June 26, 2003

Contact IAGS:

Useful Reference:


Fueling the dragon: China's race into the oil market

Threats to Oil Transport

Weekly Piracy Report

Terrorist Sea Strategy: The Kamikaze Approach

The Two Faces of Saudi Arabia - Dubious allies in the war on terror.

Krauthammer: "Energy Fix: Pump the Oil, Raise the Tax "

Fueling the Future: The Prospects for Russian Oil and Gas"

Caspian Oil Windfalls: Who Will Benefit

Hizb ut-Tahrir: An Emerging Threat to U.S. Interests in Central Asia

American Anti-Slavery Group

Freedom House

Hybrid Vehicles:

Toyota Prius - 48mpg
Honda Civic - 48mpg
Honda Insight - 56mpg
Ford Escape
DOE Hybrid Electric Vehicle Program
Federal Tax Incentives
State Tax Incentives

How Does it Work? Take a peek:
Internal Combustion vs Fuel Cells
Look inside a Fuel Cell

Fuel Cell Developers:

Ballard Power Systems
UTC Fuel Cells
MTI MicroFuel Cells
Neah Power Systems
Millennium Cell
Delphi Corporation Energy Visions Inc.

IAGS is a non-profit public education organization, not beholden to any industry or political group. We depend on you for support. If you think what we are doing is worthwhile, please Support IAGS.
IAGS is a publicly supported, nonprofit organization under section 501(c)3 of the Internal Revenue Code. All contributions are tax deductible to the full extent allowed by law.

Property of The Institute for the Analysis of Global Security © 2003. All rights reserved.

Back Issues

View our online presentation:  The Changing Geopolitics of Oil

Greenspan warns on implications of natural gas shortage
In testimony before the House Energy and Commerce Committee on June 10, Federal Reserve Chairman Alan Greenspan continued to warn of the economic implications of increasing natural gas (NG) prices.
The gap between North American NG demand and available supply - 95% of natural gas reserves are located out of North America, while the U.S. alone accounts for over a quarter of global NG consumption - led to sharp price increases over the past year. Greenspan emphasized "futures prices suggest that we are not apt to return to earlier periods of relative abundance and low prices anytime soon." Rising prices profoundly impact industries reliant on NG, like fertilizer and ammonia makers, as well as the utility market, which turned to NG to generate electricity in the late 1990s when NG was promoted as a cleaner-burning fuel than oil or coal. In Greenspan's words, "if we stay at these very elevated prices we're going to see some erosion in a number of macroeconomic variables which are not evident at this stage."
The U.S. gets its natural gas from three major sources: domestic production (81%), imports from Canada (17%), and imports of liquified natural gas (LNG) (2%.) For shipping purposes, natural gas from outside of North America is supercooled to become LNG. Specialized LNG terminals and tankers are pricey, up to $1 billion and $500 million each respectively. Transport and handling of LNG, highly pressurized and explosive, has substantial security implications.
Canada, currently the largest supplier of America’s imported NG, will need more and more of its NG for itself, and would therefore be hardpressed to increase exports.
Greenspan recommended that the U.S. prepare to import more natural gas by building more LNG import terminals. He noted that while increasing NG "supplies from abroad..would expose us to possibly insecure sources of foreign supply, as it has for oil..natural gas reserves are somewhat more widely dispersed than those of oil." While most global oil reserves are in the Middle East, there are roughly equal reserves of natural gas in the former USSR and the Middle East.
However, gas from the Former Soviet Union (FSU) will almost certainly not make its way to North America. Regarding gas from Russia proper, Brookings fellow Fiona Hill and energy consultant Florence Fee, note in an analysis of Russian oil and gas that Russia’s giant gas company Gazprom controls 90% of Russian gas output and "Industry analysts question Gazprom’s ability to increase its natural gas exports to Europe, as well as to construct new pipelines and meet the anticipated long-term contracts with Northeast Asian countries." Regarding the Central Asian states of the FSU, Hill and Fee note "Central Asian gas fields are poorly situated for European markets and equally distant from markets in Northeast Asia." The only existing pipelines for export of Central Asian gas run through Russia, which capitalizes on the constraint by using the resource to "supply gas at low-cost to former Soviet states such as Ukraine, which have fallen behind in their energy payments to Russia."
With the FSU and Canada so constrained, the Middle East is left as the main potential NG supplier for the U.S., replicating American over-dependence on politically volatile regions for oil supply. The U.S. is also sure to face increased competition for LNG imports due to the growing energy appetites of fast-developing China and India.
Greenspan noted the U.S. would do well to increase use of coal and nuclear power. The U.S. holds 25% of global coal reserves. The main obstacle to the use of coal as an energy source is concern over its effects on the environment through carbon emissions, but this is being addressed by ever more advanced and economical clean-coal technologies. While nuclear power supplies 20% of U.S. electricity, public perception has hindered expansion of the industry.
Also see: The U.S. faces a shortage of natural gas

