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USA: “Non-economic Coercion Measures” for Europe

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nord stream

The next few months can be critical for implementing projects to supply Russian gas to Europe. The US administration is stepping up efforts aimed at disrupting the construction of the Nord Stream-2 gas pipeline.

At the same time, at the other end of the European energy map – in the Balkans – discussions on a future regional gas structure with a possible parallel renewal of the construction of a gas pipeline from Russia to Bulgaria under  the Black Sea have livened up against the background of the successful implementation of the Turkish Stream project.

On May 23 at the hearings of the Foreign Affairs Committee of the US Congress House of Representatives, the US Secretary of State, Mike Pompeo, said that the USA intends to halt the implementation of the Nord Stream-2 project. “We must continue to exert pressure to curtail Nord Stream-2.” We should not increase Europe’s dependence on Russian energy supplies. If we succeed, we will help Europe to stand firm “, he stressed.

According to his explicit statements – “while Europeans depend on Russian energy supplies, it limits their freedom of action against Russia. In reality, it is a bit more complicated, but, in fact, this statement is true. We have a real opportunity to detach them from Russia in many aspects. ”

Washington needs to rule out the situation in which “during the crisis period,” Russia might use energy supplies to exert pressure on Europe, Mike Pompeo believes:”We must make sure that they have no such leverage.” (rbc.ru)

Responding to this the Russian Embassy in the USA said that opposing to the construction of the Nord Stream-2 gas pipeline Washington “is imposing its non-competitive liquefied natural gas on Europe”. Russian diplomats noted that geopolitics again “unduly interferes in the economy” and “discredits the slogans about supplies diversification.”

Russian diplomats recalled that former US President Ronald Reagan, who is “the idol of the current Republicans”, also opposed the construction of a gas pipeline from the USSR to Germany in early 1980s. His administration imposed sanctions against those companies that took part in the construction of the gas pipeline. Then Washington also justified its actions by the need “not to allow Russia to strengthen its influence on the European allies of the United States,” the embassy noted.

This is in reference to the directive of President Reagan, signed in 1983. It  envisaged the use of economic pressure in order to limit the foreign and military potential of the USSR and, in particular, to counter the construction of the main export gas pipeline Urengoy-Pomary-Uzhgorod with the participation of companies and banks from European countries.

“Today, in this sense, we seem to have returned 35 years ago. The same rhetoric, the same methods. Only now the administration protects that gas pipeline, because it was built through Ukraine, “the Russian diplomats stressed. They also recalled that Ronald Reagan “had the wisdom” to remove all restrictions two years later because of their “total meaninglessness,” and expressed the hope that the administration of  President Donald Trump “will draw conclusions from history much sooner.” (rbc.ru)

Berlin also criticized the position of the Donald Trump administration regarding the project for constructing the second stage of the gas pipeline from Russia to Germany. German Economic Affairs and Energy Minister Peter Altmaier said that Washington’s goal is to ensure the supply of large volumes of its own liquefied natural gas (LNG) to Europe. “They have an extensive infrastructure of terminals for liquefied natural gas, which they must use for their own benefit,” the minister said.

He stressed that the USA remains to be Germany’s friends and partners, but the German government prefers to defend “common values”: if Washington follows the “America first” principle and protects primarily its own interests, then the USA should understand that Europe will defend the European ones.

In addition, Peter Altmaier expressed doubts that the US administration will succeed in achieving its geo-economic goals in the energy sector even if the project for the construction of the second stage  gas pipeline from Russia to Germany is eventually blocked since liquefied natural gas will still cost the Europeans more than the pipeline gas. “So blocking Nord Stream-2 on its own will not guarantee the export of American LNG to Europe,” the German minister said. (rbc.ru)

Former German Federal Chancellor Gerhard Schroeder was even more outspoken on this matter. According to him, the US resistance to the construction of the Nord Stream-2 gas pipeline has no rational justification; it can be explained only by the commercial interests of competitors.

“There are no rational arguments against the” Nord Stream – 2 “, such arguments are just being made up. Behind them are private and economic interests of competitors, in particular, the United States” – he said during a business breakfast at the St. Petersburg International Economic Forum.

