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Syria and Lebanon: Energy Challenges and Chances Remain High

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Syria’s energy landscape is slowly taking form after eight years into the conflict. Despite the fact that the Islamic State (IS) terrorist organization has lost control of almost all territory that it once held, Syrian, non-Syrian actors and foreign powers are not ready to discuss creating a political deal. Instead, they continue to compete for control over energy infrastructure and trade in order to gain political leverage.

Oil middlemen facilitate fuel trade between the Syrian government and the Syrian Democratic Forces (SDF). In light of the American declared position to withdraw military forces from northeastern Syria, the SDF and local interest groups in the oil producing areas have allegedly reached an understanding with the Assad government that allows reinstitution of regime control over oil and gas fields in exchange of security guarantees and a revenue-sharing arrangement that is beneficial for both sides.

It is estimated that the American-supported SDF produces approximately 50-70 thousand barrels of oil per day. From this, 40 thousand barrels are destined for the local market, and the rest are funneled to the Syrian regime.  The lack of investment however in the rehabilitation of energy infrastructure in northeast Syria impedes the increase of oil production. The absence of American investment in the U.S-controlled areas in northeast Syria is attributed to Washington’s reluctance to actively engage in nation-building and long-term construction. This reality has prompted China to dynamically pursue its Belt and Road Initiative throughout Syria and diversify Chinese foreign asset holdings in the context of new geopolitics of global infrastructure development countering American influence at regional and international levels.  In fact, Chinese investors have returned to Syria and inspect gas installations they held before the outbreak of the Syrian civil war, while the China National Petroleum Corporation has stakes in the largest Syrian oil companies namely the Syrian Petroleum Company and Al Furat Petroleum.

In general, foreign production sharing contractors go back to Syria to inspect either oil facilities that are under the control of the SDF or gas facilities that are mostly under the control of the Syrian government. French Total and Royal Dutch Shell are two major oil production sharing agreement holders in facilities under the complete control of the American-supported SDF.

The U.S. leverage over Syria’s oil and gas fields through the American-supported SDF is important. This situation provides Washington a golden opportunity for strong bargaining power in negotiations with the Assad regime for Syria’s political future. Equally important, the energy industry—from equipment and sales to crude transportation—is heavily sanctioned by the United States and the European Union. U.S. sanctions on Syria’s energy industry predate the crisis, but their renewal has sent the signal to state and non-state actors that revenue generation from the black-market oil and gas trade will not be tolerated. European sanctions imposed in 2011 prohibit trade on equipment and technology for the oil and gas sectors including exploration and production, refining and gas liquefaction.      

In this complex setting, the Russian factor cannot be ignored. Russian companies like Gazprom contribute to the restoration of destroyed infrastructure and have upgraded the Banias refinery located in western Syria. Russian companies seem to lead investment in revitalizing Syria’s oil and gas sector. However, due to sanctions, it will be difficult for Damascus to find partners to buy its crude exports. 

Under the circumstances, it is estimated that the U.S. should implement its advanced technology to rehabilitate critical energy facilities in northeast Syria as a means to solidify control over vital infrastructure; this will grant Washington a major foothold in Syria and provide a bargaining power in future political negotiations with the Assad regime. Also, the U.S. in coordination with the EU should set up a governing body to ensure that the potential international safe zone in northern Syria does not exceed 10 km in depth. This would allow oil and gas facilities in northeast Syria to continue production without interruption and not deter investors from participating in the rehabilitation of the Syrian oil industry.

Coming to neighboring Lebanon, the Lebanese government launched the second international licensing round for geopolitically diverse blocks 1, 2, 5, 8 and 10. The country’s energy sector and regulatory framework have advanced with the adoption of the Petroleum Tax Law and the model Exploration and Production Agreement (EPA), as well as the 2017 decree that divided the Lebanese Exclusive Economic Zone (EEZ) into ten blocks.

Notably, the Lebanese regulatory framework is still underdeveloped despite the fact that the first licensing round was unexpectedly transparent. For this reason, a sovereign wealth fund law and onshore exploration law should be enacted to ensure transparency and confidence in the Lebanese petroleum investment framework.  Transparency can be built on the standards set by the Extractive Industries Transparency Initiative that is a global standard promoting accountability in managing oil and gas revenues, and reforms for greater transparency. The recently enacted Law 84 is a step towards the right direction in that it aims to enhance transparency and fight corruption in the Lebanese oil and gas sector.

