Energy Security Current Issue
Baku-Tbilisi-Ceyhan pipeline: not yet finished and already threatened
The long-delayed 1000-mile Baku-Tbilisi-Ceyhan (BTC) pipeline to transport 1 million barrels of oil a day from the Caspian to the Turkish port of Ceyhan is progressing toward completion as early as 2005. But even before the construction is finished, terrorist elements may already be planning attacks on this high quality target. IAGS' Gal Luft discusses the threats.
A strategic approach to pipeline security
Aside from BTC, a consortium of Western energy companies has already started the construction of the South Caucasus Gas Pipeline. Thus far the host countries of the pipelines along with the Western energy companies have taken responsibility for the protection of the critical energy infrastructure. Yet, it is clear that by sole attention to the military aspects of the pipeline protection it will be impossible to guarantee their full protection. The host countries can upgrade their pipeline protection units and patrol teams and purchase the most advanced technology in the world. Baku based analyst Fariz Ismailzade argues that to achieve longterm security the communities along which the pipelines will pass be must be involved in the protection process.
Terrorism Goes to Sea
New evidence suggests that piracy is becoming a key tactic of terrorist groups. In light of al Qaeda's professed aim of targeting weak links in the global economy, this new nexus is a serious threat: most of the world's oil and gas is shipped through pirate-infested waters.
In a recent Foreign Affairs article, IAGS' Gal Luft and Anne Korin analyze the situation and recommend policies to mitigate the risk.
Radical Islam and LNG in Trinidad and Tobago
Trinidad and Tobago alone account for 80% of all U.S. LNG imports. Security analyst
Candyce Kelshall warns that Islamist terrorist groups are active on the island and might find LNG shipping an attractive target.
Terror's Big Prize
Since September 11, pipelines, tankers, refineries and oil terminals have been attacked frequently. Except for a sharp increase in maritime insurance premiums in these regions these attacks had marginal strategic consequences. But in at least two cases oil terrorism could have rattled the world.
Needed: Three 1-billion-barrel oil banks
The lesson from the recent oil price jump is that the oil market has too little wiggle room to deal with supply disruptions. It's time
for consuming nations to think about providing their own liquidity mechanisms.
On the technology front
Fuel Cell power plant installed at NJ College
The fuel cell will provide 250 kilowatts of electric power as well as heat, to several buildings on the campus.
The enzyme costs of converting cellulosic biomass into sugars for fuel ethanol production have been reduced approximately twenty-fold with technology developed by the National Renewable Energy Laboratory (NREL) and Denmark based Novozymes, biotech-based leader in enzymes and microorganisms.
EU study: Methanol from biomass - competitive with gasoline
A study of a new patented Swedish technology concluded that the alchohol fuel methanol can be
produced from biomass via black liquor gasification at a cost competitive with that of gasoline and diesel.
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Chinese Quest for Crude Increases Focus on Africa
The scramble for Africa's oil
and gas reserves continues.
US, European and Asian
companies have been flocking
to the capitals of Algeria,
Libya, Nigeria, Angola, Egypt
and even Sudan in recent
months. Yet the battle for
energy resources on the
African continent still appears
to be in its early stages.
Leading oil sector analysts have
warned of growing conflict between
Western and Asian countries as
they seek to outbid each other for
key hydrocarbon assets in Africa.
These forecasts have been largely
based on the expectation that China
will become the major player in nontraditional
oil and gas producing
regions on the continent.
As the growth of China's economy
surges ahead and its energy
requirements rise in tandem, West
Africa, Libya, Sudan and even South
Africa have become key areas that
Beijing has targeted in its global
crusade for crude oil, natural gas and
even refining assets and
In the latest country analysis report
on China published by the Energy
Information Administration (EIA) of
the US Department of Energy in July
2004, it was noted that China was the
world's second largest consumer of
petroleum products in 2003. The
country moved into second place --
overtaking Japan for the first time --
behind the US, with total demand of
5.56 million barrels per day.
China's oil demand is projected by
the EIA to reach 12.8 million bpd by
2025, with net imports of 9.4 million
bpd, which will impact significantly
on world oil trends. As the source of
around 40% of global oil demand
growth over the past four years,
Chinese demand for crude is already
a key factor in world oil markets.
In terms of its drive into Africa,
recent reports in the South African
press have noted that China has
increased its economic and
diplomatic involvement in Southern
African countries, notably Angola
and South Africa itself. These two
states have been identified by
Beijing as having suitable resources
to satisfy partly its expanding need
for energy products.
In 2001, around 25% of Angola's
crude oil exports went to China. In
contrast to most oil deals in Africa
that involve foreign investors and
are based on production-sharing
agreements (PSAs), market contracts
or international finance agreements,
China has largely invested in the
Angolan oil sector via a series of
soft loans it has granted to Luanda.
