Gas and oil galore

| October 26, 2011 | 0 Comments

“Control energy and you control the nations.” This thesis, as advocated by Henry Kissinger, might not be the most original theory that advances our understanding of politics, particularly in the arena of international relations. Determinism of this sort unduly diminishes the role of other, non-materialistic factors in the fortunes of nations, for if it were true, we would not think of South Sudan as an afflicted country. But as historian Paul Kennedy and others have reminded us, energy has always played a pivotal, even primary, role in the rise and fall of great powers. Indeed, if historians were geologists, they might be inclined to vigorously stratify the various eras of human history and their respective events according to their dominant source of energy. Noted political strategist Kevin Phillips did as much in his book American Theocracy: The Perils of Radical Religion, Oil, and Borrowed Money in the 21st Century (2006) where he writes that “the world’s age of oil has also been its era of American supremacy” — and argues that both might have already peaked.
Perhaps. Setting aside the most perilous pronouncements about the long-term state of global petroleum supplies, however, no one can deny that a growing segment of the international community has developed a more than critical attitude towards oil, thanks to its complicity in global climate change, terrorism and financial turmoil. But if citizens — particularly western ones — feel increasingly uncomfortable about greasing the skids of Middle Eastern despots in contributing to a planetary meltdown, they seem to accept their contributing role by being more than ambivalent about the alternatives.
Consider Germany. While other nations are doubling-down on nuclear power despite the events of Fukushima, Germany has decided to phase out its nuclear reactors by 2022. Held up against the unfolding process of climate change, this turn of events has stoked fears around kitchen and corporate boardroom tables that electricity will become too expensive and unreliable.
But Germany’s decision to phase out nuclear power could also boost its position as one of the most important manufacturers and exporters of technology, designed to collect and carry alternative forms of energy, such as wind, solar and geo-thermal power. Getting out of nuclear power, therefore, could be the best or worst thing Germany has done for some time.
So what should be done? How does the international community reconcile ecological inevitabilities with economic necessities? To paraphrase Winston Churchill, safety and certainty in energy lie in variety and variety alone. Oil will likely remain the most important source of traditional energy for some time. This is partly thanks to the tragic irony that climate change, often attributed to the burning of fossil fuels, promises to open up new reserves in the Arctic, where the predicted — not to mention profitable — scramble for its resources might already be underway. But if this quest for new riches might be the source of geo-political conflict in the future, it has also seen its fair share of cooperation.
U.S. giant Exxon Mobil recently won what The New York Times called a “coveted prize” in the global petroleum industry, by securing the right to drill for oil off Russia’s Arctic coast. The scale of this agreement with Rosneft, Russia’s state-owned oil company, is, in the words of Russian Prime Minister Vladimir Putin, “scary,” as investments by both companies might reach $500 billion, according to The Times. As part of the deal, Exxon has agreed to give Rosneft assets, including some in the Gulf of Mexico and in Texas.
With such figures in the room, one can only surmise that the potential of future profits readily trumps political grievances, past and present.
Technological improvements such as carbon-sequestration also promise to lower environmental inhibitions about the use of coal and other non-renewable hydrocarbons.
But all depends on supplies and exploration costs. Other energy alternatives, including renewables one, will emerge as part of a moving puzzle and, with them, new players in the great game for energy.
This review has sought to recognize this unfolding transition by acknowledging nations whose traditional energy resources remain under-explored for a variety of reasons. But it has also sought to highlight nations that are taking steps to break their dependence from traditional forms of energy. Saudi Arabia and Russia, today’s energy super-powers, could soon find themselves competing for energy supremacy.


