IEA Critical Minerals Demand Growth
July 17, 2024
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“California has implemented a variety of programs unique to the state,” said Max Pyziur, EPRINC’s Research Director. “Primarily with environmental goals, some of these programs have been effective; others are contentious and questionable. Nevertheless, they have added substantial cost to the state’s price of gasoline.”
On Tuesday, November 16 2021, EPRINC President Lucian Pugliaresi participated in a marathon hearing with the House Committee on Energy and Commerce. Some of the notable comments he made, pulling from EPRINC’s research on the ongoing energy transition, are listed below. In addition, the full testimony with charts is here and a video of the hearing in its entirety can be found here.
1. The Energy System is highly complicated, inter-connected regionally and globally in ways that are not always apparent. The energy transition presents a new set of supply and price risks for consumers and manufacturers. Fully implementing an energy transition over the next 30 years is neither easy nor can it be assured.
2. Achieving net zero in the developed world will reduce carbon emissions by only a small amount, likely no more than 20 percent of expected global emissions.
3. Regulatory programs as well as private sector commitments to accelerate the energy transition – whether it be mandates, targets, financial and procurement guidelines create uncertainty and financial risks that limit investment commitments to current legacy fuels, many of which are likely to remain in demand for years to come.
4. Most of the recent escalation in energy prices can be tied directly to dislocations in energy supplies (largely oil and gas) from the Covid-19 pandemic. However, government policies, such as the halt on leasing on federal lands, the cancellation of the Keystone Pipeline, the potential cancellation of line 5 from Canada, rising regulatory requirements and permitting delays are all threatening North American oil and gas production. We undermine this strategic asset at our peril if we abandon these fuels before the energy transition is well established.
5. Policy Matters. The US should see the current energy crisis in Europe as a cautionary tale and learn from it.
6. Policy initiatives that seek to accelerate the U.S. to a fully renewable energy complex will have global implications for energy security.
7. The transition will establish new environmental challenges and energy security issues in addition to the old.
The International Energy Agency (IEA), a collection of member countries formed in the 1970s to secure the energy security of the advanced Western democracies, is now calling for a halt to the development of new oil and gas resources as a fundamental strategy for addressing the threats from climate change. The halt in development is viewed by the IEA as essential for the world to reach net zero carbon emissions by 2050. Michael Lynch, Distinguished Fellow at the Energy Policy Research Foundation, Inc. (EPRINC) points out the risks of such a strategy in his paper entitled Shifting Oil Industry Structure and Energy Security Under Investment Phase-Outs. Since only private oil companies in the West are likely to respond, future oil supply probably would be dominated by Middle Eastern and Russian oil companies, mostly state-owned. Such a policy initiative, if successfully implemented, will see OPEC and allied producers (OPEC+) share of the world oil market supply rise to over 80% by 2040, degrading global energy security and severely limited the capability of the IEA to implement its Emergency Sharing System in the case of an oil crisis. The publication can be found here.
Throughout much of the developed world, there is a consensus that concern over climate change is leading to a rapid downturn in petroleum use and that petroleum will likely have a rapidly declining role in the world’s energy mix over the next 30 years. However, a rapid energy transition to a world no longer reliant on fossil fuels represents a formidable challenge and a high likelihood remains, especially in the developing world, that petroleum’s important and large contribution to the world energy mix will not be so easily displaced. Recent EIA forecasts show that world oil and gas demand has reverted to trend. Supply requirements for the end of 2022 are likely to exceed 100 million barrels/day, a remarkable recovery from a decline in liquids demands of over 15 million barrels a day in 2020 from the Covid-19 pandemic. Although Venezuelan oil production has been constrained by both technical mismanagement and sanctions, the size of its reserve base documents its potentially important role in meeting future world oil demand.
The timing of Venezuela’s petroleum future depends on whether it can enter the world oil market under traditional commercial conditions. On June 25, 2021, the U.S., Canada, and the E.U. issued a joint communiqué that made clear that a decision regarding the timing and specifics of the sanctions on Venezuela remains the primary determining factor on when and if Venezuela can play a larger role in the world oil market.
Even if Venezuela were somehow to find its way free of sanctions, the road back to higher production will require massive capital investment. Venezuela, which produced over 3 million barrels in day in the 1970s, is now at only 600,000 barrels per day. The authors estimate that the level of investment and amount of time required to rehabilitate the production potential of Venezuela would approach $30 billion USD in two stages:
Stage 1 – Pre-sanctions recovery: An investment of $7-9 billion over 2-3 years to get back to production prevalent before sanctions started in 2017 (about 2 million barrels/day).
Stage 2 – Post-recovery: An investment of an additional $20 billion/year for 2-3 years. These investments would take 4-5 years to yield additional production. This would require investment into offshore and underdeveloped onshore projects to bring them up to full production capacity. With proper investment, Venezuela can sustain a production output of approximately 2.5 million b/d over the next 20-30 years.
