Resource nationalism is one of the alternative models challenging the centuries old dominance of the Anglo-American open trade system. The National Bureau of Asian Research has an excellent and detailed report on the current rise of energy and resource nationalism among Asian nations. This development has tremendous implications for both geopolitics and geoeconomics as the end of the current long cycle approaches. The full text of this document was set to expire on 11/24, but it is still available as of today, so interested parties should download a copy ASAP
Archive for November, 2011
Anabasis
November 28, 2011Anabasis is the classical story by the Greek warrior Xenophon. In it, he tells the tale of a large army of 10,000 Greek mercenaries hired to help a Persian leader usurp the throne. At the conclusion of the battle, the Greek leaders are poisoned and the Persians plan to kill or enslave the remaining Greek soldiers. Anabasis tells the heroic tale of how the legendary Ten Thousand fought their way across hostile southwest Asia to relief on the Black Sea.
I bring up this tale because the United States and its allies in Afghanistan potentially face a similar situation. After a NATO airstrike in Pakistan killed 24 Pakistani soldiers, the shaky US/Pakistani relationship is in the deepest trouble in years, as Pakistan has closed its border to supply trucks. At the same time, Russia is trying to pressure the west to abandon its ballistic missile defense plans by threatening to close the Northern supply route. This would effectively cut Western forces off from resupply and leave them stranded in hostile territory. It is, of course, unlikely that such a full cut off will occur, but it is a frightening situation that highlights the difficulties of the Afghan operation.
Job opportunity for experienced energy researcher
November 25, 2011a recently opened vacancy for an experienced social scientific researcher at the Energy research Centre of the Netherlands (ECN) may be of interest to EnerGeoPolitics readers
http://www.ecn.nl/wens/ecn/vacancy/E2011070
China on its diplomatic heels
November 23, 2011Diplomats will try to avoid the word containment, but the US has certainly begun to close a loop around maritime China (they still have potential outlets through the Eurasian Heartland): Expanded US naval presence in Australia and Singapore, F-16s to Indonesia, diplomatic openings with Vietnam and the Philippines, possible inclusion of India in the F-35 program. India’s Institute for Defense Studies and Analysis continues the list:
That Chinese diplomacy has played right into hands of the US is increasingly being recognized. Chinese threats and bluster have antagonized almost all the nations of East and South East Asia. Alarm bells have been ringing in their respective capitals as to what the Chinese intentions are. Not willing to take any chances on Chinese belligerence, almost all have begun to strengthen their defence networks. Vietnam has increased its defence budget by 70 per cent this year and Indonesia announced a 35 per cent increase in its defence outlay for this year. The Republic of Korea [ROK] is building a large naval base on Jeju Island whose location indicates that it will cater for security in the East China Sea rather than against North Korea. The US has agreed to retrofit 145 Taiwanese F-16 fighters. Similarly, Malaysia and Singapore have increased their defence purchases by a whopping 700 per cent and 140 per cent respectively. There is no doubt that the US-Australia decision to enhance their security profile by stationing 2500 Marines at Darwin is due to the same fears. The Australian decision to sell uranium to India can also be seen in the same light.
Even in the case of India, Chinese ham-handedness and belligerence have led to the addition of two new divisions for the Indian army to be deployed along the Sino-Indian border region. The US, Japan and India are to have a trilateral security dialogue by the end of this year followed by joint Indo-Japan naval exercises in 2012.
The only point I would make is that this will end up being a containment dominated by a quadrilateral power set, not trilateral – add Australia to the mix and the trio of Japan, India and Australia form the points of a geographic triangle of containment, with the US acting as an offshore balancer and working to bring the smaller nations of maritime South and East Asia into the effort.
This effort was obvious even to me, as an amateur observer, but kudos nonetheless to the State Department for setting it in motion to such effect thus far.
Dirty Water
November 22, 2011The Standells had a garage rock classic with their ode to the city of Boston and its famously polluted harbor fed by the equally polluted Charles River.
“I love that dirty water/Boston, you’re my home”
Perhaps some Beijing cover band can update with a reference to their own home town. According to a recent report in the South China Morning Post, China is suffering from massive, widespread contamination of their groundwater.
