Connect with us

Energy

The Energy Sector, Competition and Security in the Eastern Mediterranean

Published

on

Recently, and particularly in 2019–2020, scholars have been increasingly focusing on the Eastern Mediterranean owing to its importance for global transport routes and its growing energy potential. The energy sources in the Levant basin raise the legitimate question: which approach will prevail? Shall we see cooperation in conflict resolution and in promoting collective security, based on joint building and development of the fields, or shall we see competition destined to exacerbate a situation already fraught with conflicts?

Development of the Fields and Plans for Transporting Resources to Global Markets

The Eastern Mediterranean sub-region is at the juncture of Africa, the Middle East, and Europe, which both makes it hostage to old overlapping conflicts and opens up certain opportunities. It is important to remember that gas reserves in the Mediterranean shelf discovered in the XXI century total over 3.8 trillion cubic meters. The key fields are Zohr off the coast of Egypt, Tamar and Leviathan off the coast of Israel, and Aphrodite off the coast of Cyprus, etc. Additionally, the so- called Block 9 is in a part of the field disputed by Lebanon. We can suppose there are large gas reserves off the Syrian coast, as well. By 2020, development had already been launched on several fields but, on the whole, both this process and its implementation are proceeding in fits and starts since matters have to be approved and agreed between unstable governments and oil companies, and also between states themselves, in the absence of demarcated maritime borders.

For decades, most states of the Levant Basin have imported gas and oil. The Egypt-Israel collaboration in the energy sector exhibits a curious dynamic. Currently, these two states have made the greatest progress in developing gas fields in the Eastern Mediterranean. In 2015, Italy’s Eni discovered the gigantic Zohr field in Egypt, a major Arab state, which allowed Cairo to break the vicious circle of its dependence on imports and to cover its own demand for gas. Egypt now produces about 311 million cubic meters of gas and 700,000 barrels of oil daily (from the deposits in the Western Desert adjacent to Libya). However, in January 2020, gas production also started on Leviathan, the largest field in the Levant Basin located on Israel’s stretch of the shelf, and this marked the start of deliveries of Leviathan-produced gas to Egypt. Noble Energy, which develops Leviathan, contracted to deliver gas to Egypt back in 2018. Noble Energy purchased 10% of Eastern Mediterranean Gas Company, which owns the gas pipeline running from Ashkelon in Israel to El-Arish in Egypt (about 90 km). Even though Egypt has no particular need for gas imports, it is striving to create a gas hub. Egypt is planning to receive gas from neighbouring states, liquefy it at the Egyptian LNG plant (Idku LNG with a capacity of 7.2 m. tonnes a year), and sell it on global markets, sending it by tanker to Europe or Asia.

Egypt’s interests have taken this turn since it has had fewer problems developing and selling its own natural gas, while the situation is somewhat more complicated for Israel. Development of the Tamar and Leviathan gas fields has slowed down owing to the technically challenging gas production process, the high market price of the gas (which makes it difficult to find buyers), and domestic political and regional instability stemming from maritime border demarcation issues.

To settle matters related to the above-mentioned Block 9, Israel engaged in talks with Lebanon on demarcating the maritime border, a historic event in the two states’ bilateral relations. Lebanese officials made every effort to emphasize that these talks were purely technical. International companies are certainly interested in the success of these negotiations; the Total- Eni-Novatek consortium has signed a contract for exploration in Block 9. Despite claims that their talks are exclusively technical, both Israel and Lebanon need these negotiations. For Israel, they will mark another success in gaining regional recognition of its rights while, should development of the gas fields prove successful, they will afford Lebanon a special opportunity to attract additional investment. The gas produced could come in handy for both domestic consumption and exports, which together would constitute an important boost to the crisis- stricken Lebanese economy.

