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Why No Questions Asked About Turkish Stream Gas Pipeline Project

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November 19 saw the completion of the offshore section of the 1,800-kilometer Turkish Stream pipeline to supply Russian natural gas to Turkey. Mentioning the project’s geopolitical significance in a speech during the completion ceremony, Russian President Vladimir Putin said that “Projects of this kind and this project in particular, are not directed against anyone’s interests. They are exclusively constructive in nature. They are aimed at developing relations between states, creating stable conditions for economic development and improving the well-being of our citizens. The implementation of such projects is a clear example of our ability to stand up for our national interests, because Turkish Stream serves the best economic interests of the Turkish Republic.”

When gas starts flowing through the Turkish Stream pipeline as scheduled in 2016, Ankara will no longer have to bother about transit risks for itself. Turkish Stream proves again that Russian-Turkish projects defy any third-country pressure, which is certainly there, but is effectively neutralized by Moscow and Ankara.

This situation comes in sharp contrast with the battles raging over the construction of the Nord Stream 2 pipeline, which is being actively opposed by the United States with President Donald Trump and other officials in Washington warning about Europe’s unacceptable economic and, therefore, political, dependence on energy supplies from Russia.

The Nord Stream 2 project is facing equally strong opposition also from Ukraine and Poland, which are eager to demonstrate their concern about safeguarding America’s interests. During a meeting with Donald Trump in September, Polish President Andrzej Duda, “expressed hope that Trump will stop the construction of the Nord Stream gas pipeline. The Polish president also said that he had discussed with his US counterpart how Washington could benefit from this since Russian energy supplies to Europe prevent the US from selling its LNG to the European market.”

Meanwhile, it looks like Ukraine and Poland are the only countries that welcome the hawkish statements made by US Energy Secretary Rick Perry. During a visit to Kiev earlier this month, Perry made a number of populist and illogical statements. “Thank you, President Petro Poroshenko, for your commitment to energy diversification. The US remains opposed to Nord Stream 2 and any energy source that can be held hostage by unstable state actors. The US stands ready to support our allies with abundant, affordable energy,” he said.

He also said that the “revolution of dignity” [in Ukraine] was a struggle for “economic freedom.” This is exactly the type of “freedom” the United States is forcing upon Ukraine by trying to raise gas prices for the people with the help of the IMF so that the cost of US-supplied LNG does not come as too much of a surprise to ordinary Ukrainians.

Natural gas supplies via the Nord Stream 2 pipeline are expected to begin in January 2020, and the Turkish Stream pipeline will go on-stream in 2019. This means that 80-85 percent of the natural gas transit via Ukraine will move elsewhere. According to the head of the Ukrainian Council on the Development of the Gas Industry and Natural Gas Market Leonid Unigovsky, “after the launch of the Turkish Stream gas pipeline, gas transit through Ukraine will decrease by 12–13 billion cubic meters a year.”

As a result, Ukraine will lose half of the 70-90 billion cubic meters of natural gas currently flowing through its territory.

Mindful of this prospect, Kiev representatives have repeatedly stated that Ukraine is counting on US and EU in thwarting the construction of the Nord Stream 2 gas pipeline. How come they haven’t they been saying the same about the Turkish Stream project?

Ukraine has always actively protested against the construction of the Nord Stream 2 pipeline, but has for most part ignored the Turkish Stream project, just acknowledging the mere fact of its existence and mentioning the possible consequences of its construction.

“The construction of the second half of the Turkish Stream pipe may be completed in 2018. It is almost 50 percent ready now and the rest will be completed next year,” the board chairman of Naftogaz of Ukraine, Andrei Kobolev, said in the fall of 2017.

“We expect that as early as late next year, the first leg Turkish Stream will take on a share of the [gas] transit through the territory of Ukraine,” he added.

The US position on the Turkish Stream project has never been as vocal and insistent as it has been on the North Stream 2. Kiev’s position has been the same, even despite the threat Turkish Stream poses to its economic interests. Just like that of the leaders of Mejlis (banned in Russia) who, despite their claim to have a special relationship with Ankara, have not protested against the construction of the  Turkish Stream pipeline, realizing full well that kowtowing to Washington’s interests  could cost them their more important relations with Ankara.

Why all this lack of attention towards the Turkish stream project? Washington wants Europeans to start buying its LNG, which, though expensive, brings democracy to the Old World, while simultaneously sticking to its anti-Russian policy. The US is also unwilling to antagonize a fellow NATO member, which plays an important role in the Middle East and the Syrian conflict.

Europe needs gas and doesn’t really care about where it comes from, provided that itkeeps non-commercial risks at a minimum [something Kiev worries so much about], and is available at an affordable price.