In April this year, another soft loan
agreement was reached between the
two countries in which the
equivalent of 10,000 bpd of crude oil
was tied to a US$2 billion loan to be
repaid over 17 years at 1.5% interest.
Analysts, such as Jakkie Cilliers of
the Institute for Security Studies (ISS) in
South Africa, believe China is more
likely to grant loans than make
donations to African countries
which would push Chinese
companies to the forefront in terms
of oil sector participation in Africa in
the coming decade. Angola and
other African nations are likely to
welcome Chinese loans given that
there are no political conditions
attached to them.
Cilliers stated in a recent interview
that his impression of China "is very
much that politics follows economic
development" and that current
"Chinese political and geo-strategic
expansion is following [China's]
absolutely phenomenal economic
Although China has already secured
ties with oil producers in Southern
Africa such as Angola, its
involvement in the region is expected
to expand after the launch in 2005 of
the New Asian/African Strategic
Partnership. The programme has
been set up to improve trade and
investment opportunities between
the Southern African region and
One of the leading countries which is
expected to profit from this new
arrangement is South Africa. Overall
trade and bilateral investments
between China and South Africa
remain minimal, yet the latter's
technology in the energy sector and
Sasol's strong refining and
gasification infrastructure will be
vital to China's future development.
In terms of technological expertise,
China is looking at South African
coal liquefaction methods which
seek to form oil from coal. In August
Sasol, South Africa's chief producer
of oil from coal, signed a letter of
intent with China to investigate the
feasibility of establishing two coal
liquefaction plants in the Asian state
-- one in Shaanxi province and the
other in the Ningxia autonomous
region -- at a cost of around US$6
billion. China has coal reserves of
around 1 trillion tonnes.
The potential for increased foreign
direct investment in these African
states, and the solutions they offer
China's booming oil demand, makes
closer co-operation between the
countries involved inevitable.
Yet Western governments, security
analysts and geostrategic energy
policy makers are becoming more
worried about the burgeoning
energy links between Beijing and
several African regimes. Trade
between Africa and China has
increased by nearly 50% this year
compared to 2003, which is
significantly greater than the growth
in Chinese trade with any other area
in the world over the same period.
The London-based Africa
Confidential newsletter recently
published fears that doing business
with China will make African
governments more corrupt. China is
paying with large sums of advanced
credit or loans for infrastructure
development, making it more difficult
to ensure that oil revenues benefit
the people of the countries that
produce the oil.
IAGS' Gal Luft stated his belief that the
"Chinese way of doing business" in
the oil industry could reverse
progress that has been made in terms
of fighting corruption on the
continent and delivering benefits to
"The Chinese are much more prone
to doing business in a way that
today Europeans and Americans do
not accept -- paying bribes and all
kinds of bonuses under the table.
These are things that have been
rampant throughout Africa,
particularly in Nigeria, Angola and
Equatorial Guinea and to a certain
extent Chad and Gabon," he said.
In recent interviews, China's deputy
foreign minister, Zhou Wenzhong,
said that China will pursue its oil
interests in Africa without political
restrictions or concerns. He was
quoted by the Chinese press as
saying that the country tries "to
separate business from politics."
The state-owned China National
Petroleum Corp. (CNPC) is currently
developing oil projects in Chad,
which has diplomatic ties with
Taiwan. Chinese oil companies are
also signing contracts in West
Africa's other key oil producers,
such as Nigeria, Equatorial-Guinea,
Congo-Brazzaville and Gabon. Other
countries like Ivory Coast,
Mauritania and Niger have also been
identified as future areas for cooperation
by Beijing. Contracts
between the Chinese authorities and
many of these countries have
already been signed, although few
have generated any significant
However, during Chinese President
Hu Jintao's visit to Gabon, one new
deal was made public. State-run
Chinese concern Sinopec, Total
Gabon and the Gabonese
government signed several
agreements which guarantee China a
steady flow of Gabonese oil.
Yet, despite the developments listed
above, analysts believe that the
overall impact of Chinese companies
in Africa will be limited because they
do not have the financial power or
technology to access the continent's
biggest oil fields, which are offshore.
"A lot of the new oil that is being
brought online is being developed in
deep offshore waters and a lot of
those fields are only capable of
being exploited by western
companies both because of their
access to proprietary technology as
well as the large amounts of financial
capital that are needed to exploit
those fields," stated Ian Gary, an oil
specialist with US-based aid group,
Catholic Relief Services.
Dr. Cyril Widdershoven is an IAGS associate fellow. This article was originally published in NewsBase Afroil Monitor.