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IEA chief: Only a decade left in US shale oil boom
A surge in US oil and natural gas production has lifted hopes about North American energy security, but that growth will plateau and will be difficult to replicate elsewhere, says Maria van der Hoeven, chief executive of the International Energy Agency, in an interview with the Monitor.
The United States is awash in hydrocarbons, the result of good geology, supportive prices, a favorable regulatory and investment climate, and technology innovation. But the US energy boom is temporary, and not easy to replicate in other parts of the world, Maria van der Hoeven, chief executive of the Paris-based International Energy Agency (IEA), says in a Feb. 22 interview with The Christian Science Monitor. Here are edited excerpts:
Q: The energy industry has undergone a revolution in drilling techniques that has opened up vast new sources of so-called “tight oil” and “shale gas,” particularly in North America. Is the promise of this unconventional oil and gas overhyped?
A: The light tight oil revolution in the United States is changing the geographical map of oil trade. But we also mentioned [in an IEA analysis] that this growth would not last – that it would plateau, and then flatten and go down. That means that from 2025 onward, it’s again Saudi Arabia and the Gulf states that will come back. Because of the changing trade map, this oil will almost completely go to Asia – China, India, Korea and Japan.
There are some people who really think they can replicate the United States shale gas boom. It’s not as easy as that. The land ownership and the resource ownership go together here in the United States – the only country where that is the case. It’s also about having the right gas industry, the right knowledge, the right infrastructure, the water, the human skills, the geological information, etc. And geology in this part of the world, especially where the shale gas boom is, is quite different from Ukraine or Poland. You can learn from it, but it’s not a copy-and-paste. The United Kingdom is changing its attitude to shale gas. China wants to develop its shale gas, but it’s in a very dry part of the country. South Africa is looking to its shale gas resources. The point is there’s a lot of shale gas in the world, but it’s not as easily accessible as it was in the United States.
Q: California is 36 months into its worst drought ever, threatening power outages in a state that gets 15 percent of its electricity from hydroelectric dams. How critical is water to the future of global energy security?
A: The use of water in producing energy is a big issue, but it is also the use of cooling water in power plants. Sometimes there is a lack of water, and hydroelectric dams are not producing as much power as they should. Sometimes there is too much water, and it threatens infrastructure. So we are working with a number of countries on the resilience of energy infrastructure to climate conditions including water – rising sea levels or storms or whatever it is. The other issue is water use in unconventional gas production [hydraulic fracturing]. We started a high level forum on unconventional gas last year, and water will be the focus of its second meeting this year in Calgary. The water-energy nexus is underestimated at this moment. The energy-food nexus is looked into from many sides, but I think the awareness for the water-energy nexus is growing and rightfully so.
Q: Countries like Spain and Germany are second-guessing ambitious plans to transition to renewables as electricity costs rise. Is Europe backtracking on its clean-energy goals?
Europe paid the price of a decarbonization policy in a time frame that made costs quite high. This is something we have to realize. You have to choose your renewable energy sources based on the indigenous sources you have. Solar in the south of Europe – in Spain, in Portugal, in Italy and in Greece – is much more available than in the northern part of Europe, like the Netherlands or Germany. But wind is more available in the north than it is in the south. There is hydropower in the Alps, in the Pyrenees, and in the Scandinavian countries. It’s important to choose your technologies based on resources you have because otherwise your feed-in tariffs will be quite high. And when you have a feed-in tariff that is paid for by part of your population like in Germany, then you have to see to it that the burdens are divided among your population in a way that is acceptable. If you have a feed-in tariff, that’s fine, but put a cap on it. And see to it that when your technology costs come down your tariffs go down, because normally the tariffs are in place for quite some years and you pay a lot of money. At the same time, you need subsidies for renewables because we are not there yet, by far. You need subsidies not only for technologies that are economically more or less viable, but also for new technologies to come. Governments need to use their money to really push technology development and new types of renewable energy that are still in a lab stage or in a pilot phase.
Q: Parts of sub-Saharan Africa are coming into new sources of oil and gas. Can countries like Kenya and Uganda reap the benefits of their own resource wealth without falling victim to the “resource curse” that has hurt countries like Nigeria?
A: Without good governance you can’t guarantee that you are not going to end up in the same situation as Nigeria. And that’s a very difficult one. This is a very poor region of the world, and in our view it’s important that you are on good terms with local populations, host populations, and with host governments. And that means that you share benefits. That can be sharing benefits of fossil-fuel resources, and that can also mean, for instance, that you invest in renewable technology to bring electricity to the people. There are more solutions than one, but we will be working on this, and will come up with a number of proposals in our World Energy Outlook 2014.
Q: About 550 million people in Africa are without electricity. Can African nations leverage renewable energy – and “leapfrog” traditional electric grid development – to increase electricity access and spur growth?
A: They need to leapfrog in Africa and they can. Why should they make our mistakes? There are quite a lot of remote areas where you have to find mini-grid, off-grid solutions, and you need to have storage capacity. It’s not always big storage capacity, but the costs have to come down. So it’s absolutely vital that we look into a myriad of options. That involves solar, it involves geothermal, hydro, wind, and other renewable and fossil sources. Let’s not close our eyes and think that because we did a number of things in Europe that it must be done the same way in other countries. We’re not only talking about renewables in Africa – it’s a mixture. And of course some countries have their own indigenous resources. The point is how they can get the money out of it to pay for the solutions for electrification.