Limitations to Growing Supply
Physical Limitations of Supplies
The largest proportion of current energy sources are derived from coal, oil, and natural gas – sources formed from the release of carbon and hydrogen via organic decay (hence the term "fossil" fuels). Because the formation of these fuels occurs in geologic timeframes that pre-date human history by millions of years, fossil fuels are known as "non-renewable" energy sources. Supplies are finite, although there is considerable debate over remaining quantities, how to measure them, and whether continuing technological advancements will extend expected supply timelines. As noted by the National Petroleum Council, "current assessments for both oil and natural gas indicate large in-place volumes of resource."
Geopolitics and Reliability of Supplies
The complexity of fuel sources, their geopolitical environments, and their control has led to concerns regarding secure and reliable energy supplies. Current oil, gas and coal production is drawn from increasingly diverse political environments (see Figures below) with coal production in particular shifting from the OECD in the mid 1970s to China and elsewhere in Asia today (see Figures below). There is a similar trend for natural gas, with production shifting from the OECD to the Middle East, the former USSR, Asia, and Africa. The shifting world energy map has created concerns for consumer nations about energy security and reliability of supplies. The increasing concentration of sources of energy supply and demand centers will require increased investment as well as longer and in some cases, more congested and difficult transport routes, resulting in security and environmental challenges. (See Energy Portfolio).
Worldwide Crude Oil Production by Region, 1973 and 2006
Worldwide Crude Oil Production By Region, 1973 and 2006
|
1973 2,867 Mt |
2006 3,936 Mt |
| OECD |
23.6% |
23.2% |
| Middle East |
37.0% |
31.1% |
| Former USSR |
15.0% |
15.2% |
| Non-OECD Europe |
0.7% |
0.2% |
| China |
1.9% |
4.7% |
| Asia (excludes China) |
3.2% |
4.5% |
| Latin America |
8.6% |
9.0% |
| Africa |
10.0% |
12.1% |
Worldwide Hard Coal Production by Region, 1973 and 2006
Worldwide Hard Coal Production By Region, 1973 and 2006
|
1973 |
2006 |
| OECD |
50.0% |
28.1% |
| Former USSR |
22.8% |
46.2% |
| Non-OECD Europe |
0.4% |
12.4% |
| China |
18.7% |
1.4% |
| Asia (excludes China) |
4.8% |
4.7% |
| Latin America |
0.3% |
1.4% |
| Africa |
3.0% |
4.7% |
| Total |
2,235 Mt |
5,370 Mt |
Worldwide Natural Gas Production by Region, 1973 and 2006
Worldwide Natural Gas Production By Region, 1973 and 2006
|
1973 |
2006 |
| OECD |
71.4% |
37.6% |
| Middle East |
2.1% |
11.1% |
| Former USSR |
19.7% |
28.1% |
| Non-OECD Europe |
2.5% |
0.5% |
| China |
0.5% |
2.0% |
| Asia (Excludes China) |
1.0% |
9.2% |
| Latin America |
2.0% |
4.9% |
| Africa |
0.8% |
6.6% |
| Total |
1,227 Bcm |
2.997 Bcm |
In terms of future production and supply, a substantial amount of oil and gas reserves are controlled by a small group of national oil companies (NOCs) with the private oil companies holding only 5% relative to national oil companies. (See Chart Below)
Given this characteristic of supply, national oil companies and energy ministries will play an increasingly important role in the future development of supplies. As can be seen in the chart "World Oil Reserves," global reserves of conventional oil are dominated by the Middle East. However, there are huge unconventional resources such as extra-heavy oil, oil sands and oil shale outside of that region.
Six countries—the United States, Russia, China, India, Australia, and South Africa—contain 81 percent of global coal reserves and account for an equal share of coal production. Globally, coal reserves are significantly larger than other fuels. At current prices and consumption rates, present reserves will not be depleted for another 150 years.
Energy Supplies and Social Development
Because natural resource extraction involves large capital projects, processing facilities, pipelines, and infrastructure, the "footprint" associated with these projects is typically significant. This presence can bring benefits of employment, local spending, and substantial tax payments. At the same time, countries that are disproportionately reliant on natural resource revenues and do not have diversified economies can face "boom and bust" effects when energy prices fall or production starts to decline. In countries that produce energy, transparency and strong governance is critical to ensure equitable distribution of natural resource benefits throughout society. (See Energy & Development).
Energy Supply Extraction and Risk
Natural resource projects can be quite risky, and due to their often immense size, can be very expensive. A typical oil exploration project, for example, may have only a 10% likelihood of commercial success given the uncertainty around the geology, and the commercial, and/or political environment. Large energy projects for extraction of oil, gas, or coal can require long lead times − as much as 10-20 years from the exploration phase to the commencement of production.
Even when large scale deposits are developed, these resources are not typically found in locations that are near the needed infrastructure. In the case of oil and gas, there is often a need to construct pipelines to carry these resources to markets. Depending on the location, these pipelines may involve the participation and/or approval of multiple companies, governments, tax authorities, and regulators who must agree on tariffs, right of way considerations, environmental impacts, and capital costs before construction can begin and resources can be developed for supplying energy needs.
Environmental Impacts of Supplying Energy
The fact that oil, natural gas and coal will continue to be indispensable sources of supply for the world’s growing demand for energy raises environmental concerns, of which global climate change looms the largest. However, technological advancements are underway, which will help to both reduce carbon emissions associated with fossil fuel production and consumption as well as to "store" produced carbon in a manner that reduces global climate change impacts. (See Energy Portfolio). In addition, there are oil (including oil sands), gas, and coal resources that are located in sensitive areas and declared off limits to resource extraction in order to protect wild habitats, national parks, and tourist locations. (See Energy & the Environment).