Most recently, under the patronage of His Highness General Sheikh Mohammed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi, Deputy Supreme Commander of the UAE Armed Forces and President of the Emirates Center for Strategic Studies and Research (ECSSR), the ECSSR organized its 19th Annual Energy Conference under the title ‘Unconventional Fossil Fuels: The Next Hydrocarbon Revolution. Large numbers of renowned researchers, economists, political scientists, and experts of energy attended the said conference. Heads of corporate world, policy makers, engineers, geologists and strategists took part in the proceedings of the energy conference. The interactive sessions were interesting, informative and forward-looking. The two day conference explored the latest developments and technologies in the field of unconventional fossil fuels.
The ECSSR 19th Annual Energy Conference successfully addressed the rise and competitiveness of unconventional fossil fuels, considered by many speakers as long-term game changers in the energy world. It thoroughly examined their influence on global energy dynamics, supply and demand and country geopolitics, as well as their prospective role in the future of energy and its related implications for the oil-producing countries of the Arabian Gulf and the global energy industry as a whole.
Famous dignitaries and energy experts from the GCC, MENA, UAE and the world participated at the conference, debating the challenges posed by emerging unconventional fuels. According to many experts, the new discovery of shale oil and gas and its relatively attractive economic viability and multiplier effects suggests that it could be seen as an alternative to conventional oil and gas. The said conference served as a global platform for discussing a highly sensitive issue related to energy and the geopolitical transformations taking place in its wake.
Main Areas of Elaboration
The conference projected a number of significant points which are given below as:
(a) Future of conventional oil & gas markets
Majority of the speakers, researchers and energy experts were agreed that despite the US increasing productive capacities of shale oil and gas, the preeminence of conventional oil and energy markets remains intact. Largely negative impact of the unconventional resources of shale oil production on the environment due to wasteful emissions and pollutants caused by the process of hydraulic fracturing, or ‘fracking’ to extract oil and gas out of these rocks would create problems in the days to come.
(b) Emergence of Multipolar world
The participants in the conference concluded that the US is not the only country to possess large deposits of shale rocks. Huge deposits have been found in China as well, which in fact has larger deposits than the US. Other nations could follow suit and GCC nations may play a leading role in the future.
(c) Rise of unconventional fossil fuels in the US
They concluded that with recent rise in production of unconventional fossil fuels in the US, there has been an exponential increase in the production of natural gas that has severely affected international gas markets, but shale oil has made little impact on international oil markets.
(d) Pivot role of the GCC
Despite emerging trends in the conventional oil and gas resources and rise to unconventional fossil fuels in the world the role of the Gulf Cooperation Council (GCC) nations would not be affected and remain central to international oil and energy markets for decades. This point was stressed by the Director General of ECSSR, His Excellency Dr. Jamal Sanad Al Suwaidi, who in his closing remarks stated that the Conference “reinforced our self-confidence and the confidence in the prospects of our pioneering march.
The Director General of the ECSSR His Highness Dr. Jamal Sanad Al Suwaidi his welcoming speech highlighted the importance of research in the field of energy. He said that research and forward-looking studies on energy are of the utmost importance for all countries and people around the globe. Energy is the milestone of development, he added.
He appreciated the leading role of the ECSSR in conducting various international conferences especially on energy on regular basis which usually covers diversified emerging socio-economic, geo-political and geo-strategic related challenges to energy. It also covers the latest industry developments, various innovative techniques and technologies related to energy, renewables and their future, and the interplay and influence of both consumers and producers across the world, he added. The ECSSR stands for achieving sustainable development, cooperation, and support regional and international events to explore the latest developments and technologies in the field of unconventional fossil fuels.
Dr. Jamal being a renowned research scholar rightly pinpointed the complicated and complex role and overlapping of geo-politics, geo-strategic and the last but not the least, economics in the field of unconventional fossil fuels today. Undoubtedly, these developments will have repercussions on the global conventional energy sector in general, and the Gulf Council Countries (GCC), MENA and the UAE in particular. These developments will have repercussions for global energy markets in terms of supply and demand dynamics among consumers and producers of new energy sources he explained.
He stressed the need to analyze the ambitious pursuits of unconventional fossil fuels of many Asian and Indian Ocean countries like China, India, South Korea and Malaysia etc. along with shale gas production.