Overlapping maritime claims between Israel and Lebanon over an 854-square kilometer (km) maritime boundary continue to be a major challenge due to the high risk of escalation if exploration of block 9 were to proceed in the disputed area. American mediation led by then US Deputy Assistant Secretary of State and now ambassador to Turkey David Satterfield after years of failed initiatives to help resolve the Israeli-Lebanese maritime dispute has been critical. According to leaked information, Lebanon has sought to ensure that Hezbollah’s arms are not linked to the maritime boundary demarcation negotiations and has rejected Israel’s proposal for a 6-month timeframe of talks.

Negotiations are currently stalled but it is with no doubt that they have so far been complex and difficult due to implications on the national security of both Israel and Lebanon. It is estimated that negotiations will likely start again in the coming months as Lebanon considers the process to be viable according to a statement made by the Lebanese prime minister during his August 15th official visit to Washington DC.

On another note, the newly founded East Mediterranean Gas Forum (EMGF), which aims to create a regional gas market, facilitate the use of existing ones, and construct new infrastructure is a significant development. Interestingly, the exclusion of Lebanon from EMGF has prompted the country to not seek alternative membership in any new Russian or Iranian supported like-minded energy Forum. Instead, Lebanon advocates for the speedy development of three Floating Storage and Regasification Units (FSRUs) to secure swift access to new gas supplies and at relatively low cost. 

In terms of policies to be pursued, the US should continue to act as mediator and facilitator in the discussions to demarcate the disputed maritime area between Lebanon and Israel, allowing the two neighbors to embark on trans-boundary gas sharing initiatives on exploration and production. The resolution of the maritime boundary dispute will be immensely beneficial to Lebanon and the broader region.  Also, a sovereign wealth fund law and onshore exploration law should be enacted to ensure transparency, efficient management of gas revenues, and confidence in the Lebanese petroleum investment framework so that international energy companies are attracted to the country’s oil and gas sector.  

Evidently, Syria and Lebanon are players in a high-stakes energy game unfolding in the East Mediterranean. The way that both countries address challenges and explore chances will determine their engagement or exclusion from broad energy cooperation that increasingly defines the region and the policy agendas. In this respect, time is of the essense.

Antonia Dimou is Head of the Middle East Unit at the Institute for Security and Defense Analyses, Greece; and, an Associate at the Center for Middle East Development, University of California, Los Angeles

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Energy transition is a global challenge that needs an urgent global response

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COP26 showed that green energy is not yet appealing enough for the world to reach a consensus on coal phase-out. The priority now should be creating affordable and viable alternatives 

Many were hoping that COP26 would be the moment the world agreed to phase out coal. Instead, we received a much-needed reality check when the pledge to “phase out” coal was weakened to “phase down”. 

 This change was reportedly pushed by India and China whose economies are still largely reliant on coal. The decision proved that the world is not yet ready to live without the most polluting fossil fuels. 

 This is an enormous problem. Coal is the planet’s largest source of carbon dioxide emissions, but also a major source of energy, producing over one-third of global electricity generation. Furthermore, global coal-fired electricity generation could reach an all-time high in 2022, according to the International Energy Agency (IEA).

 Given the continued demand for coal, especially in the emerging markets, we need to accelerate the use of alternative energy sources, but also ensure their equal distribution around the world.

 There are a number of steps policymakers and business leaders are taking to tackle this challenge, but all of them need to be accelerated if we are to incentivise as rapid shift away from coal as the world needs. 

 The first action to be stepped up is public and private investment in renewable energy. This investment can help on three fronts: improve efficiency and increase output of existing technologies, and help develop new technologies. For green alternatives to coal to become more economically viable, especially, for poorer countries, we need more supply and lower costs.

 There are some reasons to be hopeful. During COP26 more than 450 firms representing a ground-breaking $130 trillion of assets pledged investment to meet the goals set out in the Paris climate agreement. 

