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AB 2000 studies

Alain Boublil Blog

 

The real energy transition

In France, we are delivering speeches and we like writing laws. One of the favorite purposes is the evolution of a key economic activity: energy production and consumption. It is also at the heart of the debate about environment and the threats greenhouse gas emissions are weighting on the planet. But it is also a key sector for the purchasing power and companies results. Every year, British Petroleum publishes a report on world energy production and consumption by sources of energy and by country. That also allows to assess midterm trends since the report provides the last ten years figures. The 2007-2017 period has been especially interesting. It started with the major financial crisis and the world economy went through deep transformations with the development of digital technologies and non conventional fossil fuels. It was also during that period of time that preoccupations regarding environment appeared at the top of the international scene.

Regarding energy, the key point is the rapid rise of the American oil production thanks to the new extraction techniques. It has almost doubled to reach 13 million barrels per day. The United States became the biggest producer in the world with a 14.6% market share, ahead of Saudi Arabia and Russia. The global production grew during this period from 82.3 to 92.6 mb/d, invalidating the analysis of these who thought that it will level off. The peak oil theory is over. It is that phenomenon which has generated the oil price fall in 2014 and 2015. Exporting countries thought that fall will discourage the new American producers. But that did not happen because these ones have been able to reduce their costs and have taken advantage of the point that these new extraction techniques were flexible. They permitted to adapt very quickly to the market changes, to the contrary, for example, of off-shore fields.

The American administration has supported its companies through the end of the ban on crude exports which had been instituted after the first oil shock and through the facilitation of the building of new pipelines. But the country remains the biggest importer because its consumption, even if it is leveling off, has reached 20 mb/d. All in all, the shale oil arrival has reduced OPEC influence and has permitted to mainly address the rise of the emerging countries demand (China, Brazil, India) and to compensate the consequences of the depletion of some fields like in Northern Sea or in Algeria and of political crisis like in Venezuela or in Libya.

The second transformation regards the natural gas market but its consequences are different. The American production became the biggest in the world (20% of the global one), ahead of Russia and Middle East ones with 18% each. But its development is linked to different factors. Natural gas is more difficult to transport than oil and it was necessary to plan new infrastructures and liquefaction capacities with ship able to carry it. The price fall generated by these new resources has lead to a swift in power production to the detriment of coal in the two biggest consumers, the United States where it has been reduced by 60% and in China where, after decades of growth, coal consumption is now stagnating for five years. The price factor and the abundance of the resource have not been the only cause in this country: authorities have issued new rules much more constraining to protect air quality around major cities, which has lead to close many coal power plants. At the same time, due to the accelerated country urbanization, the new homes were connected to gas distribution networks. That has also contributed to reduce coal and wood domestic use. China natural gas consumption has been multiplied by three in ten years and should reach soon 300 bcm3 when pipe lines which are now under construction in Siberia as the new LNG terminals will be put into operation. That trend is much less clear in the other developed countries, notably in Europe where consumption is stable and in India where growth has not been focused on natural gas but on coal.

Figures published by BP are putting the use of other energy sources into perspective. Nuclear power production is stagnating. The very low restart of Japanese plants and the new ones built in China are not enough to recover the level reached before Fukushima catastrophe. Hydraulic production is leveling off, once the big investments, notably in China and in Brazil have been achieved. New sites able to constitute a growth revival are not appearing. At last, renewable energies enjoy a strong growth but their share in the power mix is still low compared to traditional sources, even if the fall of their production costs has been significant these last years. The issue regarding their intermittent character is still a major obstacle as much as storages techniques are not able to cope with it. At the world level, they are approaching nuclear energy share but represent only half of hydraulic power production and eight or nine times less than each of the fossil fuels. Here again, it is in China and in the U.S. that their growth has been the highest.

All in all, during these last ten years, primary energy consumption has only risen by 16%, twice less than economic growth. But that trend is hiding very large disparities. It has fallen in developed economies, to the exception to Germany, where it has stagnated and to Canada where it has increased by 8%. But it strongly rose in emerging countries and even in Australia (+10%) or in Singapore (+50%). This situation is reflected in CO2 emissions with surprising results. The country which has most contributed to their stabilization, the U.S. (-15% in ten years) is the one which has denounced the Paris Agreements. China, which is the biggest emitter with 27% of the total, has successfully stabilized its emissions. Gulf countries, Korea, India and Brazil, among others, to the contrary, have considerably increased their emissions. At last, Germany, despite its action in favor of renewable emits, per inhabitant, twice more CO2 than France, due to its stubbornness to keep its coal fired power stations.

These statistical data based on a long enough period to be credible show that there is a long way from speeches to reality. The main detractor of the Paris Agreement runs the country which is the one which contributes the most to its fulfillment. Renewable energies contribution is marginal. Emissions stabilization observed for the last ten years is the result of a new balance between fossil fuels and definitely not of their abandon. This way is quite unrealistic when we look at the situation of the world as it is and as it evolves. It is on this basis that the real energy transition will rely at the world level.         

  

 

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