“When it comes to energy, the rule of the game is to expect the unexpected. So much effort is going into research, development and innovation all across the energy spectrum, 10 years from now we may well see the next game changer” – Daniel Yergin –
Profound changes are taking shape right now in world energy. We are on the verge of an ongoing energy revolution. The world economy, trade and investment shifts, new strategic partnerships involving the US, China, Russia, Saudi Arabia and other major energy powers, food production and distribution, geopolitics, and the environment all depend on how this revolution will turn out.
As the world population grows rapidly and mostly in developing economies so does the demand for energy, driving fierce competition for diminishing resources. The world energy map is changing its hydrocarbon supply and also expectations are going to change including on markets, geopolitics, technology, environment and investment, with serious implications for our region.
More than ever, countries and industry are trapped in uncertainty about how to deal with growing energy demand, led by China and India. The worlds hunger for energy is still satisfied by coal, and without a more incisive switch to greener sources the battle against climate change could be lost within less than a century.
Energy demand will continue growing in the coming decades, with coal and nuclear power becoming relatively less important, and natural gas, nuclear power and renewable sources becoming more important. Development of renewable energy sources like wind, solar and biofuels, though starting from a low level, will proceed and become more important a few decades from now.
Chinas growing energy demand has prompted it to invest more than $70 billion a year in nuclear, wind, solar and biomass projects, so the energy priorities set by its new leadership could have profound and even unpredictable global effects.
In the past few years Brazil has discovered huge oil reserves in deep- water offshore projects. The United States is on the way to becoming an energy superpower, having unlocked natural gas and some oil in shale rock through horizontal drilling and a process known as ‘Tracking.” At the same time, Canada has ramped up production of petroleum from its oil sands deposits in the western province of Alberta. Despite all the talking about it, shale gas is not happening yet outside of northern America, and it is not enough to meet our long-term goal of a decarbonised energy system.
There are also setbacks in the “nuclear renaissance”, “resource nationalism”, declining levels of investment in the energy sector, climate change, emission trading, transition to “green energy”, as well as changing geopolitical dynamics that influence the traditional energy game in our region.
The future outlook will be poor without a long-term vision for stronger collaboration and partnership among the countries in our region. Major regional projects, ie Southern Corridor, TAPI, Blue Stream, North Africa pipelines, Chinas “Silk Road” energy corridor and Arab gas pipeline, will be seriously affected by how the global dynamics will play out. Hunger for investment in power generation, pipelines, LNG terminals, refineries and upstream projects will not be easily satisfied. National response to these challenges and opportunities may not be sufficient – regional collaboration is a must to create confidence building and synergies.