Amory Lovins wears many hats -- theoretical physicist, adviser to the U.S. auto industry and to the Pentagon on energy efficiency, and co-founder of the Rocky Mountain Institute, a Colorado-based think tank whose vision is a world without oil by 2025.
But during the luncheon address to the Division of Environmental Geosciences at the recent AAPG Annual Convention in Houston, Lovins added a new hat to his collection -- that of “wildcatter.”
Lovins regaled the audience with his recent “exploration” discoveries -- a “8.3-million-barrel-a-day oil field in the Detroit Formation” and a 15-Tcf-a-year natural gas play somewhere in the continental United States. These “discoveries” are actually made through cutting consumption.
Lovins laid out the roadmap for the United States to offset its energy consumption -- without drilling a single oil or gas well -- by the equivalent of 8.3 million barrels a day and 15 Tcf a year (or half the nation’s annual natural gas consumption). Such a monumental feat could be accomplished, he said, through the adoption of currently existing, energy efficient technologies and the substitution of oil with hydrogen.
A co-author of Winning the Oil Endgame: Innovation for Profits, Jobs and Security, Lovins described how the United States can reduce, even eliminate, its escalating consumption of oil by building energy efficient, ultra-light automobiles and aircraft, by substituting biofuels for oil, by retrofitting the electrical power industry and its gas end users, and by redesigning its key industrial sectors.
Lovins challenged the DEG audience to picture an American economy in 2025 that’s not held hostage by the global commodity price of oil or by the handful of countries that produce that oil. Further, he described how the United States could prosper on all fronts -- corporate profits, jobs and national security -- while eliminating its geopolitical dependence on oil.
“The prize is enormous,” Lovins said of the potential change, “a world that doesn’t depend upon or fight over oil. Public policy must support -- not distort -- this change.”
Having a New Model
Lovins suggested that market forces and “business logic” -- not government policies or subsidies -- should drive this monumental step-change in how we consume energy.
As a model he pointed to the financial successes of the Royal Dutch Shell Group and British Petroleum. During the past five years, British Petroleum has parlayed its acronym “BP” into “Beyond Petroleum” -- an elegant marketing tool that’s predicated upon a multi-billion dollar investment in solar, wind and hydrogen technologies.
True to its mantra, as BP’s profits have increased, the corporation’s greenhouse gases have decreased (on a percentage basis, relative to the amount of energy produced).
Lovins likens the demise of today’s oil industry to the transition that saw whalers lose market share in the 1850s.
“Whalers were astounded when they ran out of customers before they ran out of whales,” he said. In fact, Lovins declared that many nations have adopted some of the prescriptive moves detailed in Endgame, and that we have already transitioned the hydrogen economy.
“Two-thirds of the fossil fuel atoms being burned worldwide are hydrogen,” he said. “We’re only talking about the last one-third of these atoms, namely carbon.”
No stranger to the oil and gas industry, Lovins has consulted to the U.S. Department of Energy and to many of the world’s multinational E&P firms during the past couple of decades. Given the opportunity, he would immediately retrofit the United States’ aging fleet of oil refineries, resulting in a 42-percent energy cost savings with payout of capital expenditures over three years.
“Oil is a great industry,” Lovins said, “but a bad business, sort of like airlines.
“The smartest oil companies have been trying to broaden their business model for several decades,” he added, suggesting that E&P companies need to redefine themselves as “energy” companies.
Geologists’ Future: ‘Rosy’
Lovins challenged the petroleum industry to squeeze significantly more revenues out of assets that already have been amortized. At a time when the oil industry is reaping unprecedented profits, he called upon it to change its paradigm, to invest in a diversified and energy efficient portfolio.
Should oil and gas geologists fear the hydrogen economy? Not according to Lovins who already views non-renewable fossil fuels -- coal and petroleum -- through the lens of the hydrogen economy.
Geologists, he suggested, will continue to play a crucial role in the decades to come, even as the United States and the rest of the world embrace the hydrogen economy -- geologists’ skills will be used to map subsurface reservoirs for enhanced oil recoveries and for carbon dioxide sequestration.
“The future is rosy for gas under any scenario, even mine,” he said, as natural gas is a key feedstock for hydrogen.
Pointing to recent technological developments in biofuels, Lovins described how Brazil has replaced 34 percent of its oil needs with biodiesel, repaying initial government subsidies by 50-fold. And, he cited Europe’s adoption of biofuels as “a good transitional product.”
He suggested, further, that the United States could replace one-fifth of its oil consumption (or four million barrels a day) with “modern” biofuels, substituting ethanol derived from costly, heavily subsidized corn-based sugars with ethanol from the woody parts of plants like switchgrass and poplar.