Reconfiguration of the natural gas production network in Europe

Source: Mike Benna (Unsplash image)

Reconfiguration of the natural gas production network in Europe

Written by: Kerem Öge

Europe is one of the key theatres of global natural gas trade. Despite the European Union’s (EU) commitment to transitioning away from hydrocarbons, natural gas still plays a key role in supplying and sustaining crucial energy demand for the continent. The trade in natural gas has enjoyed continuous growth over the last two decades (except a minor dip immediately after the 2008 financial crisis) until the Covid-19 pandemic hit the global economy in early 2020.

The macroeconomic shock induced by the pandemic has had a major impact on natural gas markets. Throughout the world, the demand for natural gas has declined due to lockdown measures and slowing down of economic activity. However, the demand for gas along with other energy sources surged in 2021 in response to the global economic recovery. High demand combined with various supply shortages around the world meant that the energy prices has once again soared in this period. Finally, in 2022, the price of energy including natural gas has skyrocketed due to Russia’s invasion of Ukraine.

The dramatic fluctuations in energy markets in the last three years facilitated significant debate about the future of natural gas in Europe. While many call for an immediate transition to renewables, unfortunately this is not realistic. In fact, what we are currently experiencing is not the end of natural gas in Europe, but a major reconfiguration of the natural gas production network. Specifically, there are four seismic changes that will transform the post-Cold War status quo in which Russian gas has steadily supplied European gas markets.

The first change is the phasing out of fossil fuels. As European countries refine their plans to reduce greenhouse gas emissions in response to the ongoing climate crisis, natural gas will eventually decline in strategic importance. However, the road to achieve zero emissions is long and winding, and natural gas plays a pivotal part in the process as a relatively ‘clean’ fossil fuel. Accordingly, while coal plants are being phased out in many European countries, the EU’s gas consumption is expected to remain relatively high in the next two decades, and almost 90 percent of this gas will be supplied by external sources.

The second change is the increasing availability of Liquified Natural Gas (LNG) thanks to the ‘shale revolution’ that originated in the United States. LNG provides a flexible alternative to long-term supply contracts that guarantee a certain amount of natural gas delivered by pipelines. In the next few decades, the increasing availability of LNG from Qatar and the United States may in fact facilitate the emergence of a global gas market. This would obviously have huge implications for many Eastern European countries who are currently completely dependent on Russian gas.

The third major change is a geopolitical one, which is often referred to as ‘pipeline politics’. In the post-1991 period, Russia has been a relatively stable supplier of natural gas to Europe via pre-existing pipelines that go across Ukraine and Belarus. In the last decade, numerous political and economic conflicts with these transit countries have motivated Russia to seek alternative routes such as Nordstream 1 and 2, South Stream, and Turkstream. Meanwhile, Azerbaijan also emerged as a modest, but reliable natural gas provider to Europe via Trans-Anatolian Gas Pipeline. Recent completion of some of these projects has seriously undermined Ukraine and promoted the emergence of Turkey as a new transit actor in European energy security.

The fourth and final change is associated with war and conflict in Eastern Europe. Russia’s invasion of Ukraine in 2022 prompted a severe political and economic response by the EU against Moscow. Specifically, the Nord Stream II project was shelved by Germany and the EU is currently proposing plans to phase out Russian gas by 2027. Needless to say, these developments have the potential to fundamentally transform EU-Russia relations and would have major implications for the other three processes described above.

At the moment, it is difficult to imagine how the new natural gas production network in Europe will precisely look. However, one can make certain predictions based on the four transformations described above. It is clear that LNG will be the winner in the short-term as a flexible substitute to Russian gas. Consequently, natural gas pipelines are likely to become less important from a strategic perspective as more and more countries in Europe switch to LNG. Similarly, renewables, such as solar and wind energy, will increasingly become more viable options due to high prices. Finally, Azerbaijan, Qatar and the United States are likely to emerge as key energy providers for Europe, while Russian Gazprom will eventually target other markets, most likely in Asia.

Author Bio:

Kerem Öge is a Lecturer in Peace Studies and International Development at the University of Bradford. Previously, he has worked as a lecturer at King’s College London, Aston University, University of Nottingham, and the University of Wales Trinity Saint David. Kerem studied at the Middle East Technical University for a BSc in International Relations and a Minor degree in International Economics. He has an MA in International Political Economy from the University of Warwick, and he received his PhD in Political Science from Boston College, Massachusetts in 2013. He has held postdoctoral positions at Université Laval and McGill University.