Ukraine wants to remain a transiter of Russian gas while simultaneously switching to LNG imports from the US and convincing the European Union of the importance of such an arrangement. Kiev’s fears are reflected in concrete figures: “… the implementation by the Russian Gazprom of the Nord Stream 2 gas pipeline project poses a major fiscal risk for Ukraine, which will lose up to 3 percent of GDP.”

Speaking of strange logic, Ukraine’s Foreign Minister Pavel Klimkin insists on the extension of the gas transit contract with Russia beyond 2020, which he believes could facilitate his country’s early EU integration. However, there are certain undercurrents here too. Ukrainian energy officials planned to minimize transit risks through the sale of the country’s gas transmission system (GTS).

“The Ukrainian GTS costs about $14 billion. Ernst & Young estimated it at 329 billion hryvnia ($11.9 billion), and so Ukraine will be looking for buyers of its ‘pipe’ outside the EU,’” in a thinly-veiled hint that there is only one buyer outside the European Union – the United States.

Washington wants to wrest Ukraine from the peaceful context of interstate relations by keeping it in a state of tension and conflict with Russia. However, this goal is fully shared by Kiev, which entertains illusions that America really cares much about Ukraine’s economic wellbeing. In fact, the US is more interested in the European market than it is in Ukraine’s, so the former Soviet republic is only instrumental in Washington’s ongoing war with Brussels for the EU market.

Turkey is a NATO member playing a significant role in the Middle East and serving a buffer between Europe and refugees. Ankara has a real sway over the political processes unfolding both in Europe and the Middle East. This allows President Recep Tayyip Erdogan to play his game defending his country’s interests.

By contrast, Ukraine, which neither has an own game to play, nor any political weight to lean on, just can’t afford antagonizing Turkey, which, otherwise, might stop reckoning with Kiev’s interests in the Black Sea region. Meanwhile, as Russia’s President Vladimir Putin said, the gas transit via Ukraine will continue only if its economic feasibility is fully proved by Kiev.

First published in our partner International Affairs

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Indonesian Coal Roadmap: Optimizing Utilization amid Global Tendency to Phasing Out

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Authors: Razin Abdullah and Luky Yusgiantoro*

Indonesia is potentially losing state revenue of around USD 1.64-2.5 billion per year from the coal tax and non-tax revenues. Although currently Indonesia has abundant coal resources, especially thermal coal, the coal market is gradually shrinking. This shrinking market will negatively impact Indonesia’s economy. The revenue can be used for developing the country, such as for the provision of public infrastructures, improving public education and health services and many more.

One of the main causes of the shrinking coal market is the global tendency to shift to renewable energy (RE). Therefore, a roadmap is urgently needed by Indonesia as a guideline for optimizing the coal management so that it can be continuously utilized and not become neglected natural resources. The Indonesian Coal Roadmap should also offer detailed guidance on utilizing coal for the short-term, medium-term and long-term.

Why is the roadmap needed?

Indonesia’s total coal reserves is around 37.6 billion tons. If there are no additional reserves and the assumed production rate is 600 million tons/year, then coal production can continue for another 62 years. Even though Indonesia’s coal production was enormous, most of it was for export. In 2019, the export reached 454.5 million tons or almost 74% of the total production. Therefore, it shows a strong dependency of the Indonesian coal market on exports, with China and India as the main destinations. The strong dependency and the global trend towards clean energy made the threat of Indonesian coal abandonment increasingly real.

China, one of Indonesia’s main coal export destinations, has massive coal reserves and was the world’s largest coal producer. In addition, China also has the ambition to become a carbon-free country by 2060, following the European Union countries, which are targeting to achieve it in 2050. It means China and European Union countries would not produce more carbon dioxide than they captured by 2060 and 2050, respectively. Furthermore, India and China have the biggest and second-biggest solar park in the world. India leads with the 2.245GW Bhadla solar park, while China’s Qinghai solar park has a capacity of 2.2GW. Those two solar parks are almost four times larger than the U.S.’ biggest solar farm with a capacity of 579 MW. The above factors raise concerns that China and India, as the main export destinations for Indonesian coal, will reduce their coal imports in the next few years.

The indications of a global trend towards RE can be seen from the energy consumption trend in the U.S. In 2019, U.S. RE consumption exceeded coal for the first time in over 130 years. During 2008-2019, there has been a significant decrease in U.S coal consumption, down by around 49%. Therefore, without proper coal management planning and demand from abroad continues to decline, Indonesia will lose a large amount of state revenue. The value of the remaining coal resources will also drop drastically.