Suhail Mohammed Al Mazroui, Minister of Energy, UAE in his keynote address to ECSSR said the UAE energy diversification policy was based on its geographical and climatic nature. UAE opted to diversify its energy mix to include renewable and solar energy despite being a key member and producer in Organisation of Petroleum Exporting Countries (OPEC) and Organisation of Arab Petroleum Exporting Countries (OAPEC), he added.
In his address, read on his behalf by Dr. Mattar Al Neyadi, Ministry of Energy Undersecretary, Al Mazroui noted UAE diversification of energy resources policy had earned the a prominent stature in the region. He appreciated the leading role of the UAE in using solar power technologies to generate electricity, spread knowledge and establish specialised research centres and institutes. He highlighted the productive role of the Masdar in the fields of renewables and export of energy. He pointed out that the inauguration of Masdar’s 100-megawatt concentrated solar power (CSP) plant; Shams 1, in the Western Region in 2012 and the launch of the 13-megawatt Mohammed bin Rashid Al Maktoum Solar Power Park October, 2013 demonstrate the UAE’s firm commitment to develop the solar power. He expected the first UAE’s nuclear power plant in Braka to go operational in 2017 while capacity of the planned four plants combined will be at 5,600 megawatt in 2020.
He projected UAE positive and productive role in stabilizing world oil markets by raising its output capacity to 3.5 mbpd by 2017 to meeting rising demand in emerging economies in Asia and Latin America and rapid economic growth in the Middle East due to demographic and economic expansion.
Panel-I “Unconventional Fuels: Geopolitical Consequences for the Arabian Gulf and the UAE”
Speakers | Association | Research Paper’s Titles |
Panel Chair | ||
Dr. Thani Ahmed Al-Zeyoudi | Director, Climate Change and Energy Affairs, Ministry of Foreign Affairs, UAE | |
Mehmet Ogutcu | Chairman, Global Resources Corporation, UK, Special envoy. The energy charter, UK | Implications for Global Energy Markets and Gulf Producers |
Dr. Anas F. AlHajji | Chief Economist, NGP Energy capital management, USA | The US energy revival |
Luis E. Giusti | Senior Advisor, center for strategic and international studies of America: Director general, Centro Latinoamericano de Energia Republica of Colombia | Shifting Power, from traditional oil and gas producers to consumers and new producers |
Findings
The first panel rigorously discussed the geopolitical consequences of unconventional fuels on the GCC and the UAE. Mehmet Ogutcu, an internationally recognized expert on energy, infrastructure investment, finance and geopolitics, and Chairman of the Global Resources Corporation, termed recent US-Iran re-negotiations the game changer in the days to come, adding they are again emerging as a major oil producer and noted that Iraq is predicted to increase production from the current 2.5 million bpd to 6.7 million bpd by 2025.
He pinpointed many energy security risks for China in the region and around the globe especially the Strait of Malacca, a narrow stretch of water, through which China receives 80 per cent of its imports but also contains a large US naval presence. This concern, he said, led China to develop land-based pipelines all the way to Iran. He presented the emerging oil and gas pursuits of many regional countries of CIS and Russia and their expected geo-political and geo-strategic dominance in the future. He rightly replied that chess of geo-politics would decide the fate of conventional and unconventional fossil fuels around the globe and all the countries should sit together in order to secure their survival on this planet where with the passage of every day, oil and gas reservoirs are getting lesser and lesser. He said discovery of many unconventional fossil fuels has changed the game of the players and rules of the game in the regional and global energy markets. The role of emerging economies, China, India, Brazil, Turkey and Russia would be vital in the fields of unconventional fossil fuels especially in Shale gas.
He predicted not so friendly relations and easy supplies of energy in different parts of the world because of widening gap between supply and demand. Additionally, most resource-holders seek to change the balance of interests with international extraction companies in order to maximize their gains through so-called “resource nationalism, he added. Resurgence of US oil and gas production, particularly through the unlocking of new reserves found in shale rock has the ability to change the dynamics of energy markets. The Arctic region, Brazil, Australia, Central Asia, the Eastern Mediterranean, and East Africa would also be new movers and shakers in the fields of energy.
He expected that new technologies, producing regions, price fluctuations and calculations, geopolitical tensions, consumption trends, and investment and trade patterns would all likely affect Gulf producers domestically as well as internationally. He stressed the need to have proactive and forward-thinking if the Gulf region to preserve its significance in world energy and respond to domestic challenges effectively.
Dr. Anas F. AlHajji, the Chief Economist, spoke highly about the shale gas discovery of the US. He said the shale revolution in North America, in addition to the increase in oil production from the Oil Sands of Alberta, have already changed the direction of the global oil and gas trade, and will continue to do so in the coming years.
