applying their skills to a common problem, with the opportunity to push the limit every day. It has recently allowed us to start drilling deeper Miocene and Paleogene reservoirs in the Gulf of Mexico and produce discoveries such as our recent substantial find at Kaskida, one of the larger discoveries in the Gulf in recent years.
Tight gas
I just mentioned the effort to reach the large volumes of the world’s gas resources that are in challenging situations – one is so-called ‘tight gas’, of which there are huge resources in North America that could supply the US gas market for years to come. The development challenge here is due to low connectivity of pore volumes in the reservoir rock.
BP is a world leader in tight gas technology, and a key dimension of this is advanced horizontal drilling and hydraulic fracturing techniques. These techniques are helping us achieve production rates of up to 10 times higher than more conventional methods, and recoveries per well of some 5 times higher.
Last year we announced a commitment to a large increase in spending in the Wamsutter field in Wyoming. Using a blend of seismic, horizontal drilling and hydraulic fracturing, this should allow us to increase BP’s share of ultimate recovery from the field by around three trillion cubic feet of gas and increase BP’s daily net production from 135 to 250 million standard cubic feet per day by the end of the decade.
Wamsutter is an important test-bed. There, potential for almost another ten trillion cubic feet of tight gas resource in North America that could be converted to proved reserves over the next 10-15 years if these technologies are successfully deployed; and many more such resources elsewhere in the world, for example in sub-continental Asia and the Middle East.
I just mentioned the effort to reach the large volumes of the world’s gas resources that are in challenging situations – one is so-called ‘tight gas’, of which there are huge resources in North America that could supply the US gas market for years to come. The development challenge here is due to low connectivity of pore volumes in the reservoir rock.
BP is a world leader in tight gas technology, and a key dimension of this is advanced horizontal drilling and hydraulic fracturing techniques. These techniques are helping us achieve production rates of up to 10 times higher than more conventional methods, and recoveries per well of some 5 times higher.
Last year we announced a commitment to a large increase in spending in the Wamsutter field in Wyoming. Using a blend of seismic, horizontal drilling and hydraulic fracturing, this should allow us to increase BP’s share of ultimate recovery from the field by around three trillion cubic feet of gas and increase BP’s daily net production from 135 to 250 million standard cubic feet per day by the end of the decade.
Wamsutter is an important test-bed. There, potential for almost another ten trillion cubic feet of tight gas resource in North America that could be converted to proved reserves over the next 10-15 years if these technologies are successfully deployed; and many more such resources elsewhere in the world, for example in sub-continental Asia and the Middle East.
Environmental Challenges
These are just a few examples of what we are doing to bring hydrocarbons to market securely and safely. There are also many others – such as our US tight gas business – that I don’t have time to talk about today.
Looking to the future technology will also play in important role as we seek to provide alternative energy sources that are clean, local and sustainable. In BP we support the emerging consensus that measures should be taken to stabilise CO2 levels in the atmosphere at around 500-550 parts per million this century. It’s calculated that this will require having emissions in 50 years time at roughly the same level they are now – about 25 billion tonnes of CO2 equivalent – despite a projected doubling in energy consumption.
We’re not talking about eliminating carbon emissions entirely. Science implies that there is a tolerable level of emissions. The challenge is to limit them and change the mix towards lower-carbon sources. 40% of the power plants that will supply energy in 2020 are yet to be built, so the possibility of change does exist. Again, technology will be the key to this low carbon future.
These are just a few examples of what we are doing to bring hydrocarbons to market securely and safely. There are also many others – such as our US tight gas business – that I don’t have time to talk about today.
Looking to the future technology will also play in important role as we seek to provide alternative energy sources that are clean, local and sustainable. In BP we support the emerging consensus that measures should be taken to stabilise CO2 levels in the atmosphere at around 500-550 parts per million this century. It’s calculated that this will require having emissions in 50 years time at roughly the same level they are now – about 25 billion tonnes of CO2 equivalent – despite a projected doubling in energy consumption.
We’re not talking about eliminating carbon emissions entirely. Science implies that there is a tolerable level of emissions. The challenge is to limit them and change the mix towards lower-carbon sources. 40% of the power plants that will supply energy in 2020 are yet to be built, so the possibility of change does exist. Again, technology will be the key to this low carbon future.
BP is deeply involved in almost every part of this landscape. We are already a major player in biofuels – with about 10% of the global market. We are investing $500m over 10 years, in a biofuels institute with a major research university yet to be chosen, in the US or UK.
Biofuels are important for 3 reasons. The first is maturity, so far very little technology has been applied to biofuels, if a step change could be made in crop yields and the conversion process, they could be economically viable in temperate climates. The second is scale; breakthroughs here would enhance the energy independence of the US. The US has vast land space which could produce crops to fuel energy needs. The third is its energy density. Whilst other alternative energies provide power, they do not fuel our chosen mode of transport, the car. Solar, wind and nuclear cannot power a car. Biofuels can.