The authors provide an overview of Venezuela’s production potential, and evaluate the technical obstacles that must be addressed to restore Venezuelan oil production. Their paper can be found here.
EPRINC held a virtual workshop on The Transport Climate Initiative (TCI): Challenges and Opportunities on June 16, 2021.
EPRINC staff, policymakers, and regional experts explored the effectiveness of the program to meet its goals of lowering greenhouse gas (“GHG”) emissions. Among the topics discussed were how the program fits in with U.S. and international efforts to accelerate the energy transition, an assessment of the program’s impact on consumers, implementation challenges, and opportunities for green investments.
The Transportation and Climate Initiative (TCI) is a regional collaboration of potentially 12 Northeast and Mid-Atlantic states and the District of Columbia seeking to reduce consumption of petroleum-based fossil fuels in the transportation sector and introduce cleaner fuels and more effective transportation systems. The list of potentially participating jurisdictions are: Connecticut, Delaware, the District of Columbia, Maryland, Massachusetts, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, Vermont, and Virginia.
The agenda for the event can be found here, the presentations that were given are here, and the full video recording of the event is here.
A report on the event was written by Ashutosh Shastri, Senior Advisor, Global Gas Centre & Distinguished Fellow, EPRINC, and can be accessed here.
Colonial Pipeline Hack Highlights Growing Energy Security Risks:
Infrastructure Cyberattacks are a Threat to National Security
The recent hack of the Colonial Pipeline computer systems, which disrupted gasoline supplies to the Northeast has raised a new set of energy security concerns. Although the attack was presumably not the actions of a state entity, it is hard not to view it as an act of terrorism given its potential for widespread disruption. This is not a new threat. In the late 1990s, President Clinton issued Presidential Directive 63 which recognized that growing threats to critical infrastructure had become “increasingly automated and interlinked.” The Directive mandated that within five years (by 2003) critical U.S. infrastructure would be hardened to cyberattacks. Despite the Directive, measures to protect infrastructure from growing cyberattacks have not kept up.
This report was published on RealClear Energy, but the full PDF version of the report can be found here.
The Energy Policy Research Foundation and the Global Gas Centre have jointly hosted a webinar on the “Future of North American Natural Gas In A Carbon-Constrained World.” A group of about 60 industry leaders, researchers, and senior policymakers participated in the workshop on June 3, 2021.
GCC and EPRINC are collaborating on a joint effort to evaluate the role of North American natural gas as governments worldwide undertake efforts to accelerate the energy transition. Among the more important objectives of this joint effort are identifying recent trends and longer-term uncertainties in North American natural gas markets, government and industry initiatives to address GHG emissions and the role of natural gas both in energy markets in North America as well as in the world market as an important fuel source through LNG exports. EPRINC and GCC staff, experts, policymakers, and a cross-section of industry executives continued this discussion on the current state of the North American natural gas market and an assessment of the new regulatory environment.
The agenda from the event is here, and the presentations that were given at the workshop can be found here. A full recording of the workshop can be accessed here.
EPRINC’s Rafael Sandrea has published another paper, this one entitled “With Global Oil Demand on the Rebound, What About Supply?” The piece analyzes the impact of COVID-19 and the Texas Freeze on global oil demand and supply. Rafael also examines future oil supplies moving forward into 2021 by discussing trends in exploration and providing fresh comparative economics regarding oil supply vs. renewables.
Rafael’s paper can be found here.
Yin Zou has joined EPRINC as a Distinguished Fellow. She brings extensive knowledge and insights into U.S. and Chinese policies on energy, climate, and renewable energy. Educated in both the U.S. and China, Yin worked in Washington D.C. as a government affairs consultant for APCO Worldwide on clean energy, climate policy, trade, and investment issues. She later joined Tend, a California-based fintech company to successfully launch its mobile app in Asian emerging markets and became a serial entrepreneur passionate about bringing meaningful social change through technologies. Ms. Zou holds a dual M.A in International Relations from Johns Hopkins SAIS – Nanjing University and a Master in International Environmental Policy from American University’s School of International Service. She currently resides in New York City.
EPRINC has hosted the first virtual workshop in its new Energy Security Series series, entitled “Energy Security and the North American Oil & Gas Production Platform.” The recording of the workshop available here.
Initiatives to limit U.S. oil and gas production can be expected in the near future. Are these policy initiatives effective measures to accelerate the energy transition and do they conflict with long-standing measures to sustain American energy security?
