Two separate reports on the future of the Middle East suggest the region could someday soon be 100% renewable in its energy sources, and 100% uninhabitable due to climate change.
“The major oil-producing countries that call the Middle East and North Africa region home could make use of abundant renewable energy resources and transition to a fully renewable energy system in the coming decades,” CleanTechnica reports. But “new evidence is deepening scientific fears, advanced few years ago, that the Middle East and North Africa risk becoming uninhabitable in a few decades, as accessible fresh water has fallen by two-thirds over the past 40 years,” the Inter Press news service warns.
According to a study by Finland’s Lappeenranta University of Technology (LUT), Iran could complete a renewable energy transition by 2030, while the rest of the Middle East/North Africa (MENA) region “could make use of the abundant and various renewable energy resources available to them and develop a lucrative system in less than two decades,” writes CleanTechnica’s Joshua S. Hill. “In fact, the researchers determined that a fully renewable electricity system is approximately 50% to 60% cheaper than other emission-free energy options” across the region.
“The low-cost renewable electricity system is a driver for growing standards of living, continued economic growth, in particular also for energy-intensive products, and finally, more peace,” said LUT Professor Christian Breyer.
“The picture that emerges from the study is that the fossil fuel industry can transform its business to meet the COP21 target of a net zero emission energy system,” he added. “This requires fundamental change in how we think about carbon, but it could potentially open major new business opportunities.”
But if climate change continues unabated, Inter Press says there may be no one living in the Middle East to enjoy the change.
“The region’s fresh water resources are among the lowest in the world, and are expected to fall over 50% by 2050,” the news agency reports, citing the UN Food and Agriculture Organization. “Moreover, 90% of the total land in the region lies within arid, semi/arid and dry sub/humid areas, while 45% of the total agricultural area is exposed to salinity, soil nutrient depletion, and wind water erosion.” Agriculture consumes about 85% of the water available in the region, more than 60% of which “flows from outside national and regional boundaries.”
The situation prompted FAO Director General José Graziano de Silva to declare water access a “fundamental need for food security, human health, and agriculture”, adding that “looming water scarcity in the North Africa and Middle East region is a challenge requiring an urgent and massive response.”
Inter Press cites several recent studies on the Middle East climate crisis, including an MIT report that predicted a high enough heat index to make the region uninhabitable by 2100 unless climate change is brought under control.
When Saudi Aramco launches its blockbuster public share offering next year, its commitment to pour billions into renewable energy projects may be a key factor in drawing the attention of a group of institutional investors with $60 trillion under management.
Those investors have all signed on to the Principles for Responsible Investment (PRI), thereby promising to consider environmental, social, and governance (ESG) factors in their investment decisions, Bloomberg reports, in a recent post on Renewable Energy World. By adopting environmental and sustainability goals, Aramco “immediately open themselves up to a larger pool of investors,” said PwC partner Scott Gehsmann. “If a company is looking at raising capital, they typically must have a strategy around sustainability. If they don’t have one, it can be perceived as a negative.”
Saudi Arabia’s initial objective in adopting an ambitious renewables program was to shift more of its oil production from domestic consumption to exports. And “whether greening Aramco’s IPO would boost the value of the offering is an open question, one clouding the debate over how much investors will pay and whether the renewable energy program unfolds as expected,” Bloomberg notes.
But even so, “drawing in a bigger group of investors requires both better environmental and social governance disclosures and the start of a strategy to deal with limits on fossil fuel pollution coming from the United Nations climate deal signed in Paris in 2015.”
Navi Brar, head of advisory for the Middle East and Africa at AccountAbility, said Saudi companies and government ministries have had to scramble to put renewables and ESG programs in place. Some of them “have come to us and said, ‘How do we get our ESG performance up to a level that puts us on a level playing field globally so that investors don’t shy away from us?’” he said. “That has been something that we’ve seen, and I would expect investors to ask for such disclosures from Aramco, as well.”
Oil prices fell 5% in a single day earlier this week, pushing the Canadian dollar to its lowest value this year, after the United States reported higher oil reserves than analysts and market-watchers expected.