 The benefits of existing investment are also becoming clearer. Global hydrogen initiatives, for example, are accelerating rapidly, and if investment is kept up, the Hydrogen Council expects it to become a competitive low-carbon solution in long haul trucking, shipping, and steel production.

 However, the challenge remains enormous. The IEA warned in October 2021 that investment in renewable energy needs to triple by the end of this decade to effectively combat climate change. Momentum must be kept up.

 This is especially important for countries like India where coal is arguably the main driver for the country’s economic growth and supports “as many as 10-15 million people … through ancillary employment and social programs near the mines”, according to Brookings Institute.  

This leads us to the second step which must be accelerated: support for developing countries to incentivise energy transition in a way which does not compromise their growth. 

Again, there is activity on this front, but it is insufficient. Twelve years ago, richer countries pledged to channel US$100 billion a year to less wealthy nations by 2020, to help them adapt to climate change. 

The Organization for Economic Cooperation and Development estimates that the financial assistance failed to reach $80 billion in 2019, and likely fell substantially short in 2020. Governments say they will reach the promised amount by 2023. If anything, they should aim to reach it sooner.

There are huge structural costs in adapting electricity grids to be powered at a large scale by renewable energy rather than fossil fuels. Businesses will also need to adapt and millions of employees across the world will need to be re-skilled. To incentivise making these difficult but necessary changes, developing countries should be provided with the financial support promised them over a decade ago.

The third step to be developed further is regulation. Only governments are in a position to pass legislation which encourages a faster energy transition. To take just one example, the European Commission’s Green Deal, proposes introduction of new CO2 emission performance standards for cars and vans, incentivising the electrification of vehicles. 

This kind of simple, direct legislation can reduce consumption of fossil fuels and encourage industry to tackle climate change.

Widespread legislative change won’t be straightforward. Governments should closely involve industry in the consultative process to ensure changes drive innovation rather than add unnecessary bureaucracy, which has already delayed development of renewable assets in countries including Germany and Italy. Still, regardless of the challenges, stronger regulation will be key to turning corporate and sovereign pledges into concrete achievements. 

COP26 showed that we are not ready as a globe to phase out coal. The priority for the global leaders must now be to do everything they can to drive the shift towards green energy and reach the global consensus needed to save our planet.

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Pakistan–Russia Gas Stream: Opportunities and Risks of New Flagship Energy Project

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source: twitter

Russia’s Yekaterinburg hosted the 7th meeting of the Russian-Pakistani Intergovernmental Commission on Trade, Economic, Scientific and Technical Cooperation on November 24–26, 2021. Chaired by Omar Ayub Khan, Pakistan’s Minister for Economic Affairs, and Nikolai Shulginov, Russia’s Minister of Energy, the meeting was attended by around 70 policy makers, heads of key industrial companies and businessmen from both sides, marking a significant change in the bilateral relations between Moscow and Islamabad.

Three pillars of bilateral relations

Among the most important questions raised by the Commission were collaboration in trade, investment and the energy sector.

According to the Russian Federal Customs Service, the Russian-Pakistani trade turnover increased in 2020 by 45.8% compared to 2019, totaling 789.8 million U.S. dollars. Yet, there is still huge potential for increasing the trade volume for the two countries, including textiles and agricultural products of Pakistan and Russian products of machinery, technical expertise as well as transfer of knowledge and R&D.

Another prospective project discussed at the intergovernmental level is initiating a common trade corridor between Russia, the Central Asia and Pakistan. Based on the One-Belt-One-Road concept, launched by China, the Pakistan Road project is supposed to create a free flow of goods between Russia and Pakistan through building necessary economic and transport infrastructure, including railway construction and special customs conditions. During the Commission meeting, both countries expressed their intention to collaborate on renewal of the railway machines fleet and facilities in Pakistan, including supplies of mechanized track maintenance and renewal machines; supplies of 50 shunting (2400HP or less) and 100 mainline (over 3000HP) diesel locomotives; joint R&D of the technical and economic feasibility of locomotives production based in the Locomotive Factory Risalpur and other. The proposed contractors of the project might be the Russian Sinara Transport Machines, Uralvagonzavod JSC that stand ready to supply Pakistan Railway with freight wagons, locomotives and passenger coaches. In order to engage import and export activities between Russian and Pakistani businessmen, the Federation of Pakistan Chamber of Commerce signed a memorandum with Ural Chamber of Commerce and Industry, marking a new step in bilateral relations. Similar memorandums have already been signed with other Chambers of Commerce in Russian regions.