According to Gerhard Schroeder, who is the chairman of the board of directors of Nord Stream AG, the USA wants to sell its liquefied natural gas to European consumers, without taking into account whether it meets the quality and particular characteristics of European capacities. Such behavior threatens the energy security of the region’s gas infrastructure” – Gerhard Schroeder said. (rbc.ru)

Germany’s position on the Nord Stream-2 project is determined by purely economic, as well as, in broader terms, pan-European considerations – taking into account the growing tension in relations between the USA and its European allies.

«Even as the European leaders remain at odds with Russian President Vladimir Putin over Ukraine, Syria and other issues, the Iran crisis is pushing them closer together. At the same time, Angela Merkel’s ties with Trump are deteriorating, with the USA now threatening to punish German companies involved in building a new pipeline for Russian gas under the Baltic Sea», – the American business news agency Bloomberg says.(bloomberg.com)

Increasing pressure on European governments and companies to force them to abandon the implementation of the Nord Stream-2 project, in addition to deepening the contradictions on both sides of the Atlantic, has another important consequence.

The pressure on the above project irrespective of its results objectively increases the chances of implementing energy sector projects on the south-eastern flank of Europe. The countries located there are clearly in a hurry to raise their own bets in the energy party in order to get the role of not only the regional but also the pan-European gas distribution hub.

Within the given context, it is by no means accidental that the President of Bulgaria, Rumen Radev, during a two-day visit to Russia, re-created a new project for the construction of a Russian-Bulgarian gas pipeline. Recalling the Russian-German gas project, as well as the importance of energy security for Sofia and Brussels, he said: “I hope that our governments will reconsider the possibility of direct gas supplies from Russia through the Black Sea.” At the same time, Radev stressed that Russia has always been Bulgaria’s strategic partner in the energy sector, supplying natural gas, oil and nuclear fuel. (rbc.ru)

Rumen Radev elaborated on the subject in an interview with the Russian media, timed for his visit to Sochi. “Undoubtedly, the safest, most reliable and cheapest way is direct. Especially when it comes to the supply of additional Russian natural gas to Bulgaria, Serbia, Hungary, Austria and northern Italy. For Russia as well as for Bulgaria, a logical choice for expanding the supply of Russian natural gas to Europe is through Bulgaria, “he said. (kommersant.ru)

It is obvious that in the near future we can expect intensification of bilateral and multilateral discussions regarding the future gas transportation infrastructure in South-Eastern Europe with its “linkage” to Austria or Italy. And Bulgaria and Turkey will be the key players here. Ankara is unlikely to take a positive view of Sophia’s intention to lock on itself regional gas flows, instead of receiving gas from the second  “Turkish stream” export  line.

The publication in one of the leading Turkish newspapers – Habertürk is quite telling – without mentioning the initiative of the Bulgarian side, it has actually joined the discussion about who will become the main beneficiary of the Russian gas transit: “Where from and where to will the second line of the”Turkish stream” go? It is unknown yet. What will this line be: Greece – Italy, Bulgaria – Serbia – Hungary? Time will tell”. (haberturk.com)

The interest of the countries of South-Eastern Europe in becoming not only consumers but also transit hubs of Russian gas is also determined by their geographical location, which complicates the receipt of LNG tankers from the USA (unlike the capabilities of Germany, Poland or the Baltic countries). Appropriate receiving and re-gasification terminals can only be used in Croatia and Greece, but undeveloped pipeline infrastructure for further transportation deprives such supplies of economic meaning for countries such as Austria, Hungary, the Czech Republic or Slovakia.

The current multi-directional trends in the world oil market is an additional factor of uncertainty – as the situation in the market directly determines the gas price. Most experts refrain from long-term forecasts, but several estimates foreshadow a further increase in world oil prices. Thus, the experts of Bank of America predict that the price of oil will return to $ 100 per barrel by 2019, and specialist in the field of oil hedge funds Pierre Andurand believes that even $ 300 per barrel “is not impossible.” (vestifinance.ru)

It should also be taken into consideration that the continuing trend towards an increase in world oil prices objectively undermines the belief in the ability of the US shale industry (both oil and gas) to effectively influence global processes. “Shale oil will not solve the current oil supply problems” the British Guardian quotes Goldman Sachs experts as saying. (theguardian.com)

The key shale oil  field in the USA – the Permian – is operating at its limit. It suffers from a lack of space not only for oil production, but also for natural gas production, – analysts of S & P Global Platts warn. (vestifinance.ru)

All  this,  in turn, betokens new attempts by the Donald Trump administration to achieve its global economic goals by what is called in political economy as “measures of non-economic coercion”.

