Energy & Power

Cover Report

WEC New Challenge for Asia
Mollah Amzad Hossain, Rome, Italy

To achieve a sustainable energy future will require an unprecedented level of global cooperation between industry and government, and deeper integration of regional and international energy markets, the World Energy Council said at the conclusion of its 20th World Energy Congress held in Rome, Italy.

The three years leading to the Montréal 2010 World Energy Congress will determine the next 30 years of energy system. To foster a high level of cooperation during these crucial years, WEC is expanding its global mandate, which will address the three most important challenges of energy sustainability: eradicating energy poverty, setting the global value of carbon, and establishing global rules of energy trading and investment amid growing energy nationalization.

To guide these decisions, WEC's new global mandate will from include the following responsibilities: A global framework to curb greenhouse emissions beyond 2012 that will also ensure a stable carbon price global rules of energy trade and investment new financial schemes limiting investment risk and offering realistic returns more government engagement and public-private partnerships to address increasing global energy interdependence, a key strategy to eradicate energy poverty.

Increased input by industry will lead to more effective government policies that ensure investment incentives are maximized for the long term. Substantial investments are needed to double global energy supplies by 2050 and will also result in lower energy intensity without a consequent rise in carbon emissions.

"WEC is optimistic a third energy revolution can be accomplished if urgent action is taken to vigorously pursue all energy options," said André Caillé, outgoing WEC Chairman. "Industry has all the latest available technologies needed to develop fossil fuels, nuclear, large hydro and renewables that reconcile development with climate change."

The WEC said it believes fossil fuels will remain a main fixture of the world's energy supply for the next generation, but more spending on research and development of new technologies is needed to deliver cleaner and alternative forms of energy and to promoting the sustainable supply and use of energy for the greatest benefit of all
boost energy efficiency. Energy conservation must also become a high priority for future energy security.

"The Rome Congress has energized discussion of Italy's energy policy and highlighted the need to open public debate on the role of nuclear power," said Chicco Testa, Vice Chair of the WEC Rome Congress 2007.

As nuclear power will be an important and growing share of the energy mix, a global reduction in emissions will require an important focus on transport, including on the global development of biofuels, the conference observed.

"Our goals should be to move now towards responsible economic development, climate protection and the reduction of global inequalities. We have to act quickly to address those global issues involving governments and companies as well as individuals. With its worldwide membership, WEC is the perfect organization to assemble all stakeholders, which is vital to elaborate the concrete solutions we need today," said Pierre Gadonneix, Chairman of the World Energy Council, Chairman and CEO of Electricité de France.

Global Energy Markets under Greater Stress

Apart from exhibitions, the 5-day congress was full of presentations and speeches. The acceptance speech by Dr Hisham Khatib of Jordan in the 2007 Global Energy Award ceremony was extraordinary.

Looking on the global energy markets, he said, these are now under greater stress than at any other period since 1980. "Oil prices are now nearing in real terms the threatening peaks that existed in 1980; the energy structure, which depended heavily on fossil fuels throughout practically all the last century, did not change, and is unlikely to change for decades.

"Investment requirements for the energy sector are soaring, in a few instances more than doubling, material costs are rapidly rising, with shortages in investment funds, manpower and refining capacities. All this is straining the economies of many developing countries, representing challenges more than promises. Unfortunately the grim picture of this year is unlikely to look brighter between now and the 2010 Congress in Montreal."

However, Dr Hisham Khatib said, "through efficiency measures we have been able to effectively decouple energy from economic growth. We need now to reduce the infringement of energy use on the health of the environment... Still the picture is not all dim, the world economy in spite of the challenges is growing in a robust way. Growth in real terms is averaging 5% annually, and is likely to continue at that level, which means that real incomes per capita of the world citizen will grow at a rate around 3-4% annually; most of this growth will be in developing countries and not only in China and India. This is a robust economic growth, fueled by energy, yet assisted by globalization and trade, movement of capital and investment, movement of talented people and tourism. Without availability of energy, in all its forms, such economic growth and human development would never have been possible."

