One of the least explored but increasingly important areas of critical energy infrastructure protection concerns offshore oil and gas installations. The international regulatory framework provides a number of countervailing measures that can be used by states to protect offshore installations and respond to attacks and security incidents involving these installations. Mikhail Kashubsky who is with the Centre for Customs and Excise Studies in Australia explores the international regulatory aspects of offshore installations security in the second part of a three-part series for the Journal of Energy Security.

Operational energy (OE) is a buzzword in the halls of Washington for how new, improved and sometimes alternative energy and power solutions can be researched, tested, and ultimately deployed to make the warfighter more effective and efficient. While the US has put considerable resources and effort behind OE other nations are doing their part as well.  At NATO headquarters in Brussels, the concept is referred to as Smart Energy and has its own Smart Energy Team (SENT) which was set up by NATO’s Emerging Security Challenges Division (ESCD).  The team is comprised of a group of experts from six Allied and two Partner countries. SENT's main tasks are to identify the best existing 'smart energy' solutions, and to provide recommendations for improving NATO’s standards and best practices. IAGS, publisher of the Journal of Energy Security, maintains an observer status to the SENT and participates in the non-classified sessions of SENT meetings held in Brussels.  As equally important as these developments are is the fact that the North Atlantic Council, NATO’s highest political body,  approved the addition of the new Energy Security Center of Excellence in November 2012 at which OE research, discussion, and collaboration serve a key role in its core mission.  On the R&D front this is lead by NATO’s Science and Technology Organization and contributed to by thousands of engineers, scientists from disciplines spanning the natural sciences to physical sciences, and other experts to move the OE process forward.  

Operational energy in practice may be a nascent development but the needs for it are not.  Fuel requirements during wartime have been a strategic concern for nations for over a century.  During World War II, Japan’s retrofitting of its navy to run on coal in response to the American blockade, Germany’s push towards Baku to control the birthplace of the Soviet Union’s   oil industry are but two examples of energy’s prominence in strategic operations and objectives over the last century.  In Afghanistan, 70% of the logistics burden borne by the US military has been dedicated to moving fuel and water around.  Future operations, given the landscape of uncertainty as to where and under what conditions conflict will occur, places an even greater responsibility on defense and military establishments to think through the energy burden beginning with defense planning, plowing through OE R&D, testing, and deployment and ending with how to effectively [and efficiently] clean-up, dispose of waste, and repatriate tons of equipment from a conflict zone.  Add to this global environmental concerns, operational considerations by some nations on targeting access to strategic transport corridors (and the commodities that transit them) that impact on military strategies, shrinking defense budgets and the role of energy in military operations becomes a fire-storm on how best to win the next fight.   

North America
 
In the United States, the US Air Force deemed October Energy [Awareness] Month as has the US Army, Navy and Marine Corps. Awareness raising on how the different services are addressing operational energy as well as how military personnel can themselves contribute to energy savings for improved operational effectiveness and straight forward energy efficiency through behavioral change are but two of the reasons for the focus.     From an Alliance standpoint, NATO’s Allied Command Transformation in Norfolk, Virginia is focusing on how OE can be streamlined into long term operations and strategy.  And at NATO headquarters, in October the NATO Review –NATO’s flagship media outlet dedicates a good portion of its coverage to Smart Defense, of which Smart Energy,  is a key component.  So why the focus now on the nexus between improving military operational energy capabilities and lowering operational and security risks through the lens of energy and power? 

Lessons learned: Afghanistan

The lessons of Afghanistan, of which there are many, provide a case in point.  The logistical difficulties of moving fuel and power to where it is needed are enormous.  Hundreds of lives have been lost in Afghanistan, and many more wounded (according to a US Army report in 2008 1 out of every 24 casualties in Afghanistan was tied to moving fuel and water). According to information drawn from NATO’s library guide, other statistics bring the OE challenges in Afghanistan into perspective.  Among them,

• ISAF needs more than 4 million liters of fuel per day in Afghanistan.
• For each gallon of fuel to Afghanistan up to 4 gallons are consumed for transport.
• On average one soldier dies in every 24th fuel convoy of the US military in Afghanistan.
• Up to 1000 fuel convoys per year have been sent to bases in Afghanistan.