Mouzayian Khalil : 13 Jul 2022 12:23 |  Tags: Climate Crisis Energy Eu Natural Gas Natural Resource Trade |  Comments (0) |  Close comments |  Report a problem

Nigeria’s New Petroleum Industry Act Could Entrench Injustices in Oil host Communities

Shell Oil’s oil and gas terminal on Bonny Island in southern Nigeria’s Niger Delta (Photo by Pius Utomi EKPEI / AFP)

Written By: Dr Phillip Nelson and Dr Modesta Tochi Alozie (Research Fellows, University of Warwick)

After nearly two decades of legal limbo, the Nigerian government has finally signed the Petroleum Industry Act (PIA) into law. In Nigeria, the petroleum sector contributes significantly to the country’s economic growth and development. There are laws empowering the federal government to control and distribute the revenues generated from oil extraction. Many people in the Niger delta, the region where Nigeria’s oil exploration takes place, believe that the current fiscal framework guiding the distribution of oil revenues does not favour them. Concerns over the environmental harms of oil exploration also run deep within the Niger delta. The oil communities have been protesting against these legal frameworks and environmental harm, with many calling for resource and pollution control. Many commentators agree on the need for transformative reforms in the oil sector. The PIA, among other things, aims to address some of the grievances within the oil host communities.

The PIA aims to improve the governance of the Nigerian oil industry by ensuring accountability and transparency, while repositioning Nigeria for gas-based industrialisation as the world moves away from oil. The bill aims to address the massive lack of development in the Niger delta by requiring oil operators to contribute 3 per cent of their operating expenses toward a host community trust fund which is to be utilised for the socio-economic development of the Niger delta.

Yet, the PIA has not escaped criticism. It allocates 3 per cent of operating costs for community development, rather than the 10 per cent the local communities asked for. This minimal commitment has generated scepticisms about the willingness of the federal government to integrate local demands into oil policies and laws. However, what is less widely discussed, is the other ways in which the PIA risks entrenching existing injustices.

Chapter 3 section 257 (2) of the Host Community Section of the PIA states that:

“Where in any year, an act of vandalism, sabotage or other civil unrest occurs that causes damage to petroleum and designated facilities or disrupts production activities within the host communities, the community shall forfeit its entitlement to the extent of the costs of repairs of the damage that resulted from the activity with respect to the provisions of this Act within that financial year: Provided the interruption is not caused by technical or natural cause.”

This blog highlights three avenues through which this approach taken in the PIA may entrench injustices in oil host communities if it is not implemented carefully. First, this section prescribes collective punishment that can be ineffective and morally hazardous. Second, that it could constrain citizenship and activism, and finally that the process of establishing the causes of oil spills may be flawed.

1. Collective punishments are morally hazardous and can be ineffective.

When an entire community is forced to forfeit their entitlements for acts of vandalism, sabotage (pipeline vandalization) or unrest, they are being collectively punished for acts that may be caused by only a very small number, or even a single individual. Herein lies our first concern with the clause above: punishing innocent parties for the actions of others is unjustifiable. Collective punishments exacted during the course of conflict have been generally outlawed since the Hague Regulations of 1899. The Geneva conventions also prohibit collective punishments, and many individual states have specifically outlawed such punishments in their military regulations. In the case of Nigeria, if oil extraction were hampered by civil unrest, punishing the community rather than establishing individual responsibility would violate international conventions. Additionally, collective punishments can incentivise otherwise well-behaved, individuals to dissent – if you are going to be punished anyway, why not take part, or take what you can get from the situation? Furthermore, historically the Niger delta communities have had a very terrible relationship with the federal government and collective punishments could entrench community hatred towards the federal government.

2. Constrains on citizenship

The requirement that the oil communities forfeit their host community funds if civil unrest impacts oil production has significant implications for citizenship and activism. Historically in the Niger delta, protests and activism have been used to challenge unjust laws and policies as well as other harmful impacts of oil exploration, such as environmental degradation. However, the federal government has often repressed protests in the oil communities and described them as undermining peace and security even when they have been peaceful. Based on this history, we argue that this section could provide a window of opportunity for the federal government to characterise any act of local resistance to the oil industry as civil unrest. Concern that any protests, even when legitimate, could result in withholding host community funds can discourage all anti-government protests, effectively stripping citizens of their rights.

