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Dave Summers

Dave Summers

David (Dave) Summers is a Curators' Professor Emeritus of Mining Engineering at Missouri University of Science and Technology (he retired in 2010). He directed the…

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The World Starts to Come Apart at the Seams as it Battles over Energy Supply

There is a lot going on in the Middle East at the moment. There is the revolution in Syria which seems now to be entering some form of end game, and there are the riots in Egypt. There are some signs that these events might move on to countries such as Jordan. Increasing levels of turmoil in the Middle East do not help stabilize the future flow of oil and natural gas around the world, and there are underlying tensions, brought about in part by the need to sustain sanctions against Iran.

Turkey, for example, which is caught up in dealing with Syrian refugees and the adjacent civil war is also largely dependent on Iranian fuel to get it through the winter. In October Turkey is reported to have imported 75 kbd of Iranian oil with larger portions of the total 417 kbd import coming from Iraq (105 kbd) and Russia (103 kbd). The volumes that continue to flow are now becoming a source of friction, since US law demands that countries continue to lower their imports every six months. While Turkey continues to work to lower their need for Iranian oil (and may increase imports from Russia) in the interim the U.S. Government is not increasing pressure but apparently moving to extend the waiver of sanctions not only to Turkey, but also to a total of 21 countries, a list that includes China, India and South Korea.

Two officials said an announcement of the six-month extensions was expected from the State Department on Friday. The officials spoke on condition of anonymity because they were not authorized to publicly preview the step.

In addition to China, India and South Korea, the waivers will apply to Malaysia, Singapore, South Africa, Sri Lanka, Turkey and Taiwan. All nine were originally granted six-month renewable exemptions from the sanctions in June.

The exemption means that banks and other financial institutions based in those places will not be hit with penalties under U.S. law enacted as a way of pressuring Iran to come clean about its nuclear program.

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A total of 20 countries and Taiwan have been granted the waivers. The others—Belgium, Britain, the Czech Republic, France, Germany, Greece, Italy, the Netherlands, Poland, Spain and Japan—will come up for review in March.

Yet Turkey, which gets some 20% of its natural gas from Iran, taking roughly 90% of Iran’s natural gas exports is resisting pressure to lower its gas purchases, since the fuel is the primary source for most Turkish electricity. And further, with estimates of Turkish needs estimated as rising to 655 kbd by 2016, the ability of the country to sustain an adequate supply of power supply may become more difficult without reliance on Iran.

There is a somewhat similar argument made in South Korea, who, while they have cut demand by some 30%, continue to import around 186 kbd of Iranian oil as of October, though the volume varies, depending on who is doing the counting. Similarly one sees that both China and India are reported to be lowering their purchases so that there is a projection that Iran might not ship more than 834 kbd in December. Some of the problem in sustaining even this level of supply is apparently coming from the lack of available tankers, and with Iran now being willing, apparently, to use false shipping transponders in co-ordination with Syria rather than just changing names; events seem moving toward some form of a Bond movie.

Related Articles: Why Integrated Policies are Vital for Egypt's Energy Future

Oil is a recognized critical component in building energy supply and the current ongoing effort to contain Iranian exports seems to take much of the headline, relative to overall supply questions. But the game is being played in the margins of balance of overall oil supply and demand. The arrival of significant supplies of natural gas, whether real – as in the United States – or potential – as in most of Europe – has moved the focus away from concerns over oil supply as an issue.

Yet China does not seem to be cutting back on overall oil use, demand rose 6.6% in October 2012, over that in October 2011, and averaged 9.76 mbd. If that continues, then China must find an additional source for 644 kbd next year, over and above current suppliers and volumes. And so, with the country still growing, that demand will also continue to grow. But there are not a lot of places that can provide for that increased need. The slow economies of the United States and Europe have dropped demand from where it could have been. And while the European economy is likely to struggle on through next year, that of the United States (lunatics no longer being allowed in Washington) is on the path to recovery, which may well swell energy demand more than anticipated, and absorb any increased domestic supply without much further change in import needs.

And thus one comes back to the aggressive nature of the Chinese in regard to the hydrocarbon resources of the South China Seas. The ASEAN nations seem powerless, whether by inclination or real power, to do much to protest the Chinese position. The Chinese are also working to minimize the American presence, and treaty obligations, that involve them in these discussions. China has just authorized seizure of foreign vessels in their waters (which they, disputedly, claim include most of both China Seas). At the same time India has taken notice, and is more than just expressing concern.