Three years ago, the US Department of Defense created the Office of the Assistant Secretary of Defense for Operational Energy  at least in part in an attempt to focus and stop the blood-letting by US and ISAF forces in meeting their operational energy requirements.   The office’s creation in 2010 came at a precarious time when budgets of all kinds, let alone budgets for military expenditures, had already been under pressure for years by the collapse of financial markets which lead to recession paralleled by skyrocketing prices for oil which peaked in July 2008. All of this came at a time when America was still deeply embedded both in Iraq and Afghanistan.  In 2012 in the NATO Chicago Summit Declaration , Allied Heads of State and Government agreed that NATO [itself] should work “towards significantly improving the energy efficiency of our military forces” (paragraph 52).

So countries, like the US, and collective security organizations like NATO, have been mandated to act on operational energy; yet mandates are often ignored by the governments that declare them and through their attendant institutions through inaction.  In the case of OE however this doesn’t seem to be the case.  There is a small set of drivers behind OE R&D, testing, and deployment that help give some form to the current OE movement. 

Drivers: Austerity, Current Operational Needs, and Future Uncertainties 

Pressure from governments on their military institutions towards greater austerity and cost savings is a critical driver in the OE debate.  Doing more with less, a common adage used in discussing Smart Defense, also applies to OE.  Meeting current operational needs, through assisting the solider in being more effective in his/her mission, extending the time the solider can stay in the field without resupply, and gaining advantage through enhanced communications (power reliant) catalyzed and has sustained the drive to OE for the US and ISAF during combat operations in Afghanistan.  However, this period is coming to an end and with it the shift from an ongoing, US and ISAF kinetic combat mission to training.   With this change will come an even greater push towards austerity as the deployment of OE technologies will be drawn down and repatriated back home and in the immediate term the (real or perceived) need for OE reduced. 

As the push for cost savings increase, in an era when NATO will have no ongoing combat operation after 2014, a second challenge is that while OE technologies may be strategically, tactically, and operationally performance efficient they may not necessarily be perceived as cost efficient as measured by traditional methodologies or metrics.  In response, new metrics have been developed that put OE costs on a more equal footing with their traditional, and perhaps cheaper counterparts.  Steps in this direction, from the development of Key Performance Indicators for consideration in system requirements or in developing a measurement for the Fully Burdened Cost of Energy go in the right direction and help level the playing field.     

Where are we?

Instituting operational energy measures on a national basis let alone on a collective security basis is an incremental process.  Further there has to be the political will to carry through on what at first may appear as consensus on the issue but which hides fissures between prospective partners themselves.  On the first of these points, it is often not always entirely clear who within a Ministry of Defense, Department of Defense or even a particular service is responsible for OE research and development, program funding, and procurement and acquisition.  Despite this obstacle, the initial challenge can be overcome but clearly transparency and communications need to be improved. Secondly, there needs to be enhanced public-private sector dialogue in order that private sector product and service providers understand the given priorities of a service or even national government.  This isn’t a one-size fits all shop but needs to be nuanced by the clear identification and understanding of differences between nations and how service providers can practically go about approaching those with a check book.  Third, there is a startling array of application, needs-driven sectors to be served.  These include:

- building materials and installation technologies including portable HVAC systems
- Advanced fuel cell and battery systems for ground, air & space applications
- Further Performance metrics and measurements development
- Portable energy harvesting
- Biofuels and advanced “drop in” fuels
- Optimization of microgrids
- Energy integration in data-to-decision: Intelligent power management
- R&D in waste-to-energy conversions for FOBs
- Tactical renewable energy systems and networks

Whereas a country like the US may have its own priorities defined by an individual service, another country like Turkey, with Europe’s largest standing army, may have other priorities where operational energy is at play.  What would help greatly, particularly within a NATO context, is to move OE further on as a strategic priority bolstered by the political will of its Members so that OE guidelines and standardization can be harnessed and developed based on NATO’s true strength of driving forward interoperability.  This is much like creating a market for a product where competitors have to play by the same set of rules.  There is nothing earth-shattering in this observation but simple, practical ideas rarely are. 