First published in our partner International Affairs

Energy

Is energy transition the answer to Africa’s Socio-Economic Development?

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The African Union Commission (AUC) through the African Energy Commission (AFREC) hosted a high-level online side event at the COP26, held under the theme: “Opportunities and Challenges for African Energy Transition: What will it take for Africa to reach net-zero emissions’’?

The meeting called for bold measures related to opportunities and challenges facing Africa, to accelerate actions towards the full implementation of the Paris Agreement and the UN Framework Convention on Climate Change. The meeting aimed at fully unlocking Africa’s position on climate adaptation, to expand modern energy access, reduce poverty and create jobs, whilst contributing to the global objectives of circumventing the lock-in of carbon into future development on the continent.

As impacts of climate change continue to worsen and pose significant threats to socio-economic development globally, speakers across governments, African Union Commission, African Development Bank, United Nations, leading policy influencers and private sectors deliberated through a virtual forum, co-organised by the African Development Bank (AFDB), United Nations Economic Commission for Africa (UNECA), and the African Union Development Agency (AUDA-NEPAD).

In her keynote address, H.E. Dr Amani Abou-Zeid, Commissioner for Infrastructure and Energy at the African Union Commission underscored that it is in the best interest of Africa to join global efforts, to transition towards Net-Zero emissions, in order to mitigate future impacts of climate change on the continent and also reduce the costs of adaptation.

‘‘The availability of abundant renewable energy resources on the continent such as hydropower, solar, wind, geothermal and bio-energy can transform Africa’s energy sector to modern and sustainable energy through both grid and off-grid systems. These resources offer opportunities to accelerate clean energy access on the continent through energy transition and especially factoring natural gas as an energy transition fuel for power and clean cooking’’, She stressed.

Dr. Abou-Zeid also emphasized that Africa’s political will and commitment is highly significant to accelerate the uptake of renewable energy as evidenced by the targets within countries national plans reflected in their Nationally Determined Contributions (NDCs) to achieve climate and development ambitions. ‘‘COP26 should seek to stimulate concrete actions to address the huge financing gap to achieve net-zero emissions by 2050’’, she further stressed.

Though Africa contributes about 3.6% of the global CO2 emission, there is evidence that climate change impacts on Africa are more severe, bearing in mind that access to affordable clean energy remain one of the biggest challenges facing the continent. Thus, addressing persistent barriers to energy development on the continent through technical, financial, markets, policy and regulatory framework is essential.

H.E Dr Gerd Muller, the Federal Minister for Economic Cooperation and Development of Germany called for joint forces amongst nations to act now on issues of climate change and decarbonisation. He said that moving to renewable energy will create jobs and many other opportunities, which will make Africa a green continent. “Decarbonisation is necessary because the energy sector is the source of more than two thirds of all CO2 emissions’’ he emphasised.  Expressing Germany’s commitment to work with Africa in her energy transition ambitions, he hailed the proposed AU-EU Green Energy Initiative as an appropriate instrument for facilitating a bi-continental approach.

H.E. Mr. Benatou ZIANE, Minister of Energy Transition and Renewable Energy of Algeria noted in a statement read on his behalf by Mr CHABANE Merouane, Permanent Secretary, that Africa needs to diversify its energy sources and liberate itself from the dependency of hydropower, to guarantee energy security for the future generations for the development of an economy which is based on a model that is aligned with socio-economic needs, promote equality, employment creation and responds to Africa’s energy challenges. “Algeria has already started working on a policy framework for a new energy model, to balance a local energy mix which is favourable for transition and reducing emission by 2030. We are also working on developing renewable energy by increasing 15 GW by 2035’’ he stressed.  