— Today, the ties between Russia and Pakistan are objectively strengthening in all areas including economic, political and military collaboration. But we, as businessmen, are primarily interested in the development of trade relations and new transit corridors for export-import activities. For example, the prospective pathways of the Pakistan-Central Asia-Russia trade and economic corridor project are now being actively discussed at the intergovernmental level, — said Mohsin Sheikh, Director of the Pakistan Russia Business Council of the Federation of Pakistan Chambers of Commerce and Industry. — For Islamabad, this issue is one of the most important. Based on a similar experience of trade with China, we see great prospects for this direction. That is why representatives of Pakistan’s government, customs officers, diplomats and businessmen gathered in Yekaterinburg today.

However, the flagship project of the new era of the Pakistan-Russia relations is likely to be the Pakistan Gas Stream. Previously known as the North-South Gas Pipeline, this mega-project (1,100 kilometers in length) is expected to cost up to USD 2,5 billion and is claimed to be highly beneficial for Pakistan. Being a net importer of energy, Pakistan will be able to develop and integrate new sources of natural gas and transport it to the densely populated industrialized north. At the same time, the project will enable Pakistan—whose main industries are still dependent on the coal consumption—to take a major step forward gradually replacing coal with relatively more ecologically sustainable natural gas. To enable this significant development in the Pakistan’s energy sector, Moscow and Islamabad have made preliminary agreements to carry on the research of Pakistan’s mineral resource sector including copper, gold, iron, lead and zinc ores of Baluchistan, Khyber Pukhtunkhwa and Punjab Provinces.

A lot opportunities but a lot more risks?

The Pakistan Stream Gas Pipe Project undoubtedly opens major investment opportunities for Pakistan. Among them are establishment of new refineries; the launch of virtual LNG pipelines; building of LNG onshore storages of LNG; investing in strategic oil and gas storages. Yet, it seems that Pakistan is likely to win more from the Project than Russia. And here’s why. The current version of the agreement signed by Moscow and Islamabad has been essentially reworked. According to it, Russia will likely to receive only 26 percent in the project stake instead of 85 percent as it was previously planned, while the Pakistani side will retain a controlling stake (74 percent) in the project.

Another stranding factor for Russia is although Moscow will be entitled to provide all the necessary facilities and equipment for the building of the pipeline, the entire construction process will be supervised by an independent Pakistani-based company, which will substantially boost Pakistan’s influence at each development. Finally, the vast bulk of the gas transported via the pipeline will likely come from Qatar, which will further strengthen Qatar’s role in the Pakistani energy sector.

Big strategy but safety first

The Pakistan Stream Gas Pipeline will surely become an important strategic tool for Russia to reactivate the South Asian vector of its foreign policy. Even though the project’s aim is not to gain a fast investment return and economic benefits, it follows significant strategic goals for both countries. As Russia-India political and economic relations are cooling down, Moscow is likely to boost ties with Pakistan, including cooperation in economy, military, safety and potentially nuclear energy, that was highlighted by Russian Foreign Minister Sergey Lavrov during visit to Islamabad earlier this year. Such an expansion of relations with Pakistan will allow Russia to gain a more solid foothold in the South Asian part of China’s BRI, thus opening up a range of new lucrative opportunities for Moscow.

Apart from its economic and political aspects, the Pakistan Stream Project also has clear geopolitical implications. It marks Russia’s growing influence in South Asia and points to some remarkable transformations that are currently taking place in this region. The ongoing geopolitical game within the India-Russia-Pakistan triangle is yet less favorable for New Delhi much because of the Pakistan Stream Project. Even though the project is not directly aimed to jeopardize the India’s role in the region, it is considered the first dangerous signal for New Delhi. For instance, the International “Extended troika” Conference on Afghanistan, which was held in Moscow last spring united representatives from the United States, Russia, China and Pakistan but left India aside (even though the latter has important strategic interests in Afghanistan).

