 | ||
 | | |
 | ||
| | |
 | ||||||||||||||
|  |  | |  | |  | |  | |  | | |||
| | | | | | | | | | | | | | |
 | ||||||||
Dutch IGCC pioneers chalk up pain and gain Emergency response is behind schedule in the European public sector A new refining industry in Europe's Asian Corridor Commission proposes milestone energy proposal Replace fuel oil with distillate? Cancelled projects will sustain margins “Marine distillate not fuel oil from 2010” Branson's biofuels megastore You heard it here first: refinery CO2 storage a reality in Norway Buncefield 2: Investigation critical Where now for Swedish Class 1 diesel My slow awakening to climate change The luckiest motorist alive Safety row goes on over Europe's largest LNG terminal New WHO guidelines on city air quality put focus on diesel Would LNG really 'evaporate harmlessly' in an accident? Another lesson in the thermobaric bomb Spare a thought for the oil-rich But will the good times keep on rolling? Carbon storage and the zero emissions refinery Everything just changed E85 and high octane gasolines The problem of small-minded young engineers New Permit Regulations Biodiesel newbuilds and a new green superfuel Spilled wine and our split industry Drilling down into the prospects for IGCC The beginning of the start of the end of oil | Spare a thought for the oil-rich this Christmas Join me at this festive time in sparing a thought for the fantastically wealthy. We all know that the principal raw material of the hydrocarbon processing industry can be produced upstream for a matter of a few dollars per barrel. Meanwhile, this year we’ve seen the oil price in real terms match the highs of the 1970s. Oil export revenues in Saudi Arabia, for example, are expected to be US $75Bn higher this year than in 2003, boosting Saudi GDP by more than 40% according to the US Energy Information Administration. The oil price is making some countries a mind-boggling amount of cash. It’s also making some companies a huge amount of cash. So why would some of the latter group of companies be very worried about the apparent good fortune of the formerly mentioned rich countries? Why would the UN be worried enough to fund international research? And why would BP be spending £14m funding a new Centre for the Analysis of Resource-Rich Economies at Oxford University? Well, it turns out that in the same way that being the heir to a great fortune can leave you just that little bit less well-adjusted, having massive oil wealth can be self-destructive for countries politically. Now, this isn’t about rich oil companies propping up juntas for their own evil reasons, although there probably have been some instances of that. No this is instead about rather thoughtful oil company workers wanting their operations in the developing world to have a positive long-term impact, rather than leading those societies back into a now-established cycle involving boom, bust and, in the worst cases, civil war. But why should we in the downstream industry care? Well, for one thing, with this magazine being read in more than one hundred countries, you may be at work in an oil-wealthy developing nation. But, whether you are or not, our industry is gradually reconfiguring itself, almost in spite of its better judgement, to a high oil price environment. The high oil price has thrown the switch on a lot of new downstream investment in the middle east. A new gas to liquids industry is as we speak coming to life in Nigeria. An oil rich Russia is building ports, boosting exports, attracting investment and leading to fundamental changes in crude oil processing across Europe. The former World Bank and UN-funded economist I spoke to about this says that the so-called ‘resource curse’ helps to explain why Iraq will take a generation to recover and why Russia, currently the great energy security hope of the European Union, could unravel politically, he fears. “We’ve been there before in 1974 and 1979,” says Richard Auty, just retired from Lancaster University as Professor of Economic Geography. “Some resource-rich countries avoided the decimation of their economies when the oil price fell, but many didn’t,” he says. “It’s not an economic problem. It’s a political problem. But how do you tackle it? You can’t tell the leaders directly. You need to be more subtle,” he explains. Prof Auty’s ideas are best sampled in a seminar, like the 24-hour gathering with BP middle managers he participated in: “They really wanted their company to be a force of good,” he remembers. The following brief account is less ideal, but let me see if I can’t get a reference you can look up if you’re more interested (check the end of the column). According to Prof Auty, the Nigerias, Algerias, Venezuelas and Iraqs of this world have never recovered from the mid-Eighties oil price collapse. Countries like those had given the 1970s to the pursuit of resource-based industrialisation. Similar in some ways to Russia’s current growth under the oil oligarchs, a critical failing was that this process did not create wealth and competitively diversify the economy, but rather concentrated large funds under government control that were poorly invested. “One per cent are receiving most of the rent [export revenue] from Angola’s hydrocarbon production,” says Prof Auty. As typical for such countries, expansion of infrastructure and the public sector created demand for skilled labour and other inputs which could not be met domestically, pushing up inflation and the national exchange rate, and destroying jobs in the agricultural and manufacturing sectors that could no longer compete abroad. “I saw this when I visited Ministries in Nigeria in 1985,” he remembers, “there were desks crammed into all the available government office space, but often the people sitting there had no pencils or paper: they were just drawing salaries fed by oil rent.” Resource poor countries, on the other hand, are forced down a route of competitive labour-intensive industrialisation that expands cities earlier and rapidly absorbs surplus labour. This triggers the quest for higher productivity that improves popular education, creates an entrepreneurial class which demands the protection of laws and regulations, and stokes demands from an increasingly well-organised workforce that the government spends wisely and accountably the taxes it raises from their income, profits and expenditure (instead of from oil revenues). According to the professor, resource-based industrialisation is often not competitive and companies investing today in Nigerian synfuels or Russian refining, for example, will need to carefully assess the sustainability of the business environment. If these countries repeat the mistakes of oil-based growth during the 1970s and 1980s, then at best the multinationals may be exposed to public scrutiny for ‘supporting corrupt regimes’. At worst: “If you are making your economy increasingly dependent upon natural resources, then you are likely to go from a resource rich to a resource poor country very fast,” says Prof Auty. “Poorly invested natural resource revenues lead to a growth collapse, political tensions and, in extreme cases, civil war. And we’ve seen a lot of that in Sub Saharan Africa.” To avoid the excesses of Venezuela’s government under Hugo Chavez, or Iraq under Saddam requires an understanding of the resource curse, which BP’s endowment at Oxford University, is intended to assist. For the rest of us, understanding the mixed blessing a wealth of hydrocarbons presents, may help us appreciate the complexity of the fundamental questions the industry faces today: How long will the oil price be high? And what happens when it falls?
* Auty, R.M. (2001) 'Resource Abundance and Economic Development', Oxford: Oxford University Press | |||||||
Download Energy Industry Resumé with work samples Profile: Tim Lloyd Wright MA Here you'll find a brief profile of my work with international energy, transport and associated environmental issues. Energy trends articles You heard it here first: refinery CO2 storage a reality in Norway From the archive... Over-processed fuel leaves oil tankers adrift | ||||||||
| | | | | | | | |