In their panel discussion H.E Hon. Dr. Matthew Opoku Prempeh, Minister of Energy of Ghana, Mr. Jean-Paul Adam, Director Technology, Climate Change and Natural Resources Management of UNECA, Mr. Henry Paul Batchi Baldeh, Director Power System Development at AfDB, and Mr. Mamadou Diakhité, Acting Head of Division for Environmental Sustainability at AUDA-NEPAD highlighted the following:

  • Africa need to be realistic in  choosing  the energy transition pathways which address her unique requirements/circumstances;
  • Enhancing policy, legislation and implementation approaches across national, regional and continental level, to enable a favourable environment for development;
  • Leapfrog into the green development space without ignoring Africa’s infrastructure development and industrialisation ambitions;
  • Develop bankable projects to scale up access to funding and investment;
  • Adopt a mix of energy solutions to address the needs of each country including solutions to high tariffs and accessibility to sustainable energy options;
  • Promote energy efficiency which is necessary for energy transition;
  • Focus on building energy infrastructure and strengthening transmission corridors.

The African Union together with its various development agencies and partners have taken concrete actions by developing continental development programmes and projects such as, improving infrastructure to increase regional power system network by 2040, stimulating and expanding energy markets by providing evidence-based policy advise to member states and ensuring that frameworks and strategies which will enhance technology transfer, technical capacity building at continental and national level are adopted and strengthened. Mobilising adequate financing to accelerate the energy transition agenda in Africa is also one the challenges that the Commission has focused its attention.

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Energy

Energy Sector in Spain: Current State and Future Prospects

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Europe’s energy transition is under scrutiny following the region’s soaring electricity prices and the scarcity of fossil fuels. The inadequacy of renewable energies to efficiently respond to these problems has become apparent. Is it necessary to increase the commitment to renewable energies and accelerate the transition? Must Europe re-think the market for emission rights (responsible for 70% of the increase in electricity prices in Spain, according to the Bank of Spain)? Does Europe need to take a step back and stockpile fossil fuels to avoid a future energy crisis?

Spain, like the rest of its European neighbors, has been a victim of the current electricity price crisis and the authorities are still trying to resolve it. To understand it in depth, it is first necessary to understand the state of the energy industry in Spain. This article aims to present a detailed analysis of the most recent developments in the energy field in Spain, the current situation of the sector and its prospects. To this end, it studies fossil fuels, renewable energy, nuclear energy, and ends with an open discussion that seeks to address some of the main issues that will define the future of the energy transition in Spain.

For this analysis, the article takes official documents of the Spanish government as its main basis: the Energy Book 2018 of the Ministry of Ecological Transition and Demographic Challenge, the National Integrated Energy and Climate Plan 2021-2030, the Law 7/2021, of May 20, on Climate Change and Energy Transition. It also uses sources like the Red Eléctrica de España website, multiple Spanish press articles and the IEA Spain 2021 Energy Policy Review.

Fossil Fuels

As of 2018, fossil fuels held a major share in the Spanish final energy consumption. Oil (51% of final energy consumption) is mainly imported from Nigeria, Mexico and Saudi Arabia. Yet, Spain is a net exporter of oil products and has 9 refineries. Gas (16,4%) is mainly imported from Argelia (51% of imports), followed by Nigeria, France and Qatar. Around half of the supply arrives in LPG. Finally, coal (1.8%) is mostly imported from Russia, Colombia and Australia.

The government expects a 34% reduction of the fossil fuels contribution to primary energy by 2030 (with compared to 2017 data). In final consumption, oil participation is forecasted to drop by 28% between 2015 and 2030. Gas will maintain a stable share, due to its key role in the combined cycle electricity production that will support the development of renewable energy. Finally, coal will become insubstantial, in line with the Decision 2010/787/EU of the Council of the EU and the closing of the coal extraction in Spain.

Renewable Energy

Renewable energy made up 7.2% of the total final energy consumption in Spain, a figure that has experienced constant growth since the 1990s, but that has been mostly stable since 2011. In terms of electricity production, data in August 2021 renewable energy accounted for 49% of total production. In addition, a steady growth in thermic renewable energy (1.6% per year, thanks to biomass) and transport renewable energy (thanks to biofuels) should be noted.

