Uranium and Nuclear Energy: 1981: Proceedings of the Sixth International Symposium Held by the Uranium Institute, London, 2 – 4 September, 1981

France

PART ONE

WORLD ENERGY PERSPECTIVES

Outline

Chapter 1: Introduction to World energy perspectives

Chapter 2: Chairman’s Introduction

Chapter 3: World energy outlook

Chapter 4: Coal’s contribution to energy supply

Chapter 5: Electricity production costs in European countries

Chapter 6: Nuclear energy and the developing world

Chapter 7: Prospects and problems for nuclear power and its fuel cycle in developing countries

Chapter 8: Prospects for nuclear power in the USA

Chapter 9: Discussion

Introduction to World energy perspectives

Chairman

Mr Glyn England is Chairman of the Central Electricity Generating Board (CEGB). He joined the Department of Scientific and Industrial Research in 1939. After war service he entered the electricity supply industry, in which he has held a number of posts. From 1958 he was responsible, as Development Engineer (Policy) with the CEGB, for building up a multi-disciplinary planning team and became Chief Operations Engineer in 1966. In 1971 he was appointed Director-General of the CEGB’s South Western Region and in 1973 Chairman of the South Western Electricity Board. He became Chairman of the CEGB in 1977. Mr England is a Member of the British National Committee of the World Energy Conference and Vice-President of the International Union of Producers and Distributors of Electrical Energy.

Authors

Mr Pierre Desprairies is a graduate of the Ecole Nationale d’Administration. Since 1951 he has worked in the petroleum industry and in the field of energy economics. He is currently Chairman of the Council of the Institut Français du Pétrole and Chairman of the Commission on Energy and Raw Materials of the 8th Plan. He is an Administrateur of the Compagnie Française des Pétroles, the Société Nationale Elf Aquitaine, the engineering company Technip and the Société Internationale de Service Industriel et Scientifique.

Mr G. Frank Pecchioli graduated as a mechanical engineer from Bologna University in 1953. He then joined Shell in Holland and for 9 years from 1954 held various positions in Venezuela. He returned to The Hague to take co-ordinating responsibility for Greece, Iberia and, in 1964, for multi-country projects in Europe. In 1966 he moved to Italy as Managing Director of three companies in which Shell Italiana had acquired a 50% interest. In 1968 he joined Shell Italiana as Manager, Marketing Economics, and in 1971 became General Manager, Personnel and Trade Relations. In 1975 he returned to London as Head, Personnel Relations, Group Personnel, in Shell International Petroleum Co. Limited, and in 1978 became Managing Director of Shell Coal International Limited.

Mr Georges Moynet is a graduate of the Ecole Polytechnique. He joined Electricité de France (EDF) as an engineer and operated thermal power plants. For 10 years he has been responsible for economic studies and programming. He is currently Head of the Programme Division in the Engineering Directorate of EDF.

Dr Adnan Mustafa graduated in 1969 with a PhD in nuclear magnetism from Southampton University. He joined the Faculty of Science at Damascus University in the same year and chaired the Physics Department in 1974. From 1966 to 1977 he was a Visiting Professor at the Universities of Sussex and Southampton. In 1974 he was appointed Syrian Minister of Oil and Mineral Resources, and in 1979 became Assistant Secretary-General of the Organization of Arab Petroleum Exporting Countries. Dr Mustafa is Chairman of the Syrian Society of Physicists and Mathematicians and a member of the UK Institute of Physics, the American Physical Society, the European Physical Society, the Arab Physical Society, the Arab Union of Physicists and Mathematicians, and the American Society for the Advancement of Science.

Mr Leonard L. Bennett is Head of the Economic Studies Section of the IAEA Division of Nuclear Power and is responsible for studies of the economics of nuclear power, projections of energy and nuclear power growth, and assisting member states with the planning of electric power system expansions. Before joining the IAEA in 1976, he was a research staff member of the USA Oak Ridge National Laboratory for 18 years, including 6 years as Director of Economic Studies and Evaluations.