Energy Trade in the WTO

Pascal Lamy, Director General of the World Trade Organization (WTO) said: It is good to see the business community taking the lead and assuming its collective responsibility vis-à-vis one of today's biggest challenges: responding to the world's exploding need for energy and its impact on sustainable development.

"In our collective search for a better global governance on energy, most now recognize that market mechanisms have proved their value. Markets remain the most efficient way to allocate resources. But markets must be governed by transparent and predictable rules. And this may be where the WTO, as a forum for the negotiation and
enforcement of multilateral trade rules has a role to play," he said.

The WTO boss mentioned that a large part of big world energy actors such as Russia, Iran, Kazakhstan, Ukraine, Iraq, Algeria or Libya are not yet WTO Members. "Other big players such as Saudi Arabia and several other Gulf States, have just recently joined the organization. It is therefore no surprise that energy has not been singled out as a specific sector of trade within WTO."

"Existing WTO rules, which were not negotiated with the specificities of the energy sector in mind, may not address appropriately all the needs of energy trade. Back in the 70s and 80s, governments tried but did not manage to tackle the issues of dual pricing practices and export restrictions on raw materials. Disputes arose concerning the exact scope of the transit obligation, and were eventually settled between the countries concerned. The lack of comprehensive international competition rules, and the fact that government procurement disciplines apply only to a fraction of the membership, may also be seen as a weakness," observed Pascal Lamy.

Moreover, he said, WTO rules are based on a distinction between goods and services, but it is not always easy to categorize transactions as "goods" or "services" trade, in the energy sector. And, the nature of some energy products, such as electricity, is still not clearly defined.

"Today energy is a global concern, and so should be the solutions. The growth rates in many developing countries will inevitably push up global energy demand. Massive private investments will be necessary to respond to the needs of new technological research. Energy consumption will need to be reconciled with sustainable growth, if we are to tackle the challenges posed to climate change. The WTO, with its 151 Members, can make an important contribution to the complex energy chessboard."

EU Dispute

Alexander Medvedev, Deputy Chairman of the Management Committee of Gazprom was another important speaker in the congress. Quoting the latest IEA forecasts, he informed that world demand for gas, as a energy source with demonstrable environmental advantages, is rising steadily – 2% in the world as a whole, 1.4% in the EU and a massive 5.1% in China.

But at the same time, he said, the EU’s dependence on imports is growing, as its indigenous gas resources are depleted. "We, along with other major operators in the EU market, are concerned over the latest proposals from the European Commission under which gas pipelines in the EU could not be owned or controlled by the companies which supply the gas – the so-called “ownership unbundling”.

"We are currently analyzing the Commission’s proposals carefully, and at this stage I leave aside the question whether the forced disposal of assets which the Commission’s proposals would require is compatible with the protection of private property in a market economy."

In conclusion, he stressed that the prospects for the world gas market look good, and that Russian gas will be a central part of this growing industry.

“Global Oil Resources and the World’s Energy Future”
Saudi Aramco President & Chief Executive Officer Abdallah S. Jum‘ah addressed the 20th Congress of the World Energy Council focusing on oil resources.

"We live in a time when global energy issues have reached unprecedented levels of significance both for nations and the consuming public. As you know, however, concerns over energy security are nothing new. Back in 1972, an interdisciplinary research group known as the Club of Rome issued The Limits to Growth, a landmark study which predicted the rapid depletion of natural resources leading to worldwide socioeconomic chaos," he said.

Fortunately, he continued, the dates predicted for the exhaustion of these various resources have come and gone without the dire consequences of societal collapse and economic misery envisioned in the report. "The same holds true for most of the oil forecasts made during the last three decades. In the 1970s, many forecasters said we would reach the oil supply peak by the year 2000. A number of predictions made during the 1990s pushed that date back to 2010 or so, while some forecasts issued during this decade—already past the first predicted peak oil date—locate the turning point sometime in the decade to come. Forecasts of ultimate recovery from conventional oil resources have indicated a positive trend, steadily increasing from less than a trillion barrels in the 1940s to four trillion barrels or more today."

