Gulf and European Energy Supply Security - Feem-project.net

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Energy Security: Potential for EU-GCC Cooperation Figure 2: Major World oil supply Disruptions Source: International Energy Agency (IEA) of Hurricane Katrina and Rita in 2005 (certainly not a geopolitical event), and separates the Venezuelan strike from the onset of the war in Iraq. In IEA’s list we find again six international conflicts, three domestic conflicts and one event which is not geopolitical in nature but rather an Act of God (the hurricanes). Our analysis will cover these events and more in some detail, critically examining their impact and probability of repetition. 1. Geopolitical threats to oil security It is generally understood and accepted that geopolitical factors may negatively impact oil supplies. However, moving from this broad statement to a more precise definition and evaluation of the threat, which might offer a satisfactory basis for 2 discussion of potential remedies and cost-benefit analysis of adopting the same, is a much bigger challenge. We shall distinguish between resource nationalism as an ideology, which is widely believed to negatively affect oil exports, and political instability as a phenomenon that may lead to the same outcome. 1.1 Key Concepts and Definitions In real life, the exact boundaries between resource nationalism, political instability, and conflict are sometimes blurred. We shall include under resource nationalism all policies undertaken by the national governments of the producing country which restrict access to resources to a subset of potential players,
or create separation between the domestic and international market, or directly impose quantitative limitations on production and exports. These policies may result in lower exports either indirectly or directly. Political instability will encompass changes in policies that are the result of changes in the structure of power, i.e. in the government in place. The concept of political instability deserves separate treatment because it aims at measuring the stability of policies in the presence of changes in government. Political instability may be the outcome of constitutional processes – as it is normal in democracies – or extra-constitutional transitions, which we may group in the two main typologies of “coup d’état” and “revolution.” The case of failed states, when central government authority collapses entirely and is substituted for by generalized armed violence, may be viewed as an extreme manifestation of political instability. 1.1.1 Resource nationalism The definition of resource nationalism, as given above, encompasses a wide variety of policies. Access to resources may be forbidden absolutely, on environmental or strategic grounds (an example is US restrictions on offshore drilling); or limited, delayed or otherwise hindered by the opposition of the local population or authorities, on environmental or “fair share” grounds (an example of both issues being tar sands in Canada). More frequently, access is restricted to specific categories of players. The latter are normally national oil companies, whether government or privately owned. In most producing countries, the national oil company enjoys privileged access, either through the total exclusion of foreign companies (e.g. Mexico, Kuwait) or by forcing the latter to enter into joint ventures with the national oil company, and in some cases mandating that the national oil companies own 50 percent or more of the equity. However, there are countries in which all national oil companies, including private companies, enjoy privileged access (this is the case of the Russian Federation, for example). Threats to Oil Supply Security Secondly, access to resources may not be restricted to specific categories of players, but the development or pace of exploitation of resources may be constrained in order to conform to OPEC quota discipline or support OPEC action to manage the market – in the case of those countries that are not members of OPEC; or with a view to extending the productive life of the fields. Limits on production may be imposed on foreign companies even in cases where they enjoy equity access to oil resources, as contracts or regulations frequently impose on the operator the obligation of submitting a production plan and obtaining the approval of the relevant authorities. Thirdly, restrictions may be imposed on exports, to benefit domestic consumers and industrial users. These restrictions may take the form of export taxes; limitations of physical access to export facilities (pipelines to reach terminals, access to loading terminals); preference for domestic refineries which, in turn, may be mandated to serve the domestic market at prices set below their international level; or simply, in the case of gas, refusal to invest in export infrastructure and projects. In other words, restrictions to exports may be the outcome of either actions or the failure to act. All the above-listed policies allow for considerable variation and flexibility in implementation. Resource nationalism, therefore, is a phenomenon that should be viewed as having ups and downs, and involves adapting to circumstances. Historically, access of international oil companies to resources has faced progressively more stringent restrictions. IOCs used to enjoy predominant access and control before 1970 but lost their position in the following decade. Changes since 1980 have not been as impressive as in the crucial decade of the 1970s. In the 1990s and early 2000s it had been predicted by some that the pendulum would swing back, and international companies would be able to acquire much more direct control over reserves. This was linked to the expectation that Russia would open up and become fully accessible, and the toppling of the Saddam regime in Iraq would be instrumental in again opening the doors to that country. In fact,
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that Russia and China have started
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(Parliament) which favors the use o
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of unconventional gas, has already
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Geopolitical Issues of Europe’s F
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• • • • • • • • •
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SESSION V: Renewable Sources in EU-
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• technologies, overall technical
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Figure 2: Overview of Opportunities
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onshore (378 TWh/yr), large-scale h
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world. Hence, renewable energy supp
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case. Figure 8 shows the developmen
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Overview of RES Characteristics and
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keep the RES surcharges for the ene
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in the electricity sector, particul
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References • • • • • •
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