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1 Global Resources

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3 Global Resources Conflict and Cooperation Edited by Roland Dannreuther Professor of International Relations, University of Westminster, UK and Wojciech Ostrowski Research Fellow in International Politics of Energy and Mineral Resources, Centre for Energy, Petroleum and Mineral Law Policy, University of Dundee, UK

4 Editorial matter, selection, introduction and conclusion Roland Dannreuther and Wojciech Ostrowski 2013 Individual chapters Respective authors 2013 Softcover reprint of the hardcover 1st edition 2013 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No portion of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, Saffron House, 6 10 Kirby Street, London EC1N 8TS. Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The authors have asserted their rights to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act First published 2013 by PALGRAVE MACMILLAN Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited, registered in England, company number , of Houndmills, Basingstoke, Hampshire RG21 6XS. Palgrave Macmillan in the US is a division of St Martin s Press LLC, 175 Fifth Avenue, New York, NY Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world. Palgrave and Macmillan are registered trademarks in the United States, the United Kingdom, Europe and other countries. ISBN This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. Logging, pulping and manufacturing processes are expected to conform to the environmental regulations of the country of origin. A catalogue record for this book is available from the British Library. A catalog record for this book is available from the Library of Congress. ISBN ISBN (ebook) DOI /

5 Contents List of Figures and Tables Acknowledgements List of Abbreviations Notes on Contributors vii viii ix xi Introduction: The Dynamics of Conflict and Cooperation 1 Roland Dannreuther Part I Historical Legacies 1 History of the International Oil Industry 13 Paul Stevens 2 Minerals: Industry History and Fault Lines of Conflict 33 David Humphreys 3 History of the Gas Industry 59 Chris Cragg Part II Theoretical Frameworks 4 Geopolitics and International Relations of Resources 79 Roland Dannreuther 5 The Political Economy of Global Resources 98 Wojciech Ostrowski Part III Companies, Contracts and Communities 6 Corporations vs. States in the Shaping of Global Oil Regimes 119 Giacomo Luciani 7 Communities: A Case Study of Oil Sands in Nigeria 140 Murtala Chindo and Michael Bradshaw 8 Sector Legal Frameworks and Resource Property Rights 159 Evelyn Dietsche v

6 vi Contents Part IV Scarcity, Technology and Future Supply 9 Peak Oil: Myth or Impending Doom? 187 Patrick Criqui 10 Peak Gas: Technology and Environmental Consequences 206 Ariel Bergmann 11 Mineral Depletion and Peak Production 222 Magnus Ericsson and Patrik Söderholm Conclusion: Reconceptualizing the Dynamics of Conflict and Cooperation 232 Wojciech Ostrowski Bibliography 238 Index 266

7 Figures and Tables Figures 2.1 Copper price since 1950 in real US dollar terms Copper mine production in Africa China s share of global mineral demand Terra concentration The stages of the mining cycle The fragmentation of oil based on API oil classification The four tiers of sector legal frameworks Hubbert s (1956) curves and actual US lower 48 production Oil in place, recoverable resources, cumulative production and reserves Conventional and non-conventional liquid hydrocarbons Unproven technically recoverable shale gas reserves (trillion cubic feet) Natural gas production by source, Geology of natural gas resources 211 Tables 7.1 Perceptions of environmental impacts of oil sands Differences in constitutional provisions Variations in sector legislation across the oil and gas and minerals sectors Sector and regional differences in the use of contracts and agreements Cumulative production, reserves, discoveries and resources revisited 192 vii

8 Acknowledgements The authors would like to acknowledge that this book is, in substantial part, an outcome of the EU Project for Natural Resources (Polinares), which was funded through the European Commission s 7th Framework Programme (project number ). Particular thanks go to Domenico Rossetti di Valdalbero, Principal Administrator for DG Research at the European Commission, and Philip Andrews-Speed, the scientific coordinator for the project. The authors and publishers are grateful to the following for permission to reproduce copyright material: Goldman Sachs for Exhibit 4, from Jeffery Currie et al., The Revenge of the Old Political Economy, Goldman Sachs, 14 March viii

