The Emirates Center for Strategic Studies and Research (ECSSR)

Concludes the activities of its 17th Annual Energy Conference

(Abu Dhabi, 1-2 November 2011)

Under the title of: "The global energy markets: changes in the strategic landscape"

One of the cessions of ECSSR 17 th Energy Conference

Under the auspices of the Lieutenant General His Highness Sheikh Mohammed bin Zayed Al Nahyan, the Crown Prince of Abu Dhabi, the Deputy Supreme Commander of the Armed Forces and the Chairman of the "Emirates Center for Strategic Studies and Research", in the presence an elite group of officials, specialists, energy experts, intellectuals, diplomats and Arab and foreign media persons, and at the Centre headquarters in Abu Dhabi in the UAE, the Seventeenth Annual Energy Conference was held in 1st and 2nd November 2011 under the title of: "The global energy markets: changes in the strategic landscape".

In his presentation of the conference, Dr. Gamal Sanad Al-Sweedi, the General Director of the Center clarifies that the conference addresses the new challenges facing the energy markets in general and oil in particular in addition to deciding their futures in the light of deep political and economic developments in the world. Besides, the conference addresses the rapid disturbances and changes in the region and which have neither reached an end nor clear results. Dr. Al-Sweedi has clarified that the global energy demand will grow at rapid rates over the next two decades.

The conference discussed the possible trends of the global energy markets, their strategic prospects in the Middle East, and the future of renewable energy and its economic feasibility, the prospects of nuclear energy and its economies and impact on the energy future, the energy security, the global markets, and the global warming impact on the energy markets.

The speech of HE the UAE Energy Minister

His Excellency Ali Obaid Al Yabhouni the UAE Governor in the OPEC and the General Manager of the National Gas Shipping Co., Ltd. and the National Abu Dhabi Tankers Co.

In the opening speech delivered on behalf of His Excellency Mohammed bin Zaen Al-Hamli, the UAE Energy Minister, His Excellency Ali Obaid Al Yabhouni, the UAE Governor in the OPEC and the General Manager of the National Gas Shipping Co., Ltd. and the National Abu Dhabi Tankers Co., has confirmed that although the hydrocarbons will remain the backbone of energy, the UAE has looked beyond oil in order to become a regional axis for energy in all fields, especially the alternative energy sources including the renewable and nuclear energy to meet the UAE energy needs.

Yabhouni noted that despite the ambiguity surrounding the short and medium terms, but on the long run the developing world will become an axis for the global economy, which will contribute in changing the global energy policies' scene. He added that the energy producing countries are facing an uncertainty state more than usual, which made the producers not sure of the feasibility of investment in developing oil and gas resources despite the oil prices' boom in 2008 as well as the large increases in prices in 2011.

Oil markets

Dr. Salman Ghouri, the senior economist in the Department of Strategic Planning and Policies in "Qatar Petroleum" Company had stated that until 2050, fossil fuels will remain the main source of energy consumption, which will lead to environmental damage and changes in climate. He explained that with the rapid global population and economic growth, especially in developing countries, the energy consumption will increase, and this means more gas emissions resulting in global warming and further deterioration in the global climate. All this leads to food shortage, diseases' outbreaks and population disorders.

His Excellency Adnan Amin the General Director of the "International Agency for Renewable Energy" .

For his part, HE Adnan Amin, the General Director of the "International Agency for Renewable Energy" (Irina) had clarified that fossil fuels produce more than 50% of the global carbon dioxide emissions, contribute to climate change, and thus highlight the importance of creating groups of renewable energy companies in all countries of the Cooperation Council of the Arab Gulf States. This is a matter which needs governmental support, not only governmental subsidies. It also needs international legislation and cooperation. Accordingly, IRENA was established in Abu Dhabi, and this is an evidence of international political will in order to enhance the future of clean and sustainable energy to overcome the most difficult challenges of this century.

Dr. Herman Fransan, the Executive Director of "Intelligence Group for Energy" in the USA, believes that oil markets have regained their recovery, and that prices entered the range of $ 90-120 per barrel. He added that the "Arab spring", and the subsequent halt in supplies from Libya in early 2011 have contributed to raising the prices to around $ 120 a barrel. But the persistent ambiguity and uncertainty surrounding the global economic situation, along with the starting recovery of oil production in Libya and Iraq have contributed to rein prices to some extent. However, prices' increase is still strong.