Nowadays, the renewable energy sources that have the most installed power capacity in Spain are hydroelectricity and wind power. Wind power and solar PV are expected to experience fast growth, while solar thermoelectric and pumped- storage hydroelectricity will undergo a slower development. Hydroelectricity will remain stable.

The rapid development of renewable energy in Spain is supported by a strong legislative framework. This includes domestic laws as well as the EU policy for Renewable Energy and Climate Change as well as international agreements (the most important of which, the 2015 Paris Agreement, was ratified by Spain in 2017).

Until recently, the main regulatory documents were the 2007 Spanish Strategy on Climate Change and Clean Energy for 2020 and the Renewable Energy Plan 2011-2020, based on EU Directive 2009/28/EC. However, along with the Paris Agreements, Spain is developing a new Legal Framework of 5 documents:

  • Law 7/2021, 20th of May 2021, on Climate Change and Energy Transition: sets the minimum targets for 2030 and 2050.
  • National Integrated Plan of Energy and Climate 2021-2030: published in 2020 the law sets the medium-term prospects and milestones.
  • Strategy for Low Emissions in 2050: has a long-term perspective.
  • Strategy for a Fair Transition: attempts to address the problems of regions of Spain connected to technologies that will be displaced because of the National Integrated Plan of Energy and Climate 2021-2030.
  • National Strategy against Energy Poverty.

This legal basis is supported by a set of institutions: CENER (National Center of Renewable Energies), IDEA (Institute for Diversification and Saving Energy), CIEMAT (Center of Energy, Environment and Technology Research), and CECRE (Center of Control of Renewable Energy). In addition, the government has created the Inter-ministerial Commission of Climate Change and Energy Transition (for coordinating between the different ministries) and has committed to establishing the Commission of Coordination of Climate Change politics (for coordination with the Spanish regions).

The objectives set by the Renewable Energy Plan 2011-2020 for 2020 of at least 20,8% of the final consumption of energy and at least 39% on the total of the electricity consumption coming from renewable energy were achieved. The Law 7/2021, 20th of May 2021, on Climate Change and Energy Transition sets new binding goals: 42% of renewable energy in total final energy consumption in 2030 and 74% of generation of electricity from renewables in 2030.

The National Integrated Plan of Energy and Climate 2021-2030 draws goals and prospects that are in accordance with the new law. For achieving this, it expects the renewable energy power by 2030 to consist of 50 GW of wind power, 39 GW solar PV, 27 GW combined gas cycles, 16 GW hydraulic, 9,5 GW pumped-storage hydroelectricity and 7 GW solar thermoelectric. The plan expects the price of energy generation to drop by 31% by 2030, carbon centrals to be non-competitive, and a governmental investment of 91.765 million euros in renewable energy (80% of which will be allocated to the private sector). It also forecasts that energy dependency will diminish from 73% in 2017 to 61% in 2030.

As for biomass, which accounted for only 4% of the total renewable energy generation in Spain, it is only recently that Spain took the necessary steps to promote this source. The National Integrated Plan on Energy and Climate 2021-2030 comprises the installed energy potential to double between 2015 and 2030, and states that there should be a further normative development.

Nuclear Energy

The share of nuclear energy in the total electricity generation in Spain was 22.20% in 2020, having remained quite stable over the years. It signifies close to 30% of the total clean energy production in Spain.

The main actors of the system are 4 ownership and production companies (Endesa, Iberdrola, EDP and Naturgy), the Ministry of Ecological Transition and Demographic Challenge, the Nuclear Safety Council and ENUSA and Enresa (national companies in charge of fuel supply and radioactive waste management). On the issue of fuel supply, ENUSA Industrias Avanzadas is the state-company that produces nuclear fuel for Spanish nuclear plants as well as for exports. As there is no uranium mining in Spain, the country imports the enriched uranium, mainly from the United Kingdom (Brexit was addressed in bilateral governmental contacts) and it is ensured by the Euratom Treaty and the European Supply Agency. Regarding the waste management, high radioactivity waste storage has been planned but not yet implemented, and there is one storage center for medium and low radioactivity already.

