1. Steven E. Koonin March 2007 Energy trends and technologies for the coming decades

2. Technology and policy Demand Growth GDP & pop. growth urbanisation demand mgmt. Security of Supply Environmental Impacts Supply Challenges key drivers of the energy future

3. Source: UN and DOE EIA Russia data 1992-2004 only energy use grows with economic development US Australia Russia Brazil China India S. Korea Mexico Ireland Greece France UK Japan Malaysia energy demand and GDP per capita (1980-2004)

4. demographic transformations source: United Nations 6.3 billion 8.9 billion Oceania Africa N-America S-America Europe Asia Oceania Africa N-America S-America Europe Asia

5. energy demand – growth projections Source: IEA World Energy Outlook 2006 Notes: 1. OECD refers to North America, W. Europe, Japan, Korea, Australia and NZ 2. Transition Economies refers to FSU and Eastern European nations 3. Developing Countries is all other nations including China, India etc. Global Energy Demand Growth by Region (1971-2030) Energy Demand (Mtoe) Global energy demand is projected to increase by just over one-half between now and 2030 – an average annual rate of 1.6%. Over 70% of this increased demand comes from developing countries

6. annual primary energy demand 1971-2003 Source IEA, 2004 (Excludes biomass)

7. Source: IEA WEO 2004 Notes: 1. Power includes heat generated at power plants 2. Other sectors includes residential, agricultural and service Global Energy Demand Growth by Sector (1971-2030) Energy Demand (bnboe) growing energy demand is projected Key:- industry- transport- power- other sectors

8. energy efficiency and conservation Demand depends upon more than GDP −Multiple factors - geography, climate, demographics, urban planning, economic mix, technology choices, policy −For example, US per capita transport energy is > 3 times Japan Efficiency through technology is about paying today vs tomorrow −Must be cost effective to be attractive −May not reduce demand through misuse or in supply-limited situations US Autos (1990-2001) Net Miles per Gallon: +4.6% - engine efficiency: +23.0% - weight/performance: -18.4% Annual Miles Driven: +16% Annual Fuel Consumption:+11%

9. Demand Growth GDP & pop. growth urbanisation demand mgmt. Security of Supply Environmental Constraints Supply Challenges significant resources non-conventionals key drivers of the energy future Technology and policy

10. US energy supply since 1850 Source: EIA

11. Oil Natural gas Coal Hydro Nuclear global primary energy sources Oil Coal Gas Hydro Nuclear

12. global energy supply & demand (total = 186 Mboe/d) Source: World Energy Outlook 2004 Power Generation Transportation 37Mboe/d 76Mboe/d Buildings 56Mboe/d Industry 45Mboe/d 14 Nuclear 14Mboe/d 5 Renewables 5Mboe/d 2 17 3 1 Biomass 23Mboe/d 33 8 2 Coal 43Mboe/d 11 10 16 1 Gas 38Mboe/d 6 35 12 10 Oil 63Mboe/d

13. global energy supply & demand (total = 186 Mboe/d) Source: World Energy Outlook 2004 Power Generation Transportation 37Mboe/d 76Mboe/d Buildings 56Mboe/d Industry 45Mboe/d 11 16 14 Nuclear 14Mboe/d 5 Renewables 5Mboe/d 2 17 3 1 Biomass 23Mboe/d 33 8 2 Coal 43Mboe/d 11 10 16 1 Gas 38Mboe/d 6 35 12 10 Oil 63Mboe/d

14. BAU projection of primary energy sources Source: IEA World Energy Outlook 2006 (Reference Case ) ’04 – ’30 Annual Growth Rate (%) Total 6.5 1.3 2.0 0.7 2.0 1.3 1.8 1.6 Note: ‘Other renewables’ include geothermal, solar, wind, tide and wave energy for electricity generation

15. substantial global fossil resources R/P Ratio 41 yrs. R/P Ratio 67 yrs. R/P Ratio 164 yrs. Proven Yet to Find Source: World Energy Assessment 2001, HIS, WoodMackenzie, BP Stat Review 2005, BP estimates Unconventional Reserves & Resources (bnboe)