Only a small part of the findings of the nationwide survey appears to have been made public by the Ministry of Land and Resources. But it paints a grim picture that analysts say yet again highlights the severity of the country’s water pollution problems – and the government’s failure to tackle environmental challenges.
It contains startling revelations that support Premier Wen Jiabao’s recent warnings about worsening water quality – especially pollution of underground water sources, from where nearly 70 per cent of the population get their drinking water.
Wen told a State Council meeting two months ago that groundwater contamination posed grave challenges to public health and threatened to derail the country’s social and economic development.
. . . Officials are increasingly vocal about mounting environmental problems and their dire consequences, but all this talk has yet to be translated into any concrete steps to change the situation.
More than 57 per cent of groundwater is substandard and 17 per cent of extremely poor quality, according to the survey of 182 cities last year. In addition, a marked deterioration in quality was widely seen in the northern regions.
While manufacturing jobs are beginning to return to the US (especially the American South), we appear to have successfully exported our pollution to China.
Coalitioning watch: US to give F-16s to Indonesia
November 21, 2011That is give, not sell, as the US continues to expand its defense ties in the Western Pacific/Southern Asia maritime quadrant.
“Spinning, post-industrial junk which generates nothing but bird kills.”
November 21, 2011Don Surber has a nice little piece up on the 14,000 wind turbines abandoned across the US over the last three decades. I have never been a proponent of wind as anything other than a local source of micro power. Big Wind is too expensive relative to other sources – even more so now that there is a potential glut of natural gas available worldwide. The Dutch, too, are abandoning their large scale wind projects, as they cannot survive without subsidies that are unsupportable in the current financial climate.
New Keystone pipeline route gets support from Nebraska legislators
November 18, 2011When President Obama punted the final decision on Keystone XL until after the 2012 election, he put forward the idea that the threat of groundwater contamination required further review. Specifically, environmental groups have warned of a threat to Nebraska’s Ogallala aquifer. Responding quickly to Obama’s objections, TransCanada, the company behind the pipeline project, has already proposed a re-routing scheme that has support from key members, both Democrat and Republican, in Nebraska’s legislature:
On Nov. 14, TransCanada announced it supports proposed legislation within the State of Nebraska to move the Keystone XL pipeline project forward. If passed, this legislation, introduced the same day in the State legislature, will ensure a pipeline route will be developed in Nebraska that avoids the Sandhills.
TransCanada is pleased with the positive conversations it is having with Nebraska leaders, which have resulted in legislation that respects the concerns of Nebraskans and supports the development of the Keystone XL pipeline. TransCanada at the same time confirmed to state leaders that the route for Keystone XL will be changed and reaffirmed that Nebraskans will play an important role in determining the final route.These developments in Nebraska follow the Nov. 10 announcement by the U.S. Department of State (DOS) that further assessment of alternative routes for Keystone XL was needed in Nebraska to move forward with the National Interest Determination. The proposed state legislation in Nebraska is a critical first step in that process.
Working together with the State Department, Nebraska’s Department of Environmental Quality will conduct an environmental assessment to define the best location for Keystone XL in Nebraska. TransCanada will work closely with these agencies and provide them with the information they need to complete a thorough review that addresses concerns regarding the Sandhills region.
In short, there is no longer any need to defer the decision, at least not for 15 months. The State Department can expedite consideration and have a decision by early next year. The ball is back in the administration’s court.
Massive shale gas find in UK
November 17, 2011In April, the Energy Information Agency assessed the global natural gas reserves. At the time, it estimated that the United Kingdom held 9 trillion cubic feet (tcf) of conventional natural gas, and up to 20 tcf of unconventional shale gas. Recently, however, Caudrilla Resources drilled a series of test wells in north west England and has found as much as 200 tcf in a single shale play. EIA best estimates, then, are off by at least an order of magnitude. This reinforces yesterday’s post – there are enormous amounts of unconventional fossil fuels suddenly within reach. The challenge now is to find ways to burn them more cleanly. I agree with the renewable energy supporters who believe that technology will provide the answers to the twin problems of energy security and climate change. I disagree, however, in that I believe that the technological effort is best spent in (a) extracting cheap and energy dense fossil fuels and then (b) finding ways to economically capture then sequester or utilize the resultant carbon exhaust.
