1. 1 Alternative Energy Sources Delivered on Behalf of: Bill Pyke Hilbre Consulting Limited October 2012 Copyright and all intellectual property rights retained by presenter Limitations of Fossil Fuels

2. 2 Outline Definitions Relative Energy Values Global Statistics Remaining Reserves Costs Environmental Impact

3. 3 What are Fossil Fuels? Energy sources created by the decomposition of animal and plant life over millions of years and their transformation into hydrocarbon energy sources

4. 4 Types Solid, Liquids and Gases Solids-coals and lignite, bitumen Liquids- crude oil, condensates Gases- natural gas and gas liquids

5. 5 The Global Primary Energy Mix in 2011 Source: BP Statistical Review of World Energy, June 2012

6. 6 The Global Primary Energy Mix by 2035 New Policies Scenario Source: IEA, WEO November 2011

7. 7 Outline Current status, supply, demand, petroleum commodity prices Distribution of global oil and gas reserves Oil production streams, major trade movements OPEC share and influence Future trends: supply, demand, volumes and prices The Peak Oil issue

8. 8 The Issues Fossil Fuels are depleting, limited and unsustainable in the longer-term Limits of Fossil Fuel Reserves and Resources Limitations of Production Capabilities Cost Implications Global Distribution of Remaining Reserves Energy Security Environmental Issues Fossil Fuels Emissions

9. 9 Limitations Non-renewable Resource Crude oil is a non-renewable resource Fossil fuels take millions of years to develop under extreme conditions Once they are gone, they can no longer be part of the energy mix

10. 10 Limitations of Fossil Fuel Technologies In many areas technologies are becoming more costly Fossil fuels-oil, gas, coal used as the key source (>70%) in global electrical power generation Emission of pollutants/ greenhouse gases Cost of Carbon Sequestration increases costs and prices

11. 11 Fossil Fuel Supply; Present & Future Oil  Increasing taxes to host countries-government take  Deepwater resources costs  Non-Conventional resources  Remote Locations Natural Gas  Remote locations  Investments required for new infrastructure  Transportation and tariff costs Coal  More imports from remote sources  Specification for environmental compliance favours high btu clean coals with low sulphur, chlorides

12. 12 Remaining Proven Global Fossil Fuel Reserves, 2011 Fossil Fuel% of Global energy consumption in 2009 Proven Reserves 10 9 tonnes Solid Coal, Anthracite, Lignite26%847 Liquid Crude Oil, Condensate Natural Gas Liquids34%205 Natural Gas 20%188 Sources: BP Statistical Review 2012 & IEA, 2011

13. 13 Remaining Time at Current Rates of Consumption Fossil FuelYears Solid Coal, Anthracite, Lignite 332 Liquid (Conventional) Crude Oil, Condensate Natural Gas Liquids 37 Natural Gas (Conventional)62

14. 14 The Uneven Distribution Of Oil And Gas Reserves North America Crude oil73 Natural gas 323 Central & South America Crude oil199 Natural gas 285 Africa Crude oil128 Natural gas521 Asia Crude oil42 Natural gas 574 Distribution of proven reserves of crude oil (billion barrels) and natural gas (trillion cubic feet), 2009 Source: BP Statistical Review of World Energy 2010 Middle East Crude oil754 Natural gas2,69 0 W. Europe Crude oil12 Natural gas 132 E. Europe and Central Asia Crude oil125 Natural gas 2,09 6 = % of crude oil reserves = % of natural gas reserves Key

15. 15 International Coal Transportation

16. 16 Current and Future Costs of Fossil Fuel Supply The easy resources have been developed! Future resources will take additional costs to ensure sustainable supply and satisfy supply growth against energy demand  Environmental considerations add to cost burden  Costly technologies for more difficult primary energy sources  Increasing unit labour costs as living standards rise in developing countries

17. 17 Fossil Fuel Supply Costs: Present & Future Oil  Increasing taxes to host countries-government take  Deepwater resources costs  Non-Conventional resources  Remote Locations Natural Gas  Remote locations  Investments required for new infrastructure  Transportation and tariff costs Coal  More imports from remote sources  Specification for environmental compliance favours high btu clean coals with low sulphur, chlorides

18. 18 Cash Needs To Find, Develop And Produce New Oil and Refined Products The ‘ easy ’ oil has been found or depleted New reserves will be more capital intensive Higher proportion of CAPEX will be required to sustain existing (and declining) production New oil likely to be lower viscosity, higher gravity and higher sulphur content Upstream Costs for Finding and Developing New Oil (2008-2030) have been estimated at $17.6trillion* Downstream Costs (2008-2030) have been estimated at $6 trillion* * Platts Capital Expenditure Forecast for Global Hydrocarbon Demands through 2030 L.G,Chom, October, 2007

19. 19 Oil Industry Estimated Annual Capital Spend to 2030 Sources: IEA, Platts, 2007 (Nominal Costs)

20. 20 Global Supply Run-out without new investment

21. 21 Global Supply Where Will New Oil Production Come From? Where is the ‘new’ oil coming from?

22. 22 Future Global Crude Oil Supply To Meet Demand Source: IEA, World Energy Outlook, November, 2011 Oil production rises to 99mb/d by 2035

23. 23 World Unconventional Liquids Production, 2005-2030 (million barrels per day oil equivalent) Source: EIA, International Energy Outlook, 2007

24. 24 New Sources of Crude Oil Supply in this Decade CountryAdditional production Mmb/d Comments Iraq+5.4 Field refurbishments, new developments Saudi Arabia+4.0 Empty quarter, new developments and discoveries Brazil+3.2 Santos basin Kazakhstan+1.8 Kashagan Ghana+ 2.0 Deepwater developments Uganda+1.0 New discoveries, developments U.S Light, tight oil+1.4 Bakken, Niobrara TOTAL+18.8 Source: IEA WEO, November 2011 and personal communications

25. 25 27 billion tonnes carbon released each year Emissions have increased at 2% per year In 2011 95% emissions due to fossil fuels Oil produces 40% more emissions per unit of energy than gas, and coal 80% Global Emissions

26. 26 170 220 270 320 370 420 200000400000600000 Time (YBP) CO 2 (ppm) Vostok Ice CoreDome Concordia Carbon Dioxide Levels 0 Muana Loa Readings CO 2 Levels Since 1958 310 330 350 370 10203040 CO 2 (ppm) 0

27. 27 Worldwide Carbon Emissions Carbon (10 9 metric tons) 0 1 2 3 4 5 6 7 8 175018001850190019502000 Year Oil Total Natural Gas Coal

28. 28 Global Carbon Emissions by Sector World Resources Institute, 2006 et al

29. 29 Transport Carbon Emissions by Sector note: 18% of all Global Emissions World Resources Institute, 2006 et al

30. 30

31. 31 Conclusions (1) The era of cheap oil is over 75% of major oilfields are now in decline Global consumption of 30bn barrels/year are not being replaced at the same rate. Unsustainable! Future global oil supply is under pressure from increasing global demand