The new millennium is characterized by major global changes, some already in motion and others that will be required to adjust to them. Energy supply is the centerpiece of major changes in motion as the world is in transit to a low-carbon economy. By serendipitous coincidence, on the one hand global hydrocarbon resources are being stretched by a growing population expected to reach the 9 billion mark by 2050 – an increase equivalent to three new Chinas with comfort expectations that will undoubtedly echo in more autos, more electricity, more travel … more, more, more – and on the other, an unrelenting global warming phenomenon that restrains the use of carbon-based fossil fuels that only exacerbates the process.

Coal fuels almost half of electric power generation and oil 94% of transportation worldwide. Also more than half of the oil and gas produced is consumed in transport and power generation which are sectors characterized by low efficiencies: 20% for internal combustion engines and 34% for power plants. In contrast, electric vehicles and nuclear power plants have fuel efficiencies of 75% plus and, more importantly, both are carbon clean!

World crude oil supply/production has grown only 8 million barrels a day in the last 30 years and has remained flat at 71 million barrels a day since 2004. New oil discoveries have dropped continuously to a current low of 10 billion barrels a year during the present decade, from an all-time high of 55 billion barrels a year during the 1960s. This in spite of a four-fold increase in capital spending in E&P since 2000 to an all time high of $450 billion in 2008. For the last 30 years we have been producing more oil than is being discovered – the ratio is 3 to 1 in this decade. Consequently existing reserves of conventional oil are being depleted which in turn causes production capacity to decline. Demand is simply outpacing the capacity of reserves. There is no secret as to why oil prices spiked to $147 in 2008.

We have an inverse situation with natural gas. There are abundant gas reserves, the industry is relatively young – only 22% of its EUR has been produced so far, compared with 46% for oil – but only a fraction of the new gas reserves have been developed which could bring on supply/demand imbalances as early as five years from now. For instance, the world’s biggest gas field – North Field/South Pars (Qatar/Iran) in the Persian Gulf – is underdeveloped, producing barely 10% of its potential. Other recent supergiant discoveries like Iolotan (Turkmenistan) and those in the Yamal Peninsula (Russia) are undeveloped. Four countries control more than half of the new reserves and how quickly they develop them is at their discretion. All of these new fields require advanced technology and massive development investments. Preliminary development costs in Yamal are estimated at over $100 billion. Iolotan’s gas has a high CO2 content and high reservoir pressures both of which require sophisticated technology and consequently higher capital expenditures.

Contrary to oil with dwindling reserves and declining or contained production capacity, natural gas reserves can satisfy demand through the middle of the century but only if the required investments are timely. New shale gas resources have been a game changer in the US and soon could go global, changing the competitive dynamics of the world gas market.

On the demand side, transportation and electric generation are the major sectors that need change, particularly in their fuel mix. Transportation usage accounts for more than half of global crude oil output so we need to find alternate fuels NOW. Natural gas is relatively clean – it produces 30% less CO2 than oil and 45% less than coal – and hence is considered a bridge substitute for oil while allowing time for the development of unconventional fuels and a switch to electric and/or hydrogen powered cars over the long term. Electric vehicles seem to be the best option at this time but would require more electricity generation.

Presently, coal is the main fuel for electric power generation but has its own set of efficiency and environmental issues. Natural gas has also made significant inroads into power generation and now provides 19% of the fuel mix. Natural gas is too valuable a resource to squander for large scale power generation. It is a niche supplier to industry, petrochemical feedstock and agriculture, residential and commercial uses. We cannot afford to deplete its reserves for direct use in heat generation when nuclear fuel is the standard – but still not accepted – for clean power generation and also providing stable long-term prices for the consumer. Nuclear fuel currently provides only 14% of the energy for the power generation sector.

An energy revolution is on the horizon. These are some of the options on the table.

Excerpts of Dr. Sandrea’s talk at the Globe Forum in Gdansk, Poland, Oct. 28-29, 2009.

Total Primary Energy – Production, Usage, Emissions


Usage %

  Production (mm boe/d) Power Generation Industry Transport Other CO2 billions/tons/yr
Coal 61 69 18 - 13 12
Oil 80 7 8 52 33 11
Gas 48 39 18 - 43 5
Nuclear 15 100 - - - -
Hydro 5 100 - - - -
Other* 25 11 15 10 64 -
TOTAL 234 37 19 19 25 28

Source: IEA08. Notes: * includes biomass, waste and other renewables; boe= barrels of oil equivalent.

For more of Dr Rafael Sandrea’s work on global oil and gas resources see: An In-Depth View of Future World Oil & Gas Supply - A Quantitative Model which is available online through

Click here for Dr. Sandrea's full bio.

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