It is often argued that in the next decade or two, we may be facing a more demanding and complex international environment and thus more pressing challenges. This will impose new requirements in terms of coordinating national and international policies, and more effectively using resources to deal with pressing issues. Can we coordinate the work of government ministries and agencies most closely in order to “join up” government and bring policies and instruments together in a more effective fashion?
US policy trends US energy policy is likely to change incrementally over the next 18 months. The US will invest more in incentives tproduce renewable fuels and plug in hybrids, raise appliance and building standards, and build a consensus for a cap-and-trade system to constrain carbon emissions. The US is also likely to fund one or more commercial size demonstration projects for carbon sequestration.
After the 2008 Presidential elections, the US will likely retain a Democratic congress. Whichever party wins the Presidency will make a harmonized cap-and-trade system, or less likely a carbon tax, a priority for the first year. Support for a new international treaty will be secondary, but harmonization will be an important goal.
A Democratic Congress will likely mean that there will be no –or modest – expansion of the exploration in the outer continual shelf. Expansion of Gulf of Mexico exploration into sensitive areas is also unlikely. Democrats will also focus more on human rights concerns in sub-Saharan Africa and place a higher value on efforts to improve oil sector transparency. Both parties will place a higher emphasis on economic sanctions on companies that do business with Iran if proliferation concerns have not been redressed.
Significance for Norway A carbon constrained US economy should lead to resumed interest in gas for power generation over coal. Demand for LNG should rise. Norway could have increased opportunities for exploration in the Gulf of Mexico, as well as LNG exports to the US.
Norway may also be a potential partner in any carbon sequestration project the US might undertake. There is little that Norway can do to influence US policy. It is primarily driven by domestic interests, and foreign policy plays a surprisingly (and disappointingly) modest role.
What will be the most important drivers, international developments and trends in the coming 10–15 years? Which developments pose the greatest risks, e.g. in terms of their potential negative impact and probability? What are the key issues that require our attention, and where can we make a difference?
The key geopolitical trends impacting Norway’s role in the world are the rise in state control of resources, reduced access to resources by IOCS, increased cooperation among national oil companies, instability in some producing areas like Nigeria, continued instability in Iraq, potential conflict in the Gulf over Iran, possible acts of terrorism on Gulf producers, increased Russian attempts to monopolize Central Asian energy supply to expand its role in the European market, and continued NGO criticism of investment in undemocratic or corrupt oil producing countries.
Many of these trends favor Norway as a destination for energy investment and increase its importance on the world stage. If Norway provides opportunity for foreign investment at modestly competitive terms it will be a favored destination for foreign investment.
Norwegian gas will be a primary source of diversity of supply for Europe much as it was with the development of Troll. Norway’s willingness to play a significantly greater role as a supplier could dramatically increase its foreign policy importance to both European and America.
Statoil will be a favored partner for other NOCs because of its relative efficiency and compatibility with state control. NOC desire for technology and training should also help make Statoil a preferred partner if it packages its exploration packages in a strategic fashion.
How can we develop more effective international cooperation and efforts to promote global governance in response to these issues?
Norway’s international role should also be enhanced.Norway can be a key bridge to Russia for Europe and the US, if it chooses to play such a role.
Both African and Latin American countries may look to Norway as economic model, enabling Norway to counsel those countries on opening their societies as well. The decline in the US image overseas may change, but, consistent with its past, Norway will have a leading role in being a broker for peace in the Middle East. Norway’s’ role as a leader in oil revenue management and extractive industry transparency should provide it useful reputational favor with NGOs and a Democratic congress. Norway’s ability to gain access to the highest levels of countries in Europe and the developing world as either as a supplier, exploration partner, development partner, or a peace broker give it an almost unique position in the world.
The international system as such is also undergoing change. A range of non-state actors have become much more important, sources of power and influence within the international system are changing, new instruments and arenas are becoming more important, and the way in which states act to safeguard their interests and achieve foreign policy goals is being diversified. Are we keeping up with changing realities?
Norway’s key vulnerabilities lie in undermining its reputation by Statoil’s investment in countries that would seem to undermine Norway’s international values. Iran holds the greatest risk.
Norway’s relationship with Russia holds risk for its relationship with both the US and with Russia. Norway can help interpret Russian actions for the US. But the more Norway plays a role in diversifying European supply of gas to counter Russia’s monopoly, the more irritated Russia may become.
The High North holds great opportunity for investment, global gas supply and even partnership with Russia.
There is risk that environmental groups may oppose this development, but that risk seems to be primarily an internal Norwegian risk, or a European one. The High north has very little profile (despite good Norwegian efforts!) with the US government or US NGOs.
Any pressure will come from industry (which seeks access) but not from governments. In my view the potential foreign policy gains to Norway, essentially remaining a strategic global supplier for several more decades, dwarf any negative risks.
How can we improve our own and the international community’s crisis prevention and response capabilities? Geopolitical developments are likely to lead to serious proposals to reform the IEA and may erode interest in the International Energy Forum. The fact that the IEA no longer contains a majority of the world’s oil consumers, notably China and India, undermines its influence.
The need to protect a liquid market for oil and resist modest but serious attempts by some consumers to secure bilateral deals at market prices makes the IEA important, but of late ineffective.
New energy security risks such as the need for greater strategic reserves, potential reserves of products, and possible natural gas reserves, open the door to an expanded mission for the IEA.
The need to bring China, India, and the rest of developing Asia into the collective energy security system also means that there will need to be incentives, such as shared opportunities to invest in carbon sequestration, or advanced engine and fuel technology.
A carbon constrained world will also increase demand for energy efficiency measures worldwide, and the IEA can be a potential platform for delivering advice to countries on appropriate technology.
The energy poverty issue remains unresolved and development gains are still projected to be outpaced by population growth. Addressing (largely rural) poverty in sub-Saharan Africa and South Asia will be a security, environmental, and humanitarian concern. The IEA along with the World Bank may be well positioned to help address these challenges with environmental, security and commercial benefits for the developed world.
The arguments for making these changes is implicit in the issues raised above: increased leverage for consumers, carbon emissions reduction, increased security through the reduction of underdeveloped and ungoverned spaces, reduction of the use of energy as a weapon by monopolistic suppliers, and protection of market systems.
The arguments against are that the IEA may be diluted, its emergency response mechanism could be weakened, and the IEA’s capacity could be challenged by new missions. Without change the IEA is likely to become irrelevant. The IEF, with due respect to its able diplomatic leadership, is viewed as an unproductive talk shop by US officials and private observers. Like the IEA’s dialogue with OPEC, it has provided legitimacy and publicity for producers, but no discernable benefits to consumers. It is a dialogue, but apparently for the deaf. It may continue to exist but it is unlikely to be viewed as a useful institution by the United States.