EPRINC staff and fellows Ivan Sandrea, Jeff Kissel, Max Pyziur, Michael Lynch, Larry Goldstein, Carmine Difiglio, Glen Sweetnam, and Lucian Pugliaresi as well as Aaron Annabel from the Canadian Embassy, Trisha Curtis (EPRINC fellow, PetroNerds), and Fred Hutchison from LNG Allies provided presentations and commentary on this important topic. Their presentations can be found here. The agenda for the event can be found here.
Recent months have seen a growing crescendo of claims that a peak in oil demand may be near, or even be past. Pandemic-related changes in behavior such as working from home are predicted to persist after the emergency ends, and advances in technology are said to make oil-fueled vehicles increasingly obsolete. Michael Lynch and Ivan Sandrea have examined these arguments in a new study by the Energy Policy Research Foundation and found strong reasons for skepticism. People in post-pandemic China do not show major changes in their behavior and the increasing demand globally for SUVs implies consumers are not focused on reducing emissions. Further, battery electric vehicles perform significantly worse than internal combustion engines in key metrics, whereas the previous transition, from horses to cars, was due to major improvements in range, speed and carrying capacity, as well as convenience.
The primary findings:
The case for a near-term peak in oil demand is certainly more plausible than that of peak oil supply, but its popularity reflects a degree of exuberance that is not warranted by the data.
Click here to access the paper on this topic written by primary author Michael Lynch, Distinguished Fellow with EPRINC and the author of The Peak Oil Scare and the Coming Oil Flood (Praeger 2016), and Ivan Sandrea, trustee of EPRINC and the former CEO and founder of Sierra Oil and Gas.
EPRINC Fellow Emily Medina has published another piece on Mexican public policy and energy economics. This paper, entitled “The U.S.-Mexico Energy Relationship Going Forward,” examines the future of the relationship between the two countries focusing on bilateral energy integration, Mexico’s new nationalist policies, and the incoming Biden administration while keeping the geopolitics of the world in mind. The paper can be found here.
The piece has been published by Mexico Today, an English-language news service by the newspaper Reforma.
The Institute of Energy Economics Japan (IEEJ) and the Energy Policy Research Foundation, Inc. (EPRINC) jointly hosted a virtual workshop, “The Role of LNG in a Carbon-Constrained Market” on December 15, 2020, 7:00 pm – 9:00 pm (Washington, D.C. – EST); December 16, 2020, 9:00 am – 11:00 am (Tokyo – JST).
This workshop was part of an ongoing cooperative program between IEEJ and EPRINC to explore the potential for LNG to meet rising energy demand and growing requirements for decarbonization in Asian markets. Japanese and U.S. energy research experts, senior representatives from U.S. and Japanese companies, officials from the Japanese Ministry of Economics, Trade, and Industry, and others came together for a discussion on policy and technology developments needed to address the challenges and opportunities for LNG as Asia’s growing energy consuming centers search for efforts to restrain carbon emissions and sustain economic growth.
The workshop agenda can be found here. The workshop was recorded and is accessible at this link using passcode: ?#?@s8cS
There were some excellent presentations given at the workshop, which can be downloaded here. In addition, EPRINC’s Max Pyziur provided all participants with a scene-setting presentation that is accessible here.
Offshore oil and gas in the Gulf of Mexico extends from the United States into Mexico. Resources from U.S. offshore lands (federal and state) have played an active role in contributing to U.S. oil and gas production and today contributes 17% of total U.S. production. Although we do not yet know the details on U.S. policy on future oil and gas development in the U.S. Gulf, the incoming administration of President-elect Biden has announced it plans to curtail or halt oil and gas development in the U.S. lands in the Gulf.
The resources in the Gulf of Mexico are shared with Mexico and credible estimates indicate that 90% of these offshore oil and gas prospects remain unexplored. Mexico has been slow to develop their offshore prospects due to capital limitations from state oil and gas company, PEMEX, which held a monopoly on development until the passing of the 2013 energy reform laws. Although private companies have had some access to oil and gas development opportunities since the energy reforms, the new Mexican administration has largely halted private sector access to offshore opportunities.
The first bid rounds for deepwater oil and gas fields in the Perdido Fold Belt and Cuenca Salina were held in 2015 and demonstrated substantial interest among private oil and gas companies. Exploratory drilling by private companies on the Mexican side of the Gulf of Mexico increased, which further demonstrated Mexico’s favorable resource development potential. In the next decade, Mexico’s initial deepwater projects awarded to private companies are expected to bring new production to Mexico in the coming years, but the pace of future development will be determined by decisions of the Mexican government on whether to permit additional bid rounds.
Authors Rafael Sandrea and Peter Stark bring a wealth of experience and expertise in evaluating the resource potential of geologic basins worldwide. Their paper on the isoOIP model demonstrates how simple and inexpensive decision support tools can continue to contribute to cost effective development of the oil and gas resources in the Gulf of Mexico.
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