This research paper was written in the Fall of 2020 at HafenCity Universität for the course ‘Urban Energy Flows’. Due to recent events regarding Ukraine, the question of energy supply remains critical, especially for Europe.
I. Introduction
In the matter of a mere 300 years, humanity has exploded in population from 600 million to over 7.5 billion people. How did this happen? Because of an increasing supply of cheap and abundant energy that powered the industrial revolution. This energy, mostly in the form of fossil fuels, is the main enabler for the welfare and economic development of a society (World Energy Council, 2016). Without it, our lives probably wouldn’t look much different than they did in the 17th century.
It is predicted (World Energy Council, 2014) that by 2050, the world will experience a doubling of energy demand to meet the needs of the projected nearly 10 billion people who will inhabit this earth. The modernization of societies, growth of the middle class and alleviation of poverty will increase the number of those who can afford to buy cars, fly to another continent for vacation and buy new technologies. While the western world is slowing in growth and beginning to address the consequences of its unbridled consumption, other countries like China, India and Nigeria are playing catch-up, growing at an unprecedented rate and striving for greater quality of life and the luxuries of the modern world that come with it.
Therefore, securing an inexpensive and reliable energy supply is one of the most fundamental tasks of any nation in the modern world, and modern life as we know it depends on it. But what exactly is energy security? According to the Energy Architecture Performance Index, which ranks countries on energy security, it is centred around the “Energy Triangle” of economy, access and environmental sustainability. That is, affordable prices, timely delivery and ease of access done in a sustainable way with as few negative impacts on the environment as possible (IEA, 2019). In an effort to define the multi-dimensional concept of energy security, George Kowalski and Sead Vilogorac (2008) from the UN Office for Disaster Risk Reduction (UNDRR) defined energy security as, “the availability of usable energy supplies, at the point of final consumption, at economic price levels and in sufficient quantities and timeliness so that, given due regard to encouraging energy efficiency, the economic and social development of a country is not materially constrained”.
This article will discuss the historical importance of fossil fuels, major flows of energy throughout the world, the different types of security risks inherent in the flow of energy, steps to mitigate those risks and finally, two major technologies (hydraulic fracturing and pipelines) that have an enormous impact on the security of energy supply in the United States, Asia and Europe.
II. History of Fossil Fuel Use
The first reported use of coal dates back to 4000 BC in China, however, large-scale use of coal as an energy source didn’t occur until the beginning of the Industrial Revolution (Ritchie & Roser, 2019), which, in combination with the agricultural revolution, led to an explosion in population growth. Figures 1 and 2 below illustrate this correlation in population growth and energy use.
According to Ritchie et al. (2019), global consumption of fossil fuels has increased 1300 hundred times over since the 18th Century, and what began with coal started to shift to oil and gas in the 20th Century with new types of engines and technologies. Today, crude oil makes up 39 percent of world-wide fossil fuel use, followed by coal (33 percent) and natural gas (28 percent) (Ritchie et al., 2019). The widespread use of fossil fuels is, and will remain for the foreseeable future, an integral part of the world’s energy mix (see figure 3) due to its energy-rich nature and its ability to be stored and transported.
The world’s biggest regional producer of crude oil is the Middle East, at around 35 percent, however the United States is currently the largest single-country producer of oil overall, producing about one fifth of the world’s supply (Richie et al., 2019). Because of the location of fossil fuel reserves, geopolitics can play an integral role in security of supply. Regional disruptions such as the 1973 oil embargo of OPEC and the 1979 Iranian Revolution had a major impact on markets at the time, underlining the need for countries to focus on the importance of energy security for economic development.
Today, as many countries are beginning to see the need for cleaner, renewable energies, a shift toward investments in cleaner technologies is beginning to occur, albeit slower than necessary to meet current goals of less than 1.5 °C, and even 2 °C of warming.
III. World Energy Flows
To understand the importance of the security of energy supply, it is first important to understand the forms of primary energy, where it comes from, and where it goes. Energy comes in many forms, with primary forms of energy including coal, oil, natural gas, uranium, wood, the sun and wind, tides, rivers and the heat of the earth to name a few.
These primary forms of energy are unevenly distributed around the globe, with some countries being ideally suited for geothermal energy due to the shifting of the earth’s plates (the Philippines, Australia, United States), while others are situated on top of huge reserves of fossil fuels (Saudi Arabia, Russia). Because of this imbalance in resource distribution, it is necessary to buy and sell energy from around the globe, which has led to the formation of organisations and cartels like OPEC (Organization of the Petroleum Exporting Countries) to stabilise markets and set prices to ensure steady supplies.
While renewable energies are gaining in share, the bulk of the world’s energy continues to come from fossil fuels, therefore they will be the primary focus of this research. According to the International Energy Agency (IEA, 2014), nearly 80 percent of the world’s energy consumption comes from fossil fuels, with the main source of this consumption coming from the transportation sector (see figure 4) at 57.3 percent (LLNL, 2011).
