New energy dynamics: The time is here for a new international energy governance

10:11 13 April in ARTICLES, In English

logo-hurriyet-daily-newsHürriyet Daily News | 13 April 2015

Mehmet Öğütçü – Urban Rusnák*

Rapidly changing energy dynamics are set to determine the course of our economic development, complex geopolitical confrontations, amazing technological breakthroughs and massive investment and trade flows. 
As a result, the newly emerging energy game, with players and rules that have changed beyond recognition over the past two decades, will continue to stay in the spotlight. 

The way that global and local energy businesses, technology companies and financial institutions conduct their business has also changed fundamentally. Those who have not adapted or who drag their feet against much-needed reforms will not likely have a meaningful role in the future of our energy world.

Likewise, the role of international energy organizations currently active on the world scene will have to change (or disengage from the realities on the ground) – from the Organization of Petroleum Exporting Counties (OPEC) to the International Energy Agency (IEA), from the International Energy Forum to the Energy Charter and the EU’s Energy Union. They will have to catch up with underlying trends and duly prepare themselves for a future ridden with uncertainties and risks in order to find their place in the new order and better serve their members and partners.

The change on the energy map is evident across the world. Of particular interest are the current initiatives underway in Eurasia with new discoveries, giant projects, pipelines, capital placement and legal, institutional and geopolitical hurdles. 

Some of the critical energy developments that may influence the way our energy future looks include, inter alia:

• President Putin’s killing of the South Stream gas pipeline project and reincarnating it last December in Ankara as the “Turkish Stream,” which has a very ambitious timeline and wide-ranging implications for Russia, the EU, Turkey and Ukraine as well as for other competing gas projects;

• The possible lifting of sanctions against Iran as a result of the recent nuclear deal, that will open the way for fresh investment, albeit gradually and prudently, into Iran’s hydrocarbon and petrochemical sectors and step up efforts for cross-border energy shipment projects;

• The smooth completion by early 2018 of the first leg of the $45 billion Southern Gas Corridor, which will make gas available first to Turkey and then to Europe in 2019 if no serious setbacks occur;

• Oil and gas exports from Iraq’s Kurdish Regional Government (KRG) territory to the Turkish market and via Turkey to high-value international markets, despite high levels of instability in Iraq due to the Islamic State of Iraq and the Levant (ISIL);

• China’s ambitious new Silk Road Initiative and its implications in the field of energy, expansion of trade and potential for enhanced cooperation from Asia all the way to Europe.

No doubt this list can be further expanded, with significant challenges and potential opportunities stemming from technological developments in energy fields such as renewables, storage or unconventional gas. 

It is not a coincidence that in 2014 one of the major international energy organizations, the Energy Charter, undertook a comprehensive review of its mission, structures and future direction in order to stay relevant in the new energy world order and serve its member and partner countries better in the period ahead.

At the moment, 65 countries are signatories of the Energy Charter declaration and 52 (plus the European Union) are signatories of the Energy Charter Treaty. This means it is still far from universal. Fortunately, at least 15 other countries are preparing to join the new International Energy Charter. The updated text and scope make the charter more attractive to new countries. 

On May 20-21, 2015, states representing up to one half of the U.N. membership will gather at a ministerial conference in The Hague on the International Energy Charter to map out common principles for international co-operation and partnership in this new era. 

What are the differences between the old and the new Charter? Foremost, it will not be linked geographically to Europe, and it will rid itself of its 1990s political framework. The new Charter will also reflect a new vision of energy security, rather than the old Charter’s equalizing of energy security to security of supply for energy consumers. 

If we want to stay relevant in the 21st century, we need to take a broader view on energy security, including security – or predictability – of demand, safety of transit and transportation and absence of energy poverty while at the same time ensuring trade, technology, human skills and capital is flowing to where they are needed most. 

* Ambassador Urban Rusnák is the Secretary-General of the Brussels-based Energy Charter Secretariat (ECS) and Mehmet Öğütçü is a special envoy of the ECS and chairman of the London-based Global Resources Partnership Group.