Abstracts of Talks

Australia's Oil Industry: Looking Back From The Future
By Nicholas Grollman, EEPOC Consulting
Presented at PESA ACT Branch Luncheon meeting, March 2nd 2001

Energy futures - the contradiction
In at least two addresses to environmentally-focussed audiences last year, the Chairman of the Board of the Ford Motor Company envisaged that the predominant automotive power source 25 years from now could be hydrogen, not gasoline or diesel.¹ In contrast, the latest projections by the International Energy Agency (IEA) show a global growth in oil consumption to 2020 – principally to satisfy transport requirements – that portends an increased dependence on Middle East OPEC producers and offers no prospect of reducing greenhouse gas emissions from fossil fuels in general.²

The contradiction presented by these different outlooks arises not from different technical understandings or political motives but from looking at the issue from opposite ends. As Nicholas Grollman explained to a PESA ACT audience in March, projecting forward from the unsustainable present cannot produce a vision of a sustainable future. On the other hand, working backwards from a vision of a sustainable world (which is the only world worth contemplating) does offer solutions – in fact, it's the only procedure that enables us to work with, rather than against, the historical and natural processes that ultimately shape both the habitable portion of the planet and the society which lives in it.

Projections versus predictions
Grollman, an exploration geologist with a particular interest in the oil industry's role in sustainable development, grounded this assertion in the educational methodology, or 'pedagogy', of The Natural Step Environ-mental Institute (TNS). This provides a whole-systems framework for sustainability that is disarmingly simple in its conception but at the same time scientifically rigorous and comprehensive. He pointed out that the Institute's success with its 'pathfinder' organisations in Europe and the USA stems from enabling corporations to design their own strategy for working within this framework. Fundamental to this is the understanding that projections of current economic trends over the next couple of decades – such as those of the IEA – are not predictions but merely play out a set of assumptions. Moreover, 20 years is too short a time-span for major differences in potential long-term outcomes to emerge, a point demonstrated to the Canberra audience by graphs showing the similarity of the IEA reference scenario to early phases of longer term scenarios by such organisations as the World Energy Council and Shell, even though the scenarios differed markedly later in the 21st century.

The IEA is quite explicit in stating that its reference scenario does not reflect future energy and environmental policies. Indeed, the assump-tions behind it – a global economic growth rate averaging 3% per annum and a continuing 'close relationship' between energy demand and economic activity – virtually ensure unsus-tainable outcomes unless 'economic activity' becomes substantially dematerialised and the energy to drive it increa-singly renewable and non-polluting. As is stands, however, the scenario from 1997 to 2020 shows:

• Energy demand rising by 57%
• Oil demand rising by 53%
• CO2 emissions from energy use rising by 60%
• Fossil fuel share of the total energy mix rising from 87 to 90%
• OECD oil import dependence rising from 54 to 70 %

The IEA further qualifies its projections by acknowledging its uncertainty over:

• Macroeconomic conditions
• Fossil fuel supplies and costs
• Energy technology

Yet these are the very 'megatrends' that control the world's energy future, not least among which is the physical limit, both locally and globally, to the rate at which low-cost oil can continue to be produced. How useful, then, are the IEA's projections?

Generally, such uncertainties are handled by modelling alternative scenarios reflecting a leaning toward either technological solutions, environmental imperatives or political exigencies, as if these were mutually exclusive and a matter of choice. These alternatives are commonly presented as variants of the unsustainable reference scenario. But as there is so little that we can be sure of when we lock our thinking into the unsustainable present, why not use the sustainable future as the reference framework and work toward that?

Definitions
The process of envisioning this future, noted Grollman, is often the first stumbling block, with definitions of sustainability commonly appearing too complex, too value laden or too broad. The way forward is to acknowledge the complexity of the issue but to encompass this complexity within a broad set of principles. Thus, sustainability should not be equated narrowly to ISO 14000³, or to greenhouse policy, or to eco-efficiency, recycling and resource conservation, although all have a role to play. Nor is it a question of 'balance' as habitats, species and natural interrelationships once lost cannot be wholly restored or replaced. Sustainability is most easily expressed by describing what a sustainable society would be like. This is encapsulated in the four system conditions outlined in Table 1, which completely define the problem. Translating these four conditions into terms relevant to a particular industry is a straightforward but stimulating and creative process, explained Grollman, which invariably produces a vision of the future that would not have emerged without the frame of reference provided by the system conditions. Working back, or 'backcasting', from this vision then provides the direction for the development of a sustainable industry.

A Sustainable Oil Industry
The workings of the backcasting process could only be touched on during a luncheon address, but Grollman did provide some indication of what might emerge from a backcasting exercise involving Australian oil industry participants. Initially, the objective of the industry would be analysed. This has remained basically the same throughout the 20th century, and might be expressed as the commercial provision of petroleum-based fuels and materials with profitability largely dependent on volume of throughput. Alternatively, however, it might be expressed as the provision of the services which oil and gas currently provide (directly or indirectly), including:
energy services: transport, heating, cooking, cooling, lighting, processing etc.
materials services: manufactures, building and infrastructure, packaging etc.

With Canberra 'stakeholders' in mind, Grollman explained that different agencies and institutes would find themselves guided by a backcasting process keyed into the newly defined objective and the four system conditions onto converging pathways aimed collectively at sustainable long-term energy outcomes. While not wishing to 'predict' the outcome of the procedure, he speculated that for AGSO this could point to a continuation of current assessment programs for oil and gas resources to 'bridge' the transition to renewables; for DFAT (Department of Foreign Affairs and Trade), an assessment of alternatives to dependence on imported oil and fulfilment of gas export potential to reduce coal use in the region; for the AGO (Australian Greenhouse Office), an impetus to look forward to the point at which net greenhouse gas emissions are, essentially, zero, rather than back to 1990 as its reference year; for APPEA, a recognition that the oil company of the future might be modelled along the lines of service-oriented multi-utility alliances whose profitability comes from adding value to their products rather than from volume of energy sales; and for DISR (Department of Industry, Science and Resources), an incentive to revive the National Sustainable Energy Policy (dormant since 1998) in a form which integrates the Action Agendas that currently separate areas of energy policy.

For information on The Natural Step and its educational programs in sustainability management, go to the website www. ozemail.com.au/~natstep or contact Nicholas Grollman at eepoc@ozemail.com.au.

After more than 20 years in petroleum exploration, Nicholas Grollman has in recent years focused on the relationships between the energy resource industry and the world we live in. He was awarded his M.Env. Sc. in 1995 and PhD in 2001, both from Monash University, for research into aspects of sustainable energy policy development. Still a practising geologist, he also seeks to assist energy and resource companies to think, plan and operate within a framework that will lead toward agreed and definable long-term sustainability goals. He has established EEPOC Consulting for this purpose. Nicholas is accredited as a consultant by The Natural Step Environmental Institute Australia.

¹Coalition for Environmentally Responsible Economies (CERES), San Francisco, April 14, 2000; 5th Annual Greenpeace Business Conference, London. Accessible through www.ford.com.
² For Executive Summary see http://www.iea.org/ new/releases/2000/weo.htm. See also 'Continuing growth for world energy consumption', Australian Energy News, December 2000, 21-23; 'Robert Priddle talking straight', Australian Energy News, March 2001, 9-10.
³ The voluntary series of standards addressing environmental management programs.