Leading the three major problems of the energy industry in 2013

What will happen in 2013 on the road to human energy exploration? Three issues will likely dominate the world energy agenda for 2013 and beyond.

First, the continuing impact of the “unconventional oil and gas revolution” in North America. This has changed our expectations for the world energy market. A few years ago, many people predicted that the US oil and gas supply will continue to decline, and oil and natural gas imports will increase. But the development of shale gas has changed people's expectations. The United States now has low natural gas prices and is already self-sufficient. Many LNG import receiving stations are being converted to export stations to export US natural gas to Asia and Europe.

In addition, the impact of shale gas has spread to the oil field, and shale gas mining technology is currently being used by many companies for the development of “tight oil”. Thanks to the increase in the production of tight oil, the current US oil production has increased by 25% compared with 2008, resulting in a significant drop in oil imports.

Low-cost natural gas is also increasing the competitiveness of US manufacturing in the world market. Surprisingly, the large amount of natural gas supply has also caused a new political debate in the US about whether the US should export natural gas to Asia and Europe. Of course, these exports will be welcomed by natural gas importing countries, as these countries still have to pay high prices for imported natural gas. But those in the US who oppose natural gas exports are worried that natural gas exports will push up domestic gas prices, which will adversely affect US manufacturing.

Cambridge Energy's view is that the current US natural gas supply is sufficient, so building some LNG export stations will not have a significant impact on the US natural gas market and prices. In addition, as one of the major new sources of supply to the global natural gas market alongside the Middle East, Australia and Western Canada, US natural gas exports can increase global supply. The development of these new resources is good news for importing countries, as it means that importing countries have more supply options. This is of great significance to China, where natural gas is only 4% of the energy mix, and will increase in the future.

To what extent can the technology that makes the North American energy revolution a reality be transplanted to other parts of the world? We have seen this potential in many countries, including China. But these countries will need time to better understand the characteristics of these resources and reach a certain level in the relevant exploration technology, infrastructure and logistics systems to reach the current level of North America. This is already a major topic in China's energy industry, and in 2013, we must be able to see the accelerated spread of these technologies and capabilities in various countries.

The second big problem is the world economy. The worst global economic recession since World War II has been five years. This has significantly reduced the growth rate of energy demand, which in turn has had a major impact on the energy sector. But today's oil prices remain at more than $100/barrel.

At present, Europe's sovereign debt crisis and fiscal austerity policies are dragging down the world economy, and the Chinese economy is also affected. Any possible economic rebound in 2013 will definitely stimulate energy consumption growth. But from this perspective, the supply situation of the world oil market in 2013 is better, especially in the United States, Canada, Brazil, Kazakhstan and Iraq. However, emergencies may always increase the tension between supply and demand.

This leads to the third issue we will face in the future. From the Syrian civil war to cyberattacks against major oil exporters, the “Arabian revolution” that began in 2011 has clouded the Middle East under a number of uncertainties that will affect the supply situation in the region.

But the biggest regional risk is still from Iran. In the past few years, there have been many predictions that "Next Year" will be a decisive year for Iran's nuclear program, but these predictions have repeatedly proved to be wrong.

However, 2013 seems to be a real test moment. Iran’s uranium enrichment program will continue, while the international community’s sanctions against Iran’s oil exports are much more effective than predicted a year ago. Iran’s oil exports have halved, which has had a major impact on the oil-dependent Iranian economy (in fact, Iraq’s oil production has surpassed Iran). But can the pressures and risks facing Iran be enough to prompt Iran to solve the problem through negotiations? Any agreement that may be reached needs to ensure that Iran will stop acquiring efforts to build nuclear weapons.

If there is no substantial progress in this area, then the Middle East will face a series of events and “accidents” that could lead to conflicts and riots, all of which are real risks, including the threat of oil and gas supply disruptions. If this happens, it will cause panic in the global oil market, push up oil prices, and have a serious impact on the world economy that is struggling to recover.

In addition, other trends will continue in 2013. Renewable energy has continued to grow strongly over the past few years, and I described it as “rebirth of renewable energy” in The Quest. We expect the 2012 renewable energy power generation industry. The scale of spending will reach $184 billion. This has become a truly global business. China, which is committed to the development of "new energy," has become a leader in this field.

Of course, the renewable energy industry will face many difficulties in 2013. Global renewable energy development is highly dependent on various forms of government support, including incentives and subsidies. The “fiscal tightening” of the financial crisis in Europe and North America will cut the government budget, which will be a huge challenge for many renewable energy projects and will also reduce the investment level of the renewable energy industry.

From a larger perspective, it may be more instructive to examine which form of energy contributes to meeting the world's energy needs. The results may be unexpected to many people. From the beginning of the 21st century to the present, the largest increase in energy output is coal, which is twice as fast as natural gas, three times as much as oil, and ten times more renewable.

But the energy industry's focus on technological advancement will continue to reshape the energy landscape. It is technological innovation and continuous experimentation that has led to revolutions in the field of shale gas and tight oil in the United States. Therefore, technological advancement will continue to improve the economics of renewable energy and other alternative energy sources, reduce their production costs and increase their competitiveness. A larger industry scale.

The most striking achievement of the past few years has been the dramatic decline in the cost of solar photovoltaic technology. Of course, a large part of this is due to overcapacity in the photovoltaic manufacturing industry. This caused financial losses to the government and led to trade tensions between some countries. However, the competitiveness of photovoltaic power generation over traditional energy sources has indeed improved, of course, its cost needs to be further reduced. How far can we go in this regard? Let us wait and see in 2013.

The author is the president of IHS Cambridge Energy Consulting (CERA), the Pulitzer Prize winner, and the book The Quest.

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