Terrorism expert warns of attack on oil targets in strategic chokepoints
Think of anything within your sight - from toothpaste to light bulb to golf ball - and realize that these things are possible only as a result of the discovery and production of oil and gas. This self-test opens the powerful and thought-provoking book Terrorism & Oil by Neal Adams, one the most influential voices on terrorism in the oil field. Adams emphasizes how addicted our society to this threatened resource and how vulnerable we are to disruptions in oil supply, which he believes are inevitable. Terrorists are knowledgeable, resourceful, and have proven to be capable of sustaining a pace two steps ahead of western intelligence and law enforcement agencies. "Oil terrorism can cause grand scale disruptions that could wreak havoc with any country's economy and way of life," he writes.
Adams is particularly concerned about the situation at sea. Today, over 60% of the world's oil is transported by sea through a small number of geographic 'chokepoints' -- channels narrow enough to be blocked, and vulnerable to piracy and terrorism. The most important chokepoints are the Strait of Hormuz, through which 14 million barrels of oil are moved daily, Bab el-Mandab, which connects the Red Sea to the Gulf of Aden and the Arabian Sea and the Strait of Malacca, between Indonesia and Malaysia. There are also the Bosporus, the Suez Canal and the Panama Canal. Many of these places are controlled by countries in which terrorists operate. "From all the chokepoints the Strait of Hormuz is the 800-pound gorilla," said Adams in an interview to Energy Security, "if something happens in this location, there is no alternative supply route. Fourteen million barrels will go out of the market, most of them go to Japan and the EU." This would have major implications on world economy and on everyone's life. The situation in the Strait of Hormuz is of particular concern primarily because Iran controls the three tiny islands of Abu Musa, Greater Tunb Island and Lesser Tunb Island. Adams warns against further deterioration in U.S.-Iranian relations. The Iranians have the capacity to shut down the strait. Last year Ayatollah Ali Khamenei, Iran's supreme leader warned: "If they [the Western countries] do not receive oil their factories will come to a halt. This will shake the world." Adams sees many consequences to an attack in the Strait, from maritime insurers shutting off tanker coverage to contamination of the entire area due to nuclear release. "My fear is that we have already forgotten the implications of 9/11 and will not understand the need for change until that life-altering experience has already occurred. The U.S. has become a 'fat and Lazy' society, accustomed to the idea of endless energy supplies far into the future."
Adams thinks the U.S. doesn't understand the ferocious drive of various factions to obtain world dominance through any means. "We need to make every possible effort to remedy this situation through increased domestic production, emphasis on development of significant alternative fuel sources, conservation, and a drastically revised domestic and global energy policy."

