Energy demands reshaping global marketplace
Published: Thursday, February 24th, 2005
Attendees of a major symposium in Houston last week heard some thought-provoking prognostications about the global energy outlook. Some of the observations come from representatives of the oil industry, and must be taken in context. But that doesn’t mean they aren’t valid, or shouldn’t give Americans something to think about as Congress again takes up an energy bill. Among the most interesting comments were those of Dave O’Reilly, CEO of ChevronTexaco Corp., who told attendees he’s long been skeptical of the need for a national energy policy, but has been re-thinking that in light of escalating global competition — possibly someday leading to conflict — for energy supplies. Economic booms in India and China, and the insatiable appetite of these countries for energy, are prompting Asian companies to aggressively pursue development deals with foreign suppliers of oil and natural gas supplies. “What I see happening is the beginning of alliances forming between Asian entities and Middle East entities for the long term,” O’Reilly said. “And I think it’s very important that our government recognizes and understands the implications of that.” Added O’Reilly: “We are seeing the beginnings of a bidding war for Mideast supplies between East and West. The new Asian demand is reshaping the marketplace — and we’re seeing the center of gravity of petroleum markets shift to Asia, and in particular to China and India.” The United States, by contrast, seems paralyzed on energy policy. O’Reilly stumped for more drilling in Alaska, the Rocky Mountains and the Gulf of Mexico, as well as breaking down regulatory barriers that block access to Mexico’s energy sector. “The time when we could count on cheap oil and even cheaper natural gas is clearly ending,” O’Reilly said. One way the United States might bridge the gap between demand and supply, at least when it comes to natural gas, is with imports of liquefied natural gas (gas that’s cooled to a liquid, then shipped in tankers, much like oil). But many of the port facilities that will be needed to handle the shipments are running into local opposition, or getting balled up in regulatory red tape, especially along the East and West coasts. Pat Wood, chairman of the Federal Energy Regulatory Commission, told conference attendees that energy prices will continue to soar unless most of these terminals come on line and a natural gas pipeline from Alaska to the lower 48 is built. “The numbers do not add up under any reasonable (energy cost) scenario — even one that has gas demand significantly reduced — if we don’t have those two projects done,” Wood said. “This is the most important thing our country can do today to provide for a secure energy future tomorrow.” But the omens are not promising on either front. Exxon-Mobile has abandoned plans to help build the Alaska pipeline, and is instead investing $20 billion in a LNG production facility in Qatar. And while 59 LNG terminals are in the planning phase, NIMBYs and state and federal regulators could derail most of them, possibly leading to severe natural gas shortages in coming years. One analyst with Cambridge Energy Research Associates predicted that no more than six to eight of the 59 proposed LNG terminals would be built, due to “fierce” opposition to the facilities outside of Texas and Louisiana. Congress’ passage of an Energy Bill might or might not help with these matters, depending on what’s in it. Members should steer clear of corporate welfare giveaways to the energy sector — earlier bills were larded with far too much pork — and focus on stripping away many of the procedural and regulatory hurdles that obstruct greater development of domestic energy resources, while maintaining the reasonable level of environmental protection the public expects. Today’s advanced technologies allow resource extraction with minimal impact on the land, water and wildlife, enabling us to strike a better balance between economic and environmental aims. All we need is the political will to apply them.
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