He analyzed various emerging trends in North America’s energy production, consumption, imports, productivity, costs, and also investments. He highlighted the impact of these trends on the global oil, natural gas, LNG, and NGL markets, with special reference to the MENA countries. His speech elaborated the main question is: will the energy revolution in North America change the energy mix in the MENA countries? The answer depends on the status of the global LNG and petrochemicals markets after 2020, he added. He said the shale revolution in North America poses an indirect but serious – threat to renewable energy programs in the MENA countries.
Luis Giusti, a Senior Advisor at the Centre for Strategic and Industrial Studies, stated that for the Arabian Gulf, the fossil fuels will dominate the energy sector for many years to come. Giusti stated that ‘fracking’ is not a new technique; it has been practiced since 1937. “What is causing the problem now is the disposal of the chemicals used,” he added. The rightly pinpointed the importance of physical possession of energy resources in the world. He briefly narrated the historic developments in the fields of oil and gas production and consumption in the world and especially in the West. He also critically analyzed the role of international energy corporations in the fields of price, supply and demand.
The chances of discovery of shale gas are still limited and require gigantic effort on the part of the producers, he added. Availability of water, environmental considerations, finances and technologies are the few main hurdles in the development of shale gas and many other unconventional fossil fuels.
There have been incidents of conflict of interest among the different countries on the issue of energy resources. New big players like China and India with their NOCs have taken strong positions across the globe, he elaborated. “OPEC´s power has become Saudi Arabia’s power. Russia and the FSU have increased their reach in Europe and the Far East, while Latin America especially México, Argentina and Venezuela continue to hold strong positions, he added. He raised different questions yet to be answered in terms of challenging the Arctic, Brazil’s subsalt, the Canadian oil sands, Argentina’s Vaca Muerta, the US revolution and the Middle East develop in this ever-changing environment?
Panel II “The Future of Unconventional Fuels in the Asia-Pacific Region’
Speakers | Association | Research Paper’s Titles |
Panel Chair | ||
Dr. Philip Andrews-Speed | Principal Fellow and head, energy security division, energy studies institute. National university of Singapore. | China’s Shale Gas Ambitions |
Prof. Yoshihiro Masuda | Associate professor, frontier research center for energy and resources, school of engineering, university of Tokyo, Japan | Japan’s Development of Flammable Ice |
Dr. Manochehr Dorraj | Professor of international affairs, Texas Christian university, USA | Ramifications for Asia-GCC Energy Relations |
Findings
DR. Philip Andrews-Speed concluded that China may have larger shale gas reserves than the USA. It has encouraged China’s government to launch a series of policies to promote the exploitation of this resource and to announce annual production targets for shale gas of six billion cubic metres per year (bcm/yr) by 2015 and 80 bcm/yr by 2020, he further explained.
He said Chinese government took many meaningful measures to promote the production of natural gas, the government has been raising gas prices for producers and has introduced an additional subsidy for shale gas. Over the last two years, two bidding rounds have been held which have led to 20 blocks being licensed to Chinese companies he added. In addition, one production sharing contract (PSC) has been signed between Shell and PetroChina, and a number of other foreign oil companies are in various stages of developing ventures with Chinese national oil companies (NOCs) he further elaborated.
He mentioned many positive and integrated policy initiatives for the development of shale gas in its country. Technical, environmental, industrial, administrative, regulatory and legal issues are the main reasons of its low production of unconventional fossil fuels especially shale gas.
According to him, the shales in China tend to be deeper and more plastic (less easy to fracture) than in the USA, and often lie in mountainous terrain. It would increase the cost of extraction. He estimated that the prospective areas in the north of China are very dry, which will provide a challenge in terms of water supply for hydraulic fracturing. On the contrary the prospective areas in the south have more abundant water supplies but have a high population density, both in cities and in farming areas. This will pose environmental challenges, he added.
He pinpointed that the manner in which the bidding rounds were designed and implemented suggests that the Ministry of Land and Resources has insufficient understanding of the shale gas industry. Access to pipelines is critical for producers of natural gas. Yet all gas pipelines in China are owned and controlled by NOCs and no regulation requiring third-party access exists. He concluded that the legal framework for the participation of foreign oil companies remains ambiguous.
