Tuesday, 20 April 2010
Energy Security: Motion.
Eamon Ryan (Minister, Department of Communications, Energy and Natural Resources; Dublin South, Green Party)
The Fine Gael Party motion is well constructed and I would not disagree fundamentally with much of the analysis Deputy Coveney presented. It is crucial we start to debate and understand this issue of energy security within the context of good energy policy being set and getting clean, competitive and secure energy sources. We are always trying to get those three legs of the stool right but we could add a fourth leg. Recently, I have started to change my thinking. The fourth leg is the country's balance of payments. I guess it is part of competitiveness but we want to reduce the amount of money we spend on energy imports and increase our exports. We could say there are four legs on the stool.
I have been acutely appraised of the energy security issue. Anyone who grew up in the 1970s and pushed the car to the petrol station had that hard-wired into his or her brain. Anyone who read "Limits to Growth", as I did as a teenager, had the clear understanding that this century would be defined by resource limits.
My thinking on energy security was further developed or honed eight or nine years ago. A very important conference was held in the Tipperary Institute which, I think, was organised by Richard Douthwaite from Feasta, the foundation for economic self-sustainability. A speaker at that conference was Colin Campbell, a former geologist, who had worked in the seas around Ireland looking for oil. He had also worked in Colombia and a range of different locations. As an independent expert, a geologist, who had worked for many of the oil companies but who no longer had any interest in them or in oil exploration, I found his analysis carried a certain weight. It was independent and he did not have a vested interest. He was surrounded by a collection of similar experts from all over the world, including Jean Laherrère from France who, I think, had worked for Elf, the French oil company, Chris Grabowski, the editor of one of the main petroleum magazines who has been quite brave in terms of saying it as it is, Matt Simmons from the USA and a range of other people who were part of what one might call that peak oil community. It is a community which has got it right.
A representative from Shell or one of the large oil companies at that conference eight or nine years said that this was all nonsense, that there was no shortage of oil, that we would be fine until 2050 and that even then we would find something else. At that time, the official sources of the International Energy Agency were scathing in their criticism of the likes of Colin Campbell and the Association for the Study of Peak Oil and Gas.
However, what has happened in the intervening eight or nine is interesting. The geological reality has become increasingly apparent. We face a world not in which oil will disappear overnight but in which it will become increasingly scarce. We will face a peak, if we do not face it already, followed by a contraction in availability, in particular of light sweet crude oil which has powered our civilisation for the past 100 years. There is much shale oil left in Alberta, Canada, in Venezuela and elsewhere but it takes almost as much energy to get that out of the ground and huge volumes of water which are not readily available.
Nothing will be as good as oil. We will never have an energy resource which is as energy dense, transportable and as useful as oil. It is stored solar energy, stored for 150 million years. It is the perfect solar energy in terms of its energy density and transportability. Jonathan Porrit said recently that three tablespoons of oil is the equivalent of eight man hours of energy. Deputy Ferris knows what it is like to haul a net. If he did that for eight hours, three tablespoons of oil would give one that energy. It is phenomenal energy material. However, it is clear we face a peak in global oil production and that this planet faces a fundamental challenge to provide oil for its people in a world where it is no longer as freely or as cheaply available.
I am very much appraised of the Association for the Study of Peak Oil and Gas and the need for us to act now. Reality has caught up. A year and a half ago, I invited over Fatih Birol of the International Energy Agency and brought in the senior civil servants from across the public service and told them to listen to him. In its 2008 report, the most conservative energy agency said our dependence on oil was utterly unsustainable, that the age of cheap oil was over and that governments must act now. This report could not have been more stark. It did a field by field analysis which had not been done previously. Many lies are told in the oil industry. When the IEA started to look beneath the surface of what people had been saying and at the reality, there was a stark warning to every government which has continued since that we must rid ourselves of our dependency on oil, in particular.
