Editor's Note:

Each fall the National Council on US-Arab Relations brings together a distinguished group of diplomats, government officials, business people, military officials, scholars and others to tackle the thorny issues surrounding US-Arab relations. SUSRIS has provided AUSPC speakers' remarks, which touch on the Saudi-US relationship, to you for over the last five years. In keeping with that practice we again provide for your consideration a collection of AUSPC presentations.�

Today we present the remarks of Jim Burkhard, Managing Director of Cambridge Energy Research Associates [CERA] Global Oil Group. Mr. Burkhard discussed the hard truths we confront in energy supplies and the core strategies for dealing with them. He was joined on the panel by Karen Harbert, the panel Chair, of the U.S. Chamber of Commerce's Institute for 21st Century Energy, Ryan M. Lance of ConocoPhillips, Jay R. Pryor of Chevron and Nabilah Al-Tunisi of Saudi-Aramco. Their remarks have been provided separately.

This is the final iteration of Arab-US Policymaker Conference reports for this year. For more transcripts online check the index and links below.

17th ANNUAL ARAB-U.S. POLICYMAKERS CONFERENCE
"Transitioning the White House: Challenges and Opportunities for Arab-U.S. Relations"
October 30-31, 2008 | Washington, DC

Energy: Hard Truths
(AUSPC 2008)
Jim Burkhard

[KAREN HARBERT] ..Jim Burkhard is the Managing Director of Cambridge Research Associates Global Oil Group, which means that he leads the team of experts that analyze and assess the upstream and downstream business conditions for these investments and the strategies companies should employ. He also develops and maintains detailed short term and long-term forecasts on global crude oil and refined product markets. 

In 2005 the Secretary asked the NPC what does the future hold for oil and gas supplies and what supply and demand strategy does the Council recommend to ensure greater economic prosperity and stability for the U.S.? Pretty big question, pretty tall order. When we started to look at how to tackle this question we said, �Gee, you really cannot look at oil and gas in isolation.� Coal, nuclear, renewables, they impact oil and gas. And you cannot look at the United States as an isolated actor in the energy market. So what we needed to do was to develop a comprehensive energy assessment at the global level to develop the insights and recommendations that we came up with, and that�s what we did. 

The study conducted in 2006 and 2007 involved around 350 people from a range of industries and disciplines. There are of course oil and gas companies that participated in it. We also had power companies, financial institutions, universities and a number of NGOs and foreign companies because we did want to get that global reach and input for the study. At the end of the study we came up with what we called six hard truths about energy that framed the recommendations we made to the Secretary and I�ll go over each of these six hard truths and I�ll briefly summarize the recommendations we made.

The first hard truth and Ryan [Lance (link below)] alluded to this. But coal, oil and natural gas, the fossil fuels, will remain indispensable to meeting global energy demands out to 2030 at least, if not well beyond. The fossil fuels represent trillions of dollars of investment. More than a century of investment in infrastructure on the consumption and supply side. You�re not going to replace that overnight. It takes a long, long time. So fossil fuels were important 30 years ago, they�re going to be important to us for decades to come. That was the first hard truth.

Second, the world is not running out of energy resources but there are accumulating risks to continuing expansion of oil and natural gas production from the conventional sources that we�ve historically relied on. These risks create significant challenges to meeting projected global demand growth.

Third hard truth, to mitigate these risks the expansion of all economic energy sources will be required including coal, nuclear, biomass, other renewables and unconventional oil and gas. And of course each of these sources face their own challenges. 

Fourth hard truth. Energy independence should not be confused with strengthening energy security. The concept of energy independence is not realistic in the foreseeable future but U.S. energy security can be enhanced by moderating demands, expanding and diversifying domestic energy supplies and strengthening global energy trade and investment. 

Next hard truth. A majority of the U.S. energy sector workforce, including skilled scientists and engineers, is eligible to retire within the next decade and it�s urgent that this workforce be replenished and trained. One brief anecdote on this. I�m 40 years old and when I graduated from college hardly anybody was going into the energy business, the oil business, because it was a consolidating business. And it continued to do that through the 1990s. Well, now we�re living with the impact of that missing generation of engineers. 

Last hard truth. The policies aimed at curbing carbon dioxide emissions will alter the energy mix. They will increase energy related costs and require reductions in demand. 

So those were the hard truths that we developed and they framed what we call the five core strategies that we recommended to the Secretary of Energy in 2007. And these core strategies -- whether the oil price is $150 or $50 or even less than that -- these core strategies remain credible and relevant.

The first core strategy is to moderate growing energy demand by increasing energy efficiency of transportation, residential, commercial, and industrial uses.

Second, in the United States we should expand and diversify energy supply, moderate the decline in oil and gas production. And the U.S. has been successful in moderating if not expanding gas production at least recently. Also to increase access to new resources. 

Third core strategy. And this is vitally important. It sounds simple. But it is extremely important and that is to strengthen global energy trade and investment. Both Nabilah and Ryan [links below] have illustrated the importance of global trade, investment and cooperation to enhance the flow of energy from where it�s produced to where it�s consumed. 

The fourth core strategy. Enhance science and engineering capabilities in the United States.

The fifth. As Co2 emission reductions are considered, promote a global framework for carbon management to establish one transparent, predictable economy wide cost. And two, develop a legal and regulatory structure to enable carbon capture and sequestration. That�s where you take carbon � say from a coal plant, capture it and store it long term for example in a reservoir. On that issue of carbon whether, regardless of what one may think about how we should tackle global climate change.. not making the comment about whether it�s good, bad.. but it does seem that something is coming. Both presidential candidates in the United States advocate some type of carbon regulation. But some type of clarity of the potential costs is important for investors. Imagine you are contemplating spending billions of dollars to develop a coal plant. Coal plants emit a lot of Co2. And you don�t know what the future costs of Co2 will be. When will that cost come into play. So that uncertainty is a significant impediment to some investment to expand energy supply in the United States.

The bottom line to all these strategies is they all must be pursued. This is not an a la carte set of items. All of them must be pursued in order to be effective. The impact of the report has surprised many of us. I�ll give you a couple of statistics that surprised many of us that worked on the study. The study report was pretty big, it�s a pretty think report. I saw some copies out there in the lobby if you�re interested in picking one up. But there have been 1.5 million downloads of this report from the NPC web site. There have been about 180 presentations and briefings in the United States and around the world about the study results. Such as the one that I�m doing now. And the interest globally has been impressive. It has been produced in a number of languages � English, Japanese, Arabic, Russian, Chinese, and Spanish. 

So to conclude, a key.. the bottom line.. a key point of the report is that we do need a balanced approach and we need a sustained and long term focus, a focus that goes beyond the two, four or six year time frame. Certainly we do need the short-term commitment but you do need a long term commitment and focus to overcome the energy challenges that the United States and indeed the entire world face right now.

Thank you.
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Source: Arab-US Policymakers Conference Web Site (AUSPC 2008)
http://www.auspc.org 

Transcription Services by Ryan & Associates

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