Containing China even as she peaks
November 17, 2011It is my belief that, while it continues to be a major economic force and will challenge US supremacy in the coming decades, China’s long term potential is at or near its peak. Like a supertanker that takes a long time to turn, this peak may not be evident for awhile, and policy makers will continue to make moves as if China is still, inevitably, rising. Still, the signs that China has peaked are around. Yesterday, there was a report that a major Chinese economist had made a secret speech claiming that many of China’s financial numbers are fabricated and that, in fact, the nation is close to bankruptcy. Today, it is Amitai Etzioni at National Interest, with an essay on the Overblown Fears About China’s Rise.
Of course, this does not mean that China is suddenly rendered impotent. Indeed, as they recognize their peak, they may become more dangerous, knowing that their moment is slipping away. For that reason, the US will still attend to its coalitioning moves, strengthening ties with allies surrounding China. Earlier this week, we noted the moves to share the advanced F-35 aircraft withIndia and Japan. Yesterday, it was announced that the US would establish a naval presence in Northern Australia. These moves are not just aimed at China, but also at the various nations of the Southern Asian periphery that have concerns about China. A US presence in the region serves to bring many of them into our orbit, as analysts in India have already noted:
The US move to create a naval base in northern Australia close to the South China Sea can actually mean more dollars in the Indian kitty, and put more strategic and business opportunities in New Delhi’s way, sources said. The first piece of evidence has come by way of Australia’s decision to sell uranium to India.
The US move will provide a sense of protection to East Asian countries including Japan, who have serious conflicts with China but buy vast amounts of Chinese goods. The new found protection will encourage East Asia to reduce its dependence on China for goods and enhance economic ties with India, sources said.
“Japan, Vietnam and Indonesia will feel more secure. India and Indonesia can get together to control the Malacca Straits, which is the route though which 90% of Chinese goods to East Asia passes,” Subramanian Swamy, Janata Party president and a widely regarded China expert, told TNN.
I have not agreed with everything they have done (especially the failure to maximize the strategic domestic energy resources), but this is a very strong move by the Obama Administration.
Update: The World is Awash in Oil
November 16, 2011“The World is Awash in Oil” is a phrase that I have used repeatedly on this blog, going back to the very first few months. The phrase is actually incorrect – when I wrote “oil,” I really meant fossil fuels, and I tend to also use the phrases Shale Age and The Second Age of Oil interchangeably as well. When I first began using it, just over 3 years ago, the technological breakthroughs in shale production were relatively new and we didn’t really know how abundant the newly economic energy resources would be. We still don’t “know,” as the estimates will probably continue to rise upward, but the Institute for Energy Research has some updated numbers in their new report “The Turning Tide for World Oil Supplies”:
In the 1970s, reports provided to President Carter concluded that our domestic oil resources would be exhausted by the end of the century. At that time, global proven reserves were about 600 billion barrels. Since then, we have consumed over 700 billion barrels of oil globally and proved oil reserves worldwide now exceed 1.4 trillion barrels.
Estimates of oil resources are generated by geologists based on limited physical data, expectations about prices, and existing technology. But expectations and technology change and improve over time. The estimates of the Bakken are one good example. After all, the 2008 USGS estimate of recoverable oil was 25 times larger than the estimate a mere 13 years earlier.
In oil fields, only 35 to 40 percent of oil in place is initially produced. As oil prices increase and as technology changes over time, there are increased incentives to invest in production and technology to squeeze more oil from existing fields. Advances in technology enable companies to increase recovery from existing fields and to produce oil from unconventional sources that were uneconomic at lower prices. As long as the price of alternatives is higher than the price of producing the marginal barrel, it makes economic sense to produce more and to invest in technologies for finding and producing oil.[37]
And so it is with North American and South American oil. The newer finds in Canada, the United States, Brazil, and Argentina are now economic due to technological breakthroughs in drilling and the sustained higher price of crude that make unconventional sources of crude economic. These new finds can make the United States nearly independent of crude oil from the Middle East in the future. To do that, the United States must set policies conducive to their production and consumption in this country.