By the year 2035 Spain plans to close all of its nuclear energy generation plants, in collaboration with EU nuclear countries. Enresa and the nuclear energy companies agreed in 2019 on a calendar to shut down the 4 nuclear plants by 2030 and the resting 3 before 2035. This signifies the consolidation of the process of shutdown of the reactors: it establishes the necessary protocols and puts an end to continuous disagreements between the parties. It also makes sure that nuclear energy continues contribute to the clean energy production goals of 2030.

In line with this, the Law/2021, 20th of May 2021, on Climate Change and Energy Transition states that the government will not give or extend any prospecting and exploitation permits for radioactive minerals and that it will not allow for new nuclear plants to be built. With the closing of the current nuclear plants and the prohibition on new nuclear plants, the future of nuclear energy in Spain is being replaced by renewable energy.

Discussion

This article portrays the directions of Spanish energy policy. It notes a number of features: the decline of coal-produced energy and the mining of coal, the preservation of gas as a supporting resource for renewable energy complications, the abandonment of nuclear energy, and the commitment to renewable energy. While these goals are supported by a planned framework and milestones, factors that initially were not accounted for are impacting their progress.

Up until 2020 Spain was successfully closing down coal mining and coal-fired thermal power plants. By 2018 it had abandoned coal mining, and by the end of 2020 it had closed most of these plants. In 2021, however, Spain has had to increase the electricity generation of the remaining coal powered plants due to the storm Filomena and the shortage of energy sources that it is currently suffering. October is expected to be the month this year during which the highest amount of coal consumption. In addition to that, Spain has been buying Moroccan electricity originating from coal.

The use of gas in combined cycle plants is under scrutiny due to recent developments in the country’s main gas source, Algeria. Algeria has traditionally exported gas to Spain via the Medgaz pipeline (directly to Spain) and GME (via Morocco). In recent weeks Alger closed diplomatic relations with Rabat, and three days later hinted that it would not renew the GME pipeline agreement, which expires on 31 October.

Exclusive use of the Medgaz pipeline (which has recently been extended) would not be sufficient to cover Spanish gas demand. Even so, after bilateral contacts, Algeria guaranteed gas supply to Spain and will probably continue to do so via LNG tankers, which will increase prices.

The Spanish nuclear sector is one of the most important sources of clean electricity for Spain. Yet the infrastructure is too old, and its plants have already received too many extensions on their use. The government, therefore, plans to close down all nuclear plants by 2035. As a result, we can expect a rise in the importance of nuclear waste management can be forecasted, as well as problems with the relocation of the industry workers. However, following the electricity prices exponential rice of this summer, the Spanish government has entered into a conflict with the electricity companies (which own the nuclear plants). In response, the companies have threatened to close all nuclear power plants by 2021. Such an event would significantly damage the Spanish stand on clean energy as well as accelerate the termination of nuclear energy in Spain.

In contrast to coal or nuclear energy, renewable energy sources are the focus of government support. The trend in the sector this century has been one of steady development, which this is expected to continue. While hydropower has historically been predominant, wind and solar are set to see the greatest increase. With this, Spain hopes to reduce its dependence on fossil fuels and lower the price of electricity.

However, these plans have been called into question by the events of recent months. On one hand, there has been criticism on the stagnation of the development of solar photovoltaic energy (partly due to the inadequacy of the public administration in processing the requested projects as well as the opposition from local communities in rural areas). While this does not jeopardize Spain’s clean development goals, it does imply a certain slowdown. On the other hand, the current electricity price and energy supply crisis has highlighted the limitations of these developments in Spain, and has strained relations between government and energy companies, which may hinder future progress.

The prospects for energy in Spain are clear: renewable energy. The speed, however, at which Spain plans to reach its targets may be affected by factors not initially foreseen. The need to resort to coal, doubts about gas supply, and the conflict between state and energy companies that has endangered the continuity of nuclear energy in the country are examples of obstacles that need to be overcome. This is not to say that Spain will not achieve its goals, but rather that it is in a transition phase, and that the success of this process depends on how it responds to the problems that arise. This is why the future of energy in Spain, although moving in a very specific direction, is still open.

