View of the Ras Tanura terminal in Saudi Arabia, the oil exporter receiving the highest revenues in the context of the crisis generated by the Russian invasion of Ukraine. CREDIT: Aramco

By Humberto Márquez
CARACAS, Apr 13 2022 (IPS)

The oil and gas supply crisis unleashed by the Russian invasion of Ukraine represents new business opportunities for the oil-producing countries of the developing South, both traditional and emerging, and also for accelerating the global transition to green forms of energy.

“The countries with the most positive economic effects are the net exporters that depend on hydrocarbon revenues for a large portion of their budget, economic activity and foreign exchange,” Nate Graham, head of energy at the Washington-based think tank Inter-American Dialogue, told IPS.

In Latin America this is the case, Graham said, for “countries such as Colombia, Ecuador and Venezuela, while on the other hand, countries in the Caribbean, Central America and Chile, which import oil and gas, will suffer the opposite effect.”

The opportunities arose after the Feb. 24 invasion of Ukraine, due to the abrupt withdrawal, in markets with fragile balances, of some three million (159-liter) barrels per day of crude oil from Russia, and the decision of a large part of Europe to cancel gas imports from Russia and look for other suppliers.

Oil and gas producers in the South “are enjoying extraordinary revenues,” Venezuelan oil geopolitics expert Kenneth Ramirez told IPS, “but those who are not producers have higher energy bills and are suffering from higher prices for food, of which Russia and Ukraine are major suppliers.”

Graham said: “Even in oil-producing countries, rising consumer fuel prices put pressure on governments to provide subsidies, which can then be politically difficult to reverse when prices fall again.”

But it seems that it is not yet time to heed all the warnings, given the new “(black) gold rush” unleashed in a world dependent on fossil fuel energy and aware that it will continue to be so for several more decades.

The oil production vessel Liza Destiny is used by Exxon to develop oil fields under Atlantic waters that Guyana has not yet definitively demarcated with neighboring Venezuela. CREDIT: SBM Offshore

Room for everyone

In South America one of the first to benefit has been Guyana, which extracted from the Atlantic Ocean – in waters pending delimitation with Caracas, noted Ramirez, who chairs the private Venezuelan Council of International Relations – some 110,000 barrels per day (b/d) in 2021 and expects to add another 220,000 within a year.

To achieve this, U.S. oil giant Exxon, with a century and a half of experience in the industry, accelerated its decision to invest another 10 billion dollars in Guyana.

Neighboring Suriname is also hoping for new investments, and traditional exporters Colombia and Ecuador must be rubbing their hands together in anticipation. But the most striking note was a new contact between the United States and Venezuela.

Formal ties between the two political opponents are broken, Washington has imposed sanctions that prevent Caracas from freely trading its oil and the South American country has made a show of being Russia’s ally in the region.

Venezuela, a major oil exporter throughout the 20th century, with production exceeding three million b/d between 1997 and 2001, now produces less than 700,000 b/d, following a decline in its oil industry under the administration of President Nicolás Maduro, in office since 2013.

But the country has gigantic reserves, close to 300 billion barrels, mostly of heavy crude, and the market read the new contact from Washington as a sign that the United States has decided that the adiós to Russian supplies will last for a long time.

The US company Chevron, which maintains a minimum level of production in Venezuela with Washington’s permission, could invest to produce another 200,000 b/d in a year, and the state-owned oil company Petróleos de Venezuela (PDVSA) is studying the leasing of new oil tankers, according to industry sources.

A technician works at the Tema refinery in Ghana, an emerging oil producer in West Africa. CREDIT: TOR

In Africa, in addition to the best-known producers, such as Nigeria, Angola, Libya, Algeria and Egypt, there are the hopes of the smaller and newer producers, such as Equatorial Guinea, South Sudan and above all Ghana, which, from producing a few thousand barrels a day five years ago, now produces almost 170,000 barrels per day.

Iran is another long-time oil producer which is again flexing with the crisis: it maintains energy alliances with Russia while the tug-of-war with the United States – which has sanctioned it for more than 40 years – continues over its nuclear program, whose redefinition may free it from some sanctions.

Tehran, which produces 2.5 million b/d, is preparing to increase its crude oil exports from 1.2 to 1.4 million b/d, and has a long-term plan to return to a production level of four million b/d.

Among the major beneficiaries of the crisis are the Gulf Arab exporters and in general the partners of the Organization of Petroleum Exporting Countries (OPEC), which act in alliance with 10 other producers in the OPEC+ group.