9 Abbreviations ANC ARAMCO ASPO BHP CCGT CERA CFP CIC CNMC CNOOC CRS CVRD ECT EIA EITI EOR EPA ERCB FIRB FRELIMO FSU GCC GHG IEA IEF IFPEN IIED IMF IOCs IPC IPCC IPO ISI JOA JODI JV KIO KOC African National Congress Arabian American Oil Company Association for the Study of Peak Oil and Gas Broken Hill Proprietary Combined Cycle Gas Turbine Cambridge Energy Research Associates Compagnie Française des Pétroles China Investment Corporation China Nonferrous Metals Corporation China National Offshore Oil Corporation Corporate Social Responsibility Companhia Vale do Rio Doce European Charter Treaty Energy Information Administration (US) Extractive Industries Transparency Initiative Enhanced Oil Recovery Environmental Protection Agency (US) Energy Resources Conservation Board (Canada) Foreign Investment Review Board (Australia) Liberation Front of Mozambique Former Soviet Union Gulf Cooperation Council Greenhouse Gas International Energy Agency International Energy Forum IFP Energies Nouvelles International Institute for Environment and Development International Monetary Fund International Oil Companies Iraq Petroleum Company Intergovernmental Panel on Climate Change Initial Public Offering Import Substitution Industrialisation Joint-Operating Agreements Joint Oil Data Initiative Joint Venture Kuwait Investment Office Kuwait Oil Company ix

10 x List of Abbreviations LKAB LNG LPG MIM MMSD MNC MPLA NGLs NGOs NIEO NMC NOCs NRC NYMEX OBT OECD OPEC PDVSA PSA PSC PWYP RST SA SAP SOE SWF TNC TPA UMHK UNCTAD UNDP UNEP UNITA UNOCAL URR USGS WBMS WTI WTO Luossavaara-Kiirunavaara Aktiebolag Liquefied Natural Gas Liquefied Petroleum Gas Mount Isa Mines Mining, Minerals and Sustainable Development Multinational Corporation People s Movement for the Liberation of Angola Natural Gas Liquids Non-Governmental Organisations New International Economic Order National Mining Company National Oil Companies National Resource Company New York Metal Exchange Obsolescing Bargaining Theory Organisation for Economic Cooperation and Development Organization of Petroleum Exporting Countries Petróleos de Venezuela, S.A. Production Sharing Agreement Production Sharing Contract Publish What You Pay Rentier State Theory Service Agreement Structural Adjustment Programme State-Owned Enterprise Sovereign Wealth Found Transitional Corporation Third Party Access Union Minière du Haut Katanga United Nations Conference on Trade and Development United Nations Development Programme United Nations Environment Programme National Union for the Total Independence of Angola Union Oil Company of California Ultimate Recoverable Resources United State Geological Survey World Bureau of Metal Statistics West Texas Intermediate World Trade Organization

11 Contributors Ariel Bergmann is an energy economist at the Centre of Energy, Petroleum and Mineral Law and Policy (CEPMLP), a multidisciplinary institute within the University of Dundee, United Kingdom. His research is oriented towards renewable and alternative energy issues, specifically social value and willingness to pay for alternative energy sources. He is also interested in the interface between energy projects and environmental impacts at the local or regional level. Michael Bradshaw is Professor of Human Geography and former Head in the Department of Geography at the University of Leicester, UK. His PhD is from the University of British Columbia, Canada. His research is on resource geography with a particular focus on the economic geography of Russia and global energy security. He is Honorary Senior Research Fellow at the Centre for Russian and East European Studies in the University of Birmingham and Visiting Senior Research Fellow at the Oxford Institute for Energy Studies. He is currently conducting research project on the geopolitical economy of global gas security and governance, funded by the UK Energy Research Centre. He has a forthcoming book entitled Global Energy Dilemmas. Murtala Chindo was educated at UDU Sokoto, Imperial College London, and has a doctorate degree in Geography from the University of Leicester. He is Honorary Research Associate, University of Leicester, and Lecturer in the Department of Geography at IBB University, Lapai, Nigeria. From 2004 to 2007, he was a policy researcher on natural resources and infrastructure for a presidential think tank that provided policy advice to the president of Nigeria. His research interests include communities, resource extraction and development, resource governance, mining and geographic information systems. Chris Cragg is a freelance journalist, specializing in energy and environmental issues. He was editor of the Financial Times Energy Economist for 14 years and worked as a writer-researcher at BP for 4 years. He writes regularly for the European Energy Review and for Platts. He is currently engaged in advising the Nigerian government on pollution issues. Patrick Criqui is a senior researcher at CNRS and director of the Economics of Sustainable Development and Energy Laboratory (EDDEN, UPMF-CNRS Grenoble). His research initially focused on the economics of solar energy and modelling of international energy markets. He then developed global xi

