Fossil fuels are usually one-off use. Once they're gone, they're gone. That doesn't mean to say we can't take advantage of the resources while they're there. But in order to maintain the standard of living that we have and are becoming accustomed to, something has to change, quickly.
The UN climate change summit in Copenhagen in December 2009 is now being described by many as a failure. Nonetheless, those same issues will arise again and eventually a consensus policy will emerge and become international law. Time will tell, but it is highly possible that the time for a spike in hydrocarbon demand and pricing has already peaked, or is very close to.
Humans are a fickle race and an oil price of $147 a barrel made people sit up and think. Furthermore, there were behaviour changes, people began to fill their vehicles with fuel less often, heavy-fuel-consuming vehicles were less popular and the use of natural gas was reconsidered in both the domestic and industrial setting. Couple that sea change with a post-recession world and climate change and the new decade could just be a whole new ball game.
It is not easy, however, to wean an almost totally oil and gas-dependent global economy onto alternatives in the blink of an eye. In the transition period, nations, corporations and individuals will have to learn to use resources smartly, not simply up production to meet demand.
Eventually the option to increase supplies will simply not be there from conventional sources. Investments will have to continue to be made in hydrocarbons. Indeed, without those investments we could be looking into another economic abyss. According to the International Energy Agency (IEA) the demand curve for global oil is still rising. The IEA says that the 2014 demand for oil will be at 89mbpd (million barrels a day) and that by 2014, 51% of that demand will come from non-Organisation for Economic Cooperation and Development (OECD) nations.
The IEA published figures from the Oil & Gas Journal, stating that as of 1 January 2009, globally, there were oil reserves of 1,238.9 billion barrels and 6,254.36 trillion cubic feet of natural gas. In other words, based on current reserves and current usage the oil will run out in just under 40 years and natural gas will last slightly longer.
That is assuming that all the reserves can be exploited and brought to market in time. The reality is likely to be that the time frame to change to alternative fuels is much shorter. Yes, it is possible to argue that the reserve figures are understated. There are vast areas of the world that remain virtually unexplored for hydrocarbons. New discoveries are being made all of the time. But can producers keep up with an ever-rising demand curve? To say that this is a challenge is an understatement.
Turning to the reserves
Most of the planet is covered with water and much of that has yet to be explored for offshore hydrocarbons. There have already been major recent discoveries off Angola, Brazil, Libya, Nigeria, Spain and the US. Then we have the conundrum of the Arctic and Antarctic – whether or not the environment can be compromised for hydrocarbon recovery.
We also have vast unexplored areas of our open oceans to consider. The oil and gas industry is going to have to invest in new techniques for recovering hydrocarbons from increasing technically challenged areas. This is already happening in the much-maligned Canadian oil sands as traditional mining transforms to steam assisted gravity drainage (SAGD) and beyond.
Vast natural gas reserves trapped in shale deposits in the US were previously thought to be unobtainable until the process of well fracing – hydraulic fracturing of rock to allow gas or oil to flow – was discovered and implemented. Also, enhanced oil recovery (EOR) techniques use CO2, one of the major drivers of our climate change problem, to pressure 30%-60% more production out of existing gas and oil wells. These techniques, and new ones to come, could buy us a little more time.
Nonetheless, mankind is resourceful. When faced with a problem, we can overcome it or make a workaround, albeit often at the last minute. Sky-high hydrocarbon prices were part of the problem that pushed the world's economy to the brink of depression. While short-term demand-driven price spikes for hydrocarbons are perhaps inevitable, it would appear that our use of hydrocarbons has to either gracefully decline as replacements are found or stop altogether as supplies run out. At this time there does not seem to be any other choices. Faced with economic chaos and global wars in the hydrocarbon shortage scenario innovation and invention must prevail.