1. Brazil

It was a brief moment of levity that says much about the growing leverage of Brazil as a global energy player. When German Chancellor Angela Merkel visited Brazil in 2008, then-president Luiz Ignacio Lula da Silva, told her she would soon be able to call him “Sheikh Lula” — given the discovery by Brazil’s state-owned oil company Petrobras and its European partners of massive oil deposits off the Atlantic coast. While it will take considerable effort and expense to extract and exploit these reservoirs as they lie beneath more than four kilometres of water, rock and salt, they hold an estimated 8 billion to 12 billion barrels of oil, according to published figures.
Impressive statistics of this kind have naturally inspired interest from some of the world’s largest energy consumers, including the United States, which has sought to strengthen commercial and political ties with this increasingly important global power. But oil represents only one part of Brazil’s diverse energy portfolio. The country is already among the leading producers of hydro-electricity and continues to invest in additional capacities. Brazil, the second-largest producer of ethanol behind the United States, according to The Wall Street Journal, has also prepared the ground for additional growth in its bio-fuel sector. In contrast, the U.S. Senate has moved to scrap ethanol subsidies to combat rising deficits and food prices. Brazil, in short, stands poised to become an energy giant.
2. China

Call it a case of stating the obvious. As the International Energy Agency notes in its 2010 World Energy Outlook, developments in China will have “major implications” on the global supply and demand for oil, natural gas, and coal, not to mention prospects for limiting climate change. While this assessment acknowledges the status of China as the world’s largest consumer of energy and producer of greenhouse gases, it also hints at its present-day dependency on foreign sources of carbon-based energy and the long-term environmental impact of this reliance.
The Chinese leadership has responded to this reality in two ways. Short-term, China remains committed to a policy of securing traditional forms of energy, at home and abroad. Long-term, however, China seeks to reduce its use by moderating growth, improving energy efficiencies and diversifying its energy sources.
China plans to break ground on 40 new nuclear reactors in the next five years and widen its lead as the world’s largest manufacturer of solar panels and wind turbines. This position has not gone unnoticed. As The New York Times wrote in 2010, “the West may someday trade its dependence on oil from the Mideast for a reliance on solar panels, wind turbines and other gear manufactured in China.”
3. Iran

One form of energy — nuclear power — has dominated much of the recent discourse about Iran. Often heard and rarely believed claims from the Iranian leadership that the country’s emerging nuclear program will serve an exclusively civilian purpose strain credulity. That said, Iran already has the capacity to project power across the Middle East thanks to its rank as one of the world’s top five exporters of oil and producers of natural gas.
Iran stands to retain this status for some time as it possesses the third and second largest-known reserves of oil and natural gas respectively, according to the CIA World Factbook. Intriguingly, Iran’s current influence falls below expectations in light of its immense energy reserves. For better or worse, Iran remains under-exploited with production levels below its potential.
An influx of foreign investment could remedy this condition, but Byzantine investment rules and international sanctions against the ruling Mullahs have damaged the country’s energy infrastructure.
It is ironic, if not paradoxical, that Shiite Iran depends on its Sunni Arab neighbour of Oman and others to refine its oil and natural gas for domestic consumption. This condition — which bears the seed of political instability inside and outside the country — also exposes Iran as a nation whose ambitions far exceeds its institutions.
4. Iraq

History will have to decide whether the United States invaded Iraq in 2003 for the purpose of securing its oil reserves, said to be the fourth-largest in the world, according to the CIA. But no one can deny that the resource wealth of Iraq remains grossly under-utilized. The Iran-Iraq War (1980-1988), the Gulf War (1990-91) and the economic sanctions that followed it, and the sectarian conflicts that accompanied the U.S. invasion and occupation of Iraq (now winding down) have extensively damaged Iraq’s political institutions and infrastructure with obvious social and economic consequences.
Iraq might possess a princely reservoir of energy riches, but its citizens will likely live like paupers for some time compared to their equally oil-rich Arab neighbours. The U.S. Energy Information Administration projects that Iraq’s per-person net revenue from oil sales reached only $1,686 in 2010 compared with $7,685 for Saudi Arabia, $21,416 for Kuwait, and $34,110 for Qatar.
Iraq’s natural gas sector offers another measure of this under-performance. Whereas the country possesses the 11th largest known reserves of natural gas, its domestic production levels are only good enough for 58th spot in the world. Among exporters, Iraq currently ranks 116th in the world. Statistics of this kind are only the most superficial measure of Iraq’s present status and future potential.
5. Canada

