Select Committee on Environmental Audit Minutes of Evidence

Examination of Witnesses (Questions 371 - 379)



  Q371  Chairman: Good afternoon and welcome. Thank you for coming along. We have had a memorandum from the Association earlier on for which we are grateful. We think there may be a division in the House at about half past three so we will try to get through this session with you in the next 47 minutes if we can. I do not want you to feel rushed but it might be a natural break otherwise you will be hanging around for some time while we go and vote. Can I kick off by asking what the Association's view is about the debate over peak oil and whether you buy into the argument that this is now approaching relatively soon? When do you think we will reach the peak in conventional oil production?

  Mr Vandervell: If I could just kick off on that first. Thank you very much for the opportunity to come and talk to you and present our submission. As you know, we represent largely the downstream part of the industry which is concentrated on the refining and marketing of fuels. The peak oil part of the equation is very much linked into the availability of crude oil supply both now and in the future. Malcolm, you may have a few views on that.

  Mr Watson: Could I just say that we are not the experts in this. We can get someone with more expertise to give you a note if you want. In general terms, what the industry says is that there are about three trillion barrels of oil that can be recovered in the world. We have used about one trillion of those already. We know where 1.2 trillion barrels are. That is in what are called the proven reserves, published in things like the BP Statistical Review, and then there is the balance which is in unproven reserves, where they have discovered oil but have not proved it to the required standards to move it into the proven category, and there is "yet to find" oil. So we have something like two trillion barrels of oil left. That can be supplemented with unconventional oil. By that I mean things like Athabasca's tar sands in Canada, which are already being exploited, and the heavy oils in Venezuela, and that could add perhaps another trillion barrels. Then there is gas which can be converted into transport fuels which can extend that further. We as an industry are seeing something like 40 to 100 years of oil supply left. If we look at the production profiles that are produced by our industry, when they look ahead they do not show a peak in global oil production up to 2030, the limit of the forecasts. In some provinces—the North Sea—they will peak but overall globally they show no peak before 2030. In other words, we have a curve that goes up steadily; it does not fall over. If you look at the IEA's forecast it shows a similar trend. As a non-expert I would say that globally the industry does not see a peak coming before 2030.

  Q372  Chairman: You may not be the experts but as downstream businesses you have an interest obviously in this matter and some of your planning presumably is predicated on exactly those presumptions you have just described. Looking at what the Swedish Government have said about trying to make Sweden as oil-free as possible within about 15 years, how would you feel about Britain announcing a similar aim?

  Mr Watson: What I understand the Swedish Government have done is appointed a commission to look at the possibility. I do not believe they have yet come to the conclusion that that can be done. On a personal view, if you look at the demand for oil in the future, you see that oil is the largest source of energy in the world today. If you look at the forecasts by groups like the IEA or the UK Government or the European Commission, that is still true in 2030. Oil is the major source with gas following behind. I do not believe that we can replace all that energy in such a short period. You may be able to do it for a small country like Sweden but I do not believe you can do it for a large country like the UK or globally. I do not believe it is feasible, without a dramatic change in living standards of course.

  Q373  Mr Stuart: If market forces were left to themselves, how much more oil would we burn globally before running out or switching to alternatives, insofar as you have not answered that already, and what size of carbon emissions would that result in?

  Mr Watson: What I said earlier was that we have something like two trillion barrels of oil left. If that could be supplemented by unconventional oil then we would have three trillion plus barrels that we could still burn. I have to apologise, I cannot convert that into carbon dioxide quickly. I can give you a note if you wish once I have had a chance to do the sums. As a rough guide, if you divide the three trillion by eight you will get the number of tonnes and then you drop it. So if you divide it by (?) you will get roughly the amount of CO2 that is emitted as carbon from that. So that is something like 300 billion tonnes of carbon as carbon dioxide.[1]

  Q374  Mr Chaytor: All these projections of the rate at which oil reserves will decline must be based on assumptions about rates of economic growth?

  Mr Watson: Yes.

  Q375  Mr Chaytor: Are they based on assumptions about historic rates of economic growth or do they make assumptions about the likely rates of economic growth in China, India, Pakistan, Brazil over the next 50 years, because that is the key issue, is it not?

  Mr Watson: Yes. Globally they assume about a 1½% per annum growth rate for the world but that varies obviously around the world.

  Q376  Mr Chaytor: What assumptions are made about China?

  Mr Watson: I cannot quote you that figure offhand.

  Q377  Mr Chaytor: It would be very informative to the Committee if we could find out. In terms of the figures you quoted of reserves and the point at which the peak of oil production would be reached, it would be very helpful if we knew exactly what assumptions were made about China. Our worry is—and it may crop up later—that future projections are always very, very difficult and our own DTI has made some fairly conservative projections about the price of oil in the future which seem to be way off the mark. In terms of the transport sector within the UK now, 98% of UK transport depends on oil. Is that going to change or do you think that that is a given with which we will just have to live?

  Mr Watson: We are obviously going to have a major change by 2010 when we have the Renewable Transport Fuels Obligation coming into place which the oil industry is working towards meeting. The target set for 2010 is that 5% of petrol and diesel should be replaced by biofuels. As I said, we are working towards meeting that target and we expect to meet it. That will obviously take 5% off the load.

  Q378  Mr Chaytor: That will not apply to aviation.

  Mr Watson: That will not apply to aviation.

  Q379  Mr Chaytor: Given that aviation is the most rapidly growing area of transport and the most rapidly growing area of emissions, the 5% Renewable Transport Fuels Obligation—

  Mr Watson: —will not apply.

1   Footnote inserted by witness 22.05.06 As a rough guide it would produce something like 350 billion tonnes of carbon as carbon dioxide. Back

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