Mr Mason Willrich is Vice-President of Corporate Planning for Pacific Gas and Electric Company in San Francisco. He is a graduate of Yale University and of the University of California (Berkeley) School of Law. From 1960 to 1962 he was in private law practice and then became Assistant General Counsel of the US Arms Control and Disarmament Agency until 1965. Before joining Pacific Gas and Electric he was a Professor of Law at the University of Virginia and subsequently Director for International Relations at the Rockefeller Foundation in New York. From 1968 to 1973 he also served as Director of the University of Virginia’s Centre for the Study of Science, Technology and Public Policy.

Chairman’s Introduction

Glyn England

This symposium might well be described as a ‘mini World Energy Conference’. As the Chairman of a large electricity undertaking I see the Institute as unique in that it does provide for an international forum between suppliers and users of a major energy source, and there is no exact or precise parallel for any of the other fuels. But the significance of many of the issues that are important to uranium producers and to users can best be appreciated against the background of world energy as a whole. I was therefore particularly happy to take the chair at a Session where we are meeting under the general heading of ‘World energy perspectives’.

Energy has now joined two other issues which are not unrelated, world population growth and food supplies, as a problem that requires a world view. It is no accident that whenever there are summit meetings about the world the item energy regularly appears on the agenda.

The papers in this session look forward, but perhaps I could say a little about past history, making the point that the developed countries of today were at one time dependent for their energy on wind, water power, animal power and wood. In the 17th century the UK had an energy crisis, a shortage of wood, which had quite dramatic effects on the whole country. Among other things it produced a succession of migrations of the iron smelting industry, first from those parts of the country where wood was running out to other areas where there was still wood, and then to the sources of coal. More generally at that time the availability of coal and its relative cheapness had a great impact on the structure of the industry and the way of life of the people of the UK.

I mention this in this opening session as a reminder that there is nothing particularly new about exhaustion of fuel resources, nothing particularly new about the process of adaptation and the development of new processes in response to changes in the fuel supply position. Perhaps the difference is much more closely interconnected than it previously was.

World energy outlook

Pierre Desprairies

Publisher Summary

This chapter discusses leading problems linked to energy that the world is now confronting and to propose some ideas concerning possible solutions. Oil deserves special attention among all energy sources. Since the beginning of 1981, it has merely been continuing and enhancing the downward movement in consumption and prices caused by excessive rises, especially for light crudes such as those from Africa, and the slowing down of worldwide economic growth. Densely-populated oil-producing countries need to produce to live, to pay for their food and their equipment. If the economic growth of the industrialized countries were to be 4%, even if investment in the rational use of energy were pushed to the limit and the development of nonpetroleum energy sources were also pursued actively, it would be extremely difficult to prevent a sharp rise in prices. It is evident that it is absolutely necessary to pursue actively the development of coal, natural gas, and nuclear power if a physical shortage of energy is not to block economic growth.

The aim of my paper is to discuss the leading problems linked to energy which the world is now confronting and to propose some ideas concerning possible solutions. This is a vast panorama and I am highly flattered by the confidence that the Uranium Institute has placed in my capacity to describe and resolve in such a short paper mankind’s anxieties with regard to energy, a subject of almost as great important as that of food resources.

It would be easy for me to reduce the problem to four sentences that would take only a paragraph: (1) yes, there is a real and lasting oil problem due to both the natural and deliberate limiting of world production capacities; (2) no, there is no problem of supplying mankind with energy, which exists in abundance; (3) the solution is perfectly simple and obvious: investment is necessary to make more rational use of energy and to decrease the demand for oil; (4) the problem will become all the more acute and take all the longer to solve if world economic growth is fast and investment efforts in energy are negligible.

I could leave things at that and, if I was convincing, I would have fulfilled my mission. But I feel that I should present some of the facts and figures on which I am basing these affirmations in order to persuade readers to accept them.

Oil reserves

Oil, to begin with, deserves special attention among all energy sources. It has been at the heart of world concerns for 8 years now; and will remain so for at least another 10 years, perhaps even 20. The reason for this concern is that, at least between now and 1990, there is a very good chance that the demand for oil will be greater than the supply.