Prof. Yoshihiro Masuda presented the collective efforts of his team in developing the flammable ice in Japan. He narrated different data and equations in order to explain the different stages of his experiments. In order to develop new resource of energy, the Ministry of Economy Trade and Industry (METI) launched an 18-year plan i.e. Japan’s Methane Hydrate R&D Program in 2001, the first offshore production test is now being implemented, he added.
“The final goal of this program is to establish a technology platform for commercial gas production based on offshore-Japan methane hydrates by 2018” he explained. The MH21 Research Consortium (the Research Consortium for Methane Hydrate Resources in Japan) has continued its research in accordance with a three-phase approach toward the final goal: Phase 1 (year 2001 to 2008), Phase 2 (year 2009 to 2015), and Phase 3 (year 2016 to 2018) he elaborated. According to him, so far, the team has established the methodology to delineate gas-hydrate concentrated zones and found more than ten hydrate-concentrated areas in the eastern Nankai Trough, which are estimated to bear gas hydrates equivalent to approximately 0.57 trillion m3 (20 tcf) of methane gas in place.
His paper gave an overview of Japan’s R&D activities in the area of hydrate development research, and describes future potential problems from a technical perspective. It was interesting, informative and full of hope achieving new source of energy in the days to come.
Dr. Manochehr Dorraj highlighted the different aspects of Asia-GCC energy relations. He critically analyzed the different aspects of socio-economic integration, geo-political ties and geo-strategic emerging trends in Asia-GCC energy relations. He mentioned different unconventional fossil fuels namely tar sands, methane hydrates, biofuels and renewables in his paper. He also discussed the viability of these unconventional sources of fuel as long term substitutes for fossil fuels. He assessed their current contribution to the supply of energy consumption in select Asia–Pacific nations, namely: China, Japan and South Korea. He evaluated the future trajectory for the growth of these unconventional sources of energy, and based on that analysis, would expound on their impact on Asia–Pacific nations’ energy relations with the GCC countries.
Panel-III “Exploration, Production and Development of Unconventional Fuels: factors and Trajectories”
Speakers | Association | Research Paper’s Titles |
Panel Chair | ||
Awab Adil Al-Shwaikh | Projects Manager, Petroleum Council Government of Sharjah, UAE | |
Prof. Younkyoo Kim | Director, center for energy governance and security. Associate prof of international studies, Hanyang university, Korea | Shale Gas: Present Status and Expectations |
Professor. Michael H. Stephenson | Director, Science and technology. British geological survey, UK | Non-Shale Unconventional Fuels |
Prof. Brain Hounsfield | Director of research department. GFZ German research center for geosciences, Germany | The potential for unconventional fuel, development in the Arabian Gulf |
Findings
Prof. Younkyoo Kim explained each and every possible aspect of the shale gas along with is present and future development in the different parts of the world and especially in China. He said shale gas was still a largely regional resource, with only a limited impact on global markets. He critically analyzed the impact of US LNG exports on the US market. He highlighted potential economic consequences of shale gas exports on global and particularly north-east Asian LNG markets.
He elaborated the success story of North America in the field of shale gas. According to him, shale gas has become one of the hottest topics in the Chinese energy market since the country went through the second-round tender for shale gas exploration in October 2012. On the contrary, the European Union (EU) has been proceeding cautiously to embrace shale gas he added. He briefly indicated the different EU countries development in the field of shale gas mainly Poland.
He thoroughly examined recent trends in the North American shale revolution and its potential global implications.
Professor Michael H. Stephenson masterly presented the different newly discovered unconventional fossils fuels in the different parts of the world including the GCC. He explained the physical properties, potentials and expectations of these newly developed energy resources in the days to come. He rightly said that availability of these resources at the world energy markets would create strategic equilibrium between the supply and demand of the conventional energy resources. He said, scope, expansion, production and commercialization of these unconventional fossil fuels will depend on geo-politics, economics and the last but not the least, geo-strategic benefits. He also mentioned different geological divisions and hurdles in the rapid development of these energy resources.
Prof. Brain Hounsfield explained the existing oil and gas system in the Arabian Gulf. He indicated the possibilities of developing unconventional fossil fuels in the region because of rocks, regional seals, porous reservoirs and large traps, spread over both geological time and space, the region is highly prolific as regards its production rates and reserves.
He narrated the rapid development of the shale gas which has transformed the global energy outlook completely. According to him, shale gas accounts for about 10 percent of gas production in the USA and by 2035 that figure is expected to reach 35 percent. He pinpointed security of supply, exploitation efficiency, environmental compatibility and societal acceptance in the further development of the unconventional fossil fuels in the region and around the globe.