Again on politics, it is recognized that different nations largely couch the OE challenge in different ways (beyond training and equipping) and these differences need to be bridged and respected.   By way of example, the term energy security is often treated an anathema, not within a single nation, but  among nations.  Nations consider energy and power an issue of national sovereignty in short a no-go issue that is avoided because it can bleed into discussions, even with partners,  into other areas nations consider sovereign such as foreign policy.  

The politicalization of operational energy needs to avoid such a fate.  Regardless of whether a given nation’s OE policy is driven by environmental concerns (Green Energy), Smart Energy (focused not only on cost efficiencies but on operational effectiveness) or Operational Energy (a clear focus on making the solider more effective) the fact is that these are all aspects of the same challenge: preparing for potential 21st century confrontations across a multitude of threat landscapes be it desert, arctic, island or sea-based scenarios where energy use, power generation, and fuels deployment will play a pivotal role in the outcome of a conflict. 

Perhaps the biggest challenge to moving OE forward on a collective basis is the issue of trust that cannot be taken for granted even among like minded nations.  Operational energy (driven by the need for interoperability) requires sharing, compromise, and a governable commitment to doing better together.  This is easier said than done but is entirely realistic given that it is already happening albeit not as quickly as one might want in the field of Smart Defense; it is feasible in the domain of OE as well.   

Kevin Rosner 

editor@iags.org    

 

 

The issue of energy security is often cast with a rather narrow net inordinately focused on security of supply issues (with oil and gas typically at the forefront of this discussion).  This bias is readily understood in practical terms.  We understand simply and immediately an energy supply problem if we pull up to the gas pump and there is no product to put in the tank.  So while supply security is admittedly an essential component of the energy security genre, a singular focus on this aspect alone skews a broader and more profound understanding of how energy, and particularly power, if denied, is part of the larger energy-security and for that matter human landscape. 

Authors Michael Bruno and Graham Warwick in a recent article written for Aviation Week & Space Technology gave pause for reflection on just how broad and complex this landscape is when they wrote on the changing nature of how the United States conducts warfare.  Here is a case in point that highlights how cyber and energy systems are intertwined in a way that has potential (and unintended) fallout for civilians if these systems are successfully targeted.  Citing Adm. Philip Cullum, US Deputy Chief of Naval Operations for Fleet Readiness and Logistics, for potential factors playing into energy security,  the authors write that home bases have become involved directly in combat operations, with unmanned aircraft [drones] being controlled from the continental U.S. “Those bases are connected to the local grid, which now has a role to play in future warfare,” he says.

In fact there are at least 13 US bases involved in conducting what some call ‘telewar’ in addition to multiples of others presumably scattered around the world in places as far away as Afghanistan and previously Iraq.  If the local grids play a role in future warfare then doesn’t that mean that local grids are part of the battle landscape that clever cyber-foes could target in order to bring down far away drone fleets or am I missing something here?  This isn’t to say the US should not use this technology but that along with its deployment, new and unintended vulnerabilities are created, that make the energy landscape more complex for all concerned. 

A quick glance at some of this edition’s contents tell us how thinkers and solution-providers are struggling to find robust, workable ways forward in confronting increasingly hybrid, complex energy problems in an increasingly interconnected world.  Of note is Michael Hallett’s contribution “Islands in the Stream: The Compressed Natural Gas Grid as an Energy Security Enhancer.”  Hallet seeks to address the major issue of grid vulnerabilities by proposing compressed natural gas (CNG) fired microgrids as a parallel grid system particularly for urban areas vulnerable to everything from a severe weather event to a cyber-attack; at the same time Hallett argues deployed CNG could also provide the backbone for a more diverse transportation fuels network.  Who knows, maybe putting what Adm. Cullum describes as local grids supporting future warfare on Hallett’s CNG microgrid-plan is a workable energy security solution to what could become an onerous problem for the American public with a drone HQ just down the street? We stick with our look at transmission grids, and the challenges their operators face, with an interview with Mr. Terry Boston volunteer president of GO15 an association of the world's largest transmission grid operators.     