That drives the European Union. We see it across the board. Energy Ministers are all pretty much appraised of this. It complements what we are doing on climate change. The 2020 strategy is a strong, mandatory approach from the European Union and it is backed up because Energy Ministers, Heads of Government and last but not least Finance Ministers are starting to understand this reality and react to it.
The promise at the inauguration of the new President in the US was to harness the sun, wind and soil to power its cars and run its factories. The US gets it. It is an oil economy and a country which got rich on the back of oil resources. It peaked in 1976 and it now imports 15 million barrels a day of the 20 million barrels a day it consumes.
China gets it. I was at one of the Association for the Study of Peak Oil and Gas conferences six or seven years ago. The top person in the Chinese oil company was there and all he said in his speech was that China will need a lot of oil and gas. It is now buying it around the world. The estimate from the IEA is that in 2030, China will import the same amount of oil America is now importing. I do not see from where it will come. I do not believe there is a miracle source we will discover so, therefore, we must act.
This country must act. We consume 165,000 barrels of oil a day. That is ten pints of oil for every man, woman and child every day. Think of the energy in that. We do not see it because it goes to food production, transport systems, fertilisers, petrol, heating systems and industrial production. It is a lot of oil. This is one of the most oil dependent countries in the world.
I appreciate Deputy Coveney's motion because it gives us a chance to set out that reality to the people. One of the first reactions is to provide storage so that if there is another energy crisis, like in the 1970s, we have something to cover us. That is why NORA is compelled to hold approximately 90 days oil stocks for the country. Currently, it holds 84 days in gasoline and 78 days in the distilled equivalent with the remainder coming from private industry. Currently, approximately 85% of that is in real oil stocks and approximately 15% is in tickets and stock tickets. As Deputy Coveney said, approximately 45% is held in Ireland and 40% abroad. However, we have given NORA a serious amount of resources to ensure 70% of our stocks are held here. We are looking at a range of different solutions to increase our capability in that regard and we have given NORA real resources to do that job.
In terms of gas, Deputy Coveney is right that there has been a change in the past couple of years. Forever and a day, gas prices followed oil prices but there has been a divergence in recent times because of the development of the hydrovacing of shale gas in certain areas in the United States. We should be careful as to whether it is a complete game change. The EPA in the United States is starting a two year study on the implications of this for the water table and water pollution. The level of resources is also not yet clear. It is true, however, that the development of this shale gas resource changed the spot market price in the United States and, by dint of that, the world market price for gas. It has also resulted in a change in the LNG business in that tankers which previously travelled across the Atlantic may no longer have a reason to do so. This has created a certain flexibility in the market which has helped to reduce prices.
Ireland should not be complacent in this regard given that gas accounts for one quarter of our energy use. Approximately two thirds of Ireland's gas consumption is used in electricity production where it accounts for approximately 60% of our electricity. We are, therefore, highly dependent on imported gas, especially for electricity. Between 95% and 97% of Ireland's gas is imported, largely from the North Sea. North Sea gas peaked about five or six years ago and estimates show that even by 2017, within ten or 15 years of North Sea production having peaked, the United Kingdom will import 70% of its gas needs. The figure for Ireland is likely to match the British figure.
While the immediate reliance for imports will probably be on Norway, its gas resource is relatively limited on a European scale. Ireland would then be dependent on LNG or Russian or Algerian gas supplies. Ireland's energy security is, therefore, under threat owing to our dependence on imported gas. This was evident during the Russia-Ukraine gas crisis. While the crisis did not affect Ireland directly, Europe was very much aware of the problem. It changed the consciousness of the European Council of Ministers which now seeks to develop an alternative strategy in which Europe is less divided and we provide ourselves with a series of security systems to protect against gas supply shortages.
The motion is correct on the need to increase our gas protection and we are doing what is set out in that regard. Citing the example of power plants, Deputy Coveney argues that we must increase storage from five to ten days. I agree and one option we are considering is to have some of the NORA distillate stocks, which are usable in gas fired power stations, become complementary. We could use these stocks to help us meet the storage requirements in our power stations and give us the extra buffer we need.