A shorter version of this article was published in Di, Dagens Industri (the Financial Times of Sweden) on April 21 2009 (read the Swedish version in Di) . The original submitted article is translated to English by Michael Lardelli.
Last Monday (April 13) there were two articles in the Financial Times, either of which would be troubling by itself. However, if one analyses them together there is every reason to sound the alarm. On the first page there was an article on oil, ”Crisis hits N Sea oil search” and in the supplement that reports on investment funds there was an article on renewable energy, ”Inflows into clean energy drop by half”. In the article on future oil production in the North Sea it states that the oil industry has pulled on the emergency brake in terms of investing in the search for new oil fields. Investment has fallen by 78% compared to one year ago and in the article on renewable energy they state that investment has halved. The combined consequences can be devastating for our future.
One cannot expect to find large new gas and oil fields in the North Sea, but the smaller fields that one can still find are decisive for keeping production alive. Production from giant fields in the North Sea is now declining very rapidly. On average, the rate of decline is around 15% per year. To keep the large production platforms profitable they must be connected to new, smaller fields. Of course, these are also emptied very rapidly but together with the declining production from the giant fields they can still keep production profitable.
The fact that we are now not investing to try to find new fields means that an increasing number of platforms will close prematurely and permanently as their production volumes fall to levels where they are unprofitable. The Financial Times estimates that the lifetime for future oil and gas production will be halved. For the United Kingdom this can mean that in 2020 they will only produce 12% of the nation’s requirements compared to an earlier estimate of 45%. The fall in oil production is serious but even worse is that natural gas production is declining. If the scenarios that the Financial Times describes are realised there is a danger that the ”Sceptred Isle” may sink beneath the waves.
The article on the first page reveals current serious problems while the article on reduced investments in the renewable energy sector indicates an even more serious crisis for our future. The Financial Times is most concerned about the fact that the share value of companies that work with renewable energy has halved. Of course, this is a problem for owners of shares now, but the most serious problem is that the reduced investments mean that the renewable energy we need for our future will not be produced.
A new, small oil field is emptied in a few years while a wind farm is an investment with a longer future. The current volume of renewable energy is very low compared with what, in reality, would be required in the future. It is easy to have an enormous expansion from a low level but every time the volume is doubled it takes twice the effort to do so. The construction must begin forcefully now.
The global halving of investments in renewable energy is so serious that the world’s governments – and not least the governments within the EU – should gather immediately to decide on measures to combat it. In reality, there is no alternative to doing this. There is no price too high to pay to reinstate the previous investment levels. Future crisis packages should be completely focused on the energy sector.
The fact that production in the North Sea is on its way to fall by half and that, simultaneously, we are not investing in the substitutes that are needed means that it is time to sound the alarm in the EU.
The world’s governments should take president Obama’s pronouncement on energy on 26 January as their guiding star, ”No single issue is as fundamental to our future as energy”.
Professor of physics, Global energy systems, Uppsala University