With increased talk seemingly daily about energy independence, CEOs of the country’s major oil companies are weighing in on the subject. Clarence P. Cazalot Jr., president and CEO of Marathon Oil Corp., recently shared his view that energy independence is really not possible nor is it desirable. Instead, he said we should strive for energy security.

“Calling for energy independence creates uncertainty amongst our international trading partners and hinders investment in new international energy supplies,” Cazalot said. “The real key for us is energy security, which I define as having an adequate, reliable and sustainable supply of energy to meet the needs and aspirations of private citizens, commercial enterprises and public sector functions.

“Part of that security, though, means that we need to ensure environmental sustainability and that the cost of our energy is similar to that of other nations so we can maintain our economic competitiveness.”

Cazalot recently gave a global overview of energy supply and demand to a group gathered for the Port of Tampa, Fla.’s Petroleum Appreciation Day.

“There’s one indisputable fact that impacts not only our nation but also the world as a whole,” he said. “Quite simply it is that global demand for energy will continue to increase dramatically, driven in large part by population growth and the strong desire of developing countries to achieve economic prosperity. Experts may disagree over the rate of growth, but there is no dispute that the strong demand for energy is inevitable.

“The world’s population grows by a quarter of a million people every 24 hours.  It’s expected that 8 billion people will occupy this planet in 2030, up from 6.5 billion people today. About 95 percent of that growth is occurring in the developing world.”

As such, energy demand is projected to continue its upward trend.

“Secure, affordable, accessible and ample supplies of energy are absolutely essential to both economic growth and a reasonable standard of living, so it’s only natural to expect that the developing countries, with both their growing economies and populations, are going to drive increased energy demand,” Cazalot said.

The world’s two most populous countries, China and India, are the best examples of this.
 
“We’ve all seen in recent times how aggressive both of those countries have become in seeking to increase and diversify their future energy supplies,” Cazalot said.

The International Energy Agency (IEA) projects that global energy demand will increase more than 50 percent between 2007-2030. About 70 percent of the increase is going to be in developing countries, and those countries rely primarily on fossil fuels, due to the very significant cost advantage that fossil fuels have.

“This projected 50-percent growth isn’t unconstrained,” Cazalot explained. “It actually assumes significant efficiency improvements and a reduction in energy intensity.  Without these assumed efficiency gains, demand would be almost double by 2030.

“So, to meet this demand growth reliably is going to require substantial increases in the supplies of all forms of energy.”

Today fossil fuels comprise 80 percent of global energy usage; oil and gas are 60 percent; coal is 20 percent; and all other forms of energy comprise the remaining 20 percent.

“As you would expect and hope, there will need to be more dramatic growth in nonfossil fuel energy sources than has been seen historically,” Cazalot said. “Sources such as nuclear power, renewable fuels, biofuels, hydro, geothermal, wind and solar energy are all important parts of the equation.

“Yet, the fastest growing major energy sources are going to be natural gas and coal, driven by rising demand for electricity. Demand for coal is being largely driven by growth in the developing countries, particularly in Asia-Pacific. China, for example, builds a new coal-fired power plant every 10 days. I assure you they are not using clean coal technology.

“The bottom line is by 2030, despite all the rhetoric to the contrary, the IEA projects that fossil fuels will still comprise about 80 percent of the world’s energy usage.”
     
Increasing energy efficiency
So how do the United States and the world as a whole secure access to sufficient quantities of reliable, affordable energy and do so while safeguarding the environment?

Cazalot outlined what he sees as the three major components to the strategy of accomplishing this.

“First, the cheapest and most plentiful form of new energy is energy efficiency and conservation,” he said. “Reasonable progress has been made in the past. The U.S. economy has doubled since the 1970s, while our energy use has only increased about 25 percent. But much more can be done.

“To give a sense of the potential impact, a 6-percent reduction in energy use would effectively reduce U.S. crude oil imports by a third.”