Prime Minister Stephen Harper has more than once promoted Canada as an “emerging energy superpower” when abroad.
It should be noted, in passing, that Mr. Harper does not describe Canada as “an energy superpower.” In his first use of the phrase (at a G8 summit in St. Petersburg in 2006), he said only that his government “intended to build” the country into “an emerging energy superpower.” With this rhetorical qualification, Mr. Harper’s words appear more aspiration than assertion.
The supporting facts, though, are impressive enough: Canada is the world’s fifth-largest energy producer; the world’s third-largest natural gas producer; the world’s seventh-largest oil producer; the world’s largest uranium producer; and the world’s largest hydro-electricity producer. And these numbers don’t count shale oil and shale gas. In a 2009 report, the National Energy Board reported that Canada possesses 1,000 trillion (“if not more”) cubic feet of shale gas — enough, all by itself, to heat every house in the country.
But the facts do not necessarily warrant this bravado — at least not at this time. No one can deny the presence of vast quantities of energy sources such as oil, natural gas, uranium and hydro-electricity within Canadian borders, with perhaps more available in the medium future as climate change “opens up” the Arctic. It is no wonder that Chinese investors have joined their American competitors in staking out the Alberta oil sands. But the obvious foreign presence in the Canadian energy market speaks to one of the conditions that might make it difficult for Canada to fulfill Mr. Harper’s vision.
As energy expert Annette Hester argues (in a 2007 paper), the federal government neither possesses nor apparently desires the ability to leverage Canada’s energy abundance for grand political purposes. Plus, she suggests, Canadians might be uncomfortable with throwing their weight around. Canada, as she notes, is not Russia. That said, Ottawa officials have begun to meet with provincial leaders — perhaps the true power brokers in all matters of Canadian energy — in heeding the call of business to develop a more coherent, comprehensive and, dare we say it, national energy policy.
6. Australia

In no other developed nation might the causes and consequences of climate change trigger more ambivalence than in Australia. An alternating array of environmental calamities — be they droughts, floods or wildfires — have convinced many Australians that climate change has become an undeniable and potentially irreversible fact of life.
On the other hand, Australia holds the distinction of being the world’s largest exporter of coal, which also produces most of the country’s domestic electricity. The current Labor government of Julia Gillard aims to resolve this by charging industrial emitters a carbon tax to support more climate-friendly energy sources.
It is this very transition that could benefit Australia’s growing natural gas sector. A 2011 report by the International Energy Agency identifies Australia as a potential “giant” in the exploration and export of liquefied natural gas. The same report also identifies several deficiencies in the necessary infrastructure needed to process and transport this increasingly important energy resource and warns against rising costs in face of geographic obstacles. As for the broader climate change agenda, it has experienced a recent decline in political and financial support. Big Coal powers Down Under in more than one way.
7. Angola

Severe, often violent political problems currently plague this former Portuguese colony as it continues to recover from the on-again, off-again civil war (1975-2002) that began even before it had received its formal independence. Yet this condition has done nothing to reverse the rising status of Angola as one of the leading exporters of oil.
A member of OPEC since 2006, Angola has rivaled and occasionally surpassed Nigeria as the top petroleum producer from Africa, with much of it going to China, which has long identified sub-Saharan Africa as an important supply region. The benefits for both parties appear obvious. China diversifies its energy sources while developing countries such as Angola receive much needed cash without having to answer questions from western donors about political corruption and human rights concerns.
Western governments have also begun to beg for the attention of Angola, as well as other oil-rich nations along the western African shoreline. Angola recently received a controversial offer from Germany to supply a fleet of patrol boats. The vessels would not only be capable of patrolling the country’s large coastline, but also of protecting its offshore oil platforms.
8. The United States