The Aramco boss said that forecasting the future isn’t easy, and when it comes to predictions related to oil, the record is rather checkered. "In general, we have grossly underestimated mankind’s ability to find new reserves of petroleum, as well as our capacity to raise recovery rates and tap fields once thought inaccessible or impossible to produce. On balance, I am confident that this growth trend will continue. But confidence is no excuse for complacency, and I also believe we must take a hard look at the Earth’s total endowment of liquid fuels, and realistically assess our ability to meet future demand for energy."

Nuclear Power

The speakers in the congress aid that nuclear power must be more than a rich country’s option. They said diversity should not lead us to forget that all of us share a common energy future. All of us indeed are currently going through a global energy revolution, the third one in our recent history. The 1st one, in the XIXth century, featured coal and steam ; the second, which flourished in the XXth century, was dominated by oil and electricity. Today, the recipe of the third revolution is made of five elements: limited fossil resources, strong economic growth in emerging countries, demographic growth, with an increase of the world population of 3 billion people by 2050 and climate change.

The experts said, in Europe especially, nuclear energy is still a very “emotional issue”, and that many European countries entertain a very ambiguous relationship to nuclear
energy. But, dogmatism or not, prejudice or not, facts are here. And the fact is that nuclear energy is Carbon free, competitive and available, therefore an inescapable part
of the solution for energy future.

Energy Future Interdependent World

José Manuel Durão Barroso, President of the European Commission was a key speaker in the event. He said: Today, of course, that energy landscape has transformed beyond all recognition, and will continue to change rapidly over coming decades. In this regard, he mentioned: Oil prices have hit record highs - above $98 a barrel; Global demand for hydrocarbons is increasing – by more than 50% by 2030.

"Here in Europe, domestic reserves are dwindling. This is increasing import dependence from around 55% of supply today to almost 70% by 2030; The global energy system requires investments of more than $20 trillion until 2030; And above it all, looms the specter of climate change, with global CO2 emissions set to rise by 55% between 2004 and 2030. And the combined challenges of competitiveness, global energy security and climate change give rise to a new debate about the future of nuclear energy."

"This is not sustainable, and burying our heads in the sand will cost us dear – up to 20% of global GDP, according to the Stern Review. But don't just take my word for it. A few days ago, the International Energy Agency presented its World Energy Outlook 2007. This sends a clear warning signal that the continuation of current energy trends is not sustainable - economically, socially or if we are to preserve the world's climate, on which we all depend. And it is a wake up call to the world: we must act now, and urgently, and we must go for robust and ambitious policies to significantly reduce our greenhouse gas emissions."

New Challenge for Asia

The recent studies show that that the energy demand by 2030 will be double than that of in 2005. Of the additional demand, 45 percent will rise in China and India. A major discussion in the congress as to how the demand of these two rising economies will be met in future.

As carbon emission was another major aspect discussed in the conference, it was informed that India will become the third most pollution emitting country by 2015. Also, it was told that countries like Bangladesh will suffer following import of energies by China and India as well as utilization of their own resources. That's why it was suggested in the conference that Bangladesh and other countries instead dependence on neighbors should ensure optimum utilization of their resources. Another suggestion was skilled use of energy.

The experts said coal will also become an important energy source in the coming years as in case of gas and oil. The coal market can witness that's now on the oil market following import of coal even by India and China.

The Challenge Ahead

The world politics and development is now centered over energy supply. The 20th congress of the WEC was no exception.

The energy companies, donors, consumers all highlighted soaring price of oil while discussing about fossil fuels as well as other sources of energy like REs, which is expected to be 30 percent of total rise of energy production.

The experts informed that the world will require seven trillion US dollars investment in the energy sector. A lion part of the investment will be needed in technology development and research. So, the appeal was to the developed world to make the investment.

As many countries are emphasizing bio-diesel the warning from the congress was that it shouldn't hamper the production of foodgrains.

A key feature in the congress was that the demand from various quarters that the third world countries should get energy supply at a reasonable price. As developed world is responsible for the volatile situation in the energy sector, so the repeated call was that they should lead in investment for further development of technology for skilled use of energy.