A Tale of Three Energy Stories:
A New Vision of the Atlantic
for a Revived Strategic Energy Dialogue
between Brazil and the United States
Paul Isbell
CAF Atlantic Energy Fellow
Center for Transatlantic Relations
Atlantic Basin Initiative
Johns Hopkins University
School for Advanced International Studies (SAIS)
Salvador da Bahia, Rio de Janeiro, Sao Paulo
August 2014
Roadmap
• Three Stories:
• Strategic Implications:
• Brazil’s ‘Dynamic Energy
Resume’
• The ‘Shale Revolution’ and
US ‘Energy Independence’
• The ‘Atlantic Energy
Renaissance’ and the
Coalescence of an Atlantic
energy space
• The Global Geopolitical Map
and the Global Energy Flow
Map
• The Potentials and
Implications of the ‘Atlantic
Basin’
• ‘Global’ and ‘Transnational
Governance’ in an ‘Ocean
Basin World’
• The Brazil-US Strategic Energy
Dialogue and the ‘Atlantic
Energy Forum’
Story #1: Brazil’s Dynamic Energy
Resume
• From external hydrocarbon dependence to oil
exporter status
• Brazil’s Impressive Low-Carbon Energy Mix
• Threats and Challenges to Brazil’s successful energy
resume
• ‘Standard Implications’ of this Story
• The ‘Continuity of Pragmatism’?
Conclusion: Brazil’s energy resume is in need of a new
‘story’ – reveal the strategic horizon afresh
Brazil’s Energy Policy Success:
Reduced external energy dependency
• In the mid-1970s, Brazil had • Today, external
to import 35% of its energy
dependency is less 5% of
consumption.
total energy consumption
(limited to a small amount
• This external dependency
of coal, gas and electricity
had fallen to 25% by 1990.
imports)
• In 1999 oil import bill still
accounted for 15% of the
current account deficit
A conscious, deliberate
Brazilian strategic thrust
How has Brazil become nearly selfsufficient in energy?
Increased biofuels
production
Increased oil production
• Increased penetration of
sugar-cane based ethanol in
the transportation mix
during the 1980s and 1990s.
• Domestic oil production
nearly quadrupled in the
80s (from 172,000bd in
1979 to 650,000bd in 1990)
• Today, biofuels account for
about 30% of the
transportation fuel mix.
• By 2009, oil production had
risen to over 2mbd, leading
Brazil to be self-sufficient in
oil, creating a small net
export surplus
Expanded domestic ‘liquids’ production
have progressively displaced petroleum imports
Brazil’s Energy Policy Success:
Brazil’s Low Carbon Energy Mix
• 40% petroleum and
other related liquids
5 3 2
(natural gas liquids and
condensate)
8
40
• 18% sugar cane products
(ethanol and bagasse)
10
• 15% hydropower
• 10% traditional biomass
(firewood)
15
• 8% natural gas
18
• 5% coal
Brazil is the only country in the world to make
• 2.5% other renewable
significant progress on both sides of the energy ‘fence’
energies (wind, solar)
– in the realm of ‘liquids’ (ie, transportation) and in
the electricity/power sector. Over 45% of the primary • 1.5% nuclear power
Primary energy mix
petroleum
sugar cane products
(ethanol, bagasse)
hydropower
traditional biomass
(firewood)
natural gas,
coal
renewable energies
nuclear
energy mix is ‘low/lower’ carbon.
Brazil’s Energy Landscape
Liquid Fuels
• Biofuels: 30% of all
transportation fuels;
ethanol meets 40% of
gasoline demand
• Petroleum: b/w 50bn
bbl and 200bn bbl in
‘potential reserves’
Electricity
• Hydroelectric Power:
75% of installed
electricity capacity; 65%
to 80% of all electric
generation
• Natural Gas
• Renewable Energy
(wind, solar)
Threats to Brazil’s Low Carbon Mix
Hydro power’s clouded future
‘Fossil fuel creep’
• Growing public opposition
(both ‘NIMBY’ and
environmental): Belo Monte
• Recent increase in demand for
diesel fuel; outstripping local
biodiesel production
• Climate change ‘feedback
effects’ on hydraulic/water
patterns (Amazon ‘dieback’;
Eastern Amazon becoming
savannah-like ecosystem)
• Electricity demand: expected
to rise 5% annually over the
coming decade; hydro power
only projected to rise 3%
• Drought in 2001 already
provoked widespread
blackouts; experience
repeated in 2011
• Supply-demand gap to be met
by petroleum and coal?
