Emerging Markets Focus
The New Emerging Energy Future:
Towards Cleaner, Safer and Smarter Energy Written by Mehmet Öğütçü, Chairman, The Bosphorus Summit
“When a Brazilian brews her morning coffee today, she is likely to use electricity from a power plant in Uruguay that runs on natural gas from Argentina provided by a Chilean company. She drives to work in a Ford fuelled with Venezuelan gasoline, and her Canadian-owned factory may soon be powered by a 3,000 km natural gas pipeline from Bolivia.”
Tectonic changes are occurring not only in the world financial system, trading and investment, geopolitics, and technology. A fundamental transformation is also underway in the global energy system. Myriad trends indicate that the current system is far from being sustainable. It wi l l be shaped by rising demand over the long term, dominance of fossi l fuels, inaccessible supplies, price volati lity, inadequate investment, geopolitical tensions, resource nationalism, and climate change. The most pressing decision facing the next generation may be how best to accelerate the transi tion from a fossi l -fuel -based energy system to a system based on climate- friendly energy alternatives. No one country can alone address this mammoth chal lenge. The US, the EU and BRICs must al l embrace this transition—or we al l suffer the consequences.
As globalization lifts millions out of poverty, the demand for energy worldwide will continue to grow, and we risk ending up with a volatile, “beggar thy neighbor” style of competition between countries to control sources of supply, especially in the developing world. Mankind has had access to electricity for only 130 years. In just over a century, we have extended transmission lines, providing refrigeration and lighting to 5 billion people around the world. NASA's "Earth at Night" map highlights this world of prosperity, yet 24 percent of humanity still lives in the dark.
We are forced to embark on a journey to create a new energy system. However, describing this cleaner energy system is a lot easier than creating it. The transition will take time. History shows that once a new energy technology is proven, it takes about 30 years for it to achieve 1 per cent of the overall market. There is no easy solution, no technological fix and no single answer. Weaning ourselves off fossil fuels will require a combination of greater efficiency, changes in habits and lifestyle, and deploying major renewable energy projects that some people will not like.
Changing Dynamics InWorld Energy
By dint of their sheer size and population -- and their collective decision to embrace their own particular brand of capitalism -- BRICs are the economic future of the world. They today already account for a combined GDP of $15.435 trillion on a purchasing power basis. These rising economic dynamos will have to compete with the mature economic powers for access to remaining untapped reserves of exportable energy - in many cases, bought up long ago by the private energy firms of the mature powers like Exxon Mobil, Chevron, BP, Total of France and Royal Dutch Shell.
Of necessity, the new contenders have developed a potent strategy for competing with the Western "majors": they have created state-owned companies of their own and fashioned strategic alliances with the national oil companies that now control oil and gas reserves in many of the major energy-producing nations. The changing nature of the international petroleum market thus requires new rebalanced mechanisms, and new forms of partnerships among players. The profound changes in world energy, still underway, could be summed up as follows:
First, the increased international petroleum prices have, together with many other factors, shifted power significantly to oil producing countries, especially a few large ones, where the majority of remaining reserves are located, such as the Gulf, Russia, and Central Asia. This power, coupled with the huge financial assets accumulated by those producers in a high price environment, has fuelled the international ambitions of these countries to seek changing or reshaping the traditional rules of the game for the benefit of their national interests.
Aware of their increasing power, many of the resource-rich countries have either re-nationalised their oil industries or established strategic control through further transfer of power into the hands of governments.
Second, there is an increasing concern of security of energy supply at the consumer’s side. Due to increased demand and depletion of domestic reserves, major oil consumers will have to rely more on imported oil and gas, from a few politically- instable regions such as the Middle East, Africa, Russia and Central Asia, through long-distance pipelines and vulnerable sea routes. This, combined with the fact that international oil market, is less stable and more prone to the disruption of natural disaster, terrorist attack and isolated geopolitical acts increased the vulnerability of these consumer countries.
Third, the capacity of the global energy industry to satisfy demand is shrinking. By all accounts, the global supply of oil will expand for perhaps another half decade before reaching a peak and beginning to decline, while supplies of natural gas, coal and uranium will probably grow for another decade or two before peaking.
Yet, there are still huge unexpored areas in the world. For example, the Arctic is estimated to hold reserves of 51bn tons of oil and 87 trillion cu m of gas, of which 9 bn tons of oil and 10 trillion cu m of gas fall in Russia's territory. Energy investment worldwide has plunged over the past few years in the face of a tougher financing environment, weakening final demand for
Drillers and Dealers :::
::: February 2011 Edition
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