By
Dennis Morrison
The
Jamaica Observer
Kingston
Petroleumworld.com
03 19 06
Unlike
many Jamaicans, Americans are becoming very conscious of the
threat posed to their national security by the supply limitations
facing the energy sector.
Dennis Morrison
Just a few
days ago, the assistant secretary for policy and international
affairs in the US Department of Energy spoke of "the infrastructure
vulnerability and political volatility in traditional production
areas" of the world energy system. According to her, energy
security is vital if economic growth and development are to
proceed at the pace desired by the population of the Western
Hemisphere.
Ms Karen
Herbert, the assistant secretary, was obviously pointing fingers
at Venezuela, which is being criticised for "statist policies"
and "moves to restrict foreign investment. and increase
the reach of state-run energy industries".
However,
it is obvious from her testimony to the US House Committee on
International Affairs that there is a growing consciousness
of the dangers posed to US economic fortunes by disruptions
of energy supply caused by policy shifts in producing countries
or otherwise.
In fact,
she listed a number of important challenges that are facing
countries in this hemisphere: high oil and natural gas prices,
security issues in protecting production and distribution infrastructure,
declining production in traditional areas, unpredictable and
non-transparent legal, regulatory and taxation measures, and
concerns over refining capacity, particularly in handling heavy
oil.
Like Jamaica,
the USA must confront the lack of financing for alternative
energy sources and, in our case, solar energy is of special
interest. As the Green Paper on Energy Policy makes clear, there
is an important role to be played by institutions such as the
National Housing Trust in providing concessional financing for
solar heaters to encourage the use of alternative energy sources.
Serious
consideration should also be given to the inclusion of solar
heaters in the conditions for building approvals for certain
types of buildings. Certainly, hotels, hospitals and other such
operations ought not to be entirely dependent on electric-powered
water heaters.
The most
telling point made by Ms Herbert was that the energy investment
requirements for Latin America are estimated at US$1.3 trillion
for the 2001-2030 period. This is a vast sum, but must be mobilised
if supplies from the region are to keep up with demand growth.
For the
USA, it is vitally important that production of energy is maintained
and increased, as Mexico and Venezuela are among its top four
oil suppliers, while Ecuador, Colombia and Trinidad and Tobago
are also part of its supply network.
On a broader
scale, US dependency on imported oil stood at 58 per cent in
2005, as its consumption climbed to 20.7 million barrels per
day. With total oil consumption in the Western Hemisphere estimated
at just over 30 million barrels per day, this means that the
USA alone was responsible for two-thirds of hemispheric oil
consumption.
Notwithstanding
that it is a major producer, this imbalance between its share
of consumption and production will be harder to maintain, even
if large investments are made in new production in the hemisphere.
That the
USA imports more than 25 per cent of its oil and petroleum products
from Canada and Mexico, its partners in NAFTA, is, of course,
a key hedge against security concerns. We can expect that new
technologies to be developed will be aimed at processes for
economic processing of Canada's reserves of oil sands, which
stand at 174 billion barrels, representing a huge untapped source
of fuel.
Already,
co-ordination is taking place within NAFTA towards development
of the infrastructure that will be needed to tap new production
areas on the North American continent.
According
to available information, over US$25 billion of new investments
are committed to the development of oil sands production facilities,
and output should reach 1.8 million barrels per day by 2010.
By 2020, investments in these facilities are expected to reach
US$100 billion.
To the extent
that oil prices remain at over US$50 per barrel for the foreseeable
future, these investments will be attractive, so that Canada's
share of US oil imports could jump beyond the 16 per cent level
reached in 2005. Thus, its position as the leading US supplier
would become even more pronounced, allowing that country to
lessen its security risks related to imports from countries
like Venezuela and the Middle East.
The efforts
of the Americans to realign their oil supply sources to friendly
countries closer to home come at a time when there is a scramble
by companies from China and India to gain access to oil reserves.
China, having been blocked by the US government in its bid to
buy UNOCAL, a US company with oil reserves in the Gulf of Mexico
among other places, has turned to Africa, the Middle East and
the republics of the former Soviet Union.
It has acquired
a Nigerian oilfield for US$2.8 billion and another for US$2.0
billion in Kazakhstan, while taking control of Petro Kazakhstan
for US$4.2 billion. Prior to these deals, it had also signed
a US$70-billion deal with Iran to develop that country's Yadavan
fields.
India has
decided that it will not be left behind in this scramble, having
joined with China National Petroleum Company to buy Petro Canada's
share of Syrian oil fields. As its economic growth momentum
accelerates, India will be pressed to garner oil reserves overseas
because of the relative sparsity of its domestic energy resources
and the massive size of its population.
As was pointed
out by Mr Wendell Mottley, former minister of finance of Trinidad
and Tobago, in a recent presentation, so-called "Big Oil"
[the forerunners to the Seven Sisters, the transnational oil
giants of the 20th Century] has also been "farming out
to the last untapped horizons of the world's oil reserves".
But the frightening statistic to western governments must be
that 80 per cent of the world's proven oil reserves are controlled
by the OPEC countries.
Moreover,
sovereign governments and state companies have a tight grip
on these reserves. In this environment, Jamaica's energy security
is an issue that cannot be treated as partisan. Not even Trinidad
and Tobago has the luxury of pursuing divisive political games
in its approach to long-term energy supply and consumption,
as was made clear by Mr Mottley in his presentation.
The time
has long passed for the private sector and other social partners
in Jamaica to press for a national approach to policy-making
for the energy sector. We cannot afford divisiveness on this
issue.