The advent in the discovery of significant amounts of Eastern Mediterranean natural gas also prompted us to examine this East Med issue from its contentious and contested political, economic, social and even historical roots.  Roaming from Turkey to Israel to Cyprus three contributors, Karbuz, Luft, and Tsakiris each offer their own unique perspective on where natural gas development, and the debate (or hype) surrounding bringing Eastern Med gas to market stands at present.  And just to underscore this point, we are not armchair quarter-backing this discussion but the JES had bodies in the field from Tel Aviv to Istanbul to Nicosia in gathering material for reporting on this story.  In closing, there is plenty more reading in this Summer 2013 issue of the Journal of Energy Security to keep you thinking (and the lights on) during the summer doldrums.  Just as a heads up,  our Fall edition (October 2013) will be focused on operational energy and how defense and security organizations around the world are seeking to do more with less. Contributors interested in adding to this discussion should contact me at editor@iags.org as soon as possible.  Best regards, Kevin Rosner, Editor, Journal of Energy Security       

Dr. Sohbet Karbuz currently works at Mediterranean Observatory for Energy (OME), an energy industry association in Paris, as Director of its Hydrocarbons Division. Before joining the OME, he was with the International Energy Agency in Paris. Previously, he worked as research associate and manager at several institutions in Austria, Germany and Turkey.  His main areas of interests are oil and natural gas markets, energy geopolitics, energy security, energy modeling and scenario building.  In a career spanning more than two decades he has authored or co-authored numerous  books, scientific articles and book chapters. His principal hobby is writing articles on the US military energy consumption and security.  Mr. Karbuz  received his Bachelor of Science and Masters of Science degrees from the industrial engineering department of Istanbul Technical University, his PhD degree in natural sciences from the Technical University of Vienna and Postgraduate Diploma in economics from the Institute for Advanced Studies in Vienna.

The importance of what we term OPEC's "break even price of oil" was a key message in our recent book, Petropoly: the Collapse of America's Energy Security Paradigm.  The break even price is the price of oil required to balance the budget of Saudi Arabia and other OPEC countries.

If you've read Petropoly you were thus not surprised by recent reporting that the price of oil Saudi Arabia needs to balance its national budget is $94 per barrel, while Iran requires $125, nor by comments by Ali Aissaoui of the Arab Petroleum Investments Corp that "OPEC will definitely need to cut production to shore up prices as they can't produce at prices close to their break-even level."

As we explain in Petropoly, when non-OPEC countries drill more, if the slack isn't taken up by developing world growth in consumption, OPEC drills less in order to tighten the supply/demand relationship and send prices back up, and for the same reason when we use less, OPEC also drills less. 

By 2050 it is estimated that more than 5 billion people or more than half of the world’s population will live in Asia, a region replete with rich geographic, cultural, economic, and religious diversity.  This industrially expanding and burgeoning expanse- which covers about 60% of the world’s landmass stretches  (according to a Western definition)  from somewhere in the Aegean Sea to the Pacific Ocean-shares for the most part a seemingly insatiable hunger for energy resources and power.  Asians know and recognize this. 

In terms of global primary energy consumption China, India and Japan (which rank number 1, 4 and 5 respectively in terms of current consumption) are augmented by the United States (number 2) and Russia (number 3) which are both Pacific nations with substantial Asiatic populations however diverse as measured by country-of-origin.  In short, the multiple factoids that we use to define who we are and how we perceive the world we live in are shifting significantly away from Caucasian to Asian.  The world doesn’t look like the El-train in Chicago it looks like the passengers on a ferry on the Chao Phraya River in Bangkok, Thailand.  

For leadership in Jakarta, Beijing, Bangkok and Mumbai the bump and grind of keeping the lights on (in many cases where they burn only intermittingly) may or may not keep them up at night but life continues, Tuk Tuks putter through the teeming streets, and people scurry about as they do the world over clutching their plastic bags, eating on the run durum sandwiches or take-away Dim Sum from street vendors, and breathing bad air (also a global phenomenon) based on an energy model that can no longer be sustained with its present form and structure. 

In short, what I learned on my first and a most remarkable trip to the Asian Energy Security Summit in Bangkok in February was that the government owned and operated energy and power sectors--which are vastly common across every Asian nation--are unable in their present form to keep pace with changing and challenging economic development and the demographics that are driving expansion. 

