Examination of Witnesses (Questions 371
WEDNESDAY 10 MAY 2006
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
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 provincesthe North Seathey 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.
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 isand it may crop up laterthat 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
Mr Watson: That will not apply
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