“The April crude contract lost $2.86 to settle at $50.28 US a barrel, its largest one-day drop in nine months,” CBC reports. “The stockpile figures come a day after Saudi Arabia’s energy minister said OPEC production cuts are working to bolster crude prices, but it hasn’t decided yet whether it wants to extend the cutbacks beyond this summer.”
OPEC had spent months brokering a production cut among its members, aimed at reversing a fossil price crash that is now into its third year. But the fragility of that “recovery” has been reflected in the industry’s day-to-day obsession with fluctuating oil prices—and, now, in the ability of a single production report from the U.S. Energy Information Administration to pull the bottom out of the market.
“It is increasingly looking like U.S. production is recovering faster than expected,” Manulife Asset Management Managing Director Steve Belisle told CBC. “They’re drilling like never before and that is bringing production back faster than expected.”
Analysts initially expected a slower recovery on the part of U.S. shale operators, but “production is going through the roof,” Belisle added. “They didn’t need as much investment to jump-start production as before. That’s what has been surprising to the oil market in general.”
One advantage for shale producers, oilprice.com reports on The Energy Collective, is the production cost cuts of 30% in 2015 and 22% in 2016 that they achieved through “new drilling techniques, efficiency gains, and learning-by-doing.” But “some of the ‘efficiency gains’ could be temporary,” warns analyst Nick Cunningham.
“As drilling picks up, the supply of oilfield services and equipment will tighten, putting upward pressure on the cost of contractors for oil producers,” he writes. One fossil business intelligence firm anticipates 10 to 15% cost inflation this year. Already, shale producers in Texas’ Permian Basin are having trouble attracting new employees, rig rental rates are rising fast, and the cost of frac sand for a single well could increase from $350,000 last year to $800,000 to $1 million in 2017.
“The cost reductions since 2014 have been billed by the industry as monumental—putting drillers on sounder financial footing going forward, allowing companies to survive and thrive in a world of $50 oil,” Cunningham writes. But ultimately, “the longevity of the nascent shale rebound will be determined not in Texas, but in Vienna. If OPEC decides not to extend its production cut deal through the end of the year, oil prices could head down again.”
A lucrative trade in oil and gas appears to be at the heart of a series of geopolitical moves in the Indian Ocean by Saudi Arabia and China. And much of the action centres on the Maldives, one of the small island states on the front lines of climate change, according to an in-depth report published yesterday on Climate Home.
The story begins with efforts by Saudi Arabia “to secure oil trade routes to east Asia through a multi-billion-dollar investment in a Maldives atoll,” write editor Karl Mathiesen and reporter Megan Darby, citing interviews with foreign policy specialists and ex-Maldives president Mohamed Nasheed, now in exile in London, UK.
Climate Home describes the atoll in question, Faafu, as “a collection of 19 low-lying islands 120 kilometres south of the capital Malé and home to 4,000 people.” Recently, Faafu has been the subject of unconfirmed reports of a Saudi purchase. “President Abdulla Yameen Abdul Gayoom has denied the entire atoll will be sold to the Saudis, but said plans for a ‘megaproject’ worth US$10 billion—three times his country’s GDP—would be disclosed ‘once the negotiation process was completed,’” the specialist news outlet notes.
The deal puts the Maldives at the epicentre of Saudi national interest, a possible military expansion by China, and both countries’ interest in safe, secure oil shipments.
“The economic future of the Saudi petro-kingdom is bound to the sale of oil, gas, and other goods to China,” Mathiesen and Darby write. “The supply lines for that trade run through the Indian Ocean, where terror is a growing concern and vessels are shadowed by piracy.”
But the shipments also pass by the Maldives, a tiny country with a “growing Wahhabist majority and autocratic government,” where “the Saudis have found—or, according to the Maldivian opposition, created—a pliant ally where few questions are asked and fewer are allowed.”