This is not a ‘they’re wrong’ ‘we’re right’ argument but an observation gleaned from highly educated, incredibly energetic Asian energy professionals themselves.  Many Asians themselves readily acknowledge that state-on-state competition among and between Asian nations for energy resources (not public-private sector competition to generate power) is intensifying distrust, worsens maritime tensions, and aggravates key strategic rivalries among neighbors across Asia.       

The common denominator is that in all corners Asia nations are scrambling to provide power to electrify their societies using any means (resources) possible.  Power options are in many cases constrained by resource availability and electricity cost and availability is constrained by antiquated public policies originally designed to keep the lid on energy prices; these same policies (however well intended) are  currently preventing privately-generated power from flowing to the masses because the price of providing new power is constrained by government regulatory policy. 

Based on historical legacy, national governments are far and away the owner-operators of energy and power assets in Asia.  They set the price that state-owned power generators and distributors may charge their customers and they (in turn) subsidize the cost for whatever resource is to be burned, boiled or transformed from national budgets.  In 2011 globally governments subsidized fossil fuel consumer prices to the tune of US$ 523 billion up almost 30% on 2010 according to 2012 IEA statistics.  To nuance this a bit further, about half of these subsidizes are to oil products.  Generally in Asia the subsidy is between 0.3% and 23% (see map).  In India the average subsidization rate is 18.6%, in Thailand it is 20% while in China the average is 4.6%.  The point is that these subsidizes (regardless of how well intentioned) distort the real price of liquid fuels for transportation and power and in doing so encourage inefficiencies, delay restructuring power markets towards more competitive fuels and fuel use, and prevent competition from emerging in the absence of regulatory reform.            

One would think that people would at least be mildly annoyed and in some vicinities even alarmed at the growing gap between population growth and power availability.  But on the contrary there seems to be wide-spread resignation or recognition among many Asians that government structures are slow to evolve in order to meet current demand and indirectly suggest that the democratic process is at least in part to blame.  Where democracy exists (take India as an example that proudly proclaims that it is the world’s largest democratic state) decision making is designed to be deliberative (compared to what is often celebrated as expedient in autocratic regimes).  But systematic static-deliberation (is this an oxymoron?) leading nowhere can be highly dysfunctional to which many in the United States well attest to.  Independent power producers in India are doing their best, slogging it out in the political trenches, shoring up transmission losses through metering and preventing outright pilferage, and in growing their profitability in the face of daunting odds.  But even here there is nary a word about turning the Asian energy model on its head by unleashing the power (as measured by effectiveness and efficiency) of the private sector to confront the public sector’s energy woes.         

The Asian gas example
The OECD (IEA) points out that 76% of the global rise in gas demand is coming from non-OECD countries.  Where LNG is concerned this is not a bad story but keep in mind LNG is a small percentage of overall global gas consumption.  On the positive side of this story, the four largest global LNG suppliers are either Asian or in its neighborhood.  In order of magnitude these exporters are Qatar, Malaysia, Indonesia and Australia. India's percentage of natural gas in their overall energy mix is low (as calculated by IEA standards).  Despite this fact, they are already experiencing problems in meeting domestic demand. Already in 2011 domestic Indian gas production could only meet approximately 81% of its present demand from domestic sources and this was in-spite of a 45% increase in domestic production in 2010 over 2009 due to India’s Reliance Industry bringing online gas from India’s Krishna Godavari Basin (KG).  Gas import dependence is expected to increase to 35% by 2017.   Meeting these growth projections according to the Indian Independent Power Producers Association (IPPAI) there are two ready-solutions.  Either create a necessary (but expensive and extensive LNG import infrastructure for re-gasification) or to succeed in obtaining piped gas.  On the latter part of this solution-package the IPPAI admits it has been outbid and outdone across the board by China in countries like Kazakhstan, Nigeria, and across the Middle East.  This leaves piped gas.  Here again the Asian Energy Security Summit provided a backdrop to spirited discussions regarding the future of the IPI (Iran-Pakistan-India) pipeline, the TAPI (Turkmenistan-Afghanistan-Pakistan-India) pipeline and a Myanmar-India pipeline.  However none of these are operational.  Many are bogged down as collateral damage inside larger geopolitical debates and the TAPI pipeline is no closer to completion that Europe’s Nabucco pipeline which is a dead fish in the water. 