Panel-IV “Policy Challenges of Unconventional Fuels: Realties and Possible Scenarios”
Speakers | Association | Research Paper’s Titles |
Panel Chair | ||
Dr. Mohammed Yousef Al-Madfaei | Executive Director, integrated environment policy and planning sector. Environment agency, Abu Dhabi, UAE | |
Dr. Francis M. O’Sullivan | Executive Director, Energy sustainability challenge program, Massachusetts institute of technology, USA | Cost Competitiveness and Economic aspects |
Prof. Peter Styles | Prof. of applied and environment geophysics, applied and environment geophysics, research group. School fog physical and geographical sciences, Keele university, UK | Climate and Environmental Impacts |
H.E. Ambassador Talmiz Ahmad | Former ambassador of India | Implications for the global energy mix |
Findings
DR. Francis M. O’Sullivan said that the emergence over the past decade of large-scale unconventional hydrocarbon production in North America particularly in the form of shale gas and more recently tight oil have a profound impact on global energy markets. “The unlocking of shale and other unconventional resources through the combined application of horizontal drilling and hydraulic fracturing has yielded an altogether different paradigm he added. He explained that because of massive production growth from these unconventional resources, the US has become the world’s largest natural gas producer, with all time record high output seen in both 2011 and 2012.
He mentioned different challenges in the development of unconventional fossil fuels namely, potential environmental impacts associated with large-scale hydraulic fracturing. His paper also discussed productivity trends in the major emerging tight oil plays, particularly the Bakken and Eagle Ford plays. He concluded by examining how the economic realities of the U.S. unconventional resource base impacts the competitiveness of the US as an LNG exporter, and shall discuss what role US exports might play in the evolution of the global gas market.
Prof. Peter Styles explained the different climate and environmental impacts of the newly discovered fossil fuels. He also mentioned the different stages of development of these energy resources along with their combined ramifications on their climate around the globe.
He discussed the seismicity induced by one of these high profile cases, the hydraulic fracturing of the UK’s first dedicated shale gas well at Preese Hall-1, near Blackpool (NW England).
“A 3D seismic survey has been acquired and the interpretation of this shows that not only the event hypocenter but also the focal mechanism correlate strongly with an identifiable fault” he added.
H.E. Ambassador Talmiz Ahmad indicated the different energy scenarios in the region and world. He clearly mentioned that shale gas and oil production in the USA have had a dramatic impact on US hydrocarbon reserves and production. He also indicated the technological resolution in hydrocarbon exploration and production used in combination horizontal drilling and hydraulic fracturing, also referred to as “fracking.
He termed development of unconventional fuels as a “game-changer” in the US energy scenario, transforming it from a longstanding net importer into a net exporter. He satisfied with the energy outlook to 2035. According to him the shale revolution must also contend with the economics of production, in that low gas prices in the US have made further drilling and production in many areas uneconomical, while even oil prices of around $100/barrel have not been sufficient to pursue the development of several low-yield shale oil fields. Increasing community and political concerns pertaining to environmental and climate change issues, carbon emissions from fracking, environmental damage associated with unconventional exploration and extensive water usage, have all served to moderate enthusiasm for unconventional production he added.
He pinpointed many other factors that will influence the global energy mix in 2035 mainly climate change, geo-politics, patterns of global economic growth, and the last but not the least, political situation prevailing in major producer countries, i.e., those experiencing political difficulties such as Iraq, Libya and Iran, but also GCC countries, where rising domestic consumption and a need for high revenues to meet domestic welfare commitments could restrict their ability to meet global, particularly Asian, demand.
He predicted that the US shale revolution would unlikely to have a major impact on other parts of the world, although the increased use of natural gas in most economies for environmental reasons can be anticipated. Renewables are likely to be given increasing importance in the EU energy mix, with China and India expanding the use of gas, nuclear power and renewables, although their share in the national mix may be limited; both of them are likely to continue to depend on domestic and imported coal to fuel their economies, even as they develop their CBM potential, he added.
Concluding Remarks
The Emirates Center for Strategic Studies and Research (ECSSR) once again provided an ideal platform to researchers, policy makers, energy experts, economists and political scientists to discuss the emerging trends in the fields of unconventional fossil fuels. Majority of them termed it game changer in the field of energy markets. Some labeled it third generation of hydrocarbon energy. Many projected it revolution in the field of energy resources and stressed the immediate need to extend expertise and technologies in the fields of unconventional fossil fuels for the betterment of humanity at large.