Iraqi Oil Production Delayed
Looting, accidents, and sabotage are hindering Iraq’s oil production, seriously enough that a representative of the Iraqi Oil Ministry called the situation “not a problem, but a crisis.”
As attacks intensify, the mix of coalition forces and local Iraqis hired by the Oil Ministry to secure the nation’s oil infrastructure is proving inadequate to the task. Since President Bush declared the end of the war on May 1, 54 American troops have died, many of them in sniper fire or other guerilla type attack. An additional multi-national force of 20,000 troops are expected to arrive in August and September.
The Coalition-appointed interim chief executive of Iraq's oil ministry, Thamir Ghadhban, had announced in May a production target of 1.5 million barrels per day (bpd) by mid-June. Iraq is currently producing between 700 and 750 thousand bpd and requires roughly 500,000 bpd for its own consumption.
Two explosions on June 12 near the Baiji Refinery along the Iraq-Turkey pipeline have been widely reported as acts of sabotage, but a U.S. military spokesman attributed them to an accidental gas leak. In contrast to the confusion engendered by the Baiji explosions, attacks on the power grid which supplies the refinery at Basra have been clear cases of sabotage, as were attacks on a natural gas pipeline Saturday and on an oil pipeline near the Syrian border Monday.
Joseph Collins, a Pentagon official responsible for stability operations, noted that some of the attacks are the fault of "guest-worker jihadists who came in during the war and are not going back to where they came from until they are either killed or captured." Defense Secretary Donald Rumsfeld agreed, saying in a briefing last week "The people we're scooping up, in many cases, are not Iraqis."
Leaflets circulated in Baghdad by a group called al Awda, meaning "the Return," point to an alliance between Saddam loyalists and Islamist terrorist groups in Iraq. Some of the terrorists have come from outside Iraq, particularly from Iran, Saudi Arabia, and Syria.
Also see:
Saddam loyalists ally with Islamists
Saudi Mischief in Fallujah

Oil pipeline explosion kills 105 in Nigeria
A June 19th oil pipeline blast in Nigeria killed at least 105 people, according to Nigerian Red Cross figures released late Sunday. Weeks before the blast, vandals had caused a rupture in a pipeline carrying oil from Port Harcourt to Enugu, 140 miles to the north. The villagers of Onicha Amiyi-Uhu, where the blast occurred, had been scavenging oil from the leak. The blast was touched off by a spark from a passing motorcycle.
Although it has substantial oil reserves and is the fifth-largest exporter to the U.S., Nigeria's residents suffer from widespread poverty. Vandalization of pipelines and smuggling of oil is rampant, despite the government's attempts to discourage the practice and past tragedy. A 1998 explosion in the town of Jesse killed over 1,000 people.
Oil accounts for 90-95% of Nigeria's export revenues, over 90% of its foreign exchange earnings, and nearly 80% of government revenues. Transparency International lists Nigeria as the world's second most corrupt country after Bangladesh.
Thousands have been killed in religious clashes following the adoption of Islamic sharia law in states of Nigeria's predominantly Muslim north, and in other ethnic and political violence. Nigeria's exports plummeted for several months earlier this year following ethnic clashes.
U.S. ambassador to Nigeria Howard Jeter said recently that Nigeria faces real threat of Al Qaeda attack.

News from the technology front

Introducing Plug-in hybrid electric vehicles
Plug-in hybrid electric vehicles (HEVs) are hybrid vehicles with an added battery. As the term suggests, plug-in hybrids - which look and perform much like "regular" vehicles - can be plugged in to a 120-volt outlet (for instance each night at home, or during the workday at a parking garage) and charged. Plug-ins run on the stored energy for much of a typical day's driving - depending on the size of the battery up to 60 miles per charge, far beyond the commute of an average American - and when the charge is used up, automatically keep running on the fuel in the fuel tank. A person who drives every day a distance shorter than the car’s electric range would never have to dip into the fuel tank.
A study by the Electric Power Research Institute (EPRI,) a California-based research arm of the utility industry, found that consumers like plug-ins because they would offer the best of both worlds: the gas savings and emissions reduction benefits of battery powered electric vehicles, and the range of a "normal" car.
Since much of the energy used by plug-ins comes from electricity - which can be generated efficiently and cleanly from America's abundant domestic energy resources - and not from gasoline, plug-in hybrid vehicles can greatly reduce dependence on imported oil.
We'll keep you posted on progress getting plug-ins on the road. A few cities are set to test public transit plug-ins. Kansas City will test a Plug-in hybrid bus with a 20 to 30 mile electric range battery, charged by plugging into the Kansas City Power & Light Co. power grid, and a backup diesel engine to provide supplementary power if needed for longer distance, climbing hills, or air conditioning. Other vehicles will be tested in New York, Long Island, and Los Angeles.