From our partner RIAC

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The Importance of the South China Sea: Energy Perspective

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Authors: Budi Prayogo Sunariyanto and Akhmad Hanan

Territorial disputes for many countries in the South China Sea has become a hot issue for several years until today. The South China Sea, which mostly consists of ASEAN countries and part of the Asia Pacific region, is currently facing a unilateral claim from China. The dispute is not an intra-ASEAN conflict but involves some ASEAN members, Vietnam, Brunei Darussalam, and the Philippines, against China (outside ASEAN) as an aggressive claimant in the South China Sea. Indonesia is also indirectly involved (as a non-claimant state) because fishers from China often engage in Illegal, Unreported, and Unregulated Fishing (IUUF) activity in the North Natuna Sea – the Indonesian Exclusive Economic Zone.

The issues in the South China Sea have drawn global condemnation as it is considered that China could threaten the peace and security of the ASEAN region. Furthermore, the issues provoked the United States and its allies to stabilize the ASEAN regional security to maintain peace and security in the Asia Pacific region through a trilateral defence pact between Australia, the United Kingdom and the United States (AUKUS) in September 2021. Under the pact, the United States and the United Kingdom will assist Australia in developing nuclear-powered submarines and deploying allied military forces to the Asia Pacific region. This action marks a new Cold War era in the Asia Pacific region, especially in the South China Sea region.

Then the question: is it really just a matter of peace and security issues? We have to look at the geopolitics aspect of the South China Sea from another perspective for the answer. The South China Sea is an area that has abundant natural resources, especially energy resources. China and the ASEAN countries knew that the South China Sea has potential oil and natural gas on the seabed. Quoted from the Asia Maritime Transparency Maritime Initiative, the US Energy Information Agency has estimated that the South China Sea holds about 190 trillion cubic feet (TCF) of natural gas and 11 billion barrels of proven and probable oil reserves. The amount of energy reserves is fantastic and has economic value for any country with territory in the South China Sea.

On the other hand, the total final consumption (TFC) of energy by source in the Asia Pacific region reached almost 175 million Terajoules (TJ) in 2019 and is projected to increase in proportion to the population and economic growth in the Asia Pacific. The Asia Pacific region is home to about 60 percent of the global population. With this fact, many countries in the Asia Pacific are competing to find energy resources to meet their needs, as depicted in the South China Sea dispute to claim energy resources. 

China, which also lies in the Asia Pacific region, has the same goal of obtaining energy resources in the South China Sea. China’s nine-dash line claim in the South China Sea is certainly aimed to secure energy resources to meet China’s energy needs. In 2014, China National Offshore Oil Corporation (CNOOC) conducted a deepwater drilling rig in the Vietnamese waters and began seafloor drilling operations for natural gas. The location of the drilling activity is in Vietnam’s exclusive economic zone and only almost 17 nautical miles from Triton Island in the South China Sea. Then in April 2021, it was reported that Chinese scientists on a marine research vessel “Sea Bull II” had drilled deep in the South China Sea to retrieve sediment core from the seabed. This drilling activity is to explore natural gas hydrate resources in the seabed. China is undoubtedly looking for evidence of energy resources in the South China Sea.

Meanwhile, the US and its allies do not directly target the energy resources in the South China Sea. The US and its allies are interested in blocking China’s influence in the Asia Pacific. More than 30% of global maritime crude oil trade moves through the South China Sea, including crude oil trade from Europe, the Middle East, to the United States. In other words, the US and its allies are interested in securing South China Sea passage and ensuring energy supply for the US and its allies.

The Middle East considers that the South China Sea is a major trade route. In 2016, crude oil shipments from Saudi Arabia mostly passed through the South China Sea. In addition, around 90% of Japan and South Korea’s imported crude oil from Middle Eastern suppliers is transported through the Strait of Malacca and then the South China Sea. With this fact, the security of the South China Sea is essential for energy supply in the Asia Pacific region. 

The conflict in the South China Sea must be resolved immediately through diplomatic mechanisms by the Asian Pacific countries. No one can unilaterally control the South China Sea with the defence power of each country. Moreover, making territorial claims that are contrary to the sovereign rights and international law of the sea. The Asia Pacific countries are responsible for maintaining peace and security because the South China Sea has a vital role in energy security in the Asia Pacific region and globally.

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