Nasheed said it was “disturbing” to see Faafu put up for sale with no public tender. “[The Saudis] want to have a base in the Maldives that would safeguard the trade routes, their oil routes, to their new markets,” he told Mathiesen. “To have strategic installations, infrastructure.” He added that a “cultural campaign” supported by the Saud dynasty had fueled the spread of Wahhabism in the island state, setting the stage for an “unprecedented” land grab.
The Saudis “have had a good run of propagating their worldview to the people of the Maldives and they’ve done that for the last three decades,” he added. “They’ve now, I think, come to view that they have enough sympathy for them to get a foothold.”
Housing Minister Mohamed Muizzu told a news conference in Malé that he hoped to see a big investment. “We don’t want to move slowly,” he said. “We want transformational change. That is the whole mentality of this government. We want to bring better living conditions to this country on a large scale, in a small period of time.”
But Opposition MP Eva Abdulla was skeptical. “With Faafu or any other project, we are told there will be a trickle-down effect,” she told Climate Home. “That is not what we have seen. It is government MPs and their cronies who get all the benefits.”
The other part of the story is China’s growing role in financing infrastructure in the Maldives, including a “Friendship Bridge” connecting Malé to its airport island and a new port on Laamu atoll, south of Faafu. China now holds 70% of the Maldives’ foreign debt, and Chatham House associate fellow Cleo Paskal believes China sees Saudi Arabia’s Faafu deal as an opening to extend its own military footprint.
“China is on record as wanting a base in the Maldives,” she told Climate Home. “It was a big issue in 2015. It already has or is working on ‘commercial’ ports in several countries along the route from the Indian Ocean to China and recently opened an overtly military naval base in Djibouti. Saudis are unlikely to build anything like that for themselves, but may facilitate the construction of some sort of ‘resupply’ installation built by China that would likely have dual use capacity.”
But Ankit Panda, senior editor of The Diplomat, said the longer strategic view may be coming from the Maldives itself. “The geopolitical layer to this, in my view, is more on the Maldivian side for now,” he said. “The Saudis are looking primarily for a strategic investment opportunity,” but the Maldives “understands its strategic location in the Indian Ocean and sees a Saudi outpost there potentially paying dividends in the future.”
Climate Home points to the irony of a strategic oil and gas deal involving this particular small island state. “The employment of the Maldives as a strategic anchor for future oil trade rubs against the country’s vulnerability to climate change,” Mathiesen and Darby write. “It is the lowest-lying country on earth, with a high point of just 2.4 metres, meaning even small rises in sea level could be devastating.”
While one new U.S. cabinet appointee flew to the Mideast to reassure skittish Iraqis that his boss didn’t mean what he’d said about taking their oil, another assured the Wall Street Journal that he meant every word about scrapping his predecessor’s signature climate legislation.
Last month, Donald Trump told an audience of CIA employees that the United States ” should have kept [Iraq’s] oil” when its troops occupied the country for more than a decade after 2003. “But okay,” he added. “Maybe you’ll have another chance.”
Defense Secretary Jim Mattis told Iraqi officials at a meeting in Baghdad on Monday that “the U.S. military is not in Iraq to seize anybody’s oil,” Reuters reports.
But on a parallel track, Scott Pruitt, confirmed late last week as the new administrator of the Environmental Protection Agency, made it plain that President Barack Obama’s Clean Power Plan, a favourite Trump target during last year’s election campaign, is very much in his sights.
“Pruitt told the Wall Street Journal that he expects to quickly withdraw both the Clean Power Plan and the Waters of the United States Rule, the Obama administration’s attempt at clarifying the EPA’s regulatory authority under the Clean Water Act,” ThinkProgress reports.
Pruitt, who has repeatedly challenged the scientific consensus on climate change, dodged the question when asked whether the EPA should regulate carbon dioxide and other greenhouse gases.
“There will be a rule-making process to withdraw those rules,” Pruitt told the Journal. “And part of that process is a very careful review of a fundamental question: Does EPA even possess the tools, under the Clean Air Act, to address this? It’s a fair question to ask if we do, or whether there in fact needs to be a congressional response to the climate issue.”