Saudi Arabia’s Aramco alone already recorded pre-war profits of 110 billion dollars in 2021 (compared to 49 billion dollars in 2020). Both the kingdom and the neighboring United Arab Emirates have been asked by Washington to increase oil production in order to avoid a price spike.

The main benchmark crudes, U.S. West Texas Intermediate (WTI) and North Sea Brent, were trading at around 70 dollars per barrel in 2021, but with the Ukraine crisis their prices soared: Brent has been holding steady this April at above 100 dollars and WTI at close to 95 dollars.

Global demand for crude oil is approximately 100 million b/d, of which OPEC contributes 32 million b/d, plus another 14 million b/d from the 10 OPEC+ allies, including Russia, Kazakhstan and Mexico.

OPEC+ rejected the request of large consumers, considering that the price increase is not due to market fundamentals but to the conflict in Ukraine, and agreed to add only 432,000 b/d to the group’s supply, starting in May.

“Nobody listened when we said more investments were needed in oil and gas,” said Emirati Oil Minister Suhail al-Mazroui. “Raising production will only be in a measured way and through a consensus among members.”

U.S. President Joe Biden then ordered the release of one million b/d for six months from his country’s strategic reserves of more than 650 million barrels, to increase the crude oil available to refineries and thus try to curb the rise in fuel prices.

Meanwhile, Algeria allowed itself the luxury of maintaining steady prices for the gas it exports to all its customers but not to Spain, in retaliation for a change in Madrid’s position on the dispute over the self-determination of the Saharawi people.

A crude desalter unit on its way to the Orinoco Oil Belt in southeastern Venezuela, considered the largest deposit of heavy crude on the planet and whose diminished production could receive a new boost as a result of the current energy crisis. CREDIT: PDVSA

The weight of Russia

And Moscow has stated that it will receive payment in rubles for its oil and gas exports to Europe, a region 40 percent dependent on Russian gas and 27 percent on its oil, with which it has not been able to completely do without after six weeks of war.

The late U.S. politician John McCain (1936-2018) said in 2014 that Russia “is a gas station masquerading as a country” to underline the nation’s heavyweight status in the field of fossil fuel energy.

Of the 1.7 trillion barrels of crude oil reserves on the planet, Russia has 107 billion, surpassed only by Venezuela, Saudi Arabia, Canada, Iran and Iraq. The Eurasian country produces 10.8 million b/d (more than 10 percent of the world total), behind only the United States and almost as much as Saudi Arabia.

In gas its weight is even greater, since it has 20 percent of the world’s reserves (38 of 188 trillion cubic meters), making it the leader by far, and with its annual production of 638 billion cubic meters it covers more than 18 percent of global demand.

The richest will earn more

Among the winners, oil companies will earn the most, and this year the 25 largest could make profits between 100 and 120 billion dollars higher than in 2021, when, according to the U.S. organization Accountable.US, they made record profits of 237 billion dollars.

Consumers, meanwhile, will pay the price. In almost all of Latin America a liter of gasoline costs well over a dollar (1.75 dollars in Uruguay, 1.40 in Chile, and 1.32 in Guatemala, for example) and even in up-and-coming Guyana – which has crude oil but no refinery, Graham pointed out – it sells for almost 1.10 dollars.

In the United States, where one out of every five barrels of oil the world produces is consumed, a liter cost 75 cents a year ago and this April averaged 1.10 dollars, with higher prices on the Pacific coast.

Gasoline prices this year exceeded four dollars per gallon (more than a dollar per liter) in the United States, and in an attempt to curb prices the government is releasing part of its strategic crude reserves so that the refineries have sufficient supplies. CREDIT: Fidel Márquez/IPS

Path to greener energy

In Europe, “the majority are now betting on a pragmatic and possibilist vision, which continues to focus on renewable energies and energy efficiency, but a debate is opening up about the use of nuclear energy and even coal, which would make a better balance between energy security and climate change,” said Ramírez.

Graham believes that “the present crisis underscores the geopolitical risks of dependence on foreign oil and gas and the importance of reducing it for security reasons, which can be an accelerating factor for the transition to renewable technologies and green hydrogen (obtained from clean energy sources).”

But “on the other hand, some may interpret the present crisis as a reason to increase domestic and regional hydrocarbon production in the short term, which may extend dependence on fossil fuels, while companies recover the costs of new investments,” he said.

In addition, there is pressure on governments to provide fuel subsidies to lessen the impact of the crisis on consumers, which may be politically difficult to reverse and might thus generate the opposite effect to what is needed to drive the energy transition, Graham said.

