Geopolitics Comes to the US Gulf of Mexico
If oil geopolitics are defined as the regional effects of politics on global oil/energy fundamentals (or security), perhaps the most important geopolitical events of the past six months have not been in the Middle East, or Korea, but the US Gulf of Mexico, where the most energy intensive economy in the world appears to have chosen a political energy strategy, rather than an economic one. With little other than a call for a ‘clean energy future,’ there seems to be little viable option to, at best, a multi-decade, or even century-long transition from hydrocarbons. As deepwater drilling has come under legislative (but not voter) attack, onshore opportunities such as gas and oily shales, have also suffered from adverse, though less damaging, publicity. It is possible that both on and offshore exploration and development are about to get more expensive, with ramifications in the next up-cycle. If the goal is to create a bigger price umbrella for renewables, we could be well on the way.
According to the Middle East Economic Survey (MEES), even Middle East countries are clamping down on transactions with Iran, as proposed sanctions continue to develop. With energy imports as the primary target, the UAE and, particularly Dubai (a major transit point for all types of transaction, including laundered cash), are shutting down offices and closing bank accounts. ENI, traditionally nonpolitical, has most recently withdrawn from a field development, and the country’s LNG program is in tatters. Lloyd’s also announced that it would not insure cargoes into Iran. On the other hand, Russia continues to oppose the current sanction program, perhaps leaving only themselves and China among Iran’s larger trading partners.
During June and early July, France’s Areva signed nuclear power agreements with Morocco and Suadi Arabia. Areva and Korea’s KEPCO are leading the effort to sell nuclear power into the Middle East, with plans that include projects in Egypt, Kuwait, Jordan, the UAE, and, now, Morocco and Saudi. In spite of moves to add both solar and nuclear power to its supply mix, Saudi Arabia has reported that its internal use of crude oil, largely for power generation, could triple by 2030, absorbing roughly 1.5 mmbd that might otherwise have been exported to The non OPEC World.