For the time being, there is no lack of oil: there is even a surplus. Since March 1981, prices have dropped slightly, after having risen sharply since 1973. Expressed in constant money terms, a barrel of oil (with 7 barrels to the tonne) which was indexed at 100 in July 1973, rose in price to 250 in 1974, dropped back to 200 in 1978, and then rose again after 1979 to its present level of more than 400.

Prices rose sharply in 1973–74 and then again in 1979–80 because for several months the demand was greater than the supply. In 1973–74, the producing countries profited from this imbalance by raising prices. These had been maintained at a low level for a very long time, probably too long, by the oil companies which owned the oil wells and the outlets and could thus regulate the supply and demand as well as the price. I am not accusing the oil companies of any wrongdoing; the industrialized countries profited from it, and governments as well as the great majority of consumers approved this policy. Their only reproach was that the price was still too high.

The oil companies let themselves be taken unawares by the sudden spurt in the demand for oil as a result of the very fast economic growth between 1970 and 1973. The Arabian Gulf fields were no longer able to meet the demand. Extensive work had to be hastily undertaken to drill wells and enlarge terminals. In July 1973, tankers had to wait for 3 weeks at Ras Tanura before being loaded. The resumption of the Israeli-Egyptian war, the firm stand of the Shah of Iran and the Arab embargo did the rest. Everybody was surprised, if not by the event itself (which called for a rise of $12 in a single move from the previous price of $3), at least by its extraordinary scope. It was not the Americans who manipulated the price rise, as is sometimes still claimed, so as to obstruct their European and Japanese industrial rivals. In January 1979 the revolution in Iran reduced that country’s production and induced the entire world oil industry to build up stockpiles for fear of seeing the situation become worse. Lastly and above all, economic growth had resumed and with it the demand for oil. The first oil shock had been digested.

There is really nothing mysterious about this. The price of oil is and always will be a market price, set by international variations of supply and demand. This has always been true and is not likely to change in the future. Since the nationalization of the oil fields, the producing countries that now own them have the resources but no longer have the outlets that were held by the oil companies. They wish to break the links with the large international oil enterprises and sell to hundreds of brokers and buyers on a short- or very short-term basis. The market is no longer under control. Oil moves round the world at high speed on telex lines, day and night. As opposed to what is often supposed, OPEC is not a real cartel. It is a syndicate of sellers which, since the Caracas meeting of December 1979, has been incapable of agreeing oil prices. For the time being it is Saudi Arabia, which itself produces half the OPEC oil, which determines price levels. This country is now trying to bring these back to a reasonable figure. Moreover, it is not acting arbitrarily. Since the beginning of 1981 it has merely been continuing and enhancing the downward movement in consumption and prices caused by excessive rises, especially for light crudes such as those from Africa, and the slowing down of worldwide economic growth.

I apologise for plunging into the realities of the oil market, but the problem is effectively this unstable balance between supply and demand and the threat of a lack of co-ordination between demand and the available production capacity, rather than the depletion of the fossil supply of oil. This instability is likely to continue to be a problem until 1990: the reason for taking this date as a reference will become clear later. Oil consumption is currently 3 billion tonnes/year. There are about 100 billion tonnes of proven oil reserves in fields which are already equipped or which can be made ready to produce within 1 or 2 years. These available reserves represent 33 years of consumption at the present rate. Over and beyond this amount, there are about 200 billion tonnes waiting to be discovered. All world experts more or less agree on these figures. Therefore, there are 300 billion tonnes of conventional oil available for the future. By conventional oil, I mean that which is produced today at a cost of approximately $2 – 5/bbl. This is effectively 100 years of consumption at the 1980 rate (Figure 1). Is this a little? Is this a lot? The point can be debated. Let us say in any case that the house is not yet on fire.

Figure 1 Ultimate world oil resources

The problem therefore, as is sometimes said, is a problem of how fully the tap is turned on and not a problem of what is in the tank. The tank is still 6/7th full. Of the recoverable supply of 350 Gt which nature has placed at our disposal and which we began using about 1850, only 50 Gt have so far been consumed.

