Derek Brower
US soldiers began leaving Iraq’s cities on 30th June—the same day that Iraq’s oil ministry began to sell off the rights to drill its lucrative oil and gas reserves. It was a victory, of sorts, for a sovereign Iraq. But western oil companies, with one exception, spurned the auction. The politics of the country’s oil wealth now threaten to undermine its limited political progress—and the economic designs of western business.
Three forces are conspiring to keep the west away from Iraq’s 115bn barrels of oil— the world’s third largest reserve. Violence is one. On the day of the auction a bomb in the northern city of Kirkuk killed 37 people. More bombs in Baghdad and near Mosul killed dozens in July. It looks like a grim pattern: Iraq’s death toll has been on the rise since the turn of 2009, and June was the bloodiest month since last December.
Oil companies rarely shy from danger, and some (like Chevron and Norway’s StatoilHydro) have been working in Iraq. But as a herd they have become more risk averse—a legacy of the financial crisis and this year’s oil-price collapse. As a result, rights to Iraq’s eight biggest oilfields yielded only one contract, as most companies judged Iraq’s terms too steep. The contract went to a partnership between BP and China National Petroleum Corporation (CNPC), one of a host of state-owned Asian firms searching for new energy supplies. The government will pay them to turn the Rumaila field into the world’s second biggest, capable of pumping 2.85m barrels a day, or about 3 per cent of world demand. But they will be paid only $2 per barrel, half what BP asked for, and a fraction of what other companies wanted.
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Jeffrey Henderson
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South Asia has been dominated by two military conflicts in past months: Pakistan pounding of the Taliban in the Swat Valley, and the obliteration of the Tamil Tigers in Sri Lanka. Disturbing as these conflicts are, both may be dwarfed by a wider and more significant trend in the region—the rise of a newly assertive China.
At Hambantota in Sri Lanka, Chinese companies are building a new port that could serve as a refuelling and docking facility for the Chinese navy as it extends its presence (presently confined to helping police pirate activities off the Horn of Africa) across the Indian Ocean. China has also provided much of the military hardware that underpinned the Sri Lankan victory.
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John Rose
The economic crisis has exposed the dangers of Britain’s unbalanced economy. It is now widely accepted that preventing another such disaster means rebalancing our economy, ending our over-reliance on financial services and revitalising our manufacturing industry. The key to this could lie in a surprising area: nuclear power.
Nuclear has moved up the national and international agenda as problems of energy security and climate change push forward the search for new energy sources. But the nuclear revival could also bring about a renaissance in Britain’s high value-added manufacturing sector.
The government has identified 11 potential sites for its new nuclear power stations, which will provide around 20GW of electrical power. This new-build programme will of course create many construction jobs. More importantly, though, the majority of new jobs—up to 60 per cent—will require skills generic to high value-added manufacturing, such as electro-mechanical design and engineering, systems integration, robotics, materials science and process control. A new round of nuclear power stations is therefore an opportunity to build up this country’s manufacturing skills base through a privately-financed national programme.
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Julian Gough
I have decided to devote this column to doing only good.
I shall start by solving the energy crisis. Now, crisis is a terrible description and shortage is worse. The terms of this debate have been set by the oil industry, whose worldview was formed when atoms were solid. Oil industry executives still see cars as the solution to the global threat emanating from horses (who, scientists once predicted, would bury the world’s cities under 20ft of manure by 1950). But how can you have a shortage of energy in a universe made out of nothing but energy? On a planet half of which is bathed in high-energy radiation at all times? A planet with a core of solid, crystalline iron, which rotates in a boiling slurry of molten rock so energetic it can burst through the earth’s skin to consume cities? A planet with a moon that hauls entire oceans, whales and all, several meters up in the air, twice daily? Earth’s air pours forth raw electricity, in billion-volt bolts, at a global rate of 100 times a second. Absurd excesses of energy lash us from every direction, it’s a miracle we’re not all dead. Shortage? The crisis is one of overproduction.
Yet people are faffing about attempting to run cars on soya oil. Stop it! It’s embarrassing! Where is your pride in technological advance? Way back in the 1970s, spacecraft already used fuel cells and solar panels and elegant gravitational slingshots around distant planets and yet we, in the 21st century, are still trying to move forward by essentially lighting our own farts.
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Derek Brower
Russia’s annual gas row with Ukraine erupted again in December, shutting down exports for nearly two weeks. Brussels fretted, Moscow and Kiev swapped insults and their two state-controlled energy firms—Gazprom and Naftogaz—bickered, before reaching a compromise. (Russia wanted to raise Ukraine’s bill in line with European prices, while Ukraine wanted more money to transport the gas.) The dispute, more serious than its predecessor in 2006, will trigger yet more debate about Europe’s energy supplies. Three years of tough EU rhetoric, however, have yielded little progress. The EU’s flawed strategy—that market liberalisation will bring energy security—has been undone by energy companies careless of the continent’s broader long-term needs as they pursue short-term profits.
Gas is a particular flashpoint. It burns more cleanly than oil and coal, which is important for plans to slow global warming. Its power stations are also cheap, which energy companies like. This has pushed up demand: despite the recession European consumption will shoot up from 493bn cubic metres in 2010 to an estimated 625bn in 2030. Dwindling local reserves will see Europe’s gas imports almost double.