U.S., EU agree to collaborate on fuel cell development
The U.S. and the European Union (EU) formally agreed to cooperate in developing fuel cell technology. Speaking at the Brussels conference at which the agreement was announced, U.S. Secretary of Energy Spencer Abraham said the pact 'will help unify our approaches to hydrogen research and highlight the importance of international cooperation in the development of hydrogen energy technologies. [W]orking together with international partners, we can leverage scarce resources and advance the schedule for research, development, and deployment of hydrogen..technologies.'
Abraham later highlighted the importance of establishing common codes and standards, saying 'Businesses and industries that are conducting hydrogen research will have a greater incentive to invest and succeed if they know that the products they develop will have worldwide application.'
EU Research Commission Vice President, Loyola de Palacio noted that 'Europe is running today the world's largest demonstration project of hydrogen fuel cell buses. Such projects are pointing in the right direction but they don't reach the critical mass for market penetration.'
Commissioner Philippe Busquin, summarized: 'By pooling EU and US research efforts and resources, we improve our chances of finding a long-term solution to the world's energy and transport problems.'
The agreement details development of joint initiatives in seven fuel cell related areas:

  • Transportation vehicle demonstrations, including fueling infrastructure
  • Fuel cells as auxiliary power units that boost the onboard power of gasoline vehicles
  • Codes and standards for fuel infrastructure, vehicles and auxiliary power units
  • Fuel choice studies and socio-economic assessment of critical materials availability for low temperature fuel cells
  • Support studies, including assessment of critical rare earth materials for high temperature fuel cells
  • Direct methanol and polymer electrolyte membrane fuel cells for transportation and stationary applications
  • Solid oxide fuel cells and high temperature fuel cell turbine hybrid systems
Also see: EU Report: Hydrogen and Fuel Cells - A Vision of Our Future

Ballard Receives US $1.75 Million Fuel Cell Order from New Major Automotive Customer
Ballard Power Systems has received a US $1.75 million order from an undisclosed new major automotive customer for Ballard fuel cell products.
Ballard, a Canadian company that is 19.1% owned by Ford Motor Company, is commercializing fuel cell engines for transportation applications and fuel cell systems for portable and stationary products, as well as electric drives for fuel cell and other electric vehicles.
Dennis Campbell, Ballard’s President and Chief Executive Officer commented, “Our automotive business continues to grow and we are very pleased to be adding another auto company to our customer base. By supplying a majority of the major auto companies, we have the opportunity to test and evaluate our fuel cells under a variety of different operating conditions and vehicle platforms, learn more about our customer requirements and reinforce Ballard’s position as the fuel cell supplier of choice to the automotive industry.”
Earlier this month, Ballard announced that starting early 2004, its fuel cell power trains will power a fleet of five Ford Focus fuel cell vehicles, in Vancouver, in a three year field trial program in collaboration between Fuel Cells Canada, Ford and the Canadian government. The vehicles are the first of up to 100 Ford fuel cell vehicles to be operating in Vancouver by 2005.

Energy Visions achieves benchmark in its Direct Methanol Fuel Cell technology
Energy Visions Inc., a Canadian developer of advanced battery and fuel cell technologies, achieved a significant benchmark in the development of its proprietary flowing electrolyte Direct Methanol Fuel Cell (DMFC). “The development team has been able to double single cell electrolyte chamber performance over previous designs while simultaneously achieving a simpler, more compact, lower cost design. This achievement moves us substantially closer to our goal of commercializing our unique flowing electrolyte DMFC” said Dr. Douglas James, VP and GM of EVI’s Fuel Cell Division in Calgary, Alberta.
Potential applications range from portable electronics to people movers such as golf carts. In an interview with Energy Security, Dr. James explained EVI's approach of coupling a fuel cell with a Nickel-Zinc rechargeable battery in a hybrid power system. Since in a hybrid system the fuel cell is required to handle at most 20% of a peak power load, the overall cost is significantly lower as compared to solely relying on a fuel cell. EVI assesses that at mass production its hybrid system would achieve cost parity with existing solutions.
EVI is aiming for a 2005 pilot product release. Using methanol, a hydrogen rich liquid, as fuel sidesteps the fuel supply and distribution challenges currently presented by use of pure hydrogen, and holds particular appeal in the case of small vehicles or devices in which limited space is available for fuel storage.
Also see:
Details on EVI's Direct Methanol Fuel Cell technology
DOE: Clean Coal-to-Methanol project a success.

To subscribe to IAGS briefs, send a blank email to subscribe@iags.org
To unsubscribe, send a blank email with UNSUBSCRIBE written in the subject line to unsubscribe@iags.org