The International Energy Agency (IEA), made up of major industrialized consumers, recognized at its Mar. 24 meeting held to assess measures to address the crisis “the importance to energy security and clean energy transitions of ensuring clean, affordable, reliable, resilient, and secure energy infrastructure.”

Energy security and the transition to clean energies are “inextricably linked” in the view of the IEA, and its executive director, Fatih Birol, stated that “the response to this energy crisis will be an acceleration of the transition to clean energy,” not necessarily for climate reasons, but for energy security.

Experts predict that in the long term, shale gas production will not be sustainable in the United States. The photo shows a shale gas well in Montrose, in the U.S. state of Pennsylvania. Credit: Emilio Godoy/IPS

By Emilio Godoy
WASHINGTON, Oct 7 2015 (IPS)

The emergence of fracking has modified the global market for fossil fuels. But the plunge in oil prices has diluted the effect, in a struggle that experts in the United States believe conventional producers could win in the next decade.

The U.S. oil industry had peaked – when the discovery of new deposits and output from existing wells begins to fall – which made the country more dependent on imports. But the equation was turned around thanks to the new technique.“The bubble won’t explode, but it will progressively deflate. At current prices, we would see a relatively quick shrinking of capital availability for the shale sector, because those companies are producing at a loss.” -- David Livingston

The innovative technology of hydraulic fracturing or fracking and the discovery of large deposits of shale gas and oil, along with massive investment flows, led to predictions that the United States would become autonomous in fossil fuels this decade. But these forecasts have been undermined by the drop in prices.

“The world is entering a new era of uncertainty in the geoeconomics of oil,” said David Livingston, an associate in the Energy and Climate Programme of the U.S. Carnegie Endowment for International Peace. “It is far from certain that the notoriously volatile oil market will become less cyclical.”

The analyst told IPS that as a result of domestic U.S. demand, “Companies will lose spare capacity, between what they can produce and what they produce, which is important, because the market is determined by that capacity.”

After 2003 international oil prices climbed, to 140 dollars a barrel in 2008, when the global financial crisis brought them down.

This decade they rallied, to around 100 dollars a barrel. But they have fallen again since late 2014, to about 40 dollars a barrel.

That means U.S. producers, in particular shale gas producers, are facing extremely low prices, overproduction, a lack of infrastructure for storing the surplus and a credit crunch for the industry’s projects, even though prices have gone down.

In addition, China’s economic slowdown and Europe’s stagnation are hindering the recovery in demand for energy.

The development of shale oil and gas has also put the U.S. industry on a collision course with the members of the Organisation of the Petroleum Exporting Countries (OPEC), especially since one of its widely touted objectives is to reduce imports from that bloc.

A warning about the danger of methane emissions in one of the shale gas Wells in Dimock, Pennsylvania. Credit: Emilio Godoy/IPS

Since November 2014, OPEC has kept its production quotas stable, as part of a strategy imposed by the bloc’s biggest producer, Saudi Arabia, aimed at keeping prices low and discouraging the development of shale deposits, which are much more costly to tap into than the organisation’s conventional reserves.

In late 2014, the Norwegian consultancy Rystad Energy put the cost of producing a barrel of shale oil in the United States at 65 dollars a barrel, which means the industry is operating at a loss. The average cost of extracting a barrel of conventional oil in that country is 13 dollars, compared to five dollars in the Gulf.

For Miriam Grunstein, a professor at the Centre for Economic Research and Teaching (CIDE) in Mexico, the outlook is very uncertain.

“There are doubts for several reasons. First of all, due to the low prices,” she told IPS from Mexico, which has begun to explore its significant reserves of shale gas.

“Although it has forced many companies to improve their operating capacity, reduce investments and achieve greater efficiency, they are in an environment where they have to look for markets, in Europe or Asia. But that requires liquefaction infrastructure, which implies major investments,” she added, referring to the current situation faced by shale gas producers.

In June, the United States produced 9.3 million barrels per day of crude oil, about half of which was shale oil, according to data from the Energy Information Administration (EIA).

The prospects for the industry are beginning to look less promising. In its Drilling Productivity Report published in late August, the EIA projected a fall in shale gas production in September, for the first time this year, to 44.9 billion cubic feet per day.

The agency stressed that output from new wells is not enough to offset the decline in existing wells.

For Livingston, “OPEC as an institution – and Saudi Arabia, its leader – is likely to emerge from this paradigm shift stronger than before in many ways. With its new strategy – one born out of necessity – the kingdom is emphasising market share, rather than price, while also moving to delegate the burden of balancing the world oil market to the U.S. shale industry.”