Dr. Mamdouh Salama, the international oil economist expert and the World Bank consultant for oil and energy affairs in the United Kingdom has clarified that the oil market fundamentals have witnessed radical changes given the increasing Chinese influence and the recessive influence of the OPEC. He said that the OPEC works more effectively when oil price falls where its cuts reduces its countries' production to support prices. However, there are abuses because of the non-commitment of its members to the decided reductions. Nevertheless, with oil prices expected to remain high in the future, the role of the OPEC will retract and there will be no need for a quota system by which the members abide.

He added that there is a severe crisis looming in the horizon and which will push oil prices to above $150 a barrel by 2015, thus causing severe damage to the global economic growth. This would put the OPEC at a crossroads, where it must then either increase its supplies significantly to stop the sharp rise in prices or risk to accept a non-influential role in the market. Dr. Mamdouh Salama expects the second option to take place given its previous lack of the production capacity surplus and thus its inability to meet the demand and stop the oil prices' attack in 2008. With the continuation of this shortcoming, the OPEC will not be able to influence the international oil market and prices.

The nuclear energy prospects

Dr. Hans Blix, the former Swedish Foreign Minister, the Emeritus General Director of the "International Atomic Energy Agency" and the former head of the "United Nations Monitoring, Verification and Inspection Committee" (UNMVIC) in Iraq, has confirmed that the developments that had took place in the past few decades have made the chances of nuclear accidents an increasingly unthinkable matter. Therefore, nuclear energy is a long-term solution to the energy dilemmas in the future.

Dr. Hans Blix the former Swedish Foreign Minister, the Emeritus General Director of the "International Atomic Energy Agency" and the former head of the "United Nations Monitoring, Verification and Inspection Committee" (UNMVIC) in Iraq.

Blix pointed out that there are strong arguments supporting the adoption of the nuclear power option and the exchange of nuclear information in the Arab Gulf States like the "European Community for Atomic Energy." He added that the civilian nuclear energy program, which is currently being developed in the UAE, is an effective solution to the energy needs of the country, especially as it played a leading role in the adoption of an advanced program for civil nuclear energy.

On the other hand, HE the Ambassador Hamad Ali Al Kaabi, the Permanent Representative of the UAE to the "International Atomic Energy Agency", had explained that the nuclear energy sector was exposed to challenges after the Fukushima accident in Japan in March 2011. However, nuclear energy will continue to play a prominent role in the global energy sector and there will be no radical change in the global use of this source in general, but there will be more attention to the issues of nuclear safety.

Dr Vladimir Kjramenaan, the Advisor of the General Director of the Physics and Energy Engineering Institute in the Russian Atomic Energy "Rosatom" Company in Russia, has clarified the role of nuclear energy in meeting the growing global energy demand, contributing to the security of energy supplies and reducing the concerns of the climate change and the volatility of fossil fuel prices. In spite of the fears caused by the nuclear Fukushima disaster which had shaken confidence in nuclear power, the states' reactions and policies varied between reviewing the nuclear programs, taking gradual steps to dispose of nuclear energy, and reemphasizing its expansion plans.

With regard to the nuclear power economics, Professor James Talinko, the Director of Florida Laboratory for Advanced Technologies for Nuclear Fuel and Rectors' Materials and the Emeritus Professor of Nuclear and Radiation Engineering at Florida University in the USA, had said that the costs of constructing and financing the nuclear plant represents 65% of the total costs, while the operating and maintenance costs represent 24%, and the remaining 11% concerns the fuel cost. The volume economies play an important role in reducing operating costs.

For his part, Anthony Frojat, the Senior Research Fellow in the " Energy, Environment and Development Program" in "Chatham House" Institution in the UK, has confirmed that the spread of nuclear energy represents a diversification of fuel and reduces the volatility of fossil fuel prices, and thus increases the security of supplies and helps in the market stabilization. He referred to the environmental benefits of nuclear energy, where it does not emit carbon dioxide. But there remain other effects such as uranium mining, the emissions or wastes during the routine operation and the consequences of nuclear accidents.