As previously mentioned, around 35 percent of the world’s crude oil supply comes from the Middle East. The other major producers are the United States, which is currently the biggest oil producing country, and Russia. Over the past 50 years developed regions such as North America, Europe and Eurasia have been decreasing in their share of global oil consumption, while other regions, especially the Asia Pacific region, have been steadily increasing their share.
The difference between consumption and production is the fundamental reason for the global energy trade. The Middle East is a net exporter due to the fact that it produces around 30 percent of the world’s oil, while consuming only 10 percent. Meanwhile, the Asia Pacific region produces around 8 percent and consumes over 30 percent, making it a net importer (Ritchie et al., 2018). This difference in supply and demand makes it critical to secure energy access by mitigating security risks in order to meet the needs of growing populations and higher standards of living.
IV. Security Risks
The process of ensuring secure and stable energy sources is fraught with a variety of risks that can have a major impact on the stability of the world energy market. These risks range from competition, conflict and political upheaval to natural disasters, accidents and overreliance on foreign energy sources. How these risks are assessed and mitigated depend heavily on the type and nature of each risk. These will be discussed in greater detail in the following subsections.
Accidents
Accidents are a major risk inherent in any operation, especially in the extraction of oil from often remote or offshore locations. The BP Deepwater Horizon, an offshore oil rig that at the time had the deepest well ever drilled at 10,865 m, is one such example. On April 20, 2010, a blowout caused the rig to explode, killing 11 crew members and causing the biggest oil spill in US waters that lasted until July 15 before being capped (Johnson, 2012).
Other major accidents include Chernobyl and the Three Mile Island nuclear accident which caused a backlash of anti-nuclear protests concerning risk and safety that continue to this day. Even though nuclear power is a relatively clean energy, the potential impact of an accident as well as the disposal of nuclear waste makes it unpalatable to the public at large.
Conflict
There are a wide range of conflicts that can affect the security of energy supply. There are competitive conflicts, which occur when multiple nations claim possession of an energy source, such as using the flow of rivers that cross more than one country for hydropower. There are also political conflicts (Ukraine/Russia, US/Israel, US/Venezuela), regulatory risks, revolution and governmental instability as well as armed conflict and terrorism that can all have a major impact on the security of energy supply.
The ongoing Ukrainian Russian conflict is one example of a political/war conflict that began in 2014 (with other disputes occurring in 2006 and 2009, as well) with Russia’s occupation of Crimea. This conflict led to a cut-off of a northern European pipeline that passed through Ukraine and caused supply disruptions throughout Northern Europe (Smale, 2014).
Another large-scale political conflict was the 1973 OPEC Oil Embargo, which began after the U.S. decided to support Israel against the wishes of the mostly-Arab led OPEC. Revolution, such as the 1979 Iranian Revolution and the 2010 Arab Spring can also have a major effect on the availability and supply of oil.
In terms of regulatory risks, the Paris Climate Agreement, carbon pricing and other environmental regulations can also have an effect on the price of fossil fuels and the availability and cost of alternative renewable energies.
According to the World Energy Council’s Resources Report (2016) on the current state and future of the world’s energy resources, “New policies will need to be put in place and old ones revisited: carbon emissions will be priced; energy production and consumption technologies will be regulated; funding for research and development will be made available; and low carbon assets will be nurtured by financial markets. Key market disruptions will be experienced by market participants and governments alike” (p. 10).
Finally, attacks on pipelines by armed militants have been of concern in countries such as Nigeria, as well as the Islamic State’s (ISIS) occupation of oil fields in the Middle East.
Natural Disasters
Natural disasters are also a risk depending on the type of energy being produced and where it is being accessed. The Fukushima disaster in Japan was caused by a tsunami that led to the meltdown and further catastrophe. Earthquakes can also have a major impact on a variety of energy sources, such as geothermal, oil wells, nuclear plants and hydropower dams to name a few. As the climate warms and the glacial ice caps in the Himalaya and other mountain ranges begin to melt (at a doubling rate over the past 40 years), the source for a large part of Asia’s hydropower is also at risk of drying up (Maurer et al., 2019).
V. Measures to Increase Security
Now that we’ve identified some of the risks that are faced in the security of energy supply, let’s look at some ways to mitigate them.
Diversification
Diversification of both supply, and the economy are key strategies in regard to energy security. In terms of supply, a key strategic path is to not rely on any one trade partner for all of your energy needs. Not only are different sources needed, but different types of energies also contribute to creating a more stable energy mix. For exporters of petroleum products, economic diversification is also important so as not to rely too heavily on one source of income. According to the IEA (2019), the UAE’s economic diversification and decarbonization strategy illustrates how smart, strategic decisions can reduce risks with forecasts of a 44% share of clean energy and 70% decarbonization of the economy by 2050.