Besides the global market, the domestic use of coal is mostly intended for electricity generation. With the aggressive development of RE power plant technology, the generation prices are getting cheaper.  Sooner or later, the RE power plant will replace the conventional coal power plant. Therefore, it is necessary to emphasize efforts to diversify coal products by promoting the downstream coal industries in the future Indonesian Coal Roadmap.

What should be included: the short-term plan

In designing the Indonesian Coal Roadmap, a special attention should be paid to planning the diversification of export destinations and the diversification of coal derivative products. In the short term, it is necessary to study the potential of other countries for the Indonesian coal market so that Indonesia is not only dependent on China and India. As for the medium and long term, it is necessary to plan the downstream coal industry development and map the future market potential.

For the short-term plan, the Asian market is still attractive for Indonesian coal. China and India are expected to continue to use a massive amount of coal. Vietnam is also another promising prospective destination. Vietnam is projected to increase its use of coal amidst the growing industrial sector. In this plan, the Indonesian government plays an essential role in building political relations with these countries so that Indonesian coal can be prioritized.

What should be included: the medium and long-term plans

For the medium and long-term plans, it is necessary to integrate the coal supply chain, the mining site and potential demand location for coal. Therefore, the coal logistics chain becomes more optimal and efficient, according to the mining site location, type of coal, and transportation mode to the end-user. Mapping is needed both for conventional coal utilization and downstream activities.

Particularly for the downstream activities, the roadmap needs to include a map of the low-rank coal (LRC) potentials in Indonesia, which can be used for coal gasification and liquefaction. Coal gasification can produce methanol, dimethyl ether (a substitute for LPG) and, indirectly, produce synthetic oil. Meanwhile, the main product of coal liquefaction is synthetic oil, which can substitute conventional oil fuels. By promoting the downstream coal activities, the government can increase coal’s added value, get a multiplier effect, and reduce petroleum products imports.

The Indonesian Coal Roadmap also needs to consider related existing and planned regulations so that it does not cause conflicts in the future. In designing the roadmap, the government needs to involve relevant stakeholders, such as business entities, local governments and related associations.

The roadmap is expected not only to regulate coal business aspects but also to consider environmental aspects. The abandoned mine lands can be used for installing a solar farm, providing clean energy for the country. Meanwhile, the coal power plant is encouraged to use clean coal technology (CCT). CCT includes carbon capture storage (CCS), ultra-supercritical, and advanced ultra-supercritical technologies, reducing emissions from the coal power plant.

*Luky Yusgiantoro, Ph.D. A governing board member of The Purnomo Yusgiantoro Center (PYC).

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Engaging the ‘Climate’ Generation in Global Energy Transition

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photo: IRENA

Renewable energy is at the heart of global efforts to secure a sustainable future. Partnering with young people to amplify calls for the global energy transition is an essential part of this endeavour, as they represent a major driver of development, social change, economic growth, innovation and environmental protection. In recent years, young people have become increasingly involved in shaping the sustainable development discourse, and have a key role to play in propelling climate change mitigation efforts within their respective communities.

Therefore, how might we best engage this new generation of climate champions to accentuate their role in the ongoing energy transition? In short, engagement begins with information and awareness. Young people must be exposed to the growing body of knowledge and perspectives on renewable energy technologies and be encouraged to engage in peer-to-peer exchanges on the subject via new platforms.

To this end, IRENA convened the first IRENA Youth Forum in Abu Dhabi in January 2020, bringing together young people from more than 35 countries to discuss their role in accelerating the global energy transformation. The Forum allowed participants to take part in a truly global conversation, exchanging views with each other as well as with renewable energy experts and representatives from governments around the world, the private sector and the international community.

Similarly, the IRENA Youth Talk webinar, organised in collaboration with the SDG 7 Youth Constituency of the UN Major Group for Children and Youth, presented the views of youth leaders, to identify how young people can further the promotion of renewables through entrepreneurship that accelerates the energy transition.

For example, Joachim Tamaro’s experience in Kenya was shared in the Youth Talk, illustrating how effective young entrepreneurs can be as agents of change in their communities. He is currently working on the East Africa Geo-Aquacultural Development Project – a venture that envisages the use of solar energy to power refrigeration in rural areas that rely on fishing for their livelihoods. The project will also use geothermal-based steam for hatchery, production, processing, storage, preparation and cooking processes.

It is time for governments, international organisations and other relevant stakeholders to engage with young people like Joachim and integrate their contributions into the broader plan to accelerate the energy transition, address climate change and achieve the UN Sustainable Development Agenda.

Business incubators, entrepreneurship accelerators and innovation programmes can empower young people to take their initiatives further. They can give young innovators and entrepreneurs opportunities to showcase and implement their ideas and contribute to their communities’ economic and sustainable development. At the same time, they also allow them to benefit from technical training, mentorship and financing opportunities.