I go even further than IER – by developing CCS (carbon capture and sequestration), CTL (coal to liquid fuel) and other technologies, by making policy choices that allow us to begin mass substitution of fuels for transportation, the US can maximize it’s tremendous bounty of fossil fuels to become the worlds greatest consumer, producer and exporter of fossil fuels at the same time.
In short, the theory of imminent Peak Oil production is dead. The world will run on fossil fuels for the rest of the century and beyond, even with the rising demand in the developing world. Yes, the world is awash in oil.
US attempting to bring India into the F-35 fold
November 15, 2011India is preparing a major new purchase of fighter aircraft, and has spent years evaluating six major contenders. Recently, the field was narrowed to two – the French Rafaele and the Eurofighter Typhoon. In the original competition, the US fielded two different competitors – the F-16 and the F-18 (the other early contenders were Saab’s Gripen and Russia’s Mig-29). However, the US is apparently not entirely out of the competition just yet. The US is trying to interest India in the new F-35, our second most advanced fighter. The F-35 was not under initial consideration because it’s cost puts it outside the parameters of India’s initial goal, and also it was not thought that it would be available in the time frame that India prefers. However, the US may be willing to subsidize the price and to sweeten the deal by developing and building some of the components in joint ventures with Indian contractors.
The F-35 would certainly be the most capable of all the contenders, and might be uniquely configured for India’s needs because of its short and vertical take off capabilities (although the S-VTOL versions will not be available for several more years).
As The Diplomat points out, this is more than a simple aircraft supply bid. India will be a key player in the geopolitics of the 21st century, and the US is keen to foster a deep military relationship there. To contain any threat of an aggressive China, the US needs to organize the nations of the Asian periphery, of which India is key. For that reason, the F-35 is also being offered to Japan. India and Japan would join longtime US allies Australia, has been a participant in the program from the beginning, and Singapore, which has been participating since 2003.
Air Force facing critical shortage of drone pilots
November 15, 2011The US Air Force has had to shut down their drone “Top Gun” school because they need the instructors to fly combat UAV missions. The problem is that the Air Force restricts drone piloting to actual pilots, who see them as a step down from flying fighters. They could relieve their shortage by opening up drone operations to enlisted personnel. The Army already does that with their own drone program.
China: An Arctic power?
November 14, 2011As the Arctic climate changes it is becoming ever more viable as a commercial center. Vast troves of mineral resources are believed to be held within the Arctic’s relatively shallow waters. Of even greater consequence, the fabled Northwest Passage and the less well known but more viable Northern Sea Route are becoming open to commercial maritime traffic. These sea routes need not be fully ice free to be navigable – ice breaker escorts can extend the period of transit beyond those few weeks or months that need no escort.
Arctic Sea Routes
The following chart shows the value of these potential routes – the time and distance saved from traditional shipping routes are considerable. Add to that the fact that these routes border relatively stable political regions and do not risk the piracy and warfare dangers that hamper the southern routes.
China certainly understands the geostrategic value of the Arctic. China owns and operates six Arctic icebreakers and is constructing six more (compare this to the woeful state of the US icebreaker fleet – just three ships, two of which are sidelined for repair and the third only useful for thin ice conditions). China, despite its location far from the Arctic, has nonetheless been lobbying for a Permanent Observer status in the Arctic Council. Last week, China gained an important ally in this goal as Greenland joined Denmark in lobbying for a Chinese seat at the table. China, seemingly, has a greater appreciation of the importance of the Arctic than does the US, which actually has a physical presence in the region. The US does not need to try to match China in icebreakers; all we need to do is to fully support Canada – our most important ally and the nation with the most total Arctic coastline (when you count all the Canadian islands) – in their Arctic policy and claims. US naval power allied with Canadian interests should dominate Arctic discussions.
Exxon Mobil becomes first supermajor to sign deal with Kurdistan
November 11, 2011The central government of Iraq has a fractious relationship with the semi-autonomous Kurdistan region to the north, so much so that the central government forbids any oil company doing business in the south and central regions from also doing business in Kurdistan.