Europe’s strained relationship with Russia and their pipelines is another example of the importance of energy diversification, and their subsequent decision to invest heavily in a southern corridor gas pipeline from Azerbaijan.
According to U.S. Ambassador Richard Morningstar (2012), former ambassador to Azerbaijan, while speaking at the Brussels Forum, “When one looks at energy security, one has to think about more than just pipelines, but about interconnections, about LNG, about unconventional gas such as shale, nuclear in some cases, renewables, energy efficiency… There is no silver bullet. The key is diversification.”
Renewable Energy
Renewable energies are also an important strategy to gain energy security. Renewables allow countries to produce energy within their states, bypassing the need to import outside energy supplies. While some countries are better situated for geothermal energy, especially those around the Pacific’s “ring of fire” (active tectonic plates), others are ideally situated for solar irradiation, tidal and wave power, wind or hydropower. Almost every country has access to at least some, if not all, of these renewable technologies, which, when enough investment and infrastructure is in place, could drastically reduce dependence on foreign oil.
As the renewable sector grows, traditional relationships between producers and consumers are being disrupted, according to Al-Sheri (2015), “Denmark, a country that in the 1970s was almost entirely dependent on energy imports, is now the European Union’s only net energy exporter, often generating more than 100% of its electricity needs from wind power.”
Agreements and Treaties
One of the most obvious examples of an agreement to ensure energy security is the previously mentioned Organisation of Petroleum Exporting Countries (OPEC), which was formed in 1960 in response to the multinational oil companies domination of the oil market. Their mission, according to their website (n.d.), is “to coordinate and unify the petroleum policies of its Member Countries and ensure the stabilisation of oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers and a fair return on capital for those investing in the petroleum industry.”
Another important international agreement is the Energy Charter Treaty, which establishes a multilateral framework for cross-border cooperation in regards to energy trade, transit, investment and efficiency. Focused mainly on East-West relations with Russia and the EU, it is a legally binding agreement and offers a guarantee to the 51 signatories (EU, n.d.).
VI. Technologies to Increase Security
There are a wide range of technologies that can be utilised to increase energy security for countries. These can include pipelines, liquid natural gas, renewable energies, hydraulic fracturing, waste-to-energy generation and many others. Over the years, fears of “peak oil” have been replaced by “peak demand” and the fear of “stranded resources” as technologies to access previously inaccessible oil have improved and become commercially viable, while the economic growth of countries like China is beginning to slow (and with it, its consumption of fossil fuels) (Olson & Spegele, 2016). Due to these fears, and a drive for greater independence, investments in new technologies and renewable energies are increasing every year. However, the following subsections will discuss fossil fuel technologies, as they remain the most important.
Hydraulic Fracturing and Liquid Natural Gas in the United States
In 2018, the United States experienced the biggest growth in oil and gas production in history, surpassing Saudi Arabia’s massive expansion in the 50s. How did this happen? It happened because of technological improvements to the process known as “fracking”, or hydraulic fracturing. This technology, combined with the process of liquefying natural gas, allowed the U.S. to increase their domestic supply and go from one of the biggest importers of energy in the world, to a net exporter by 2020 (IRENA, 2018).
Technological improvements have significantly increased efficiency and combined with less restrictions to become a major part of this energy revolution in the United States. According to the Resource Report (2018) of the World Energy Council, the specific technological improvements at the heart of this increased efficiency is the drilling technology that includes longer laterals, improved geosteering, increased drilling rates, minimal casing and liner, multi-pad drilling, and improved efficiency in surface operations. This, combined with completion technology improvements such as increased proppant volumes, number and position of fracturing stages, shift to hybrid fluid systems, faster fracturing operations, less premium proppant, and optimisation of spacing and stacking have also improved efficiency and lowered operational costs (World Energy Council, 2018).
“Technological advances have allowed us to access it commercially. Shale gas will clearly revolutionise the supply of natural gas in North America, which in turn will give the world more LNG that was heading to the United States,” said Iain Conn (2012), Chief Executive of Refining and Marketing at BP at the Brussels Forum. “The reason it’s been developed so quickly in America, is the private individuals that own the land, also own the mineral rights. In Europe that’s not the case. Trying to persuade a farmer in the UK to allow someone to drill for shale on their land and then put pipes all over it is a bit of a different thing when they don’t get the rent from it”(min. 25:30).
These conditions have led the United States to become significantly more energy independent, and less reliant on foreign oil in general.