Last year we launched our Alternative Energy business with the aim of becoming the world’s leading low carbon power business. We will spend $8 billion dollars over the next 10 years and expect to cut projected GHG emissions by 24 million tonnes a year by 2015. We continue to ramp up our solar production where we are already one of the world’s largest suppliers. We’ve moved into wind at scale have completed 2 large deals in 2006 that, along with our own significant land bank, have provided us with a large North American development portfolio in excess of 8 GW.
Biofuels are important for 3 reasons. The first is maturity, so far very little technology has been applied to biofuels, if a step change could be made in crop yields and the conversion process, they could be economically viable in temperate climates. The second is scale; breakthroughs here would enhance the energy independence of the US. The US has vast land space which could produce crops to fuel energy needs. The third is its energy density. Whilst other alternative energies provide power, they do not fuel our chosen mode of transport, the car. Solar, wind and nuclear cannot power a car. Biofuels can.
Last year we launched our Alternative Energy business with the aim of becoming the world’s leading low carbon power business. We will spend $8 billion dollars over the next 10 years and expect to cut projected GHG emissions by 24 million tonnes a year by 2015. We continue to ramp up our solar production where we are already one of the world’s largest suppliers. We’ve moved into wind at scale have completed 2 large deals in 2006 that, along with our own significant land bank, have provided us with a large North American development portfolio in excess of 8 GW.
We are also involved in several leading edge project technologies to sequester CO2 such as the carbon dioxide capture and storage pilot which we are undertaking with Sonatrach and Statoil at In Salah in the Algerian desert. This project ties low carbon energy to our core skill of understanding and managing hydrocarbon reservoirs. About 10 per cent of the gas in the reservoir is made up of carbon dioxide that we are separating, compressing and re-injecting into wells 6000 feet deep. More than 17 million tonnes of carbon dioxide will be injected into the reservoir over the next 20 years. This is roughly equivalent to the CO2 produced by one quarter of the vehicles in Texas in one year.
We’re also planning to build the world’s first hydrogen power stations, one in California. These power stations use gas or coke as a feedstock and convert it into hydrogen - from which clean power is generated. We then take the carbon dioxide and store it underground where it has no impact on global warming. We are planning one such facility at our Carson refinery, spending around a billion dollars on 500MW of power for the LA area and we’re collaborating with GE with a view to building more, maybe up to 15 over the next decade. These plants also actually help produce hydrocarbons because the CO2 can be used to flush out trapped remaining oil from mature oil fields.
We’re also planning to build the world’s first hydrogen power stations, one in California. These power stations use gas or coke as a feedstock and convert it into hydrogen - from which clean power is generated. We then take the carbon dioxide and store it underground where it has no impact on global warming. We are planning one such facility at our Carson refinery, spending around a billion dollars on 500MW of power for the LA area and we’re collaborating with GE with a view to building more, maybe up to 15 over the next decade. These plants also actually help produce hydrocarbons because the CO2 can be used to flush out trapped remaining oil from mature oil fields.
Conclusions
These are just a few examples of what we are doing here in the US with technology to increase the supply of energy today and tomorrow. I’d like to conclude with some observations and some hopes for the future.
The first observation is that many roads currently lead in the direction of low carbon energy. The environmental imperative takes us there. Economics takes us there - as sustained high prices encourage diversification. Energy security takes us there because many of the most secure options are also low-carbon ones – wind, solar, biofuels, and more efficient coal-fired power.
Secondly, technology has been, and will continue to be, the key to our energy future. I believe as IOCs, we must continue to invest in exploration and production capability and in technology to meet demand. We must continue to develop technologies to increase recovery of oil and gas from established hydrocarbon positions around the world. We must also develop technology to meet society’s desire for locally sourced low-carbon energy.
During the time I’ve been speaking around 3,000 children will have been born. As they grow they will need warmth, light and food. They will want to use computers, drive vehicles and enjoy the benefits of power. Using technology to provide them and billions more with safe, secure, sustainable energy is a huge challenge. I hope I’ve managed to share with you today a glimpse of what BP is doing to rise to that challenge.
Thank you.
These are just a few examples of what we are doing here in the US with technology to increase the supply of energy today and tomorrow. I’d like to conclude with some observations and some hopes for the future.
The first observation is that many roads currently lead in the direction of low carbon energy. The environmental imperative takes us there. Economics takes us there - as sustained high prices encourage diversification. Energy security takes us there because many of the most secure options are also low-carbon ones – wind, solar, biofuels, and more efficient coal-fired power.
Secondly, technology has been, and will continue to be, the key to our energy future. I believe as IOCs, we must continue to invest in exploration and production capability and in technology to meet demand. We must continue to develop technologies to increase recovery of oil and gas from established hydrocarbon positions around the world. We must also develop technology to meet society’s desire for locally sourced low-carbon energy.
During the time I’ve been speaking around 3,000 children will have been born. As they grow they will need warmth, light and food. They will want to use computers, drive vehicles and enjoy the benefits of power. Using technology to provide them and billions more with safe, secure, sustainable energy is a huge challenge. I hope I’ve managed to share with you today a glimpse of what BP is doing to rise to that challenge.
Thank you.
Related links