The future of renewable energy

In his paper "The future of renewable energy", Dr. Waheeb Issa Al Nasser, the Vice Head of the University of Bahrain for Planning and Development and the Professor of Applied Physics in the University in the Kingdom of Bahrain, has clarified that renewable energy had continued its strong growth in 2010 to account for a 16% share of the total global energy consumption. This represents half of the new added electrical power in the world and which is estimated at 194 GW.

The global production of biofuels has increased by 14% to reach 59 million tons of equivalent oil. The geothermal capacity has increased by 1.8% to reach 10.9 GW, while the biomass waste production has settled at 65 GW. The hydroelectric power offers more than 15% of the total electricity in the world and about 5% of its energy business; its installed capacity reach about 100 GW, and its production was 776 million tons of equivalent oil in 2010. The energies of waves and tides contribute by less than 0.03% of the renewable electricity production, despite the spread of these systems in 32 countries.

Studies show that the production of electricity from solar energy has increased by 53% since 2000, while the amount of electricity generated from wind has increased by 32%, the solar water heaters by 21%, geothermal energy by 4%, and hydroelectric power by 3%. The production of ethanol has increased by 10% and the bio-diesel by 9%.

The reports show that the total investment in renewable energy sources continues to increase year after year to reach $270 billion in 2010.

The global status of the Renewable Energy Policies Network

Dr. Mohamed El-Ashry, the Chairman of the "Renewable Energy Policies Network for the twenty first century (REN21)" has referred to the network report in 2011 in collaboration with a network of international researchers, and stated that the renewable energy sector continues to operate well led by the performance of developing countries in spite of the deteriorating economic statuses, and that the world has entered a new era characterized by attention to the issues of energy security, climate change and the ability of the poor to get modern energy services.

Al Ashry added that at the global level, the climate change is highlighted as the most serious link between energy and the environment. The energy production and use contributes significantly to the accumulation of greenhouse gases in the atmosphere. The international community had agreed in the "Copenhagen Summit in 2009" and "Cancun Summit in 2010" on limiting the rise of global temperatures, but given the continued global energy demand growth, the reduction of global emissions would require an unprecedented technical shift regarding how to produce and use energy. The adoption of "Kyoto Protocol" in 1997 and the agreement among most of the developed countries on legal targets to reduce emissions have helped in opening the door before international emissions trading and the establishment of a large carbon market. The project of the EU of emissions trading is the largest in the world, where it captured 84% of the global market value in 2010.

Energy policies in the GCC countries

Dr. Mohamed Ramadi, the Professor of Economics and Financial Management at King Fahd University for Petroleum and Minerals in Saudi Arabia has confirmed that the Council countries face increasing difficulties in their management of energy resources, and that the domestic energy demand is expected to grow over the next two decades, particularly in Saudi Arabia, the UAE and Qatar driven by the increased expectations, the demographic factors, and the economic diversification. Ramadi has added that the GCC countries will have to change the way of their management of their domestic energy programs, either related to oil, gas, renewable or nuclear energy, and develop a plan to achieve sufficiency in energy and a more effective supply network among the Council countries.

On the other hand, Dr. Stephen Hertog, the Professor of Comparative Political Systems at London Faculty of Economics and Political Science in London University in the UK, refers to the historical importance of oil industry in the Council countries for being a source of net revenues and because the oil sector was a pioneer of heavy manufacturing especially the intensive energy industries in those countries that have aptly succeeded in industries in which other countries in the "OPEC" failed. The success of the Council countries is attributed to abandoning bureaucracy, their use of separate salaries and employment systems, and their benefit from the direct care of the rulers. "Aramco" and "SABIC" and "Mubadala for Development" companies are considered clear models for these successes in the region.

Dr. Gamal Sanad Al-Sweedi, the Director General of the "ECSSR", summarizes the conference deliberations in this regard by stressing the importance of establishing renewable energy companies groups in the Council countries together with continuing to offer the governmental support, issue organized legislations, and offer international cooperation to enhance the future of clean and sustainable energy. He also pointed out to the importance of the Council countries developing a comprehensive plan among each other to achieve energy self-sufficiency and establish a more effectively supply network among them pointing out these countries had been able to build institutional structures for energy and heavy industries sectors run by the state. These sectors represent "pockets of efficiency", especially in the UAE and Saudi Arabia as a result of their management which has nothing to do with bureaucracy, and committing to professional obligation and specialization. It is a model required to be repeated in all activities run by the region countries such as aviation, space and renewable energy.