• Or by natural gas and
renewable energy (wind, solar
etc)?
Threats to Future Oil Exports
Challenges and Dilemmas of the Pre-Salt
• Ambitious production targets (over 4mbd by 2020; 25% from
pre-salt)
• If target met, Brazil would likely move from being the 14th
largest oil producer in the world to the fourth largest.
• Daunting investment needs: Petrobras 2010-14 5-yr plan: capital
expenditures of $224bn ($50bn+/yr to 2020)
• Logistics/infrastructure challenges: “entire floating cities” will be
needed in Brazil’s SE waters
• Required: state-of-the-art technology; technically sophisticated
and specialized workforce
• Potential investment, technical and labor bottlenecks: impacts
of the recent Brazilian petroleum legislation?? (IOC access,
domestic content, R&D requirements, etc.)
Brazil’s Climate Change Challenge
Total Emissions Profile
2%
12%
9%
Energy
Industrial
Agricultural
21%
56%
Land/Forestry
Waste
Energy Emissions Profile
3%
13%
Electricity/heat
17%
Manufacturing/const
ruction
Transportation
28%
39%
Other Fuel
Consumption
Fugitive Emissions
• Brazil: 52% of LAC emissions; 7%+ of
global total (1.25% of world energy
and 35% of global land-use
emissions)
• Nearly 80% from ‘AFOLU’ sources
(agriculture, forestry and land-use);
only 20% of Brazil’s emissions come
from the energy sector;
• 1.9 tons of CO2 per capita from
energy; Less than one-fifth the OECD
average; less than half the world
average
• W/o 40-year investment in
renewable energy, emissions would
be nearly 20% higher
• However, AFOLU emissions have
slowed. Meanwhile, energy
emissions are growing faster
Standard Interpretations of the Story
Optimistic line:
“The country of the future has finally
arrived”
•
•
Brazil has increased its geopolitical
‘flexibility’ just as it has enhanced its
macroeconomic ‘flexibility’
– Iran (and like examples)
– Military spending (low levels, low
growth rates relative to other BRICS
Brazil’s oil and its future position among the
top handful of oil exporters will allow it to
continue to progressively eliminate poverty
and to continue to expand its middle class
Pessimistic line:
“A wave of ‘B as in BRIC’ admirers,
followed by a wave of ‘B as in BRIC’
sceptics”
• Brazil now facing limitations &
growing challenges; cycle of
‘emergence’ now facing
‘diminishing marginal returns’
• Brazil is now ‘punching above’ its
weight (the undiplomatic example
of the Brazil’s sides fate in 2014)
• Pre-salt legislation as an example
•
Brazil has and will continue to become a key
technological player in the ‘offshore’ and in
the global relations between IOCs and NOCs
• Brazil is suspicious of the Northern
Atlantic and inclined to continue its
South-South strategic thrust
•
As a result, Brazil has a chance at a
permanent seat on the UN Security Council
• Brazil faces the danger of relying on
raw material exports to China
What fate for the historical pattern of Brazilian policy pragmatism?
Brazil’s Policy Pragmatism
• Brazil used the state to promote ethanol
o Subsidies
o Mandates
• Brazil used the market to expand domestic oil
production
o 1997 partial privatization of Petrobras
o Opening and partial liberalization of petroleum
sector
o More recent pre-salt legislation?