In legal, if not alt-, fact, the United Supreme Court settled that question a decade ago, “ruling in Massachusetts vs. EPA that the EPA does, in fact, possess the authority under the Clean Air Act to regulate greenhouse gases as air pollutants,” ThinkProgress notes.
Meanwhile the Washington Post reports that the Trump White House was preparing two new executive orders to put Pruitt’s agenda items into action.
“One will instruct the [EPA] to begin rewriting the 2015 regulation that limits greenhouse gas emissions from existing electric utilities,” the paper states. The Obama-era regulation, part of the Clean Power Plan, would have forced utilities to reduce their use of coal as a fuel.
In his campaign, Trump adopted the industry’s rhetoric that this constituted a “war” on the highly polluting mineral. The same order is expected to “instruct the Interior Department’s Bureau of Land Management to lift a moratorium on federal coal leasing,” the Post says. The other anticipated executive order would remove federal protection from wetlands, rivers, and streams that feed federal waterways.
Although it lives in the shadows of the region’s dominant oil and gas player, Saudi Aramco, state-owned Qatar Petroleum has just concluded a two-decade growth spree that made it the world’s leading source of liquefied natural gas (LNG), and a bigger oil and gas producer than ExxonMobil or Russian state oil company Rosneft PJSC.
Now, with domestic crude production declining and new offshore gas drilling off the table, the company is looking to shift into international markets, and “QP will have no problem paying for overseas expansion,” Bloomberg reports. The country’s LNG terminals have mostly been paid for, according to Qatari Energy Minister Mohammed Al Sada, and the country expects the current global natural gas glut to ease by 2021.
The news agency’s overview tracks a history in which Qatar Petroleum has been active in oil, gas, electricity—and helium, of which it is the world’s biggest exporter. But the company made its biggest mark with gas, becoming the world’s largest LNG exporter in 2006 after building 14 production plants in partnership with some of the world’s biggest fossil companies.
“By more than doubling gas and oil production since 2006, Qatar has become the world’s fourth-biggest energy supplier and wealthiest country by per capita income,” reports correspondent Mohammed Aly Sergie. “Qatar Petroleum has overtaken Rosneft and Exxon in total output, according to data compiled by Bloomberg, and the company makes and sells more LNG than any other.”
With ownership positions in the businesses that extract, process, ship, and receive its gas, the company has used its integrated supply chain to deliver the cheapest gas in the world, “an advantage QP plans to exploit as competitors in Australia and the U.S. dethrone it as the top producer by volume,” Bloomberg notes.
A sensitive point to European Union nations and their leaders is their dependence on Russia for 37% of the union’s natural gas supply. Moscow has more than once hinted it might close the taps. But new discoveries in the Eastern Mediterranean may change that equation, if significant technical and political hurdles can be overcome.
Plans are under way to deliver gas from the Leviathan field west of Haifa, which Israel claims, to Turkey and Egypt by undersea pipeline. But “the whole area from Cyprus to Lebanon and Egypt may be sitting on even bigger gas fields,” Bloomberg reports. “The United States Geological Survey estimates they could hold more than 340 trillion cubic feet, an amount that would surpass U.S. proven reserves.”
And Europe beckons, as a continent that is “rich, mostly lacking its own fuels, and desperate to wean itself off energy dependence on Russia,” the news agency notes. “It’s just that getting the gas there will require collaboration between countries with a history of feuding or fighting.”
A first problem will be aligning all the region’s potential producer nations behind a delivery strategy. Gas fields in the region are claimed by Egypt, Israel, and Cyprus, although some are also off the Gaza strip, theoretically part of some future Palestinian state which might lay claim to them. Even so, Bloomberg finds reasons for all the region’s big powers—Turkey, Egypt, and Israel—to collaborate on gas development and delivery.
‘Many analysts see an Israel-Turkey pipeline via Cyprus as the best way to transmit gas to Europe,’ writes correspondent David Wainer. “It could also be piped to LNG plants in Egypt and shipped from there. Israeli and European Union officials have even held talks on an ambitious pipeline route all the way to Greece.”
