ENERGY, REQUIREMENTS AND SOURCES

Energy transition became a major issue during the 2020 pandemic, although it had already been around for a couple of decades. Stronger political, social, financial, and even legal pressure on big oil companies have had a great impact on our industry. We have experienced large-scale redundancies and less investment, and [major companies are leaving the business. As the remaining players embrace this transition, it is important to understand the basics of energy: what it is, how and why we consume it, where it comes from, and crucially, how energy needs vary by region. These new market conditions are a great opportunity for us to expand our knowledge about the energy sector, where we should not be relegated as professionals from a decadent industry.

Energy is the stored capacity for doing work. It can be preserved as potential energy, like in the chemical components of food, coal, oil, nuclear [noun] and batteries, or as kinetic energy, related to the motion of particles and materials, like running water, wind currents, the radiation of the sun and subsurface thermal heat. That energy is transformed and delivered according to the demand.

But what do we use energy for? Humankind has three critical requirements to be able to function as it does today: to transport, to heat, and to power electric machines. The energy that we consume as end-users to perform those works is called Final Energy. It is essentially the form in which it is commercialised and consumed, like electricity, petrol or natural gas. The customers are usually classified into three sectors: residential and commercial buildings, transport, and manufacturing industry. Figure 1 below shows the share of final energy of each end-use and the proportion that each sector demands of those uses. For transportation, most of the demand comes from road vehicles, followed by maritime shipping and aviation. Electricity is mostly used by households and commercial buildings, as well as the industrial sector. Heating is also required by the industrial sector to manufacture products such as iron and steel, petrochemicals, and cement, where temperatures above 200°C are required. Heating buildings during the boreal winter accounts for the rest of the demand.

Figure 1. Final Energy by use. The pie chart presents energy consumption broken down by need and the sectors that contribute to each of those needs. (Data extracted from diverse reports from the IEA, IRENA, and Ourworldindata.org.)

The natural resources that the final energy comes from are called Primary Energy. This is transformed or refined to be delivered in its final form of use. Due to historic reasons, most primary energy comes from oil, coal, and gas, as those fuels serve all energy needs. Figure 2 below shows the share of each source of the total primary energy consumption and the sectors in which those sources are used. Generating electricity consumes a vast portion of primary resources, with coal and gas remaining the major suppliers; around 75% of coal produced and 35% of gas is used for this purpose. Coal and gas supplies also serve to fulfill heating needs from buildings and industrial processes. Crude oil is the main source of energy for transportation purposes (approximately 80%). Fossil fuels also have non-energy uses, as feedstock for the petrochemical industry, cement, steel, and fertilisers.

Figure 2. Primary Energy by source. The pie chart presents energy generation broken down by source and the uses of that energy. (Data extracted from diverse reports from the IEA, the EIA, IRENA and Ourworldindata.org.)

Figure 3. Energy flow from need to source.

Figure 3 above illustrates the energy flow from needs to sources. As was previously shown, most of the primary energy is used by the electricity sector, but this only accounts for 22% of the final use. This is explained by energy losses. In the case of electricity, efficiency depends on the source but, in general, around 30 to 40% of primary energy is converted into electricity, with the rest being lost as heat. In addition, there are energy losses during the final consumption that vary according to the appliance or device; for example, incandescent light bulbs compared to LED ones. In the light transport sector, only 30% of the energy content in a gallon of petrol is used to move a car; the rest is lost as heat and friction. In conclusion, the effective energy that we require as end-users is less than the primary energy consumption.

So how much energy is produced and consumed? This is sometimes difficult to picture, as the units used to express quantities do not help to have a palpable sense of magnitudes: the units used are exajoules (EJ), terawatt-hours (TWh), and megatonnes of oil equivalent (Mtoe). Figure 4 below attempts to provide a scale comparing these measures with something more common to us: oil and gas fields. The bar graph compares an oil field of 100 MMBO and a gas field of 1 TCF with the energy production from three sources in the UK and the EU in one year. To the right, there is shown the electricity consumption of the UK and Colombia, two countries comparable in terms of size of the population but with different levels of economic development.

Figure 4. Scale of energy. The numbers inside the bars are millions of barrels of oil. (Data taken from Ourworldindata.org.)

Figure 5 below expresses, in billions of barrels of oil, the final energy consumption in several regions and the world as a whole per year, compared to the total oil reserves of West Africa. Final energy demand varies between countries, which drives the needs of each one. As an example, Latin America consumed 1,400 TWh of electricity in 2019 (half that of Europe). In most LA countries, 70% or more of electricity comes from hydropower. Except for in Chile and Argentina, heating for buildings is not required at all. Energy needs are more focused on access to clean cooking fuels like gas, cheap transportation fuels, and off-grid electricity projects for rural areas.

Figure 5. Scale of energy at a regional level. The numbers inside the bars are billions of barrels of oil. (Data taken from Ourworldindata.org.)

Energy is crucial to keep the world running as we know it; therefore, it is important for us in the energy sector to better understand how energy is used, why each source is used, and how consumption differs from one region to another. The crude oil market will inevitably change, but other subsurface-related energy solutions like gas, geothermal, and CCUS will play a role during the rest of the century, allowing us to broaden the spectrum of sectors in which we can deliver new ideas and approaches.