Although India doesn’t have any direct territorial claim in the area, the waters are strategically important to New Delhi for three reasons. First, like for any trade-dependent country, the South China Sea represents an important global shipping route and freedom of navigation must be maintained. Second, India’s state-run Oil and Natural Gas Corporation (ONGC) owns a stake in waters claimed by Vietnam. And third, and perhaps most importantly, the South China Sea represents an opportunity for an Indian riposte against China’s ‘string of pearls’ naval encirclement of the Indian subcontinent.

Overall the world does not seem to be heading in the direction of a peace-filled future. The underlying imperative of energy supply to meet national needs has brought the world to war before now, remaining unconcerned about the situation means that we remain unwilling to learn the lessons of history.

By. Dave Summers

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Leave a comment
  • Ron Wagner on December 09 2012 said:
    All the world needs to cooperate in using hydraulic fracturing, and directional drilling to tap world wide resources. There is no shortage of fuel in the long term.
    The problem is focusing on productive activity, and avoiding local friction and wars. In twenty years the whole world can have an abundance of inexpensive natural gas, and more oil. That should be an international goal.
  • Mel Tisdale on December 11 2012 said:
    @ Robert Wagner:

    "All the world needs to cooperate in using hydraulic fracturing, and directional drilling to tap world wide resources."

    The last thing the world needs, the very last thing the world needs, is more fossil fuel burning in any form that it takes, be it via fracturing or directional drilling, or from wherever.

    Just what does it take to get people to realise the danger we are in? 97% of the world’s leading climate scientists, i.e. those who actually work in the field and have published peer-reviewed papers in leading journals on the subject, are of the view that global warming is real and that we are to blame. The science of the greenhouse effect is understood and was first proven over 150 years ago. It is fundamental science. Without the greenhouse effect the world would be an uninhabitable -18 C. By burning fossil fuels we are adding to the atmospheric CO2, a greenhouse gas, and thus adding to the warming. Despite these straitened economic times last year saw yet another record-breaking level of CO2 in the atmosphere. If it fell out after a short while, one could perhaps not be a too concerned, but it stays there for over a 100 years.

    One wonders if people think that global warming is not this generation’s problem. Wrong. The IEA have recently published a report that says that we are on course for about a 4 C average temperature rise by mid-century. That rise will not be sudden; it has already started. Seeing as the 4 C figure includes ocean regions, we can expect 5 C rise over land. Five centigrade rise will be unbearable in some regions, especially the middle-east. That can only mean a great deal of disruption as climate refugees migrate to cooler climes, which will of course be resisted, seeing as food and water will be in short supply. That should ring alarm bells for anyone interested in oil production. How long will it be before the masses realise what is coming and try to move early rather than late? What happens to oil supply then? How long do we have? Not long, I’ll wager.

    There is no reason to believe that a 4 C average rise will be the limit. Old Mother Nature will do what she has always done. For every gram of CO2 we pump into the atmosphere above that of the natural carbon cycle, she will increase the temperature a little and there is no scientific reason why she should stop doing so. The carbon cycle is not fixed either. The permafrost is melting and thus releasing greenhouse gases, mainly methane, which is a potent one. If that release reaches a runaway state, then I will be all the more glad that I will no longer be around.

    It is no use thinking that we have forty years or so to wait until mid-century. There are good reasons to believe that the recent increase in extreme weather events are the result of the warming we have experienced thus far. Be that as it may, the temperature is going to rise steadily to meet the projected 4 C increase that the IEA forecast.

    Anyone in their thirties or younger is in for a very dire old age. In fact it is not going to be too good for anyone with more than a few years left. When the temperatures have risen a little further, and long before any 4 C average rise, most will be ruing not having believed the scientists back in the eighties when the danger was first realised and foolishly (or should that be selfishly?) dismissed.

    Pension plan? Forget savings or anything to do with finance. Instead, find a chilly part of the world, far from centres of population, arm yourself to the hilt, develop a self-sufficient life-style and keep a low profile. Oh, and don’t do anything irreverseable on the family planning front . You will be needed to begin the whole daft cycle all over again!

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