OIL SUPPLIES DWINDLING BY DAVID PUGLIESE OTTAWA CITIZEN

By David Pugliese

Ottawa Citizen

A new report on the market for defence-related fuels and power sources says that providing militaries around the world with various energy solutions is a growing and potentially lucrative market for industry.

 

The report, produced by the defence research outlet Vision Gain in the U.S., noted that worldwide spending on military energy needs in 2008 totaled $34 billion U.S. It’s study outlines how companies can take advantage of that market which is expected to grow in the future.

An example of that growth is the Canadian Air Force’s fuel situation. In 2008, the aviation petroleum, oils and lubricants budget of the Canadian Air Force was slightly more than the service’s entire budget. In 2009 it is expected to reach 24 per cent. By 2019 that percentage could rise to 40 or even 50 per cent as fuel prices continue to rise, according to the Air Force.

Not everyone, however, sees opportunity for companies like the Vision Gain report does.

In stark contrast, the National Farmers Union in Canada is now calling for an examination of Canada’s energy policy amid growing concern that dwindling oil supplies could cause security problems and instability in the  future.

 

The union has been monitoring the state of Canada’s energy infrastructure, oil and natural gas supplies and overall state of the world’s petroleum reserves.

“Clearly, our reliance on petroleum is suddenly emerging as an urgent issue,” says NFU energy security analyst Rick Munroe.

“Energy, food, climate, water, and our economy are interlinked, so miscalculations regarding energy supplies and prices will have dramatic effects on every aspect of Canadian society,” he added.

 

The NFU has written to the government of Canada, including its lead energy department, Natural Resources Canada, calling for a formal examination of energy security concerns. Natural Resources, however, has responded that Canada’s oil supply is secure.

 

Munroe, however, said Canadians depend on secure supplies of affordable energy to import and export food as well as process, package and refrigerate it and any shortage or volatility on global energy markets “will rapidly turn into shortage and instability in food markets.”

In evaluating future scenarios regarding energy supplies, the NFU has identified several worrisome trends, according to Munroe.

Among those are:

 

1. Oil-field discovery rates—volumes of new oil being found—have peaked and been declining for decades. The world is using oil much faster than it is discovering it.

 

2. Global oil consumption (apart from temporary recessionary dips) continues to increase, with present consumption at about one thousand barrels a second.  Ninety percent of cumulative global consumption has occurred during the past half-century.

 

3. Net energy (Energy Returned on Energy Invested/EROEI) rates for new oil discoveries are similarly declining.  Many of the oil sources being brought into production now— tar sands, deep-sea oil, etc.—require higher levels of energy inputs per unit of energy output than did oil sources of past decades.

 

4. Oilfield depletion rates continue to accelerate.  New fields are “playing out” faster and faster, compared to fields brought into production decades ago.

 

5. There is growing consensus that the “easy oil” is nearly gone.  Even the IEA admits this.  New oil will require significantly more energy and money to bring to market.  This means that oil prices must necessarily rise.

 

6. Global production of conventional oil appears to have already reached a plateau. Conventional production has stalled at around 74 million barrels per day since 2004 (this despite the incentive of high oil prices).

 

7. The number of countries with exportable surpluses of oil continues to decline, resulting in the growing number of net importers.  As global export capacity diminishes, so will security of supply.  We cannot all be importers.

 

8.  Industry veterans are retiring just as the oil and gas industry must contend with new challenges.  This “grey factor” may increase the difficulty of bringing new supplies on-stream.

 

9. Similarly, there is the “rust factor”: much of the existing oil & gas infrastructure is old and must be replaced.

 

10. There are still no viable alternatives to replace petroleum (especially when one considers energy density, the net energy of oil compared to proposed replacements, flow rates, infrastructure requirements, the convenience and flexibility of liquid fuels, etc).

 

For more Canadian Forces and Defence Department news or articles by David Pugliese of the Ottawa Citizen go to David Pugliese’s Defence Watch at:

 

http://communities.canada.com/ottawacitizen/blogs/defencewatch/

 

 

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