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Part 3: Energy Security
Last month, I posted the second of a few articles that will consider the responsible integration of renewable and nuclear generation to foster economic, social, and environmental improvements for developing countries in the mid to long term. The first article focused on economic expansion and the second article discussed possible socio-economic impacts. In this third article, the discussion will shift towards energy security, which continues to have major global ramifications as it has for hundreds of years.
The concept of energy security has different meanings to different groups and people. Bearing that in mind, it can be challenging to make meaningful comparisons and conclusions when circumstances can vary so widely from place-to-place and region-to-region. By using data from the World Energy Council, the goal will be to consider energy security from three key perspectives that can likely impact decision-making at the national and regional level.
Part 2: Social Impacts and Implications
Last month, I posted the first of a few articles that will consider the responsible integration of renewable and nuclear generation to foster economic, social, and security improvements. The first article can be found here. In this second article, I wanted to shift towards the positive social implications from expanding generation assets in a responsible manner to support not just the aforementioned economic development but also long-term social benefits.
For developing countries (especially in Africa and Asia), central planning organizations have the perfect opportunity to develop long-range plans for key infrastructure expansion (notably in the energy sector) while simultaneously improving the quality of life for their citizens. Creating an effective long-term and fiscally responsible diversified energy plan using wind, solar, hydro, and nuclear power can help improve their social and education systems and support their development needs with the latest technology advances driving modern life in the 21st century.
Renewable and nuclear energy – the two largest sources of non-emitting technologies – do not need to be mutually exclusive if forward-thinking countries and companies can develop suitable complementary advanced energy management techniques. New hybrid energy solutions could play to the strengths of the respective technologies while acknowledging the shifting dynamics of electricity markets that are adjusting to the realities of an increase in intermittent generation models. And with developing countries frequently having more flexibility to design their grid structures (in comparison to pre-existing limitations in many first-world countries), the opportunities may exist to demonstrate these advances in emerging economies.
In March 2020, for geopolitical reasons, Russia refused to go on with Saudi Arabia to adjust, along the rule of what is known as the OPEC+ deal, their oil extractions to world demand. It was normal, because there were alerting signs that oil demand might drop due to the coronavirus in China. Moscow refused Ryad’s request to adhere to the production cutbacks in order to support the price. Saudi Arabia, stung to the core, reacted in the opposite way and declared its intention to increase its crude production to more than 10 million barrels per day in April, once the OPEC+ deal will expire at the end of March. In addition, it has announced reducing the price by $6 to $8 a barrel for all its crude to all destinations. The consequence was not long in coming: the price of crude fell to around $32 a barrel. Oil futures suffered their biggest daily loss since 1991 during the Gulf War.
This geopolitical skirmish happens at the wrong moment. The Coronavirus epidemic was killing much more in Europe and USA than in China (officially!). Drastic measures taken everywhere to try to limit the pandemic had radical consequences on economy. In the face of the sharp drop in economic activity, demand for oil is in freefall. It is self-evident: airplanes that don't fly, cars that stay in the garage, deserted restaurants, closed cinema and stadiums, cancelled vacations cause the consumption of petroleum products to plummet. When disruptions occur in a huge market, speculators are quick to try to take advantage of the instability.
Since late March 2020, many African Governments have announced COVID-19 crisis national response plans, including a number of social relief measures. Thirteen African governments provided free electricity for poor households and electricity consumers in the social category to help them during the crisis. This paper presents a brief overview of this specific measure in those countries, tackles related issues and challenges, and benchmarks similar social interventions elsewhere in the world.
The start of the geopolitical year 2020 is worrying, and not only because of events in Iran and Iraq. The growing importance of Turkey’s role in the Near and Middle East should not leave one indifferent; the country’s plans in the Levant Sea are notable due to this maritime region’s rich natural gas resources which already play a major role in the geopolitics of energy.
On 31st December 2019, gas from the Leviathan field off the coast of Israel began production. It will ramp up in the coming months and thus exceed the production of the other deposit – Tamar – which has produced since 2014. Israel, which was surrounded by oil-producing countries, suddenly saw its energy policy turned upside down; its coal-fired power plants will be replaced by gas-fired plants.
