The panel discussion "Where Will the Energy Come From" took place at the 59th annual conference in November, 2005.
Herman Franssen, David Goldwyn, Raad Alkadiri
We have a world hungry for oil,” said moderator Herman Franssen, and in the next 30 years — as the 5.5 billion people in the world that do not currently use oil begin to play a major role in consumption (mainly from China and India) — the question becomes, where will the energy come from? With consumption estimated to increase from the current 75 million barrels a day to 128 million barrels by 2030, there is no single source that will be able to accommodate demand.
David Goldwyn framed the energy question not in terms of where the oil is, but rather who is going to produce it, and specifically for OPEC: where is the money going to come from? He noted that in the last decade OPEC countries, aside from Saudi Arabia, have only increased their production when they partner with international oil companies (IOCs). Libya is currently involved in this process, and Goldwyn believes the country’s goals for growth are ambitious but feasible: a move from 1.5 to 2 million barrels/day by 2006, and to 3 million by 2010.
He outlined Libya’s two separate approaches for attracting foreign investment: the Exploration Production Sharing Agreement (EPSA IV) and bilateral negotiations. EPSA IV is transparent, competitive, pleasing to the IOCs, and good for long-term oil production (7-10 years), while bilateral negotiations are best for immediate results. Goldwyn reported that Libya’s poor infrastructure (mainly due to sanctions since 1986) makes deals with other countries for down-stream operations (e.g. refineries) attractive and conducive for quick results, but he warned that the role of American corporations is also dependent upon Libya’s ability to meet US governmental concerns about terrorism and internal stability.
Franssen looked at Saudi Arabia’s role in the oil industry — a country that “was, is, and will be the key to oil supply security and reasonable prices.” He predicted that high oil prices should go down in response to a spurt in non-OPEC oil production from 2007-08 and also because of a possible global recession that will bring demand down in the short-term — though he cautioned that this would only be temporary and that it should not change the overall picture of high-demand long term.
Franssen argued that the situation in Saudi Arabia and the Middle East is very complex — there are both technical and non-technical issues that will not be easy to resolve. The central technical problem is refining, not producing. Refinery capacity is not capable, Franssen pointed out, of handling the necessary production increases in Saudi crude oil. And beyond technical issues, there is the fact that many Middle Eastern countries are reaching a comfortable production plateau with little incentive to increase output — why risk further impacting reserve levels if profits are sufficient? Franssen was also concerned with stability in the region and how the US role in the Middle East may force Saudi Arabia to push itself further away from the US-Saudi relationship.
Panelist Raad Alkadiri discussed Iraq’s oil production potential in terms of key concerns that mush be addressed in order to reach a speculated output of 3 million barrels a day in two years. Security is at the forefront, Alkadiri noted, with 80 to 90% of attacks by insurgents last year taking place along a 15 km oil pipeline near Kirkuk. Political issues, such as large-scale corruption and the dismissal of more and more technocrats with every new post-war government have constantly undermined the progress of building the Iraqi oil industry.
Alkadiri said it is essential to draft laws that will ease the investment anxieties of foreign oil companies, something the current Iraqi constitution does not adequately do. Following this development, the much harder task will be the establishment of government institutions capable of enforcing these laws, specifically an effective judiciary and security force.
Alexis Rudakewych is an intern at the Middle East Institute. She graduated from Boston University with a degree in Anthropology, with a focus in Middle East studies. J. Edward Conway is an intern and a 2004 graduate of Davidson College.