The EU is caught in a bind. It wants more gas in general, but less from Russia. One escape route could be importing more liquefied natural gas (LNG)—gas converted into liquid form so it can be shipped around the world. This is cheap, for the moment, but it needs expensive specialist terminals to receive it. And many of these are in the wrong places. Britain’s spare capacity, for instance, does little to help Bulgaria. Proposals to build new facilities normally stall because the sellers want guaranteed prices, while the buyers don’t have the money to build terminals without guarantees about supply. Energy companies, who do nicely out of a tight market, have little incentive to build new depots, so the LNG sails off to terminals that already exist, often in Asia. The result is typical of the market failures that should prompt the EU to rethink its liberal instincts.
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John Beddington
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This year will see unprecedented attention given to climate change. Boosted by new political will in Washington, our political leaders will begin to sign up to emissions reductions far tougher than Kyoto. In November Britain passed a legally-binding commitment to an 80 per cent cut in emissions by 2050. Barack Obama has promised to follow suit. But still, a major rethink about the way we use energy is urgently needed.
Where should we put in most effort? The conventional wisdom says it’s all about cars, planes, and wind farms. Both the media and climate change protesters, who last month shut down Stansted airport, help cement this view. But air travel contributes a few per cent to global emissions. Meanwhile activities in British homes and offices make up more than half. If we really want to sustain the planet, we must first fix the buildings where we live, work and play. On 26th November, the government office for science, which I run, published “Powering our Lives,” a report arguing that we need a new drive to turn our old, inefficient building stock into the low-carbon homes of the future.
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Derek Brower
“In 20 years it will look like Dubai,” said Liban Bogor from the front seat. We were bumping over the rubble in a Toyota land cruiser at 10mph, returning from a feedlot on the outskirts of Bosaso, a port town on the Horn of Africa. Bogor is an influential local “businessman,” and around here that usually means a warlord, but I struggled to share his optimism. We passed youths carrying Kalashnikovs and children playing on trucks with mounted .50-calibre machine guns. Dubai it is not.
Bosaso is a hardscrabble Somalian town. The economy, such as it is, depends on the export of goats across the Gulf of Aden to Yemen. The beach is a vast latrine. In huts on the edge of Bosaso live refugees from Ethiopia and war-torn southern Somalia. Some of them try the crossing to Yemen; many die in doing so.
When our plane touched down in the town after a five-hour flight from Nairobi, we emerged to be greeted by men chewing the narcotic qat as they slouched over their AK-47s. They were not a friendly bunch. “Don’t take any more pictures of them,” an Australian mercenary with local knowledge warned us.
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Richard Barry
Colbert, financial controller to Louis XIV, famously remarked that “the art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.” The Colbert prize is an occasional award, going to the government department that runs the tax scheme with the highest feather-to-hissing ratio.
The department of energy and climate change (DECC) wins the 2008 Colbert prize for its clever system of renewable obligation certificates (ROCs). Last year it used ROCs to pluck £470m from the public, and did it with no hissing at all. Furthermore—a point that a 17th-century aristocrat like Colbert would no doubt have particularly enjoyed—the plucking is regressive, taking proportionally more feathers from poor geese than from rich ones.
All this is a consequence of the British government’s decision to place the responsibility for delivering (and financing) environmentally-friendly power in the hands of the generation utilities.
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Tom Burke
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Gordon Brown does not dither about nuclear power. His commitment to it is emphatic, advancing since the start of the year from a policy of simply replacing Britain’s existing nuclear capacity to one of doubling it, and now to there being no upper limit to its share of electricity generation. Brown has undertaken a radical reform of the nuclear regulatory and planning processes, aimed at clearing the path for new reactors. It is therefore particularly poignant that this is a policy doomed to fail.
Energy prices are rising, the climate is changing and power stations are closing—so we need more nuclear power. So runs the overwhelming volume of argument in the media. But what is missing is any critical examination of the case that underpins these dire warnings from ministers and utility industry nabobs about the lights going out. The lights are not going to go out. The government’s nuclear policy will fail. And all that will really matter is that we will have lost precious time in switching to a more climate-friendly method of electricity generation.
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Philip Ball
What to do with our nuclear waste
Now that the climate change bill has cleared its first hurdle in the Commons, it seems likely the government will have to reduce carbon emissions by at least 60 per cent by 2050. But while you might think this strengthens the case for a new generation of nuclear power stations, they will not necessarily be required. There is nothing in the bill to stop the government discharging its obligation by buying carbon credits from other countries, while not lessening emissions one jot.
Even if this loophole is closed, some people argue that massive investment in alternative energy technologies, particularly carbon capture and storage (CCS), can bring about the reductions instead. CCS, in which carbon dioxide is removed—or “scrubbed”—from power station emissions before it reaches the atmosphere, and is then stored underground, looks increasingly like a technology whose time has come. Veteran climate scientist Wally Broecker of Columbia University has been promoting the carbon scrubber developed by his engineer colleague Klaus Lackner, while the former British chief scientific adviser David King is also a fan of CCS. (As is Nicholas Stern—see our interview in this issue.)
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