The “Crisis Curve” is Accelerating in a Dangerous Part of the World
Sitting in a new land of plenty, Americans rarely notice disturbing energy trends elsewhere in the world.
But in the course of my global work, it’s impossible not to recognize there are serious energy shortages developing in other parts of the world.
In fact, I’m beginning to see worrisome indications this “crisis curve” is now accelerating.
Oddly enough, the latest danger signals are coming in from parts of the world normally thought of as net energy producers: The Middle East, North Africa and Central Asia.
Now, there are new concerns that this brewing energy crisis may well be the next serious step in an ongoing “Arab Spring.”
Suddenly, energy has become a bigger trigger point in a highly volatile part of the world…
A Fast Growing Electricity Crisis
Over the past week, new warnings have emerged in Egypt, Yemen, and Pakistan that the situation is deteriorating.
In Egypt and Yemen, the crisis is a direct result of political strife. Both countries are facing a massive collapse in electricity availability because of the unrest.
Egyptian energy officials are now publically stating the country could face a grid shutdown in the next few months, an effect of a systemic breakdown in both the generation and distribution components. In fact, even as Cairo seriously looks at massive imports of coal to arrest a fuel supply shortage, there are increasing questions about the ability of the infrastructure to even support it.
Meanwhile, in Yemen, the problem is a direct result of opposition attacks on the electricity generation facilities themselves.
As for Pakistan, they have been in dire straits for some time, as we have discussed here previously. The country has suffered through increasingly frequent blackouts and the inability to provide industries regular power for more than a few hours each day.
That has a direct, and very negative effect, on production, employment and overall economic conditions.
The Pakistani government in Islamabad had put their hopes on a combination of natural gas imports – pipelines from Iran and Turkmenistan, along with liquefied natural gas (LNG) coming to proposed new onshore and offshore terminals.
But the LNG possibilities are facing significant investment difficulties along with a time delay for implementation that the country may not be able to weather. Then there is the added uncertainty of sourcing a regular supply of gas as the feeder stock for the LNG.
Recently, there have been some indications it may come from Iraq, where the rise in oil production has resulted in a surfeit of associated gas that needs to find a market. Separate production in the autonomous region of Kurdistan in the Iraqi north is another possibility.
Both, however, require their own pipeline systems – almost certainly running through Turkey – to move out the gas. What’s more, there is also the question of where the LNG would be liquefied for the tanker traffic to any receiving terminal the Pakistanis come up with.
The primary conventional natural gas pipelines also have significant roadblocks and have experienced inordinate delays. The Iranian venture is now dead until such time as Western sanctions against Tehran are eased.
The Turkmen venture is supported by Washington. Yet it is also dependent on the participation of an avowed enemy.
In this case, the proposed pipeline would cross both Pakistan and Afghanistan. Yet the demand in both of these markets together is too small to justify the project. So the pipeline won’t be built unless it can reach just inside the border of India. This is the reason why the pipeline is known as the TAPI (Turkmenistan-Afghanistan-Pakistan-India). No India, no TAPI.
Gaming the Energy Chessboard
Of course, India has a huge energy shortage crisis of its own, one that has already cut into its economic performance and threatens to have a multiplier effect throughout the country. And while it has numerous domestic drilling efforts in the planning stages, including some huge proposed projects offshore in the Bay of Bengal, these will not be nearly enough.
The Indian economy has been hit hard on the energy front from two directions.
The first has been the sanctions against Iran. Aside from China, India has been the largest market for Iranian crude. In fact, Indian refineries are largely designed to operate on Iranian grade oil.
But the collapse in international currency exchange to pay for the imports (a direct result of the global banking sanctions) added to the rising price and made matters very difficult for New Delhi.
The second factor is perhaps the most obvious. India’s population has for some time exceeded the country’s ability to support it with any system of reliable energy. That population continues to grow.
As a result, India has been negotiating with Pakistan for pass through access to the Turkmen gas. That would allow both nations access to essential energy, while Pakistan would also receive revenue from transit fees on the gas going over the border.
Nonetheless, negotiations have been excruciatingly slow. The process has hardly been helped by radical groups in both countries who are set against any cooperation at all.
Then there is the problem that TAPI has to move through areas controlled by radical groups in both Afghanistan and Pakistan. Neither central government can provide security in these regions nor has anybody come up with a genuine idea of who could provide the necessary protection.
So once again, energy becomes the chessboard upon which geopolitics is played out.
But you should note this very carefully: Energy prices are determined by the worldwide play of supply and demand. That means energy problems abroad will come back to effect even the most oil and gas endowed of nations