The tap is the annual production capacity. The output seems to be blocked at about 3 Gt/year for a combination of economic and political reasons.

Problems of annual discoveries

Figure 2 clearly shows the problem of the tap. The 3 Gt tank at the bottom of the figure represents present annual world consumption. It is supplied from the 100 Gt of proven reserves which are made up of the fields that have been discovered and are equipped with production wells and valves. The reservoir is in turn supplied from 200 Gt of potential reserves resulting from new discoveries and improvements in recovery from both existing and new deposits. Improvements in recovery should make it possible by 2000 or 2050 to raise extraction from reservoir rocks to 40 – 50% of in situ oil, instead of the 30% which is all that is extracted at present. This makes a total of 80 Gt. But progress in enhanced recovery is still very slow. In fact, enhanced recovery will serve more to prolong the life of fields rather than to increase their production capacity. Therefore, in the years to come, it will mainly be oil from discoveries, shown by the 120 Gt on the left of Figure 2, which will top up the buffer tank as annual consumption empties it.

Figure 2 Availability of conventional oil reserves outside socialist countries.

Figure 3, prepared by Exxon and updated yearly, shows the problem of the tap, and explains some of the facts which make the attitude of the oil-producing countries understandable.

Figure 3 Growth in world oil discoveries outside socialist countries (source: Exxon)

(a) For about 15 years (1965–80) annual discoveries have decreased until now they fail to replace the annual consumption of 3 Gt.

(b) Experts are of the opinion that this situation will probably continue and that the discoveries made each year will not be any greater than 1.5 – 2.5 Gt.

(c) This decrease is linked to the fact that in the last 15 years no fields of the very large ‘super giant’ type with capacities of more than 5 billion barrels have been discovered. No more ‘Middle Easts’ have been found in the world. Numerous discoveries continue to be made, but these are of medium and small fields with amounts which do not add much to the reserves each year.

(d) Present reserves, the ones from which the world takes its daily oil, are more than half (55%) made up of the ‘super giant’ fields, which number roughly 1 in every 1000: 32 fields out of 30000. Yet of these 32 super giant fields, 24 are situated in the Middle East, which appears more and more as an enormous unique geological anomaly. This takes into consideration the fortunate discoveries in Mexico, the North Sea and Alaska as well as hopes for China. None of these regions can pretend to compete with the discoveries made in the Middle East between 1930 and 1960.

This concentration of reserves was a great help in the formation of OPEC. The growing lack of major discoveries also explains the wish of the producing countries to take advantage of the fact that the annual oil production capacity is technically levelling off, so as to obtain the best possible price, and to make their irreplaceable fossil capital last as long as possible.

In reality, a great many experts are of the opinion that if petroleum exploration were pushed to the limit in the countries where the hopes of finding fields are the greatest, the annual world production could be increased by 30% by 1990-2000 to amount to between 4 and 4.5 Gt. But there is little probability that this production capacity will be created very quickly or that it will be available on the market.

Political obstacles to increased production

Densely-populated oil-producing countries need to produce to live, to pay for their food and their equipment. This is the case with Indonesia, Nigeria, Algeria and Venezuela. On the other hand, the countries in the Arabian peninsula (Saudi Arabia, Kuwait, the United Arab Emirates) and Libya, are sparsely populated and have little desire to exhaust their oil resources. Unfortunately it appears that of the bulk of oil reserves, 68% are situated in sparsely populated countries, 60% in the Arabian Peninsula. Saudi Arabia alone has 37% of these reserves (Figure 4).

Figure 4 Proved oil reserves of OPEC countries at 1 January, 1979

Even though the dollar is in a strong position with respect to other currencies, each year its value is whittled down by inflation. It takes no great sophistication to appreciate that, rather than amassing financial surpluses in dollars, it would be better to leave the oil in the ground.

