I still believe that at some stage some fossil fuels will become stranded assets. Did anyone see Lateline last night? A big super fund in California that owns $500 million in BHP shares is trying to get Ian Dunlop (ex Shell executive) on the board at BHP so he can help them start thinking about risk management when they are so heavily reliant on potentially at-risk assets, like coal.
"Climate change: Golden energy age for Australia will cost the world dearly
Date November 13, 2013
Peter Hannam Environment Editor, The Sydney Morning Herald
Surging energy demand in Asia will deliver ''a golden age'' for the Australian economy but also set the world on a path of dangerous climate change as fossil fuel-sourced emissions soar, according to the International Energy Agency.
China will soon dislodge the US as the world's biggest oil importer and India will be the largest coal importer by the early 2020s as the centre of energy demand shifts ''decisively'' to emerging economies, the IEA said in its World Energy Outlook 2013 report.
Asia will ''need every bit of Australia's energy exports … coal, gas and maybe even uranium,'' Fatih Birol, chief economist for the energy group, said. ''I see a golden age for the Australian economy to come, looking at the export volumes … and the prices we expect.''
Australia, the world's largest exporter of coking coal, will regain the title of biggest overall coal exporter by 2030. Shipments of coking and thermal coal will rise 57 per cent from 2011 levels to 410 million tonnes per year by 2035, the report said.
With two-thirds of the world's total investment in liquefied natural gas pouring into Australia, the country will rival Qatar as the largest LNG exporter by 2020. Three of Australia's seven export projects under construction tap coal-seam gas, production of which will leap from 6 billion cubic metres in 2011 to 100 bcm by 2035 - provided sensitive water management issues can be resolved, the report said.
Carbon cost
Rising global demand, though, will come with a hefty climate cost. Energy-related greenhouse gas emissions - now about two-thirds of the total - are likely to rise by 20 per cent to 37.2 gigatonnes by 2035, according to IEA's mid-range scenario. ''Some people talk about the 'green growth' in Asia. When I look at the numbers … it's black growth,'' Dr Birol said.
Those emissions will put the world on course for a long-term average temperature rise of 3.6 degrees, far above the internationally agreed 2-degree target. Without current efforts to limit emissions, temperatures would rise 5.2 degrees, Dr Birol said.
The IEA report comes as delegates from 200 nations attend a summit in Poland as one step towards settling a new climate treaty by 2015. The Abbott government has vowed to not review the current Australian goal of cutting emissions by at least 5 per cent on 2000 levels by 2020, and is represented at the meeting by only an ambassador rather than a minister as has been the norm.
A report by the World Meteorology Organisation last week found greenhouse gas levels continue to hit new peaks with their potential warming effect on the climate rising almost a third since 1990.
Fossil-fuel demand is being stoked by massive subsidies, particularly in the Middle East, with the global total rising $US20 billion ($21.4 billion) in 2012 to $US544 billion. That total will rise to about $US600 billion a year by 2020, Dr Birol said.
By contrast, subsidies for renewable energy rose about $US10 billion in 2012 to $US101 billion, and will reach about $US220 billion by 2035, the agency forecasts. Despite continuing to lag in support at roughly a five-to-one ratio with fossil fuels, renewable energy will account for almost half the increase in power generation to 2035, Dr Birol said.
While investment in renewable energy dropped 11 per cent in 2012 in part because of policy uncertainty, installed capacity of solar photovoltaics still rose 42 per cent and wind turbine capacity by 19 per cent, the IEA said.
After 25 years of attempts to decarbonise the energy sector, the share of fossil fuels globally remains about 83 per cent, and should drop to 75 per cent by 2035, he said.
Only about 1 per cent of fossil-fuel powered plants will be equipped with carbon capture and storage technology by 2035, the IEA said.
“I don’t see a great appetite for the CCS projects...even though (they are) extremely important for the climate,” Dr Birol said.
Prices, global shifts
Energy prices - including Australia's expected export takings - hinge largely on measures governments take on restricting carbon emissions via prices or other steps.
For instance, under the current policies scenario, the IEA projects oil prices to rise from $US109 a barrel in 2012 to $US145, in real terms, by 2035. If countries acted on plans to limit atmospheric concentrations of carbon dioxide to 450 parts by per million - a proxy for limiting global temperature increases to 2 degrees - the price of oil paid to exporters would drop back to $US100 by 2035, the report said.
Similarly, thermal coal prices rise from about $US100 per tonne in 2012 to $US120 by 2035, on current policies. Should governments take steps to curb coal use, however, prices would sink to $US75 by 2035, under the 450 ppm CO2 scenario.
LNG prices are more complicated since they vary widely at present. LNG prices in the US, for instance, were just a quarter of European Union's import prices in 2012 and one-sixth of Japan's because of the boom in so-called unconventional gas development in the US.
That gap is expected to narrow in coming years, in part because of US gas exports. Under current policies, though, by 2035 US gas prices will almost triple from $US2.90 per million British thermal units (Mbtu), to $US6.90. In Europe, gas prices will rise from $US11.70/Mbtu in 2012 to $US14, while easing in Japan, from $US16.90 to $US16.70/Mbtu by 2035.
Assuming carbon curbs imposed by a 450 ppm CO2 goal, US gas prices would still rise to $US5.90/Mbtu, but drop to $US9.50 in Europe and $US11.70/Mbtu by 2050, the report said.
While energy demand shifts to Asia, supply also alters. Assuming Saudi Arabia reins in some of its output as part of its role as OPEC's swing producer, the US will overtake the Middle Eastern state as the world's largest oil producer by 2015.
The US surge is partly a result of shale oil development, which is expected to flatten out after 2020. The world's hunger for low-cost oil from the Middle East, though, will see that region remaining critical to the sector, Dr Birol said.
“Middle East is and will remain the heart of the global oil industry for many years to come.”"