The United States would become the new “swing producer”, although without achieving the same power as the Gulf producers in influencing the market.

In the long run, total U.S. oil production will tend to drop, according to EIA projections. In 2020, crude oil production is expected to stand at 10.6 million barrels per day; in 2030, 10.04; and 10 years later, 9.43.

In the case of shale gas, projections are favourable, but at higher prices. In 2020, the country should be producing 15.44 trillion cubic feet per day; 10 years later 17.85; and in 2040, 19.58.

In total, the EIA forecasts that the country will produce 28.82 trillion cubic feet per day of natural gas in 2020; 33.01 in 2030; and 35.45 in 2040.

But the average price will go up. This year, the Henry Hub reference price for U.S. natural gas has stood at 2.93 dollars per million British thermal units (Btu), the heat required to raise the temperature of one pound of water.

The price should go up to 4.88 dollars per Btu in 2020; to 5.69 in 2030; and to 7.80 in 2040.

“The bubble won’t explode, but it will progressively deflate. At current prices, we would see a relatively quick shrinking of capital availability for the shale sector, because those companies are producing at a loss,” said Livingston.

Grunstein said: “Saudi Arabia’s aim is to keep the United States from becoming a major exporter. The strong markets exert the most pressure. If demand does not recover, the demand-price ratio is awkward. Consumption is needed, and I don’t see where it would come from.”

Livingston said one option is to review the 1970s-era ban on exporting U.S. crude oil, because “If production rises, refineries can’t process it and therefore new markets are needed.”

Edited by Estrella Gutiérrez/Translated by Stephanie Wildes

The OPEC Fund for International Development (OFID) has agreed to give the United Nations Industrial Development Organization (UNIDO) a grant in support of a project aimed at improving the productivity and competitiveness of the shrimp value chain in the Latin America and Caribbean (LAC) region.

OFID is the development finance institution established by the member states of the Organisation of Petroleum Exporting Countries (OPEC) in 1976 as a collective channel of aid to the developing countries.

The grant, which amounts to 300,000 dollars, aims at co-financing a project worth close to 900,000 dollars. OFID Director-General, Suleiman J. Al-Herbish and UNIDO Director General Li Yong, signed the agreement in Austria’s capital, where the two organisations are based.

UNIDO Director General Li Yong (left) and OFID Director-General Suleiman J. Al-Herbish (right). Credit: Courtesy of OFID

Al-Herbish said that the project “will support the sustainable development of the fisheries sector in the LAC region through the promotion of more resource efficient, environment friendly and socially equitable fish farming and processing practices.”

It will also contribute to poverty reduction efforts through the creation of direct and indirect employment and income generation opportunities, as well as improved food and nutrition security, he added.

UNIDO Director General Li pointed out that the shrimp farming sector represented an important source of income in countries such as Colombia, Cuba, Dominican Republic, Ecuador, Mexico and Nicaragua.

“However, in most of these countries there is a need to enhance the productivity and competitiveness of the sector and its compliance with international quality and environmental standards.”

Aquaculture, especially shrimp farming, has been a vital source of economic growth in developing countries. Shrimp farming represents 15 percent of the total value of the fishery products internationally traded in 2011. Ecuador and Mexico are currently among the largest producers in the sector at regional level.

The agreement was signed on Aug. 25, within four weeks of OFID and the Inter-American Development Bank (IDB) signing a co-financing agreement to jointly promote development and economic growth in the LAC region through the expansion of trade financing to banks in the region.

According to the agreement, OFID and IDB will build on the existing Trade Finance Facilitation Programme (TFFP) to provide lines of credit to commercial banks in the LAC region to broaden the sources of trade finance available for LAC importing and exporting companies and support their internationalisation.

In support of global and intraregional integration through trade, this agreement will further strengthen OFID’s long-standing partnership with the IDB and widen OFID’s presence in the trade finance market in the LAC region, OFID said in a press release.

OFID works in cooperation with developing country partners and the international donor community to stimulate economic growth and alleviate poverty in all disadvantaged regions of the world.

It does this by providing financing to build essential infrastructure, strengthen social services delivery and promote productivity, competitiveness and trade.

According to OFID, its work is “people-centred, focusing on projects that meet basic needs – such as food, energy, clean water and sanitation, healthcare and education – with the aim of encouraging self-reliance and inspiring hope for the future.”