• On-going dialectic between state and market in
Brazilian energy (economic, climate) policy (eg, recent
pre-salt legislation)
Story #2: The ‘Shale Revolution’
• The ‘previous US story’: Growing external energy
dependency and declining geopolitical leverage
• The ‘new US story’: the ‘Shale Revolution’
• The ‘Standard Interpretations’
• A new narrative is called for
Previous US story: growing external
energy dependence (I)
Previous US story: growing external
energy dependence (II)
Previous US story: growing external
energy dependence (III)
The New US Story: ‘Shale Revolution’ (I)
• Shale oil production has • Gas imports down by
increased 65% since
28% since 2005
2005 (now equal to Iraqi • Oil imports have fallen
production)
16% since 2005
• Shale gas: 35% increase • Improvement in
in production (Marcellus
competitiveness of
shale in PA = to reserves
energy-intensive sectors,
of Qatar (second largest
particularly
X in 2012)
manufacturing
The New US Story: ‘Shale Revolution’ (II)
• Optimistic view on ‘energy independence’ – oil imports eliminated
by the end of this decade (based on private sector estimates)
The New US Story: ‘Shale Revolution’ (III)
• More measured, ‘official’ view – net oil imports falling to 36% by
2030-35 (based on EIA projections)
The ‘Standard Interpretations’
Optimists
•
US energy prices will fall still farther, or at
least stay low and newly competitive
•
US manufacturing industries will be
revived and that the post Cold War
‘offshoring’ trend will be reversed to
become a new ‘on-shoring wave’
•
US global influence and/or geopolitical
leverage will be significantly enhanced,
reversing the recent trend (or at least
widespread perception) of decline
•
The US to reestablish will ‘reestablish’
global stability and prosperity under its
renewed leadership
•
These changes reinforce the underlying
rationale behind the ‘pivot to Asia’
• Measured Pessimists
•
US energy prices will fall still farther, or at
least stay low and newly competitive
Story #3: The ‘Atlantic Energy Renaissance’
• A new projection of the global (energy) map
• The Atlantic Energy ‘Revolutions’
• The Shifting Global Energy Flow Map and the New
Atlantic Center of Gravity
• Paradoxes and Challenges of the Atlantic Energy
Renaissance
• Implications
A New ‘Projection’ of the Map
• Both of the stories above
are rooted in ‘national’ and
‘land-based’ notions of the
relevant map
• Result: limit our visions of
the strategic horizon
• But the global map is
transforming: the rise of the
‘seascape’
• New Map: Atlantic Basin
projection
• Relies on same data:
‘national’ or ‘continental
regional’ BUT arranges it
differently
• ‘Atlantic Basin’: Africa, LAC,
NA and Europe; plus islands
• ‘Great Crescent’: Mideast,
Central Asia, Russia
• ‘Asia-Pacific’ (South,
Southeast and East Asia,
plus all ‘islands’
Atlantic Energy ‘Revolutions’ (I)
• Proven Oil Reserves, The Atlantic Basin and the World, bn bbl, 1980-2011
Source: BP Statistical Review of World Energy 2013, and author’s own elaboration.
Atlantic Energy ‘Revolutions’ (II)
• Proven Oil Reserves, The Atlantic Basin and the World, % of world
total, 1980-2011
Source: BP Statistical Review of World Energy 2013, and author’s own elaboration.
Atlantic Energy ‘Revolutions’ (III)
• Oil Production, The Atlantic Basin and the World, 1965-2012
Source: BP Statistical Review of World Energy 2013, and author’s own elaboration.
Atlantic Energy ‘Revolutions’ (III)
• Future Oil Production, The Atlantic Basin and the World, 1990-2030
•
Atlantic Basin to account for 65% of production growth to 2030 according a ‘business as usual’
scenario (BP)
Source: BP Statistical Review of World Energy 2013, and author’s own elaboration.
Atlantic Energy ‘Revolutions’ (IV)
• Gas Reserves, Conventional (left) and ‘Shale’ (right), Atlantic Basin
and the World, 2012
•
Atlantic
The ‘Atlantic Basin’ accounts
for only 20% of conventional
proven gas reserves, but . . .
Global ‘Shale’ Gas, Technically Recoverable Resources (TRR), by
Region, 2013
Source: Oil & Gas Journal, Worldwide Report, December 3,
2012, cited from EIA 2013.
. . . The Atlantic holds 70% of
known technically-recoverable
shale gas reserves.
Source: EIA 2013, and author’s own elaboration.
Atlantic Energy ‘Revolutions’ (V)
Source: EIA 2013, and author’s own elaboration.
• Total Global Gas Supply, Technically Recoverable Resources (TRR), Atlantic Basin
and the World, 2013
•
Atlantic Basin accounts for nearly half of the world’s technically available gas reserves
(conventional + shale)
Atlantic Energy ‘Revolutions’ (VI)
• Future Gas Production, Atlantic Basin and the World, 1990-2030
•
Atlantic Basin will outpace the Great Crescent in gas production, accounting for 38% of all projected
growth in global gas production to 2030 (versus the Great Crescent’s 36%)
Source: BP Energy Outlook 2030, January 2013 and own-elaboration.