But that may be ambitious, he cautions. “Hundreds of miles of undersea pipelines will cost billions of dollars and pose a technical challenge for their designers. The region’s geology, especially the massive trench along the seabed from Israel to Turkey, will make pipeline construction tough.
And there are price concerns, as “the global supply glut weighs on the industry’s appetite for expensive projects.”
Financial media skepticism about TransCanada Corporation’s Keystone XL pipeline continued last week, with geologist and Forbes contributor Art Berman weighing in with the reminder that “it will take at least $85 oil prices to develop the new oil sands projects needed to fill the pipeline.”
And Berman adds a second risky bet to the Keystone equation: that continuing growth in U.S. tight oil production will produce sufficient demand for the heavy oil that Canada’s tar sands/oil sands can offer to refiners.
Berman notes that tar sands/oil sands production only began to accelerate when oil prices exceeded US$70 per barrel in 2005 (his calculations are all in December 2016 dollars). At that price, their cumulative output of 10 billion barrels dwarfs U.S. tight oil production of 2.4 billion barrels from the Bakken formation, 2.4 billion from the Eagle Ford field, and 0.8 from the Permian basin.
With global oil prices likely to stabilize in the $50 to $60 per barrel range, Berman notes, the Canadian Association of Petroleum Producers foresees the tar sands/oil sands adding 128,000 barrels per day of output until 2021, then another 59,000 barrels per day after that. [Climate and energy analysts can cite multiple factors that could make those figures an over-estimate.] But “if all of that new oil were going to KXL, it would not reach capacity for about 10 years.” Moreover, “other pipelines are already approved for expansion and will probably get much of the oil before KXL is completed,” he writes.
“TransCanada’s bet, therefore, is that oil prices will move much higher and more quickly than most forecasts anticipate, and that the volumes will be there by the time the pipeline is built.”
The other shaky assumption behind Keystone 2.0 is that the tight oil fields in the U.S. will continue producing for several decades. They create demand for the heavier product from Alberta, Berman explains, since most of the ultra-light crude they produce is too light for U.S. refineries. That physical reality—not the rhetoric about securing America’s oil supply or dealing with less hostile trading partners—explains why the U.S. imports three times as much oil from Canada as it does from Saudi Arabia, or as much from Canada as it receives from Saudi Arabia, Venezuela, Mexico, Colombia, and Iraq combined.
But as Berman and other shale boom critics have been warning for some time, “production from the Bakken and Eagle Ford plays is in marked decline and Permian tight oil production growth has slowed,” Berman writes. “This is despite record high numbers of producing wells in all three plays.” He figures Bakken and Eagle Ford production have already peaked, while the Permian can look ahead to “several years” of growth—but future growth forecasts are all based on the broad assumption that oil prices will gradually climb.
Which may be a stretch, given Donald Trump’s apparent determination to clear regulatory “hurdles” and unleash an increase in U.S. oil production despite weak demand for the product. In late January, Reuters reported that earlier price increases were faltering, based on reports that U.S. oil drilling was ramping up, with the country’s active rig count hitting its highest number since November 2015. “We’re in a holding pattern at this point in time,” said investment manager Mark Watkins. “Supply is a big factor right now, and you have the U.S. really filling that gap that OPEC has left open.”
(But even when analysts believed that OPEC production cuts would drive a steady increase in oil prices, fossil analysts were measuring and publications were headlining day-to-day change in pennies, not the multiples of dollars that would be needed to sustain production increases in the tar sands/oil sands.)
Two other small, momentary measures of how American oil output could defeat global efforts to drive up prices (and, in the end, drive down prices across the board): Bloomberg reported last week that U.S. exports are expected to exceed the production of four OPEC nations in 2017. And the oversupply of gasoline on the country’s east coast is so severe that tankers en route to New York are being redirected, rather than adding their cargoes to the glut.