Overproduction leads to the premature depletion of irreplaceable fossil capital. At the same time, the result is also a decrease in the price of crude oil and excessively fast industrialization, financed by the sale of oil. Much more than any struggle against tyranny, these were the reasons, exploited by the Muslim clergy and the right-wing opposition, which led to the overthrow of the Shah of Iran in 1979. The Shah was overthrown by opposition from the right and not from the left, and this precedent obviously makes the moderate governments of the countries in the southern part of the Arabian Gulf extremely prudent with regard to production rates.

For discoveries to be sufficient for a production capacity of 4 – 4.5 Gt/year, exploration expenditures would have to be geographically allocated in rough proportion to the probability of discovery. Yet 70% of these expenditures are currently concentrated in North America where the petroleum potential is nearly exhausted (Figure 5) and only 10 – 15% is spent in the developing countries which contain 80% of the likely discoveries (Figure 6). There are well known and highly valid reasons for this state of affairs, namely the risk of nationalization and non-execution of contracts once a discovery has been made, and the low remuneration that is too often offered to prospectors. All this keeps them away from countries in the Third World, and especially the OPEC countries, to the benefit of the USA. Furthermore, a great many countries refuse investment by private oil companies for reasons of principle. Others, and this is true of several countries in the Middle East, feel that they are already producing too much and do not wish to open up their territory to exploration. The result of this situation is a considerable and unfortunate waste of worldwide exploration investment, which has strongly influenced the levelling off in world production capacities (Figures 7 – 8).

Figure 5 Exploration wells drilled in non-Socialist world

Figure 6 Conventional oil reserves and resources

Figure 7 Cumulative exploration and development drilling to end-1975, by region

Figure 8 Barrels discovered per foot drilled, 1930–2000

Increase in oil demand

Although production is now stationary, the demand for oil has a good chance of increasing in the coming years. The current stagnation in demand and the pause in price rises must not lead us astray. They result from causes which are inherent in the present economic situation.

The slowing down of world economic growth, which is now between 1 and 2% per year instead of the 3 – 4% of a few years ago, decreases the demand for energy. Such a low growth rate is hard to tolerate for any length of time. In the less developed countries (LDC), the population is increasing by nearly 3% each year. An economic growth rate any lower than this figure thus causes a decrease in the standard of living which is often already below the subsistence threshold. In the industrialized countries, low growth causes unemployment which is socially and politically hard to accept. Vigorous efforts will thus quite probably be made to raise economic growth to a reasonable rate. A rate of 3% in the OECD countries and 4.5% in the LDCs can be taken as a plausible hypothesis.

The rate of economic growth will inevitably be associated with a growth in energy consumption: this link cannot be broken either quickly or without undertaking major investment. It is true that energy efficiency has improved since 1973: for the same amount of energy, about 11% more GNP was obtained in the OECD countries in 1980 and about 15% more in the USA. It is very tempting to assume that this improvement will continue so that, for example, by the year 2000 compared with 1973 this will rise to 20% or even 30%. This is not impossible, but it is difficult to affirm anything positive in a field which is still imperfectly understood. However, several reasons suggest that the favourable achievements made in recent years stem mainly from the elimination of waste that is easy to detect and from investments with a quick return, such as the adjustment of home and industrial heating equipment, seeing that windows fit properly etc. The current drop in demand appears, in the first place, to be a response to the fact that oil prices have increased 2½ times in 2 years. This effect is called price elasticity. The drop in demand seems to result only very partially from any structural elasticity which would stem from a transformation of equipment.

The equipment now used to consume energy has been designed to burn cheap oil and natural gas. Most of it has been only recently acquired and will not be voluntarily replaced for a long time. The depreciation time for a piece of heating equipment is 15 – 20 years, and that for a house 30 – 50 years, whereas for a car or truck it is 10 years. Similarly, on the supply side, any attempts to move to non-petroleum energy are limited by the fact that 6 – 12 years are required to open up a coal mine or to build a nuclear power plant. These are the reasons why no miracles can be expected before 1990: the decade is the time unit for energy.

Any economic upswing will therefore be accompanied by a more or less parallel demand for energy in the form of oil, and the present drop in the demand for oil is first of all the result of an economic slowdown and the sudden price rise which has yet to be fully