06-05-04 Meeting the world's energy challenges will require a sustained
global effort over many decades. As the largest single market in an increasingly
integrated world energy system, the United States affects and is affected by
developments around the world. As a result, US energy policy plays an
influential role in maintaining global energy security.
Recognizing the growing strains on energy systems as he took office, President
Bush sought to develop a comprehensive and balanced energy policy that could
help the private sector and state and local governments "promote
dependable, affordable, and environmentally sound production and distribution of
energy for the future." The result was the National Energy Policy (NEP)
report, which since its publication in May 2001 has guided US energy policy.
Energy outlook
The Energy Information Administration's (EIA) most recent projections paint a
clear picture of future energy challenges in the United States. Despite
continued advances in technology, total US energy consumption is projected to
increase from 98 quadrillion Btu in 2002 to 136 quadrillion Btu in 2025. Because
of slow growth in domestic energy production, net energy imports are projected
to grow from about one-quarter to just over one-third of US demand in 2025.
Oil imports account for a large portion of imported energy, and OPEC is expected
to be the principal source of marginal supply to meet increased oil demand. By
2025, OPEC production is expected to nearly double, and projected growth in
demand points to a world price of about $ 27 per barrel in real 2002 dollars.
Assuming an increase in gross domestic product of about 3 % per year over the
same period, total US petroleum demand could grow from about 20 mm to 28 mm bpd.
As a result, net petroleum imports to the United States could jump from 53 % to
70 %, with much of the oil coming from the Persian Gulf. And with refinery
capacity growth constrained by regulations and economics, refined products are
projected to represent a growing share of these imports, reaching an estimated
20 % of total net oil imports by 2025.
Although most of the United States' natural gas can be supplied currently by
North American production, the trend here is also toward a greater share for gas
imported from outside the Western Hemisphere. Even with an accelerated increase
in energy efficiency, the United States will still be highly dependent on energy
imports to meet future consumption needs.
President Bush's national energy policy
These trends make clear the need for a long-term plan for energy security. The
NEP is a revolutionary roadmap that taps into a diverse array of energy sources
to enhance US energy security, economic competitiveness, and environmental
performance. From the US perspective, energy security is more than a matter of
assuring short-term supplies; reliable access to affordable, clean, and
efficient energy services also is critical to economic growth and development.
Our approach to our energy security is informed by the following principles.
-- First, we must balance increased production with a renewed focus on the clean
and efficient use of energy.
-- Second, we must expand international engagement with consuming and producing
nations.
-- Third, we must expand and diversify our sources of supply. And finally, we
must encourage energy decisions guided by competitive markets and public
policies that stimulate efficient outcomes.
Achieving the vision of a secure and sustainable energy supply will require
transition to advanced energy systems.
Therefore, a central aspect of US energy policy is a portfolio of breakthrough
technologies that promise to alter fundamentally the way we produce and consume
energy. Our efforts also take advantage of public-private partnerships,
market-enhancing policy tools, and international cooperation.
Closing the gap between supply and demand
A balanced, comprehensive energy policy is imperative to the long-term strength
of US economic and national security. Increasing domestic production of
traditional energy sources such as oil and gas is obviously an important aspect
of the US approach to curbing imports. But the United States also recognizes
that it must take greater advantage of a diverse array of other domestic energy
sources.
The president's FreedomCAR and Hydrogen Fuel Initiative promise just that.
Hydrogen can be produced from a broad range of domestic sources -- from
renewables to fossil fuels to nuclear -- and has the potential to free us from
reliance on foreign energy imports. The president's Hydrogen Initiative
represents a commitment to the future hydrogen economy, and it has already
generated tremendous enthusiasm among the energy and auto industries.
Over the next five years, the United States plans to commit $ 1.7 bn to
overcoming several significant technical and economic barriers to the
development and expanded use of hydrogen, fuel-cell, and advanced automotive
technologies. The first $ 350 mm in grants to achieve this objective were
announced in late April.
If we are successful, commercialisation of fuel-cell vehicles, hydrogen
production, and refuelling infrastructure could take place by 2015, with
hydrogen-powered vehicles appearing in automobile showrooms by 2020. By 2040,
hydrogen could replace over 11 mm bpd of oil -- nearly equivalent to current US
oil imports.
Like many other nations, the United States has abundant resources of coal,
but its use poses environmental challenges.
The administration's FutureGen project is an initiative to design, build, and
operate the world's first coal-fired emissions-free power plant. Working with
the private sector, this $ 1 bn project will employ the latest technologies to
generate electricity, produce hydrogen, and sequester carbon emissions from
coal. FutureGen simultaneously supports several of the administration's
environmental and energy goals, and through this research coal can continue to
be part of a diverse energy portfolio well into the future.
Increasing diversity of supply
To maintain energy security, the United States is also expanding and
diversifying the types and sources of energy it imports. Helping to drive this
effort are new opportunities for increased investment, trade, exploration, and
development that go well beyond the bounds of traditional energy markets. US
goals are to diversify energy supplies and promote new resources in the Western
Hemisphere, Russia, the Caspian region, and Africa, and to improve the dialogue
with key producing and consuming countries to head off energy disruptions before
they become crises.
