Panel, Conference Presentation
MI Summit 2013 - London: Wealth and Power: Energy and the World Economy
Milken InstitutePoppy Allonby, Francesco Giuliani, Paul Hinks, Ian MacDonald, Pierce Riemer, Stephen Sedgwick
- The one-hour session will utilize a "rock and roll ride" format focused on audience interaction and panelist engagement rather than standard slideshows, addressing a subset of key topics from a broader 30-issue landscape due to time constraints.
- A shift in global power dynamics is anticipated over the last 30 to 40 years, with reserves moving from international oil companies (80-90%) to national oil companies, while OPEC reviews shale production effects before forming policy.
- Oil price expectations vary among speakers: stable levels around $100 are viewed as unprecedented for planning but may not benefit consumers, while volatility is expected between $65 and $110, with a potential future fluctuation between $75 and $125.
- Economic viability thresholds are set at specific price points: $70 to $75 for OPEC domestic welfare, $75 to $80 for deep water development, $80 to $90 for marginal barrels and US oil shales, and $70 for tight oil to remain economical.
- The next 10-year investment wave is projected to focus on extracting and transporting resources rather than finding new ones, necessitating billions in incremental infrastructure, while gas-to-liquid technology may bridge the gap between gas and liquid transport over 10 to 20 years.
- Hydrocarbons are expected to remain a component of the global energy mix for the next 100 years, despite decreasing energy intensity where GDP growth requires only 0.3% oil demand increase compared to 0.6% previously.
- Long-term energy demand is driven by a population reaching 9 billion and global GDP tripling in under 30 years, necessitating continued fossil fuel use for energy and transport despite renewable growth.
- Skills constraints are severe, exemplified by a project requiring 12 qualified managers globally with only one available, while Western universities see declining science enrollment due to finance sector allure, though Chinese and Indian graduates offer a large potential talent pool.
- Operational challenges in regions like sub-Saharan Africa include oil theft, lack of local benefits leading to sabotage, and the need for strong social contracts and local employment rates to ensure viability.
- North America is expected to capitalize on cheap natural gas via petrochemicals and exports, with tight oil becoming uneconomical below $70 and deep water requiring $100 to $110, though US oil exports are not expected soon despite potential gas export increases.
- Future technological advancements are predicted to improve drilling efficiency ratios from 1 in 20 to 1 in 10 over five years and eventually achieve electricity storage breakthroughs, though nuclear energy is not currently pursued due to a lack of specialized engineering talent.
- Emerging markets are expected to utilize coal reserves for economic development provided clean technology access is available, while global gas reserves are estimated at 200 to 300 years, delaying the end of the oil and gas age through technological adaptation.