Exxon Mobil has a very large contract developing the West Qurna field in Basra. The West Qurna field is highly productive, delivering over 2.8 million barrels per day. Nonetheless, ExxonMobil has chosen to risk losing that contract by signing a huge deal with the Kurdistan government to explore and develop six large oil blocks in the northern region.
So, the question is: does Exxon Mobil believe the potential of these blocks are greater than the highly productive field that the Iraqi government is poised to take away, or do they believe that the central government will back down and allow them to keep both that contract and the Kurdistani deals?
The ramifications here are huge. Due to years of poor governance under the Hussein regime and the near-decade long period of war and insurrection that begin with the US invasion in 2003, Iraq’s oil potential has never been systematically explored. Although it’s proven reserves are already among the largest in the world, only about 20% of the known fields have been developed. It is conceivable that, once a full exploration and development regime is instituted, Iraq could have more oil than even Saudi Arabia. At the end of the day, this is what will make the US invasion of Iraq worthwhile – not US firms getting the oil, but any firm or combination of firms that is able to unleash that potential and pump that oil onto the world market would deliver instant price relief around the globe.
There are still important issues to resolve – the aforementioned relationship between Kurdistan and the central government, settling on a hydrocarbon law, and developing export capacity (which already bottlenecks even current production levels). But, this announcement is a big development in getting Iraq’s oil capacity flowing.
Sudan jets bomb South Sudan
November 10, 2011Petroleum Economist calls this the possible beginning of an oil war:
South Sudan declared its independence from the north on 9 July this year. However, a number of issues remain outstanding between the new neighbours, the most crucial of which hinges on oil. Sudan lost 75% of its pre-independence output of 500,000 barrels a day after South Sudan’s secession, but controls the country’s only export pipeline and deep-water port. The only viable export route for South Sudan’s oil production – which accounts for 98% of the new nation’s income – is through Sudan. But the two sides have yet to agree a deal allowing South Sudan access to export infrastructure. A border demarcation dispute has also added to tensions. In the past two months, relations between the two countries have deteriorated severely.
Obama administration poised to kill Keystone XL
November 10, 2011The US State Department has demanded changes to the route of the Keystone XL pipeline that will delay the pipeline for at least another year:
The State Department is ordering the developer of a pipeline that would carry oil from western Canada to Texas to reroute the project away from environmentally sensitive areas of Nebraska.
That decision could delay a final U.S. decision on the project until after the 2012 election.
The decision will require an environmental review — and that could take at least a year.
TransCanada Corp. is seeking to build the $7 billion pipeline. Part of the 1,700-mile pipeline would pass through Nebraska’s Sandhills region and an aquifer that supplies water to eight states
Two senior State Department officials who are familiar with the project described the decision to The Associated Press. The officials spoke on condition of anonymity because they weren’t authorized to discuss the decision before an official announcement.
Petroleum Economist states that this is more than a mere delay – that the pipeline is now “all but dead.” This means that the oil from the Alberta tar sands will instead flow west, through a vastly more sensitive ecosystem, and be shipped via tanker to Chinese markets rather than to US markets. I wrote yesterday that Obama is poised to run as a Warrior President; however, for all those victories, it is difficult to paint any of them as beneficial to US energy security, which I believe is our most vital foreign policy concern for the next half century. This decision further weakens the president on that front ahead of the election campaign, even as he tries to defer a formal decision until after the election.
China: climate ransom scheme alleged
November 10, 2011That is the explosive charge from something called the Environmental Investigation Agency:
In the run-up to the international climate negotiations in Durban later this month, China has responded to efforts to ban the trading of widely discredited HFC-23 offsets by threatening to release huge amounts of the potent industrial chemical into the atmosphere unless other nations pay what amounts to a climate ransom.
China’s threat comes after the European Union and other nations moved to ban HFC-23 credits from internal carbon trading mechanisms in recognition of the perverse incentives created by these credits in the Clean Development Mechanism (CDM). The vast amounts paid for HFC-23 offsets have led to factories in China and elsewhere manufacturing more HCFC-22 and its HFC-23 by-product than necessary, just to maximise the amounts paid to destroy HFC-23 through the UN-backed carbon trading scheme.