Atlantic Energy ‘Revolutions’ (VII)
• Global Coal, Atlantic Basin and the World, 1990-2030
• Atlantic Basin: 43% of global coal reserves
Asia-Pacific: 31% of global coal reserves, but
dominates global coal consumption and
production . . . .
. . . . However, more than half of the
projected growth in global coal
production has already taken place
Atlantic Basin will continue to meet
Asia-Pacific coal demand at the margin
Source: BP Energy Outlook 2030, January 2013 and own-elaboration.
Atlantic Energy ‘Revolutions’ (VIII)
• Biofuels: the Atlantic Basin and the World, 1990-2030
• Atlantic Basin: produces, consumes and trades 85% to 90% of global biofuels
Global biofuels currently contribute less than
2mbdoe, or less than 3% of the global ‘liquids’
energy mix . . . .
. . . . nevertheless, biofuels still represent a
strategic energy vector, given that it is now
the only way to replace petroleum liquids in
the transport of global material flows (air and
sea travel. Biofuels are also a ‘strategic
branching’ fuel between a ‘liquids’ or an
‘electrified’ future for transportation
Source: BP Energy Outlook 2030, January 2013 and own-elaboration.
Atlantic Energy ‘Revolutions’ (IX)
• The Offshore Revolution: Oil
• One-third (28mbd) of global oil production occurs offshore (8mbd in the ‘deep’
offshore)
• Over 60% of global offshore oil and 95% of ‘deep offshore’ is Atlantic
Global offshore production has more than
doubled since 1980 – from less than 15% to
nearly one-third today – rising in absolute
daily production terms from 8.9mbd to
28mbd in 2010. Since 1980 . . . .
• . . . offshore oil production has accounted
for all of the net increase in global oil
production, from 66mbd to 86mbd
(+20mbd)
• . . . onshore production has fallen from a
peak (1970: 60mbd+) and now appears to
be in long-term decline worldwide
Source: BP Energy Outlook 2030, January 2013 and own-elaboration.
Atlantic Energy ‘Revolutions’ (X)
• The Offshore Revolution
• Atlantic Basin offshore oil discoveries
The Atlantic also accounts for over 60% of
global offshore oil discoveries
More importantly, the Southern Atlantic
dominates this ‘offshore revolution’
Source: Deutsche Bank and Wood Mackenzie.
Rest of the World 19%
Southern Atlantic 57%
Northern Atlantic 24%
Atlantic Basin 81%
Source: IFP Energie Nouvelle, “Panorama 2012: a look at offshore hydrocarbons” 2012
‘Deep Offshore’ Oil/Gas Investment
• US$210bn in deep offshore
hydrocarbons investment
during 2011-15 in subsea
pipelines, completions and
platforms
• Atlantic Basin: 81%
• Southern Atlantic: nearly 60%
Atlantic Energy ‘Revolutions’ (XI)
• The Offshore Revolution: Gas
• Atlantic Basin accounts for 54% of global offshore gas production
• Current offshore gas production
accounts for some 27% of total global
production.
• Over half (54%) of this global offshore
gas production occurs in the Atlantic
Basin.
• Nearly all (97%) of current deep
offshore gas comes from the Atlantic . .
..
. . . . however, because the AB only accounts
for 2% of global gas production and
Australia, the world’s largest ‘deep offshore
gas’ reserve holder (40%), is likely to
increase its production share in the future
Source: IFP Energie Nouvelle, “Panorama 2012: a look at offshore hydrocarbons” 2012
Atlantic Energy ‘Revolutions’ (XII)
• The ‘Low Carbon Revolution’
• Atlantic Basin: world’s leader in ‘low carbon’ and renewable energy
• AB’s collective installed capacities:
• solar (77% of the world total)
• wind (64%)
• geothermal (59%)
• Atlantic renewables roughly two-thirds of
the world’s total installed ‘renewable’
electricity capacity
• . . . nevertheless, Asia-Pacific will continue
to erode Atlantic Basin predominance in
renewable energy
• by 2030, Asia-Pacific will contribute 41%
of all renewable energy production,
cutting the Atlantic Basin’s prior lead (54%
in 2030, down from 79% in 1990)
Source: BP Energy Outlook 2030, January 2013 and own-elaboration.