12 xii Notes on Contributors long-term energy model, POLES, which is currently being used by the European Commission and by different administrations and companies in Europe to analyse the economics of climate policies. He was a lead author in IPCC s Working Group 3 (Nobel Peace Prize in 2007). He is member of the Economic Council for Sustainable Development headed by the French Minister for Ecology and member of the scientific council of the Local Climate Action Plan of the Grenoble metropolitan area. Roland Dannreuther is Professor of International Relations and Head of the Department of Politics and International Relations, University of Westminster. He is also International Fellow at the Department of International Relations, Tbilisi State University, Georgia. His research revolves around the areas of security studies, energy politics and international relations with a regional focus on Russia, Central Asia and the Middle East. His current research is on energy security and international energy politics, with a particular focus on China s international energy strategy and the future dynamics of international energy politics. Recent publications include China, Oil and Global Politics (2011) co-authored with Philip Andrews-Speed. Evelyn Dietsche is a development economist and public policy analyst who has held positions in the public and private sectors and academia. She has recently completed a position with a global energy company where she was instrumental in developing the company s sustainable development and broader licence-to-operate strategy. She is now a principal consultant with Oxford Policy Management and an honorary lecturer with the Centre for the Energy, Petroleum and Mineral Law and Policy at the University of Dundee. Magnus Ericsson is co-founder and chairman of the Raw Materials Group (RMG) and professor of mineral economics at the Luleå University of Technology in Sweden. His interest in the social, political and economic impacts of mining goes back to the 1970s. He has a special focus on African mining. David Humphreys is an independent consultant based in London. He was previously chief economist of Rio Tinto and Norilsk Nickel. David has written and lectured extensively on the economics of the mining industry. Recent publications include Transatlantic Mining Corporations in the Age of Resource Nationalism, Transatlantic Academy (2012). David is an honorary lecturer at the University of Dundee and a non-executive director of Russian gold miner Petropavlovsk. Giacomo Luciani is the Scientific Advisor of the Master s in International Energy at the Paris School of International Affairs of Sciences-Po in Paris; adjunct professor of International Affairs and co-director of the Executive Master in International Oil and Gas Leadership at the Graduate Institute of

13 Notes on Contributors xiii International Affairs in Geneva; and a Princeton University Global Scholar affiliated to the Near Eastern Studies Department and the Woodrow Wilson School of Public and International Affairs. His research interests include the political economy of the Middle East and North Africa and the geopolitics of energy. His work has focused primarily on the economic and political dynamics of rentier states and issues of development in the GCC countries. Wojciech Ostrowski is Post-Doctoral Research Fellow in International Politics of Energy and Mineral Resources at the Centre for Energy, Petroleum and Mineral Law and Policy, University of Dundee, and Visiting Lecturer at the Department of Politics and International Relations, University of Westminster. He is the author of Politics and Oil in Kazakhstan (2010). Patrik Söderholm is Professor of Economics at Luleå University of Technology, Sweden. His research is focused on the economics of energy, natural resources and the environment. Söderholm has been a guest researcher at the Massachusetts Institute of Technology (MIT) and the International Institute for Applied Systems Analysis (IIASA), Vienna. Paul Stevens is Senior Research Fellow at Chatham House. He is also Professor Emeritus at the University of Dundee and Visiting Professor at University College London. He has published extensively on energy economics, the international petroleum industry, economic development issues and the political economy of the Gulf. In March 2009, he was presented with the OPEC Award in recognition of his outstanding work in the field of oil and energy research.