With the recent withdrawal of the U.S. military forces from Afghanistan, Moscow has become literally the only warden of Central Asia’s security. As Russia is worried about the possibility of Islamist militants infiltrating the Central Asia, the main defensive buffer in the South for Moscow, the recent decision of Vladimir Putin to equip its military base in Tajikistan, which neighbors Afghanistan, seems to be just on time. Obviously, Islamabad that faces major risks amidst the Afghanistan crisis sees Moscow as a prospective strategic partner who will help Imran Khan strengthen the Pakistani efforts in fighting the terrorism threat.

From our partner RIAC

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Energy

How wind power is transforming communities in Viet Nam

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In two provinces of Viet Nam, a quiet transformation is taking place, driven by the power of renewable energy.

Thien Nghiep Commune, a few hundred kilometres from Ho Chi Min City, is a community of just over 6,000 people – where for years, people relied largely on farming, fishing and seasonal labour to make ends meet.

Now, thanks to a wind farm backed by the Seed Capital Assistance Facility (SCAF) – a multi-donor trust fund, led by the United Nations Environment Programme (UNEP) – people in the Thien Nghiep Commune are accessing new jobs, infrastructure and – soon – cheap, clean energy. The 40MW Dai Phong project, one of two wind farms run by SCAF partner company the Blue Circle, has brought new hope to the community.

For the 759 million people in the world who lack access to electricity, the introduction of clean energy solutions can bring improved healthcare, better education and affordable broadband, creating new jobs, livelihoods and sustainable economic value to reduce poverty.

“It’s not only about the technology and the big spinning wheel for me. It’s more about making investment decisions for the planet and at the same time not compromising on the necessity that we call electricity,” said Nguyen Thi Hoai Thuong, who works as a community liaison. “The interesting part is I work for the project, but I actually work for the community and with the community.”

While the wind farm is not yet online, a focus on local hiring and paying fair prices for land has already made a big difference to the community.

“I used the money from the land sale to the Dai Phong project to repair my house and invest in my cattle. Currently, my life is stable and I have not encountered any difficulties since selling the land,” said Ms. Le Thi Doan.

Powering change

The energy sector accounts for approximately 75 per cent of total global greenhouse gas emissions (GHGs). UNEP research shows that these need to be reduced dramatically and eventually eliminated to meet the goals of the Paris Agreement.

Renewable energy, in all its forms, is one of humanity’s greatest assets in the fight to limit climate change. Capacity across the globe continues to grow every year, lowering both GHGs and air pollution, but the pace of action must accelerate to hold global temperature rise to 1.5 °C this century.

“To boost growth in renewables, however, companies need to access finance,” said Rakesh  Shejwal, a Programme Management Officer at SCAF. “This is where SCAF comes in. SCAF works through private equity funds and development companies to mobilize early-stage investment low-carbon projects in developing countries.”

The 176 projects it seed financed have mobilized US $3.47 billion to build over one gigawatt of generation capacity, avoiding emissions of 4.68 million tons of carbon dioxide (CO2) equivalent each year.

But SCAF’s work isn’t just about cutting emissions. It is bringing huge benefits across the sustainable development agenda: increasing access to clean and reliable electricity and boosting communities across Asia and Africa. SCAF will be potentially creating 17,000 jobs.

This is evident in Ninh Thuan province, where the Blue Circle created both the first commercial wind power project and the first to be commissioned by a foreign private investor in Viet Nam.

Here, the Dam Nai wind farm has delivered fifteen 2.625 MW turbines, the largest in the country at the time. These will generate approximately 100 GWh per year. They will avoid over 68,000 tCO2e annually and create more than an estimated 302 temporary construction and 13 permanent operation and maintenance jobs for the local community.

Students from the local high school in Ninh Thuan Province were also given the opportunity to meet with engineers and technicians on the project, increasing their knowledge about how renewable energy works and opening up new career paths.

SCAF, through its partners, is supporting clean energy project development in the Southeast Asian region and African region. SCAF has more than a decade of experience in decarbonization and is currently poised to run till 2026.

UNEP

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