Sunday, June 9, 2013

Energy efficiency plans on the rise

ENERGY OUTLOOK
By Syed Rashid Husain
IT is always exciting, challenging, intellectually stimulating and indeed exhilarating, to discuss, talk and present the global energy scenario before students of energy, the analysts and indeed pundits. In most cases it is a two-way process, where both the presenter and the presented, learn from each other’s experience and interaction.
Invited by the organizers of the POGEE Conference, it was indeed a matter of personal honor to talk on the ‘Changing Global Crude Scenario.’ For industry conferences not only help in stimulating new ideas, but also provide ample opportunity to hear from the pundits, converging from different parts of the globe, their views on the evolving scenario. And this also provides the possibility of interacting and getting to know some of the movers and shakers of the industry.
The Lahore POGEE conference last week was no different, bringing to fore, once again, the issues plaguing the energy world. As soon as one finished the talk on ‘changing global crude scenario,’ Antoine Halff, Head of Oil Industry and Markets Division and the Editor, Oil Market Report of the Paris-based International Energy Agency, was quick to raise the issue of low gasoline prices and government subsidies in the oil producing countries, its contribution in the galloping, rather unacceptable, domestic consumption levels and the inefficiency it breeds into the overall system.
In hindsight, perhaps one knew the question coming. For this is one of the issues that keeps cropping up, every time someone from this, oil producing, region gives a talk and submits his personal view of the global energy conundrum. A few years back, while this scribe was invited to the board room of the International Energy Agency in Paris, to give his take on the global energy scenario; ‘Oil - the Other View,’ Halff’s predecessor at the IEA, David Fyfe too had asked an almost the identical question.
Low gasoline prices and the subsequent rising consumption within the GCC is an issue before the energy world – none can dare deny. It breeds inefficiency and at the same time could strain the global demand – supply balance – some argue even today, while the shale revolution is about to inundate parts of the globe.
In a recent report, consulting firm Oliver Wyman underlines that energy consumption in the Middle East has grown so fast that “continued projected consumption growth of three percent per annum and the level of investments that will be required are likely to lead to an even wider gap between supply and demand.”
The report then added, “The growing energy consumption in the Middle East threatens to sap the region’s competitiveness and economic growth. Even a moderate adoption, however, of measures used elsewhere in the world to increase energy efficiency could significantly reduce investment needs for energy infrastructure, slow the pace of energy consumption growth, free up oil for export and help mitigate pollution and the region’s carbon footprint.”
And this oil-producing region is more than aware of the situation, one could say with some background info and considerable conviction. There is a stark realization at the top, and one literally means the top, that the current model is simply unsustainable. People at the apex in Dhahran are not only alive to the situation but are keen on reversing it. They fully understand and concede that the current low gasoline prices are breeding inefficiency in the overall system. If it remains business as usual, the galloping domestic consumption may even touch the seven million barrels per day mark soon, Aramco top brass has been pointing out – and for some years now. And the day domestic consumption reaches that level; what would be left for exports? A major issue indeed - with serious consequences - most agree and concede.
And the scenario is not limited to Saudi Arabia alone. The entire oil-rich GCC is faced with an identical scenario. The current lifestyle is extracting a price of its own. Kuwait will also have to burn 700,000 to 900,000 barrels per day by 2030 to meet its growing electricity and water needs. And the consumption by the transportation sector would be in addition to it, leaving little for exports. And this would again carry huge social consequences. For all the glitter that one sees today in Kuwait, as elsewhere in the Gulf, is owed basically to crude exports. From where that could be sustained, if most of this crude is consumed domestically, is anybody’s guess?
This indeed cannot be permitted to go on forever. It has to change – most agree. The only question is how and to what extent.
Efforts to change the direction, to turn the tide, are on – throughout the region – from Riyadh to Kuwait and Abu Dhabi. Energy efficiency initiatives are being enacted and implemented throughout the Gulf so as to reverse this dangerous trend.
Courtesy, the Saudi Energy Efficiency Center (SEEC), Riyadh is seriously focusing on reducing power consumption through audits, load management, regulation and education. Similarly investments in environmental-friendly building projects in the Kingdom are also set to reach SR100 billion (over $26 billion). According to Faisal Al-Fadl, Secretary General of the Saudi Green Building Forum, Saudi Arabia is home to five percent of the total Middle East green building projects. The growing emphasis on tapping solar and nuclear options are also steps in the direction – freeing more crude for exports.
The United Arab Emirates has also launched its National Energy Efficiency and Conservation Program which seeks to promote efficient utilization of energy in the residential sector. It also is pursuing an active solar and nuclear energy program.
Kuwait is likewise pursuing energy efficiency programs. The Ministry of Electricity & Water and Kuwait National Petroleum Company are also endeavoring to map out a national energy efficiency strategy. As per Dr. Mershan Al-Otaibi, Asst. Undersecretary for Planning and Training, Ministry of Electricity and Water, Kuwait, short-to-medium term savings for electricity generation could be derived with a new energy-saving code for new buildings that will also reduce costs by 20 percent. Over the long term, he underlined, Kuwait could be generating 15 percent of its electricity requirements from renewable energy by 2030.
Indeed, some politically painful decisions may also have to be taken to reverse this disastrous course. And this is not easy. The fact remains that in wake of the current scenario, all around, many such decisions may not be easy to go ahead with at this particular juncture.
Yet the direction is very much there. The awareness is very much present. Virtually everyone concedes that there is no other way but to stop this wastage. The current inefficiency in the overall system has to be corrected – one way or the other - even if the entire process appears strikingly painful.
A beginning has been made. A few small steps are already in the pipeline. Some others are ready on files – to be undertaken as soon as situation persists. These are a prelude to drastic changes – all around.
And this remains a major consolation, let’s agree Mr. Halff!