Pipelines from Russia and the Caucasus
Gas and oil pipelines have long been an important technology in delivering fast, safe and reliable energy to countries around the world, with Russia being one of the most important players. Currently, Russia supplies the European Union with around 37 percent of its natural gas, and even though tensions have been high due to the Ukraine/Russia conflict and the sanctions imposed after the poisoning of a former Russian spy in the UK, this number has been increasing over the last several years (Kottasová, 2018). This is due in large part to Russia’s pipeline infrastructure which allows it to keep its prices down and more attractive than other sources, such as LNG.
New pipeline projects like the Nord Stream 2 have been increasingly controversial due to an increased dependence on Russian gas, however the financial aspect of the pipeline makes countries like Germany view the project differently (Kottasová, 2018). However, plans have been in the works for over a decade to implement a southern corridor pipeline that would connect Europe to Azerbaijan’s vast gas reserves, and much of the pipeline has just recently come online. According to Julia Nanay, Senior Director of PFC Energy, speaking at the 2012 Brussels Forum, Turkmenistan is sitting on one of the largest gas fields in the world with enough gas to feed pipelines to Europe, Eurasia and China.
Nicolay Mladenov, Bulgaria’s Minister of Foreign Affairs, also added in the same 2012 round table discussion, “We need to get different routes, we need to get different suppliers. If we want to have a really integrated Europe, with its own foreign policy, we need our own energy policy. It means linking our electricity grids much more closely, as well as our gas grids, increasing our storage capacity. Dependency varies, especially depending on the particular pipeline. We need a much more cost effective way of getting gas into Europe through different routes and different suppliers” (min. 14:02).
Meanwhile, Russia and China have been in talks for over a decade about opening up pipelines previously stalled due to price disagreements. The Power of Siberia and Altay pipelines (see figure 5) are two of those that are currently slated to become operational by the end of 2019 (Russia Today, 2019). Pipelines are a powerful technology in the flow of energy as well as contributing greatly to the flow of geopolitical goodwill.
VII. Outlook
The nature of the energy landscape is dramatically changing as new technologies, renewable energies and shifting allegiances play their part on a global scale. While fossil fuels remain the most important energy source, and will continue to meet the world’s base-load demand for decades, the search for cleaner energy will increase in importance as the world warms and countries begin to feel the impact of climate change.
According to the Energy Architecture Performance Index (EAPI), an organization that measures the energy security of countries, Europe continues to hold 16 of the top 20 spots due to its long history of cooperation and the diversity of its energy mix (EAPI, 2017). However, because of a lack of local resources across the continent, securing a stable supply will be one of the most important tasks for the European Union moving forward, especially as regional cooperation is showing signs of deterioration (e.g. Brexit).
The United States, ranked 52nd on the EAPI, has drastically improved in its energy access and security due to technological advancements that allow it to access shale gas, as well as its investments in renewable energy. However, the current administration has rolled back environmental protections and stopped the push to phase out coal, negatively affecting its environmental score. Its penchant for isolationism and “America First” is also a risk moving forward, as energy security requires cooperation among nations to have a stable and efficient energy trade.
The Russian Federation, ranked 48th on the EAPI, is rich in natural resources and is making moves to link more pipelines with both Europe and China to ensure adequate demand. However, 60 percent of their Gross Domestic Product (GDP) is natural gas, oil and other natural resources, meaning if demand dries up, so could its economy. This, combined with minimal investment in renewable energies makes Russia vulnerable in the future.
China, ranked 95th on the EAPI, is investing heavily in renewable energies (45 percent of worldwide investment) to offset its huge demand for fossil fuels. However, due to its massive economic growth over the past decades, its had a huge environmental impact that has lowered its performance. Currently, China is ranked first in diversification of import counterparts, emphasising its strong commitment to world trade (EAPI, 2017), and this, combined with its aggressive investments in developing nations rich in resources, make it relatively energy secure.
“What is needed is a new governance structure, one that moves beyond traditional bilateral relationships between producers and consumers,” wrote Al-Sheri et al. (2015), “In a rapidly evolving world, guaranteeing energy security will require the careful management of multiple, interlocking relationships. Only an inclusive international forum, in which complex ideas can be shared and debated, is likely to prove adequate to the task of navigating the new era of energy use, production, and consumption.”
In these times of increasing nationalism and inward thinking, it is my belief that security of energy supply will only continue to grow in importance, and risk. The turbulence of the markets, as well as the breakdown in international cooperation between countries like the United States and China as well as Russia and members of the EU, make predicting the outlook of the security of energy supply a difficult task. It is no longer possible in this globalised world to step away from international cooperation in energy supply without serious ramifications. What is needed is working together toward a common goal of clean, safe and reliable energy for everyone. Whether this is possible depends on the combined strength of individual actions, such as Greta Thunberg who began the Fridays for Future movement, and the political will to make hard decisions that will have long-term positive impacts. If we can surpass the selfish, short-sighted nature of humanity, future generations may have a chance to thrive.