In a shocking attempt to blackmail the international community, Xie Fei, revenue management director at the China Clean Development Mechanism Fund, threatened: “If there’s no trading of [HFC-23] credits, they’ll stop incinerating the gases” and vent them directly into the atmosphere. In an interview with Bloomberg News, given at the Carbon Forum Asia in Singapore last week, Xei Fei claimed he spoke for “almost all the big Chinese producers of HFCs” who “can’t bear the cost” and maintain that “they’ll lose competitiveness”.
China’s claim belies the fact that HFC-23 can be destroyed for just €0.17 per CO2e tonne. The destruction of one CO2e tonne generates one Certified Emission Reduction (CER) under the CDM, which historically has been sold on carbon markets at an average price of €12 — 70 times the actual cost of destroying HFC-23.
Because of these vast profits, China has repeatedly rejected attempts to help developing countries destroy HFC-23 emissions through the Montreal Protocol. At the 2009 and 2010 Meetings of the Parties to the Montreal Protocol, China blocked progress of a North American proposal to pay the actual costs of destroying HFC-23 emissions at plants not currently covered by the CDM, which account for over half of developing country HFC-23 production.
HFC-23 is produced as an unintentional by-product of the refrigerant gas HCFC-22, itself a powerful greenhouse gas and ozone depleting substance. This means that the quantity of HFC-23 produced is directly related to the production of HCFC-22. HFC-23 is an important contributor to climate change because of its incredibly high 100-year global warming potential (GWP) of 14,800.
“Attempting to force countries into squandering billions on fake offsets that actually increase production of greenhouse gases is extortion,” said Samuel LaBudde, Senior Atmospheric Campaigner with the Environmental Investigation Agency (EIA). “China is not the victim here, and a world order responsive to climate change cannot be predicated on unrepentant greed.”
I cannot vouch for the EIA, as this is the first time I have ever heard of them. They are certainly a legitimate organization, having even earned notice from the US EPA for their efforts:
The Environmental Investigation Agency (EIA) has been tackling the issue of illegal trade in ODSs since 1996 and has provided an essential service in exposing illegal activity, disseminating information to the Montreal Protocol and to other relevant bodies, and providing assistance to combat smuggling operations. EIA is the world’s leading nongovernmental organization (NGO) working on the issue of illegal trade in ODSs. EIA’s track record of investigative work, scientific documentation, and representation at international conventions has earned EIA a reputation for highly effective and successful campaigning. EIA also continues to share these skills with local groups and government officials to help empower them in the fight against environmental crime.
So, while certainly a legitimate organization, I have no experience with them so I cannot assess whether or not they have a pattern of hyperbole.
Hydraulic Hybrids
November 9, 2011By way of Instapundit, a report on a new approach that combines internal combustion engines with hydraulic systems powered by pressurized air. This hybrid recaptures braking energy otherwise lost as heat (nothing groundbreaking there) to pressurize the hydraulic fluid. This design is perfect for buses, garbage trucks, etc. – large, heavy vehicles that make frequent stops thus maximizing the energy released from breaking. The vehicle is the work of Altair Product Design, as reported by Wired:
“Primarily it has to do with power density,” said Tim Smith, director of design engineering at Altair. “The best diesel-electric hybrid can only recover 25 percent of the braking energy. The limitations are that you just can’t charge the batteries fast enough to take all the potential energy that’s available in a braking event. You can charge them at maximum rate and the rest of the energy goes out as heat.”
In some applications, such as a city bus that is constantly slowing and accelerating, a hydraulic system allows for greater, and faster, accumulation of energy.
“With hydraulic, we’re able to recover 75 percent of the braking energy to be utilized for the next launch event,” Smith said.
HHV system diagram from EPA
UPS rolled out a number of early model versions of HHVs several years ago ( the illustration above is from the UPS design), but this is an upgraded technology. Although it is ideal for large vehicles, Chrysler and other manufacturers are trying to find a way to utilize the technology, or parts of it, in passenger vehicles. Another advantage of this system, not mentioned in the linked article, is that it does not require any exotic production materials or techniques. Not only are hybrids and electrics dependent on rare earth metals for their fabrication, they are also relatively energy intensive in their construction, making their total lifetime energy use surprisingly high (although not, as once reported, greater than that of a Hummer).