The United States, Canada, and Mexico are working together to further integrate
and strengthen the North American energy market by overcoming policy and
technical obstacles to increased energy production and delivery. The United
States also has been engaging with other countries in the Western Hemisphere.
The Western Hemisphere now supplies half of all US petroleum imports, and
Trinidad and Tobago is the largest supplier of LNG to the United States.
Outside the Western Hemisphere, the United States continues to strengthen its
energy relationship with Russia, now the world's second largest crude oil
producer and exporter. In 2002, the Bush administration initiated a cooperative
effort to help improve the regulatory and investment conditions required to
increase energy and infrastructure development in Russia.
The United States also has been a strong supporter of oil and gas development in
the Caspian region and has urged governments to establish the necessary legal,
fiscal, and regulatory environments to safeguard the large investments required
to develop these new resources. Reserves estimates suggest the Caspian Basin
could produce 3.5-4 mm bpd by 2010, and the administration has advocated new
pipeline capacity to link these resources to world markets.
Energy from Africa plays an increasingly important role in US energy
security, accounting for more than 10 % of US oil imports, and it is a key
economic engine for the continent. Good governance and stable regulatory
structures are critical prerequisites for private investment in the energy
sector. Key energy producing African countries and the United States continue to
work together to promote sustainable energy and economic development.
In addition to these efforts, the United States has been strengthening its
dialogue with major producing and consuming countries to monitor market
developments and respond to supply disruptions. The United States continues to
participate in the International Energy Forum, a multilateral forum of
oil-producing and -consuming nations, the key focus of which is an effort to
improve the timeliness and accuracy of the data that guide oil markets.
The United States is also working closely with major consuming countries to
address our common energy challenges. In 2002, energy ministers from the Group
of Eight (G-8) countries met in Detroit and reaffirmed the importance of
maintaining emergency oil reserves and coordinating their use and agreed to work
together to encourage greater energy investment.
In 2003, leaders of the Asia Pacific Economic Cooperation (APEC) forum endorsed
a plan proposed by the United States to identify best practices for LNG trade
and strategic oil reserves, finance clean energy, develop a framework for a
hydrogen economy, and cooperate on methane hydrates. The United States also has
stepped up collaborative efforts on natural gas issues.
Last December, the United States hosted the LNG Ministerial Summit, which
brought together representatives from 24 countries to take a fresh look at the
world LNG marketplace. The summit served as a forum to explore all aspects of
the global natural gas production and distribution system.
Strengthening international technology cooperation
International collaboration is an essential aspect of US technology strategy as
well. The US experience has been that well-designed international partnerships
can add significantly to the store of human knowledge and propel the development
and commercialisation of new technologies.
The United States is working with many other countries to develop new
technologies and energy sources to improve energy security. These international
partnerships help leverage resources, increase the knowledge base, and expand
markets for advanced energy technology.
For example, the US led efforts to form the International Partnership for the
Hydrogen Economy (IPHE) to coordinate and leverage multinational hydrogen
research programs. IPHE will address the technological, financial, and
institutional barriers to hydrogen and develop internationally recognized
technology standards to speed market penetration of new technologies.
The multilateral Carbon Sequestration Leadership Forum, a presidential
initiative launched in June 2003, will set a framework for international
cooperation on sequestration technologies. The Forum's 16 partners also are
eligible to participate in the FutureGen project.
The United States is also pursuing nuclear energy as a secure and clean
energy choice. The Energy Department's Generation IV International Forum
program, which has 10 international partners, is working on new fission reactor
designs that are safe, economical, secure, and able to produce new products,
such as hydrogen.
And in 2003, President Bush announced that the United States would rejoin the
International Thermonuclear Experimental Reactor, a project to develop nuclear
fusion as a future energy source. Although the technical hurdles of fusion
energy are immense, the promise of this technology is simply too great to
ignore.
Emergency strategies: Response to supply disruptions
All of these activities are directed at ensuring a reliable and affordable
supply of energy, but the United States also appreciates the importance of
protecting against the possibility of a severe supply disruption. The
administration early on reaffirmed the importance of maintaining a strong
Strategic Petroleum Reserve (SPR). In November 2001 the president directed that
we begin to fill the SPR to its 700 mm barrel capacity.
Today it contains a record 640 mm barrels of oil. The United States also plays
an active role in the International Energy Agency (IEA), whose 26 member
countries are committed to holding emergency oil reserves and taking common
effective measures to meet oil supply emergencies. Together, IEA members' oil
stocks total nearly 4 bn barrels, 1.4 bn barrels of which are under direct
control of member governments, with the remainder in commercial stocks.
Conclusion
Today's energy challenges have been long in the making, and the solutions will
require a determined, sustained global effort over decades. The United States
remains committed to advancing energy security at home and abroad, and we have
developed a long-term strategy to make science and technology central to an
integrated energy, environmental, and economic policy.
The Bush administration believes that the approach we have charted will put us
on a path to ensuring secure, reliable, affordable, and clean energy to power
economic growth across the globe. While the challenges we face are significant,
the United States remains committed to leading the way to a bright energy
future.
Spencer Abraham is the US Secretary of Energy. This article appears in the
May 2004 issue of the State Department's electronic journal, Economic Pe.
Petroleumworld not necessarily share these views. This article was distributed
by the Bureau of International Information Programs, US Department of State.
Source: Petroleumworld