16. oil supply and cost curve Availability of oil resources as a function of economic price Source: IEA (2005)

17. Demand Growth GDP & pop. growth urbanisation demand mgmt. Security of Supply dislocation of resources import dependence Environmental Impacts Supply Challenges significant resources non-conventionals key drivers of the energy future Technology and policy

18. Source: BP Data significant hydrocarbon resource potential South America North America OilGasCoal OilGasCoal Resource Potential (bnboe) Africa OilGasCoal Resource Potential (bnboe) FSU OilGasCoal Resource Potential (bnboe) Gas Europe Resource Potential (bnboe) OilGasCoal Middle East OilGasCoal Resource Potential (bnboe) Asia Pacific OilGasCoal Resource Potential (bnboe) Key: - unconventional oil - conventional oil- gas - coal Oil, Gas and Coal Resources by Region (bnboe)

19. dislocation of fossil fuel supply & demand Source: BP Statistical Review 2006

20. Demand Growth GDP & pop. growth urbanisation demand mgmt. Security of Supply dislocation of resources import dependence Environmental Impacts local pollution climate change Supply Challenges significant resources non-conventionals key drivers of the energy future Technology and policy

21. climate change and CO 2 emissions -CO 2 concentration is rising due to fossil fuel use -The global temperature is increasing -other indicators of climate change -There is a plausible causal connection -but ~1% effect in a complex, noisy system -scientific case is complicated by natural variability, ill-understood forcings -Impacts of higher CO 2 are uncertain -~ 2X pre-industrial is a widely discussed stabilization target (550 ppm) -Reached by 2050 under BAU -Precautionary action is warranted -What could the world do? -Will we do it?

22. crucial facts about CO 2 science The earth absorbs anthropogenic CO 2 at a limited rate −Emissions would have to drop to about half of their current value by the end of this century to stabilize atmospheric concentration at 550 ppm −This in the face of a doubling of energy demand in the next 50 years (1.5% per year emissions growth) The lifetime of CO 2 in the atmosphere is ~ 1000 years −The atmosphere will accumulate emissions during the 21 st Century −Near-term emissions growth can be offset by greater long-term reductions −Modest emissions reductions only delay the growth of concentration (20% emissions reduction buys 15 years)

23. some stabilization scenarios Emissions Concentration

24. social barriers to meaningful emissions reductions Climate threat is intangible and diffuse; can be obscured by natural variability −contrast ozone, air pollution Energy is at the heart of economic activity CO 2 timescales are poorly matched to the political process −Buildup and lifetime are centennial scale −Energy infrastructure takes decades to replace −Power plants being planned now will be emitting in 2050 −Autos last 20 years; buildings 100 years −Political cycle is ~6 years; news cycle ~1 day There will be inevitable distractions −a few years of cooling −economic downturns −unforeseen expenses (e.g., Iraq, tsunamis, …) Emissions, economics, and the priority of the threat vary greatly around the world

25. CO 2 emissions and GDP per capita (1980-2004) US Australia Russia Brazil China India S. Korea Mexico Ireland Greece France UK Japan Malaysia Source: UN and DOE EIA Russia data 1992-2004 only

26. implications of emissions heterogeneities 21 st Century emissions from the Developing World (DW) will be more important than those from the Industrialized World (IW) −DW emissions growing at 2.8% vs IW growing at 1.2% −DW will surpass IW during 2015 - 2025 Sobering facts −When DW ~ IW, each 10% reduction in IW emissions is compensated by < 4 years of DW growth −If China’s (or India’s) per capita emissions were those of Japan, global emissions would be 40% higher Reducing emissions is an enormous, complex challenge; technology development will play a central role t E DW IW

27. Current global average CO 2 emissions and Energy per capita (1980-2004) Source: UN and DOE EIA Russia data 1992-2004 only

28. greenhouse gas emissions in 2000 by source Source: Stern Review, from data drawn from World Resources Institute Climate Analysis Indicators Tool (CAIT) on-line database version 3.0

29. historical and projected GHG emissions by sector Source: Stern Review from WRI (2006), IEA (in press), IEA (2006), EPA (forthcoming), Houghton (2005).