3. The process of establishing the cause of oil spills is deeply flawed

Finally, the above section of the PIA states that local communities will continue to receive host community funds only when interruption to oil production is caused by ‘technical or natural causes’. The issue here is that the process of establishing the cause of oil spills has been a key source of controversy in the Niger delta. When an oil spill occurs, a ‘Joint Investigation Visit’ (JIV) is carried out by representatives of the oil companies, regulatory agencies, and community representatives to establish the cause of the spill. While in theory, there are measures in place to ensure transparency and accountability within the JIV process, reports of corrupt practices, unreliability, undue influence of the oil companies, and complaints about the limited participation of the local communities are widely documented. In many cases, oil companies have used their undue influence to misattribute the cause of oil spills to sabotage which absolves them of paying compensation to the oil communities. On the other hand, local communities argue that while sabotage and vandalization is a big problem in the region, the JIV process greatly underreports the amount of oil spills caused by operational failure and corrosion. Since the process of establishing the cause of oil spills is flawed, the causality of oil spills is necessarily in doubt. We argue that this provision is likely to provide further incentive for the inaccuracies in the JIV process to continue since the cause of the oil spill will determine the allocation of development funds.

Taken together, while the PIA can provide a significant fillip to the governance of the petroleum sector, we see three main issues with Chapter 3, Section 257 (2) of the Host Community Section of the PIA. This Clause provides for collective punishment, which has specifically been outlawed in many circumstances, and it remains morally hazardous and ineffective. The Clause can also discourage host communities from engaging in peaceful protest, which is their civil right. And it can incentivise further inaccuracies within the JIV processes. With these concerns in mind, we recommend to the Federal Government of Nigeria to use needs assessments to fully explore the reasons why some individuals and groups object to the extraction by vandalising oil pipelines, and to consider using development funds to mitigate these. Lastly, we recommend, improving the legitimacy and integrity of the JIV process by making the process fair, transparent and increasing the meaningful participation of local communities. Without addressing these issues, the PIA will potentially leave the oil communities at the mercy of the powerful oil companies.

Author Bios

Dr Modesta Alozie is the Lead Research Fellow on the Data and Displacement Project at the Department of Politics and International Relations, University of Warwick, UK. She holds a PhD in Development Planning from University College London. Her research interests are in oil politics, climate change and digital humanitarianism.

Phillip Nelson is a postdoctoral researcher, most recently employed at the University of Warwick. He holds an MA in Economics and International Relations from the University of St Andrews and an MSocSci in Peace and Conflict Studies from Uppsala University, Sweden. He was awarded his PhD in international relations from the University of Essex in 2019 for his thesis on individual and group motivations for participation in civil conflict, and has so far published work in the journal of Defence and Peace Economics.

Mouzayian Khalil : 06 Apr 2022 15:19 |  Tags: Environmental Governance Niger Delta Petroleum Industry Act |  Comments (0) |  Close comments |  Report a problem

Is sustainable development possible in the current global political economy?

Source: Kristen Honig/USFS

Written By: Turhan Hizli

The consequences of climate change have become more obvious in recent decades, with global warming bringing many natural hazards, primarily sea level rises, wildfires etc. While we need to prevent its devastating impacts, can we mitigate climate change within the existing global political economy (GPE)? Can we accept that a significant reduction in emissions will inevitably require a change in our current consumption of goods and services? To sustain development without depleting our resources and damaging the environment encourages us to embrace a relatively new concept in the international development discipline- sustainable development, which according to the Brundtland Report, is a development that “meets the needs of the present without compromising the ability of future generations to meet their own needs” (Brundtland Report, 1987, p. 16). 

In the current era of global capitalism, some developed countries and global corporations disproportionately control key aspects of the GPE which is based on capitalism, globalisation, and free trade. GPE “deals with the interaction between political and economic forces. At its centre have always been questions of human welfare and how these might be related to state behaviour and corporate interests in different parts of the world” (Walzenbach, 2016, p. 1). It encapsulates predominantly capitalist institutions like the IMF and the World Bank, and since the 1990s capitalism’s ‘victory’ over socialism has led to wide-ranging support for the pro-market instruments ranging from deregulation, privatisation, and a limited state (Gilpin, 2001). A key question which currently faces us is whether sustainable development is possible within this incumbent GPE. This blog evaluates this question and concludes that sustainable development will necessitate substantial changes in the GPE and political institutions that bolster it.