Transporting the gas to Europe demanded that Cyprus be involved. This once again raised the predictable issue of Cyprus and prompted a response from Turkey (which we believe to be somewhat belated). In the course of time, Israel succeeded in securing the support of Egypt, Greece and Cyprus. The latter two states need to be involved for two reasons: the Aphrodite deposit was discovered off the coast of Cyprus and there is also the matter of transporting the Levantine natural gas to Europe. This question has produced the principal frictions concerning the Eastern Mediterranean. The plans to build a pipeline to Europe have not been implemented yet; however, on 2 January 2020, Greece, Cyprus and Israel signed a treaty to construct the 1,900-kilometre EastMed gas pipeline. This question is claimed to be of interest to both Europe and the U.S. as mitigating the risks of dependence on Russian gas (see below for further details). Construction of the gas pipeline with a capacity of 10 billion cubic metres a year is expected to take approximately seven years.

Revitalisation of Ankara’s foreign policy and regional competition in the Eastern Mediterranean While other states in the Eastern Mediterranean (Israel, Egypt, Cyprus, Greece and, to some extent, Lebanon) have attempted to form alliances around the energy sector and gas exports, Turkey has remained on the sidelines. Nevertheless, both the regional reconfiguration and the domestic perturbations that affected Turkey in 2016 after the attempted military coup resulted in Ankara taking more active political steps and shaping its own policy in the Eastern Mediterranean. Before 2016, Turkey strove to apply the “strategic depth” concept formulated in the 2000s by the state’s Foreign Minister and Prime Minister Ahmet Davutoglu. Following his resignation in May 2016, and particularly after the attempted military coup, Ankara began to steer a course toward developing a new strategy and becoming actively involved in its neighbours’ affairs.

As a result, Turkey began to drift away from the “strategic depth” concept and toward a policy that is more independent of its traditional partners and also favours tactically advantageous cooperation and going back to using “hard power” … Back in 2006, Turkish Admiral Cem Gürdeniz introduced the “Blue Homeland” (Mavi Vatan) doctrine as part of Turkey’s maritime strategy; Gürdeniz is considered to be one of the principal architects of Turkey’s current policy in the Mediterranean and of the ideology of demarcating the borders with Libya.

The agreements Turkey and the Libyan government concluded in late 2019 resulted from a bilateral Ankara-Tripoli arrangement achieved with complete disregard for other actors and for the 1982 Convention on the Law of the Sea. Since Turkey is not a signatory to that Convention, Ankara believes it had the right to shape its own bilateral relations, which also implies larger sea spaces for Turkey. Sooner or later, this approach by Turkey will inevitably come up against growing discontent on the part of other states. In this respect, much depends on whether Turkey will make concessions and cut a deal to retain some benefits, or whether it will risk escalating tensions, sanctions and serious economic problems. Turkey’s revitalised policy is reaching its limits. In fact, this policy, pursued as part of Turkey’s “Blue Homeland” doctrine, stems from Ankara’s own missed opportunities. We can expect Turkey’s revitalised policy in the “post-Ottoman” space to peak in late 2020 in the face of the discontent of other actors. It is now crucially important for Turkey to reach a regional consensus with the other states of the Eastern Mediterranean.

The Eastern Mediterranean sub-region has laid bare rifts in adjacent regions: Europe and the Middle East. As far the European dimension is concerned, we are observing a rapprochement between Italy and Turkey while France is building up its military presence in the sub-region and countering Turkey’s objectives. As far as the Middle East is concerned, strife and regional competition are building up between Qatar and Turkey on the one hand, and the United Arab Emirates (UAE), Saudi Arabia and Egypt on the other. The establishment of relations between the UAE and Israel might also entail additional risks for Eastern Mediterranean stability, since the two states’ interests are currently rather convergent and contrary to Ankara’s ambitions in the sub-region. Both Israel and the UAE have a high degree of confidence in Washington and their lobbying potential there. This could deliver a powerful blow to U.S.-Turkey relations, already severely tested in connection with the Syrian Kurds and Fethullah Gülen, the Turkish preacher accused of instigating the 2016 attempted military coup in Turkey.

In these circumstances, the rift within NATO takes on a different hue. So far, truly dangerous developments between France and Turkey, locked in a conflict in the Eastern Mediterranean, have been prevented by NATO having “arbitrators” in the U.S. and Germany. Nevertheless, it appears that joint efforts by NATO’s key members and Russia could create opportunities to develop mechanisms for preventing the situation from deteriorating further and tensions from escalating.

