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The challenge – secure, sustainable and affordable energy

Maintaining a steady supply of affordable energy in years to come is one of the biggest global challenges. Energy is indispensable for economic growth and prosperity.

Oil and gas are an integral part of our everyday lives, and that is not about to change. The major technological breakthroughs of the 19th and 20th centuries, the emergence of the automotive and aviation industries, and innovations in the chemical industry drove the rapid expansion in demand for fossil fuels and petrochemicals. The birth of the “petroleum age” in turn prompted technological advances, and made conventional energy sources the foundation of economic growth and prosperity. Coal dominated the European energy market up to the middle of the 20th century, but was overtaken by oil in the 1960s and accounted for almost half of global energy consumption by the time of the second oil price shock in 1979. Today, oil and natural gas make up around 56 percent of world energy demand, as well as approximately 56 percent of Austria’s energy needs. 

Sources: BP Statistical Review of World Energy 2015; Statistics Austria

 

Surging energy demand

The explosion in the global population and the emergence of newly industrialising countries have combined to push up energy consumption. Global demand has more than doubled since 1970, and Austria also uses much more energy than it did 40 years ago. Oil’s share of the energy mix in Austria has fallen from around 50 percent in 1970 to 36 percent today, while natural gas has made major inroads over the same  period and now accounts for 19 percent of total energy consumption compared with only ten percent in 1970. Global gas demand is set to rise sharply in the next few decades. 

Forecasts suggest that global energy consumption will rise by 40 percent by 2040. Over the same period, structural economic shifts will lead to wholesale changes in the global distribution of energy demand.

The highest growth is expected in emerging markets in Asia, Africa, the Middle and Latin America, while in  Europe, Japan, Korea and North America demand will stagnate, partly as a result of increased energy efficiency. By 2040, energy supplies will come from four different types of sources, in roughly equal proportion: oil, gas, coal and low-carbon sources. 

Sources: BP Statistical Review of World Energy 2015; IEA World Energy Outlook 2014; Statistics Austria

Natural gas – the energy source of the future

Natural gas is by far the most environmentally friendly fossil fuel. Its suitability for a wide range of household, commercial and industrial uses and its role in electricity generation are major reasons for its growing importance. It is also extremely energy efficient, and can  be transported underground along existing pipeline networks. Most important of all, gas stands out for its storability. Gas provides round-the-clock security of supply, which is especially important for large industrial companies and small and medium-sized enterprises. Natural gas has the fastest-growing share of fossil fuel consumption worldwide, since it is increasingly seen as an environmentally friendly alternative for electricity production and other applications. Moreover, increasing flexibility in natural gas trading worldwide is  supporting greater security of supply. Rapidly rising demand in China and the Middle East will be accompanied by the growing share of gas in the energy mix in OECD countries, so that natural gas will become the leading fossil fuel by 2030.

Gas is also an ideal and essential back-up for renewables due to its ability to compensate for swings in electricity supply and demand. Revolutionary power to gas technology holds the key to affordable solar and wind energy transportation and storage, and thus to the constant availability of these energy sources. But power generation is only half the story. It will soon be impossible to imagine heating without combined heat and power (CHP) plants, or personal transport without natural gas vehicles. With a range of applications that now rivals oil, natural gas fully deserves its reputation as the energy source of the future. The world’s biggest gas producers are the USA, Russia, Qatar, Iran and Canada.

Source: IEA World Energy Outlook 2014

The challenge facing oil

Demand for oil will also continue to rise, especially in the emerging markets. Oil consumption in OECD countries peaked in 2005 and will retreat to 1986 levels by 2035. But there is no substitute for oil in large parts of the economy, above all as an essential base material for the chemical industry. It is a key ingredient in over 90 percent of all chemical products, including plastics, detergents, cosmetics and fertilisers. 

The current weakness in the oil markets presents major challenges for the entire sector, and could last for several years. Between August 2014 and January 2015, the oil price sank by half, dropping to under 50 US dollars a barrel. This means efficiency is paramount in order to make sure that oil production remains economic when the price for oil is low. For many years, RAG has been a global industry leader in efficient production methods that help to conserve resources. These methods have allowed us to extract oil economically from the Zistersdorf field in Lower Austria for 78 years. 

A bright future

Oil and natural gas form the backbone of energy supply around the world. There is still plenty of oil and gas in the ground, and indeed global reserves have  never been higher. Modern technology and an improved understanding of reservoir characteristics mean that it is now possible to tap reserves that were previously considered commercially unrecoverable. In 1960 it was assumed that global oil reserves amounted to 30 billion tonnes and would run out in 38 years, but today the planet’s 239 billion tonnes of proven reserves are  expected to last for 53 years, despite the steep rise in consumption that has taken place in the meantime. 

Source: BP Statistical Review of World Energy 2015

Valuable energy on our doorstep

Austria’s oil and gas reserves play an important part in security of supply. About ten percent of the oil and  16 percent of the gas required by Austria is produced domestically – a major boon for the national economy. Large investments in oil and gas exploration, production and storage also have a major economic impact. In the past few years RAG has pumped more than EUR 1 billion into the Austrian economy by building production systems and storage facilities. The latter are RAG’s response to one of the biggest challenges facing the energy sector, namely optimising storability. Relative to consumption, the country already has the largest gas storage capacity in Europe. 

Source: Statistics Austria

EU energy strategy

The European Union sees energy as one of the biggest challenges facing the continent. The European energy system needs to be sustainable and affordable, and to safeguard security of supply. The prime objectives of these policies are reducing greenhouse gas emissions, improving energy efficiency and raising the share of renewables in the energy mix. Climate-friendly natural gas has a vital role to play in meeting these objectives.


“Conserving resources, boosting efficiency, enhancing storability, reducing our dependency on imports and expanding production capacity are key goals for Europe’s energy sector – and we must work hard to achieve them.”
Markus Mitteregger, Chief Executive Officer, RAG