30. Demand Growth GDP & pop. growth urbanisation demand mgmt. Security of Supply import dependence competition Environmental Impacts local pollution climate change Supply Challenges significant resources non-conventionals key drivers of the energy future Technology and policy

31. some energy technologies Primary Energy Sources: Light Crude Heavy Oil Tar Sands Wet gas CBM Tight gas Nuclear Coal Solar Wind Biomass Hydro Geothermal Extraction & Conversion Technologies: Exploration Deeper water Arctic LNG Refining Differentiated fuels Advantaged chemicals Gasification Syngas conversion Power generation Photovoltaics Bio-enzyimatics H 2 production & distribution CO 2 capture & storage End Use Technologies: ICEs Adv. Batteries Hybridisation Fuel cells Hydrogen storage Gas turbines Building efficiency Urban infrastructure Systems design Other efficiency technologies Appliances Retail technologies There are no “silver bullets” But some have a larger calibre than others !

32. evaluating energy technology options Current technology status and plausible technical headroom Budgets for the three E’s: −Economic (cost relative to other options) −Energy (output how many times greater than input) −Emissions (pollution and CO2; operations and capital) Materiality (at least 1TW = 5% of 2050 BAU energy demand) Other costs - reliability, intermittency etc. Social and political acceptability we also must know what problem we are trying to solve!

33. Concern relating to Threat of Climate Change Concern over Future Availability of Oil and Gas High Low Adv. Biofuels Carbon Free H 2 for Transport CTLGTL Heavy Oil Enhanced Recovery Ultra Deep Water Arctic Capture & Storage CNG Hybrids C&S Vehicle Efficiency (e.g. light weighting) - supply side options - demand side options Key: Dieselisation Conv. Biofuels two key energy considerations – security & climate

34. the fungibility of carbon Primary Carbon Source Syngas StepConversion Technology Syngas (CO + H 2 ) LubesNaphthaDiesel Syngas to Liquids (GTL) Process Others (e.g. mixed alclohols, DME) Syngas to Chemicals Technologies Methanol Coal Natural Gas Biomass Hydrogen Extra Heavy Oil Combined Cycle Power Generation Syngas to Power

35. what carbon “beyond petroleum”? FuelFossilAgriculture Biomass Annual US Carbon (Mt C) ↑ 15% of Transportation Fuels 1000

36. what carbon “beyond petroleum”? FuelFossilAgriculture Biomass Annual World Carbon (Mt C) ↑ 15% of Transportation Fuels ↑ 5300 Big!

37. biofuels today 2% of transportation pool (Mostly) Use with existing infrastructure & vehicles Growing support worldwide Conversion of food crops into ethanol or biodiesel −US Corn ethanol economic for oil > $45 /bbl −Brazilian sugarcane economic for oil > $22/bbl Flex Fuel Offers in Brazil Food Crops for Energy

38. key questions about biofuels Costs −Biofuel production costs −Infrastructure & vehicle costs Materiality −Is there sufficient land after food needs? −Are plant yields sufficiently high? Environmental sustainability −Field-to-tank CO 2 emissions relative to business as usual? −Agricultural practice – water, nitrogen, ecosystem diversity and robustness, sustainability, food impact Energy balance −More energy out than in? −Does it matter?

