Energy envisioned

Energy is a finite commodity affected
by a multitude of trends. As a result
of economic growth, increasing third-world needs, changes in weather
patterns and expanding government policies, it’s clear that both energy providers
and consumers must learn how to
squeeze more power out of less product.

While the growth of biofuels, nonhydroelectric renewable energy sources
and construction of additional nuclear
power plants will impact future energy
demand, the U.S. Energy Information
Administration (EIA) projects that —
instead of shrinking — oil, coal and natural gas will provide roughly the same
share of the total U.S. primary energy
supply in 2030 that they did in 2005.

“We are going to see a continuation of
energy prices going up 10 percent to 20
percent every two years,” says John
Barnes, chairman and CEO of B&R
Energy LLC, “and the movement of energy-intensive activities to where these
commodities are less costly.”

Smart Business spoke with Barnes
about the current and emerging trends
that will shape the future of energy in
the United States and worldwide.

What is the projected demand for gas, oil,
and alternative fuels by 2030?

It is projected that we’ll need 120 million barrels of oil per day, up from the
current 85 million. Oil demand increases
at about 2.5 percent per year. Gas
demand goes up at approximately the
same rate, but to some extent, is affected by price. With gas and oil expected to
supply an estimated 85 percent share of
the 2030 energy market, it’s going to be
tough for renewable energies and alternative fuels to do much more than hang
on to their current share.

How will weather trends impact energy production and demand?

There are still a multitude of weather
factors that we can neither accurately predict nor understand. For example, global
warming advocates and weather forecast models predicted that 2006 would prove
to be the worst hurricane season in the
history of mankind. But, basically, there
weren’t any. And in spite of those who
would like there to be, there simply is neither scientific consensus nor scientific
proof that global warming is a reality.

Hurricanes have up-cycles and down-cycles every 20 years. We’re currently in
an up-cycle, so we’ll have some hurricanes. With 20 percent of our natural gas
products and quite a bit of oil production
taking place in the Gulf of Mexico, we
will have scenarios like Katrina and Rita
when our offshore production is
impaired, which will reduce some
domestic supply for a period of time.

What role will the government play in
future energy trends?

There’s a lot of discussion in Congress
about the tax relief that was granted to
big companies so they could invest in
highly speculative deepwater drilling in
the Gulf of Mexico. Now that they’ve
found more oil there, some politicians
are saying, ‘We didn’t really mean that!’
The government will have to provide
more tax relief and incentives for exploration and drilling, or we are going to head toward more foreign dependency
and higher prices. Companies can’t drill
for oil and gas with money they don’t
have. It’s that simple.

The government also must encourage
energy economies and efficiencies,
although the price of energy is doing that
by itself. There are very few businesses
and buildings that have not implemented
energy-efficient lighting, heating and
cooling to reduce their energy costs, and
many state public utility commissions
are introducing legislation to further
drive those efforts.

How will technology impact oil and gas
trends?

Advances in natural gas production are
unlocking large areas of unconventional
gas, like the gas fields discovered in
north Texas’ Barnett Shale. More than
half of the growth in natural gas over the
next 30 years will likely come from
Barnett and other yet-untapped unconventional reservoirs.

Some additional trends include liquefied natural gas (LNG) and the reappearance of a fuel technology called Fischer-Tropsch that helped Germany fight
World War II. Countries like Iran, Algeria
and Australia have plentiful natural gas
but soft natural gas markets. LNG plants
in those countries, costing several hundred million dollars, can liquefy natural
gas so it can be shipped abroad in
extremely expensive ships. It is then deliquefied and placed into pipelines. Of
course, this only adds to our foreign
energy imbalance.

Fischer-Tropsch is a method of turning
coal into gasoline and diesel. South Africa
did extensive research on it during its
economic embargo during the apartheid
years. Considering that the U.S. is the
Saudi Arabia of coal, there will probably
be some domestic research and government funding for harnessing this technology for expanded applications.

JOHN BARNES is chairman and CEO of B&R Energy LLC.
Reach him at [email protected] or (214) 445-6808.