The War on Iraq in 2003
Almost seventeen years ago, a group of neoconservative hawks among them John Bolton, President Trump’s current national security adviser, persuaded President George W. Bush to mount a quick invasion of Iraq because, they alleged, it had “weapons of mass destruction.” That decision, based on dubious intelligence and taken against the advice of many of America’s closest allies, triggered a huge refugee crisis, destabilized the entire Middle East and cost the global economy an estimated $12.584 trillion of which the US economy’s share was $6.52 trillion according to a research paper titled: ”The Oil ’Price Rise’ Factor in the Iraq War: A Macroeconomic Assessment” I wrote and was published by the United States Association for Energy Economics (USAEE) on the 4th of June 2008. Moreover, nearly 5,000 Americans lost their lives in Iraq with hundreds of thousands more injured and receiving lifetime disability compensation.
The shift from the pure commodities to the Value-added services (VAS) in the Smart Cities.
All industry players are migrating to innovative services; Power and Gas providers to the energy monitoring, Telcos to the smart home services, device producers to the smart devices. These sectors (VAS) are more and more overlapped. Let's consider the offered range of VASs of an Energy provider, a Telco or a device producer...they are mostly the same.
After years of confrontation Brussels decided to permit Gazprom to use almost 90% of the OPAL gas pipeline, located in Eastern Germany. Almost simultaneously there were information leaks about a deal between the two players on the competition case. Apparently, both sides found a way to settle the row in a satisfactory way.
Recent intense bellicose rhetoric and sabre-rattling between India and Pakistan has raised the stakes in the completion of the much-heralded Turkmenistan-Afghanistan-Pakistan-India (TAPI) natural gas pipeline project. An unnamed official of the Indian government dismissed suspicions that the US$9-billion project could be either postponed or shelved indefinitely due to flaring animosity.
The current round of open and covert hostilities was provoked by a terrorist attack on an army camp at Uri on September 18 and another one at 46 Rashtriya Rifles camp in Baramulla on October 2. The attack in Uri located in India-administered Kashmir was carried out by a radical grouping called Jaish-e-Mohammed (JeM) that is allegedly linked to Pakistani intelligence services and reportedly responsible for a similar attack on a military base in the town of Pathankot in the Indian state of Punjab in January this year.
What are the most likely repercussions for South East Europe’s energy security after the somewhat ambiguous reconciliation between Ankara and Moscow has re-activated the Turkish Stream pipeline project? Will it challenge the EU energy directives? Will it drive another wedge into the alliance of nations loyal to the concept of an ‘energy union’ and undermine solidarity? Does it really matter or it is not worth consideration? Is it a challenge or an opportunity?
For the moment, the implementation of the project stepping into the shoes of the defunct South Stream is far from being ascertained. Yet, pre-emptive review is appropriate. Should the Black Sea offshore infrastructure materialize, even in its current scaled-down design, it might impact the breakdown of energy imports of the south East corner of Europe having negatively affected the prospects of Azeri pipeline gas deliveries as well as Qatari and US-shipped LNG.
All along most of the 2016 U.S. election trail the issues of energy policy have been conspicuously omitted by the frontrunners, instigating certain uneasiness among the industry actors, investors, trading intermediaries, stockbrokers, insurance agents and shippers. At last, the silence has been broken, partially.
Energy topped the agenda of a public rally and discourse in Bismark, North Dakota, bringing some relief to the interested parties noted for their divergent views on tapping the offshore oil deposits, widening the application of the fracking technologies, and above all, earmarking shale gas either for exports or for the domestic market.
The aspirations of Bulgaria to become a major regional energy hub have acquired some solid ground. By the end of April, nine companies have submitted non-binding expressions of interest (EoI) to book capacity in the Greece-Bulgaria gas interconnector (ICGB), which is in tune with the European Union’s energy policies. The list of companies features UK Noble Energy, Italy’s Edison, Azerbaijan’s Socar, Greece’s Depa and Gastrade, Bulgaria’s Bulgargaz, etc. The timeline stipulates submission of binding offers by mid-2016.
Bulgarian Prime Minister Boiko Borysov has long mounted a campaign, reaching out to Brussels as well, in favour of ensuring energy security in the mid-term (see. “Bulgaria's energy agenda. The virtue of flexibility”, http://www.eiranews.com/volume-3-issue-6/bulgarias-energy-agenda-the-virtue-of-flexibility/) by using every chance of bringing on board various suppliers, constructing a network of interconnectors linking up with Greece, Romania and Serbia, and earning revenues from tariffs to be paid by Austrian OMV for the use of Bulgarian pipeline network to channel gas produced at the Neptun concessionary block in the Black Sea.