Although developed countries are responsible for environmental degradation, as they consume 75 per cent of the world’s energy and contribute to 70 per cent of the ozone layer’s destruction, impact of climate change like rise in sea-level or habitat destruction threaten the livelihoods of most people in developing countries (Nixon, 2011). Developing countries in Southeast Asia are vulnerable to sea-level rise and subsequent floods whereas developing countries in Sub-Saharan Africa suffer from droughts and crop failures (Ngcamu and Chan, 2020). There are also apparent inequalities in greenhouse gas emissions, for example, the US produces 20 per cent of emissions despite having 4 per cent of the world population (Roberts, 2019). Although the developed countries are responsible for triggering climate change, attempts by developing countries to stimulate development are criticised for causing global warming. For instance, their rural inhabitants are blamed for environmental degradation as they use industrialised fertilisers and pesticides even though Western chemical corporations promote their use (Banerjee, 2003). Also, slash-and-burn farmers in developing countries are held responsible for habitat destruction whereas timber corporations are inflicting the most damage (Banerjee, 2003). Furthermore, large corporations strive to spread scientific doubts to undermine efforts to tackle climate change. For instance, large corporations like ExxonMobil hires lobbyists, journalists and scientists who do not believe in climate change to justify inaction against climate change.  

Large corporations also seek to consolidate the business-as-usual approach through green capitalism which advocates the market’s role in reducing emissions and decreasing their waste (Berghoff and Rome, 2017). Although there have been minor improvements in pollution control and emissions decline, corporations’ prime aim is profit maximisation and there is still a long way to minimise emissions and monitor businesses compliance. More importantly, corporations put pressure on developing country governments to provide some concessions in economic policies (Banerjee, 2001). For instance, in Mexico, pressure from corporations persuaded the government to grow meat for Western fast-food companies on the land that was previously used by indigenous communities to grow corn (Banerjee, 2003). Another example is Brazil’s Carajás region- the centre for iron ore and timber production, in which the Brazilian government invested US$60 billion mainly funded by loans. While this project had a low economic gain, its costs were significant, it unsettled the Eastern Amazon’s native people and caused deforestation while easing developed countries’ access to imported raw materials (Carvalho, 2001).  

Furthermore, there are contradictions in international institutions’ efforts to achieve sustainable development like the UN’s Sustainable Development Goals (SDGs). For instance, Goal 12, sustainable management and efficient resource, is incompatible with Goal 8; decent work and economic growth. Goal 12 is measured by material footprint and the consensus on yearly footprint is 50 billion tons, whereas the consensus on global economic growth in Goal 8annually is 3 per cent. This economic growth rate will increase material footprint from 87 billion tonnes (2015) to 167 billion tonnes (2030). However, reducing the material footprint to 50 billion tonnes would require six times increase in efficiency levels which is an unrealistic target. Also, Goal 13 advocates acting against climate change, and the Paris Agreement binds the SDGs to increases in average temperatures by a maximum of 2 degrees. However, with the business-as-usual approach in emission production, average temperatures are expected to rise by 4.2 degrees. To avoid global warming of more than 2 degrees, substantial decreases in CO2 emissions of around a yearly 4 per cent decline are needed. Assuming that the economic growth should be 3 per cent annually (Goal 8), and the reductions in emissions need to be 4 per cent, this would require 7.29 per cent decarbonisation annually, which means decarbonisation should happen six times faster than the historical levels which shows another contradiction between Goal 13 and Goal 8 (Hickel, 2019).

Decreasing emissions and resource consumption but also maintaining economic growth are difficult and not possible in the current GPE (Hickel, 2018).  Therefore, a considerable change in the GPE and democratic reforms in international institutions that would empower the Global South are essential. Furthermore, their debts should be cancelled, and they should receive financial assistance to achieve economic development. Developed countries should accept responsibility and implement de-growth strategies to achieve sustainable development. Deconstructing the current GPE is a bitter prescription, but the only way that humanity can survive.

Author’s Bio

Turhan Hizli is a final year Politics and International Studies student at the University of Warwick. His areas of interest include international development, geopolitics, de facto states and state-building, the politics of Cyprus and Turkey.

Mouzayian Khalil : 17 Mar 2022 17:00 |  Tags: Climate Change Global Political Economy Student Blog Sustainable Development |  Comments (0) |  Close comments |  Report a problem