Shale oil, sedimentary rock containing material that can be transformed into crude oil, continues to generate serious interest among policy-makers and investors. Nowhere might this interest be more intense and understandable than in the United States, which possesses the largest supplies in the world.
Consider the numbers. Using a middle-of-the-road figure, the Rand Corporation estimated in 2005 that 800 billion barrels of recoverable shale oil from the Green River Reservoir in the western United States could meet 25 percent of American energy demands for 400 years.
The Bakken Field, stretching across the American and the Canadian Prairie (Saskatchewan and Manitoba), has also drawn attention from energy investors, who have not been shy in framing their potentially profitable ambitions as a public, even patriotic, service.
In fact, though, the four largest shale oil zones in the world all fall within the continental United States — and the collective recoverable reserves of these deposits have been estimated at 3.3 trillion barrels. Counting even half as much, these oil reserves, by themselves, would exceed Saudi Arabian reserves by a factor of five.
Industry salesmanship might be crude, but effective. Freed from the tyrannical — not to mention costly — grip of oil from the Middle East, the United States could count on a plentiful, cheap and easily accessible source of energy for its economy and military as Washington focuses on domestic priorities such as rebuilding the country’s crumbling infrastructure, sub-par education system and manufacturing sector — if the political elites choose to do so. Whether they will remains another question. As the protracted fight over the raising of the debt ceiling revealed, political will and functionality might be the most precious commodities in the United States these days and for some time to come.
9. Israel

Jewish comedians have often asked how Moses managed to lead his people to the one place in the Middle East that lacked oil. Well, they might have to re-write that joke. According to figures reported in The London Times in March 2011, Israel is sitting on shale oil reserves that could contain 250 billion barrels of oil, a figure that would nearly equal proven Saudi reserves of 260 billion barrels.
Israel’s shale oil is land-based, not far from Jerusalem, in what is known as the Shfela Basin. Its gas deposits, on the other hand, are conventional and off-shore. The Tamar deposit, the world’s biggest conventional gas discovery in 2009, is transformative by itself; the Leviathan deposit, discovered last year, was the world’s largest deepwater natural gas discovery in the last decade. Tamar gas is expected to hit the market in 2012.
Figures of this sort could significantly change the geo-political calculus of the region. Israel, which for obvious security reasons buys the bulk of its energy from sources outside the Arab Middle East, would likely see its regional strength rise. Israel’s economy — already superior to those of its oil-rich but politically backward Arab neighbours — would achieve a far greater measure of independence. But this scenario — if it unfolds — could be quite costly to the environment. As Canadians familiar with the oilsands can confirm, the extraction of unconventional oil sources requires an immense amount of energy and water, an increasingly precious commodity, especially in the desert. The Israelis are reportedly working with a unique technology that eliminates as much as half the emissions produced by conventional drilling — and all of the water. Moses would applaud.
10. Greenland (Denmark)

Local reactions to the 2010 claim by Scottish oil giant Cairn Energy that it had discovered gases that might indicate oil off the coast of Greenland could not have been more different. Ordinary residents living near the offshore drilling site in Baffin Bay experienced what The Guardian described as “euphoria” in anticipation of future jobs and prosperity, whereas their politicians intensified their chatter about genuine independence from Denmark. Greenland has received many symbols of sovereignty since 1945, but remains a formal part of the Scandinavian country.
Environmentalists, meanwhile, sounded depressed in describing would-be scenarios of environmental destruction and devastation. Whether any of these visions will unfold remains an open question. While the Arctic might well contain up to 25 percent of the world’s undiscovered, recoverable hydrocarbons, as a 2008 report by the United States Geological Survey claims, its geography and geology will likely pose a formidable challenge with current extraction technologies, even as climate change continues to “free” said resources from their icy prison. The region around Greenland may also become a growing source of geo-political conflict between other interested and far more powerful parties, namely the United States, Russia and China. Experts who suggest that oil explorations off Greenland could be as lucrative as in Iraq, but without the instability, have a point. Like a quiet neighbour, Greenland is unlikely to generate attention. But its neighbours might.

Wolfgang Depner is a Ph.D. candidate in interdisciplinary studies at the University of British Columbia-Okanagan, in Kelowna, B.C.

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Wolfgang Depner is a doctoral candidate at the University of British Columbia – Okanagan and the co-editor of Readings in Political Idealogies since the Rise of Modern Science, published by Oxford University Press.

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