US shale gas: the first of five revolutions at the beginning of the XXI century
Three revolutions on the supply side: US shale gas, US shale oil and worldwide renewable
The US shale gas revolution is only the first (and most documented) of three revolutions that happened since the beginning of this century on the supply side. The world has changed thanks to the US shale revolutions (gas first and then oil) and a global quest for renewable. Those revolutions took over a decade but will shape the XXI century. Australia followed producing unconventional gas and is now also exporting it. It should take some time for unconventional oil and gas production to materialize in other places where the resource is available (Argentina, Canada, China, Mexico, Russia, South Africa, etc.) but the US shale revolutions should be exported in a few other countries.
Western nations, supported by the UN, are keen to restore a kind of statehood in Libya, which disintegrated after the killing of the dictator, Col. Muammar Gaddafi who died from bullet wounds in 2011. So far, attempts to bring back law, order and some form of stable governance are basically unsuccessful.
Instead of 2 rival Governments, one in Tripoli (West), one in Tobruk (East), and a multitude of local chiefs and their militias, now there are 3 Governments. The Number Three is an UN sponsored body, put together for the purpose of uniting the country. But it still stuck in Tunisia while efforts to bring it to the capital city, Tripoli, have failed. This body has neither the supports of the two rival Parliaments, nor any significant military power to impose itself by force. Contrary to its task of stabilizing and clarifying the internal political situation, the new executive body has only contributed to more confusion.
The contentious deal on the migrant flow struck between the EU leadership (despite deep divisions) and Turkey seems to be rooted in the Roman principle “do ut des” (“I give that you might give”). On the surface, it looks like a sound compromise in the absence of any other unequivocal and convincing alternatives.
However, the deal has already drawn plenty of critical “slings and arrows". Nations of South East Europe, adversely affected by the in-flow of unexpected guests in the first place, remain skeptical.
Recent efforts to put a cap on oil production in an attempt to balance the market, has not affected the pricing trend. Energy ministers from Saudi Arabia and Russia, the two major oil producers, accompanied by colleagues from Qatar and Venezuela failed to reach an agreement to cut production, compromising only on introducing a limit, fixing the output at mid- January level. With this diminishment of the original intentions, the agreement had no immediate impact on prices: curves stayed almost unchanged. The market, psychologically eager for a price adjustment, was disappointed by the modesty of the bargain.
All eyes were on Iran, which enjoyed being sanctions-free and was looking to increase his oil production and sales, seeking cash-flow, investments, and modernization. Iran did not promise to limit its production to the agreed level, but said to support the move.
In mid-January, Greece paved the way for an accelerated economic and trade engagement of the basically de-sanctioned Iran by purchasing the first batch of barrels of Iranian oil.
The reinstatement of Iran as a bona fide partner was later impressively manifested by the European tour to Italy and France by its President Hassan Rouhani, who netted quite remarkable benefits thus providing an unequivocal answer to the question used as a title for his study by expert Euler Hermes “Iran: Back in the game?” Indeed, this is a comeback for the 80-million nation, heir of the Persian Empire, and the would-be new regional leader.
The front-page maker, deputy crown prince, Mohammad bin Salman, the favorite son of Saudi King Salman, made waves at the beginning of the year by suggesting that Aramco, the state-owned energy monopoly, was nearing its first ever IPO. Most of the comments, unsurprisingly, circled as vultures over the assumptions of what it might be worth.
Since ExxonMobil, boasting of the possession of 25bn barrels of oil, is estimated to be worth around $320bn, Aramco with its immense hydrocarbon reserves of 261bn barrels could weight some $3400bn.
An expert with Bloomberg called the most likely capitalization of Aramco something ”out of this world”. While another shrewd market watcher claimed the final fix of the price tag for the Saudi’s giant would make Apple look like a ”small family owned business.”
One year after the enthronization of King Salman, Saudi Arabia has enhanced its role as a center stage player not only on the global oil market but also throughout the Middle East. The modulations of Saudi’s regional foreign policy are monitored and scrutinized with more zeal and apprehension than the behavior of other main players, including the US, Russia, Iran, Israel, and even the increasingly unpredictable Turkey.
That is due to a number of overlapping factors, not fully positive for Riyadh. Saudi Arabia kick started a chain of crucial events in Libya, Yemen, Syria, etc. which did not evolve in the desired direction.