Old resolved conflicts in the sub-region overlap with both revived and new problems. For instance, provided local actors adopt an appropriate approach and external actors focus their attention on the sub-region, the energy sector could form the basis for a future regional security architecture; currently, however, these matters are only exacerbating the regional predicament. As they overlap with the traditional Israeli-Palestinian, Greek-Turkish and Cyprus questions, these developments are encouraging escalation and further competition.

The Global Dimension: The U.S. and Russia in the Eastern Mediterranean

A competitive foundation for international relations is currently solidifying in the Eastern Mediterranean. There are no expectations of a cooperative approach, since one party or another will always have greater ambitions and will attempt to implement exclusion policies. Russia and the U.S. are the key external actors interested in the region’s stability, so it would be expedient for them to work out joint crisis-prevention solutions.

For the U.S., Israel’s security and an Israeli-Palestine settlement, as well as support for NATO’s infrastructure and bodies, remain the key issues in the Eastern Mediterranean.

The latter is particularly important for Americans because they view the Eastern Mediterranean as NATO’s naval gateway to the Black Sea. This approach by the U.S. is destructive for other actors globally and for those directly involved in security issues in the Eastern Mediterranean. Given the serious risks and the fact that the situation could get out of hand, the U.S. have therefore been prompted to recognise, at least at expert level, the need to work on technical deconfliction measures in this part of the world. This requires finding a way to untangle the Cyprus, Libya and Syria questions.

As for Russia’s policy in the Eastern Mediterranean, we should recall Russia’s Minister of Foreign Affairs Sergey Lavrov visited Damascus and Cyprus in 2020. Mr. Lavrov emphasised that escalation was inadmissible and called for peaceful resolution of the contradictions through dialogue. Bilateral and multilateral dialogue, UN mechanisms, and international law should bring the parties to de-escalate tensions. Russia’s Foreign Minister also said Moscow was ready to act as a mediator should it be necessary. Russia is particularly concerned about the Syrian and Libyan part of the Eastern Mediterranean since Russia has maintained a military presence in Syria since 2015. By 2020, the world had seen the violence in the Syrian crisis abating but, in 2019–2020, both Lebanon and Syria’s economic situation deteriorated steadily and man-made disasters and large-scale wildfires occurred. People’s lives and the overall humanitarian situation were badly affected by the political elites’ inability to settle the crises and by European and American sanctions. Syria and Lebanon’s markets and currencies fell when the U.S. Congress adopted the so-called Caesar Act, a set of sanctions against Syria, and individual sanctions against Lebanon. Moscow, Washington and Damascus need to launch a serious political dialogue (not only at the level of the secret services) concerning the situation surrounding Lebanon and Syria. Further deterioration is fraught with new risks, especially for the neighbours of the two countries.

With no “honest broker” available in the Eastern Mediterranean, the risks of new regional clashes and problems increase. Some states practice a “bloc-based” approach to developing the fields and transporting gas; there are long- standing conflicts (the Cyprus question, the Palestinian question); there are no diplomatic contacts between individual regional actors (for instance, between Turkey and Egypt, between Turkey and Syria); all these factors exacerbate mistrust and undermine regional security. The Eastern Mediterranean states are committed to resolving economic interaction issues through dialogue provided there are one or more independent actors capable of taking various interests into account and finding solutions. Such a development would create an avenue for building confidence and could even result in collective security elements. (The European Coal and Steel Community played a role in the emergence of the OSCE, so a gas community in the Eastern Mediterranean could advance sub-regional integration and security). Given the U.S.’ interest in the region and the role it plays there, this issue could be put on the Russia-U.S. bilateral agenda with a view to achieving the most secure, acceptable and inclusive result.

First published in RIAC and ISPI Joint Report “After the Storm: Post-Pandemic Trends in the Southern Mediterranean”.

Continue Reading
Comments

Energy

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

Published

on

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).

Continue Reading

Energy

Engaging the ‘Climate’ Generation in Global Energy Transition

Published

on

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

Continue Reading

Energy

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

Published

on

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).

Continue Reading

Publications

Latest

Trending