Governments must also engage young people by reflecting their views and perspectives when developing policies that aim to secure a sustainable energy future, not least because it is the youth of today who will be the leaders of tomorrow.

IRENA

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The Urgency of Strategic Petroleum Reserve (SPR) for Indonesia’s Energy Security

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Authors:Akhmad Hanan and Dr. Luky Yusgiantoro*

Indonesia is located in the Pacific Ring of Fire, which has great potential for natural disasters. These disasters have caused damage to energy infrastructure and casualties. Natural disasters usually cut the energy supply chain in an area, causing a shortage of fuel supply and power outages.

Besides natural disasters, energy crisis events occur mainly due to the disruption of energy supplies. This is because of the disconnection of energy facilities and infrastructure by natural disasters, criminal and terrorist acts, escalation in regional politics, rising oil prices, and others. With strategic national energy reserves, particularly strategic petroleum reserves (SPR), Indonesia can survive the energy crisis if it has.

Until now, Indonesia does not have an SPR. Meanwhile, fuel stocks owned by business entities such as PT Pertamina (Persero) are only categorized as operational reserves. The existing fuel stock can only guarantee 20 days of continuity. Whereas in theory, a country has secured energy security if it has a guaranteed energy supply with affordable energy prices, easy access for the people, and environmentally friendly. With current conditions, Indonesia still does not have guaranteed energy security.

Indonesian Law mandates that to ensure national energy security, the government is obliged to provide national energy reserves. This reserve can be used at any time for conditions of crisis and national energy emergencies. It has been 13 years since the energy law was issued, Indonesia does not yet have an SPR.

Lessons from other countries

Many countries in the world have SPR, and its function is to store crude oil and or fuel oil. SPR is built by many developed countries, especially countries that are members of the International Energy Agency (IEA). The IEA was formed due to the disruption of oil supply in the 1970s. To avoid the same thing happening again, the IEA has made a strategic decision by obliging member countries to keep in the SPR for 90 days.

As one of the member countries, the US has the largest SPR in the world. Its storage capacity reaches a maximum of 714 million barrels (estimated to equal 115 days of imports) to mitigate the impact of disruption in the supply of petroleum products and implement US obligations under the international energy program. The US’ SPR is under the control of the US Department of Energy and is stored in large underground salt caves at four locations along the Gulf of Mexico coastline.

Besides the US, Japan also has the SPR. Japan’s SPR capacity is 527 million barrels (estimated to equal 141 days of imports). SPR Japan priority is used for disaster conditions. For example, in 2011, when the nuclear reactor leak occurred at the Fukushima nuclear power plant due to the Tsunami, Japan must find an energy alternative. Consequently, Japan must replace them with fossil fuel power plants, mainly gas and oil stored in SPR.

China, Thailand, and India also have their own SPR. China has an SPR capacity of 400-900 million barrels, Thailand 27.6 million barrels, and India 37.4 million barrels. Singapore does not have an SPR. However, Singapore has operational reserve in the form of fuel stock for up to 90 days which is longer than Indonesia.

Indonesia really needs SPR

The biggest obstacles of developing SPR in Indonesia are budget availability, location selection, and the absence of any derivative regulations from the law. Under the law, no agency has been appointed and responsible for building and managing SPR. Also, government technical regulations regarding the existence and management of SPR in Indonesia is important.

The required SPR capacity in Indonesia can be estimated by calculating the daily consumption from the previous year. For 2019, the national average daily consumption of fuel is 2.6 million kiloliters per day. With the estimation of 90 days of imports, Indonesia’s SPR capacity must at least be more than 100 million barrels to be used in emergencies situations.

For selecting SPR locations, priority can be given to areas that have safe geological structures. East Kalimantan is suitable to be studied as an SPR placement area. It is also geologically safe from disasters and is also located in the middle of Indonesia. East Kalimantan has the Balikpapan oil refinery with the capacity of 260,000 BPD for SPR stock. For SPR funding solution, can use the state budget with a long-term program and designation as a national strategic project.

Another short-term solution for SPR is to use or lease existing oil tankers around the world that are not being used. Should the development of SPR be approved by the government, then the international shipping companies may be able to contribute to its development.

China currently dominates oil tanker shipping in the world, Indonesia can work with China to lease and become Indonesia’s SPR. Actually, this is a good opportunity at the time of the COVID-19 pandemic because oil prices are falling. It would be great if Indonesia could charter some oil tankers and buy fuel to use as SPR. This solution was very interesting while the government prepared long-term planning for the SPR facility. In this way, Indonesia’s energy security will be more secure.

*Dr. Luky Yusgiantoro, governing board member of The Purnomo Yusgiantoro Center (PYC).

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