39. corn ethanol is sub-optimal Production does not scale to material impact −20% of US corn production in 2006 (vs. 6% in 2000) was used to make ethanol displacing ~2.5% of petrol use −17% of US corn production was exported in 2006 The energy and environmental benefits are limited −To make 1 MJ of corn ethanol requires 0.9 MJ of other energy (0.4 MJ coal, 0.3 MJ gas, 0.04 MJ of nuclear/hydro, 0.05 MJ crude) −Net CO 2 emission of corn ethanol ~18% less than petrol Ethanol is not an optimal fuel molecule −Energy density, water, corrosive,… There is tremendous scope to improve (energy, economics, emissions)

40. optimizing biofuels requires fusing the petroleum and agricultural value chains Species Yield / Morphology / Development Chemistry Unnatural products Stress tolerance / Bio-overhead Safety Tillage Planting Fertilizer Water Pest control Crop rotation Sustainability Optimal catchment In-field processing (e.g., pelletizing) Transport energetics Storage Waste utilization Cellulose (bugs/ enzymes/ chems) Microbial engineering Plant integration / optimization Co-products Role of gasification Blends Additives Distribution Engine mods ExplorationProduction Transport RefiningBlending Petroleum Value Chain: GermplasmCultivation Harvest/ Transport ProcessingA real fuel Biofuels Value Chain: GermplasmCultivation Harvest ProcessDistribution Agricultural Value Chain:

41. BP Energy Biosciences Institute to pursue these opportunities Dedicated research organization to explore application of biology and biotechnology to energy issues Sited at University of California – Berkeley and it’s partners, University of Illinois Urbana-Champagne and Lawrence Berkeley National Laboratory Open “basic” and proprietary “applied” research Initial focus on the entire biofuels production chain −Smaller programmes in Oil Recovery, hydrocarbon conversion, carbon sequestration Involvement of BP, academia, biotechnology firms, government $500M, 10-year commitment; operations commencing June `07

42. evaluating power options Concern over Future Availability of Oil and Gas High Low Hydro Nuclear Solar Wind Biomass power sector Coal Gas CCGT Geothermal Hydrogen Power Unconventional Gas - power generation options - supply option Key: Concern relating to Threat of Climate Change

43. Source: IEA WEO 2006 electricity generation shares by fuel - 2004

44. levelised costs of electricity generation Low/Zero carbon energy sourceRenewable energy sourceFossil energy source Source: BP Estimates, Navigant Consulting Cost of Electricity Generation 9% IRR ($/MWh)

45. impact of CO 2 cost on levelised Cost of Electricity $0.35/gal or 5 p/l Solar PV ~$250

46. potential of demand side reduction Low Energy Buildings Buildings represent 40-50% of final energy consumption Technology exists to reduce energy demand by at least 50% Challenges are consumer behaviour, policy and business models Urban Energy Systems 75% of the world’s population will be urbanised by 2030 Are there opportunities to integrate and optimise energy use on a city wide basis?

47. likely 30-year energy future Hydrocarbons will continue to dominate transportation (high energy density) −Conventional crude / heavy oils / biofuels / CTL and GTL ensure continuity of supply at reasonable cost −Vehicle efficiency can be at least doubled (hybrids, plug-in hybrids, HCCI, diesel) −local pollution controllable at cost; CO 2 emissions now ~20% of the total − Hydrogen in vehicles is a long way off, if it’s there at all −No production method simultaneously satisfies economy, security, emissions −Technical and economic barriers to distribution / on-board storage / fuel cells −Benefits are largely realizable by plausible evolution of existing technologies Coal (security) and gas (cleanliness) will continue to dominate heat and power −Capture and storage (H 2 power) practiced if CO 2 concern is to be addressed −Nuclear (energy security, CO 2 ) will be a fixed, if not growing, fraction of the mix −Renewables will find some application but will remain a small fraction of the total −Advanced solar a wildcard Demand reduction will happen where economically effective or via policy CO 2 emissions (and concentrations) continue to rise absent dramatic global action

48. necessary steps around the technology Technically informed, coherent, stable government policies −Educated decision-makers and public −For short/mid-term technologies −Avoid picking winners/losers (emissions trading) −Level playing field for all applicable technologies −For longer-term technologies −Support for pre-competitive research −Hydrates, fusion, advanced [fission, PV, biofuels, …] Business needs reasonable expectation of “price of carbon” Universities/labs must recognize and act on importance of energy research −Technology and policy

49. Questions/Comments/Discussion