It’s time to stop awfulizing and keep organizing. But it’s hard to pay attention or keep your balance against a deluge of incoming news and distraction from the new administration in Washington, DC. We’ve started TrumpWrap to consolidate—and condense—the daily flow of news on the new U.S. presidency, to free up space in our digest and your reading schedule for the material we’re supposed to be carrying on the rise of clean energy and the accelerating collapse of the fossil economy. We’ll go deeper on Trump stories when we have to—but otherwise, we’ll get back to our regular coverage priorities, encourage you to follow the links when you really need to monitor the U.S. administration more closely, and archive TrumpWrap along with the rest of the content on our site.
It was payback time in Washington, DC last week, as the fossil industry began counting up its return on investment for the US$98 million it lavished on last year’s federal election campaign (89% of it to Republicans).
In what Global Witness calls a “grave threat to U.S. national security” and an “astonishing gift to Big Oil,” the Republican-majority Senate rescinded a rule designed to prevent corrupt deals between oil companies and foreign governments, while Congress as a whole got to work on a Roadmap to Repeal, a Koch Industries wish list for deregulating domestic oil and gas production.
“It was a tally of rules that energy industry executives and lobbyists had waged a futile fight against for eight years, donating millions of dollars to lawmakers who vowed to help block them, filing lawsuits to try to overturn them, and hiring experts to generate reports that questioned the need for them,” the New York Times reports. The hit list includes an Obama-era methane regulation, the loss of which will cost U.S. taxpayers US$330 million in wasted natural gas each year, plus $800 million in lost tax revenues over the next decade.
But like other aspects of the Trump takeover, the attack on energy and climate regulation is showing small signs of stalling out, with Rep. Jason Chaffetz (R-UT) withdrawing legislation to transfer three million acres of “excess” federal lands to states and InsideClimate News pointing to glaring flaws in the former casino mogul’s plan to fund a $1-trillion infrastructure package by raising royalties on an oil and gas drilling boom on public lands. The Brookings Institution, meanwhile, sees a “bleak outlook for Trump’s promises to coal miners”, given the long-standing impact of automation on coal industry employment.
Saudi Arabia, on the other hand, is considering boosting its investments in U.S. fossil production, after a first conversation with a famously xenophobic head of state who campaigned on a promise to increase his country’s energy independence against OPEC, of which Saudi Arabia is the de facto lead.
“There are huge areas of alignment” between the two countries, Saudi Energy Minister Khalid al-Falih told BBC last week. “President Trump has policies which are good for the oil industries, and I think we have to acknowledge it.” (Question to ponder: With Trump in charge, will Saudi Arabia demand cash on delivery?)
ICN also reports that the new management in Washington was shifting the content and tone of the Environmental Protection Agency website, though Quartz says a group of 60 programmers and scientists was busy downloading EPA data and storing it safely on European servers at the moment of Trump’s inauguration. (At last count, the pre-January 20 EPA also lived on courtesy of The Internet Archive’s Wayback Machine.)
Elsewhere, while some Republicans were trying to change their tune—or at least their optics—on climate change, others were back for more of the same. The New York Times has a good analysis of incoming EPA Administrator Scott Pruitt’s doubletalk on climate science. But in these turbulent times, it’s nice to know there are some rock-solid constants to count on: Like Lamar Smith (R-TX), chair of the House Science Committee, coming back for another round of attack on the supposed “secret science” behind the EPA’s (former) climate agenda.
Saudi Arabia is intent on delivering the cheapest solar- and wind-generated electricity on the planet when it awards a tender for 700 megawatts of renewable power this fall.
The contract will be a first installment on a $30- to $50-billion plan to generate 9.5 gigawatts from renewable sources by 2023.
“The terms on renewable contracts will be motivating so that the cost of generating power from these renewable sources will be the lowest in the world,” Energy Minister Khalid Al-Falih told media Wednesday.
“These projects have a significant size,” he added. “They will be the largest in the region size-wise, and they are the first Saudi project that will be tendered through private-public partnership.”
Saudi Arabia is the world’s biggest oil exporter, and the highest-producing member of the Organization of Petroleum Exporting Countries, Bloomberg notes.
“Building more solar plants and developing a nuclear power industry is part of a broader government plan to diversify away from crude sales as the main source of income.”