Edited by Phil Harris   

By Suleiman Al-Herbish
VIENNA, May 14 2015 (IPS)

When, in 2003, Professor Richard Smalley, winner of the Nobel Prize for Chemistry, listed the top 10 problems facing humanity for the next 50 years in order of priority, energy was at the top of his list, followed by water, then food.

Suleiman Al-Herbish, Director-General of the OPEC Fund for International Development (OFID)

Years later, this energy-water-food nexus is central to the work of the OPEC Fund for International Development (OFID) and a core element of our corporate plan.

It is hard to imagine a better life when you are in darkness and the ‘heart of darkness’ is the widespread lack of access to reliable and affordable sources of modern energy. This darkness continues to impede socio-economic development worldwide.

Nothing is worse than seeing such darkness in the 21^st century first hand. In Armenia, I visited the home of Ms Anahid, one of OFID’s many beneficiaries, whose house had recently been connected to a gas grid.

In her home, I saw a picture of her young son who had been tragically killed by a falling tree while collecting firewood. His young widowed wife sat in the corner and I had overwhelming mixed feelings: immense sadness for a life lost, yet relief that it would never happen again in that region.

It is a brutal moment when one realises the terrible human loss caused by energy poverty, and recognises how easily such tragedies can be avoided.

When one works in development, a single aim is in mind: putting people first. When we put people first, the facts are painful and implausible to ignore. The numbers are absolutely staggering: 18 percent of the world’s population still lives without electricity and 38 percent without clean cooking facilities.

If all of us think of these facts each time we switch on a light, use our phone or eat a meal, the darkness that 1.3 billion people live in becomes painful to imagine and hard to ignore.“It is hard to imagine a better life when you are in darkness and the ‘heart of darkness’ is the widespread lack of access to reliable and affordable sources of modern energy. This darkness continues to impede socio-economic development worldwide”

Despite the work of so many valuable institutions, organisations and pledges, people are often forgotten, and the political will never materialises. Yet, when the will is there, things do actually happen, and believe me, for the past ten years, I have personally seen them transpire.

In 2007, through the Riyadh Declaration, at the third summit of the Organisation of the Petroleum Exporting Countries (OPEC), member countries charged OFID with spearheading the fight against the greatest constraint to development – energy poverty – and long before it became a mainstream topic, OFID pioneered its fight against it.

OFID recognised that universal access to energy was a vital element to achieving the Millennium Development Goals (MDGs) and dubbed it the “Missing 9^th MDG”.

So, in September 2011, when U.N. Secretary-General Ban Ki-moon stated: “Energy is the golden thread that connects economic growth, social equity and environmental stability”, OFID roared.

And when Kandeh Yumkella, U.N. Under-Secretary-General and the Special Representative of the Secretary-General for Sustainable Energy for All, said that “the fact that so many lives continue to be blighted by the absence of electricity or other clean fuels for cooking and heating is without a doubt a shameful indictment of modern society,” OFID found an ally.

We knew that they represented many like-minded individuals who had the will to make our shared fight against energy poverty recognisable to the world.

We were exultant when, in 2012, with the launch of the U.N. Sustainable Energy for All (SE4ALL) initiative, energy access was finally established as a global priority. Energy poverty had finally reached the global agenda and our work throughout the years has been instrumental in attaining energy access.

OFID has been a leading partner in SE4ALL since its inception and instrumental in shaping the proposed Sustainable Development Goals (SDGs) with the eradication of energy poverty as SDG7.

Our commitment to this mission has been practical as well as communicative. Our strategy for poverty eradication has been action-based with a revolving endowment of one billion dollars pledged by our supreme body, the Ministerial Council, in our 2012 Declaration on Energy Poverty.

Over the past few years, OFID has transformed its commitments into actions in the field. This has led the share of energy projects in OFID’s total operations to reach 27 percent in the past three years, compared with around 20 percent since inception. These resources have been distributed among 85 countries for projects ranging from infrastructure and equipment provision to research and capacity building.

As the United Nations marks its 70^th anniversary, we reflect on the historical development of humanity and our unity as an international community to achieve a better world. It is an important time for us to recognize all the efforts in building improved lives and providing dignity to all.

As idealistic as I would like to be, I know there is much more to be done, and the fight is far from over.

What drives our motivation is OFID’s incredible will to continue. Where there’s a will, there is always a way.

I always said, and will continue to say: the day an institution like OFID closes its doors because of the lack of need from its partner countries to alleviate humanity’s countless problems is a day for us all to celebrate.

In the meantime, we will continue our efforts to power lives … one by one, until no single soul living on this planet is in darkness and no mother loses her son as Ms Anahid did.

Edited by Phil Harris

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