So what to do?  There is a hunger for more information regarding the potential of shale gas and oil and amazement at what the Americas have accomplished on these fronts.  There is also a good deal of unnecessary hand-wringing citing high expected costs for unconventional gas and oil development in Asia (note: oil from a dependency standpoint is even more dire than gas in India which imports 76% of its crude) but at the same time a great deal of interest in these American revolutions.  Indian challenges to unconventional oil and gas development include land-use and environmental restrictions, right-of-way legislation, and a culture of small, rural farming. The low hanging fruit here is bi-and-multilateral cooperation on the American public policy, technology, and regulatory experience-fronts which could be of assistance to those on the Indian sub-continent.  One can only hope that the US Department of Energy and the Bureau of Energy inside the US State Department are paying attention.  

Cooperation is key
Aside from the fact that Asian economies need to seriously re-examine their state-based, state-run energy model is the glowing opportunity that cooperation can play in building-down energy security related tensions in-and-among Asian nations.  Outright conflict prevention over energy resources is the objective.  And on this point, a chapter can be borrowed from how water resources are managed globally between states.  There are more than 250 water treaties in place around the world that govern the management and sharing of riparian water resources.  While we don’t know why these treaties exactly work which is to say which elements in these treaties are truly the ties-that-bind often conflicting nations together on the water-front (again take India and Pakistan as an example through the Indus Water Treaty) the fact is these treaties work.  Examining and identifying what elements in these treaties are the most effective and essential could very well prove helpful not only in avoiding future energy resource related conflicts between states that share the same resource basin but could also pave the way for the creation of regional power pools in Asia where power is needed most.  Keep in mind that water and energy resources are not evenly spatially delineated which promotes and prioritizes regional approaches to regional solutions. [For the sake of transparency it should be noted that IAGS (the publisher of the Journal of Energy Security) is a member of the Water Energy Security Consortium (WES) which also includes the Stockholm Environmental Institute, the Stockholm International Water Institute, US Sandia National Laboratory and the Center for Scientific and Industrial Research in South Africa.  The WES Consortium is pioneering the effort to promote integrated water-energy-and national security planning and policy in Southern Africa.]

Southern Hemisphere View of the World 

Map: Courtesy of the Government of Canada

Conclusion
Mr. Rosner’s education from his Asian tutors bottom-lines out as the solutions we advocate are not ‘my way or the highway’ but will be shaped and nuanced by the geographic, resource, and historical roots of Asian societies themselves. Democratic cultures and liberal economists do have something positive to offer in that they are grounded on the strength of debate, arriving at (sometimes) imperfect solutions to complex problems (but solutions none-the-less), and in their enduring experience that competition provides a greater good to the many than do monopolies (public or private) in spite of their best intentions. 

Second, what happens in Asia is already shattering the energy security demand paradigm worldwide and will continue to do so for the decades to come.  

Finally, international experience and cooperation in sharing policy options, scientific and technological experience and exchange in thwarting resource-based menaces to conflict among-and-between states is a resource vastly under-utilized and appreciated.  Asian nations are not alone in their quest to provide competitive economic and political solutions to their energy challenges because what-goes-around-comes-around and this time the true-North as determined by the mercury compass will be on the receiving end of the success or failure Asia encounters.  

Kevin Rosner is the Editor-in-Chief of the Journal of Energy Security       

FT reports:

"In January [2012,] Ali Naimi, the Saudi oil minister, said that the world’s largest oil producer aimed to keep oil prices at the triple-digit level throughout 2012....[AK: and indeed that's what happened for most of the year.] Opec’s net [2012] oil export revenues [hit] a peak of $1,052bn in nominal terms, up 2.5 per cent from last year.... A decade ago, Opec countries made just under $200bn selling their oil. In real terms, adjusted for inflation, Opec’s revenues in 2012 were also the highest ever, surpassing the peaks set during the oil crises of 1973-74 and 1979-81."

Also in 2012, drivers paid record prices for gasoline. AAA via Bloomberg: "The national average price of gasoline in 2012 was $3.60 a gallon, nine cents more than the previous annual record set last year."

Gal Luft testified on the topic Changing Energy Markets and US National Security before the Subcommittee on Terrorism, Nonproliferation, and Trade of the House Committee on Foreign Affairs. Read the testimony here.