Cazalot said energy efficiency should focus on three areas:
• Improve vehicle fuel economy.
• Reduce energy consumption in the residential and commercial sectors through more aggressive building codes and appliance standards.
• Increase the efficiency of our industrial sector.

Cazalot illustrated that his company, Marathon Oil Corp., is committed to a pledge that it, along with other oil and gas companies, made five years ago to improve energy efficiency in refineries by 10 percent over 10 years.

“At Marathon we estimate that over the last four years our refineries have improved efficiency by 4.5 percent,” he said. “Refineries use a lot of energy so these are very, very significant savings.”

In recognition of what Marathon has done, EPA gave its Energy Star award for energy efficiency to Marathon’s refineries in Texas, Ohio, Minnesota and Louisiana.

The second key component of an energy security strategy, according to Cazalot, is diversity and increased supplies of energy.

“That is, geographic diversity in terms of where we source our oil and gas from, and diversity of the alternative forms of energy that we use,” he said. “Oil and gas will remain the dominant sources of energy for a very long period of time due in large part to significant cost and infrastructure advantages.

“And, despite what peak oil theorists may say, there is more than ample oil and gas resources in the world to meet this demand. However, access to these critical resources by U.S. companies is becoming increasingly difficult and costly due to increased competition from foreign companies, an intense wave of nationalism by those countries that hold the bulk of the world’s resource, and by restrictive policies by our government.

“It’s critical for Washington, and I believe the American people in general, to recognize that our nation is in a tough global competition for new supplies of oil and gas and that the U.S. oil and gas companies are indeed our best ally in this battle. It simply makes no sense to further hinder our ability to compete by unfair taxation, regulation or other restrictive policies.”

Cazalot, along with America’s oil and natural gas companies, believes that energy development holds a lot of promise, and the numbers prove it.

“Over the last five years in just the United States and Canada, we’ve poured $12 billion into renewable, alternative and advanced nonhydrocarbon technologies,” he said. “If you add up all the various types of emerging energy technologies, over the last five years our industry has invested almost $100 billion. And that number is more than two-and-a-half times as much as the amount by the federal government and all other U.S. companies combined.”

Cazalot said that the third key component of a U.S. energy security strategy is technology.

“The technology we employ every day to find and develop oil and gas and convert it into clean fuels is truly amazing,” he said. “Advances such as 3-D and 4-D seismic allow us to better image the subsurface and understand what’s going on down there before drilling very expensive wells.”

About two years ago, Marathon held the deepwater record for gas production in about 7,400 feet of water in the Gulf of Mexico.
 
“I often wonder if that fellow who was at his grill on a Sunday afternoon barbecuing hot dogs or hamburgers had any idea that the natural gas burning in his grill was coming from 125 miles offshore, in water depths of 7,400 feet and from another two miles below the bottom of the ocean,” Cazalot said. “These are the kinds of lengths we go to provide key resources.”

In Cazalot’s opinion, no area of innovation or technology development is higher priority than carbon capture and sequestration (CCS).

“As I said, fossil fuels — oil, natural gas and coal — are going to continue to be the dominant sources of energy for the United States and the world for a long time,” he explained. “So in order to protect the environment, we must capture and permanently sequester a large fraction of the CO2 produced by burning these fossil fuels.

“While most of the technologies for CCS are essentially available, much remains to be done in improving the capture stage, demonstrating feasibility on a very large scale and lowering the cost. There are several major CCS projects underway around the world today that hopefully will point the way forward on this critical technology.”

Cazalot believes that focusing on the three areas of efficiency, diversity of supply and technology will bring a balanced solution — one that he, his company and his counterparts in the oil and gas industry are committed to.

“To me and the more than 28,000 colleagues at Marathon, and frankly all of our colleagues throughout the industry, energy security is what our work is all about as we deliver affordable, reliable energy that’s vital to the economic well-being of our country and the world,” he said.