Atlantic Energy ‘Revolutions’ (XIII)
• The ‘Low Carbon Revolution’
•
• In 2008, the Atlantic registered its peak
Atlantic Basin Renewable Energy Investment: share (77%) of global investment in
renewable energy
• Meanwhile, in 2007, Asia-Pacific
experienced its lowest recent share of
23%.
• Double dip in investment: a steep
double-dip drop-off in which AB
accounted for the entire global decline
(from US$279bn to US$214bn)
• . . . . the factors behind the drop in AB
RE investment are multiple
• recent Atlantic investment decline has
not affected the Southern Atlantic
• continued to registered constant levels
around US$20bn annually
Source: Renewable Energy Status Report 2014, REN21 (2014) and own-elaboration.
Atlantic and New Global Energy Flow Map
Source: BP Statistical Review of World Energy 2013, and author’s own elaboration.
• The Growing ‘Asian demand call’ on the Atlantic Basin, 2000-2030
•
The growth in the total ‘Asian energy demand call’ on Atlantic Basin energy is projected to
be to twice as intense, at the margin, as the growth in the already heavy call on the ‘Great
Crescent.’
Atlantic and New Global Energy Flow Map
Source: BP Statistical Review of World Energy 2013, and author’s own elaboration.
• The Growing ‘Asian liquids call’ on the Atlantic Basin, 2000-2030
•
The growth in the ‘Asian liquids demand call’ on Atlantic Basin energy is projected to be to three times
as intense, at the margin, as the growth in the already heavy call on the ‘Great Crescent.’
Atlantic and New Global Energy Flow Map
Source: BP Statistical Review of World Energy 2013, and author’s own elaboration.
• The Growing ‘Asian gas call’ on the Atlantic Basin, 2000-2030
•
The growth in the ‘Asian gas call’ on the Atlantic Basin is projected to be half again as
intense, at the margin, as the growth in the already heavy call on the ‘Great Crescent.’
Strategic Implications: The Global
Geopolitical and Energy Flow Maps
• Center of gravity of energy demand shifting east: away from the Atlantic
Basin into Asia-Pacific and the Great Crescent
• Center of gravity of energy supply shifting west: away from the Great
Crescent and into the Atlantic Basin
• Reversal of ‘East-to-West’ flows: becoming ‘West-to-East’ flows
• The Atlantic Basin will become, increasingly, the energy supplier, at the
margin, to Asia-Pacific
• Growth in global energy flows within the Atlantic (low-latitude canals will
bottleneck to push increasing flow to the ‘high-latitude’ passages the
opening Arctic in the North, but particularly the ‘Cape Passage’
• Implications:
– ‘Potential geopolitical leverage’ shifting westward (problematizes the ‘pivot to
Asia’)
– ‘Potential governance equation’ transforming into a question for newly coalescing
‘ocean basin’ associations and communities (problematizes the perceived
imperative for ‘global’ (energy) governance, esp. ‘land-based’ visions
– Heightened global ‘strategic significance’ of the ‘Southern Atlantic’
Strategic Implications: Global and
Transnational Governance
• The emergence a potential ‘pan-Atlantic’ space of ‘ocean
basin regionalism’ – particularly in the energy realm (an
Atlantic Energy Forum afoot)
• The rise of ‘seascape’ in strategic terms (relative to the
strategic landscape, for example, particularly the ‘Atlantic
energy seascape’ (ie, among other trends, the ‘offshore
revolution’ and its manifold implications)
• The potential exhaustion – or ultimate unravelling – of both
the ‘standard’ US and Brazilian energy stories
Strategic Implications: The Potentials and
Implications of the ‘Atlantic Basin’
• Shifts in global energy (and other material) reserves, production
and flows: generating a new, increasingly coherent ‘Atlantic
space’
• Former ‘global’ and traditional ‘regional’ approaches have
reached ‘diminishing marginal returns’
• A new Atlantic Community?
– The new ‘Atlantic Energy Forum’ (AEF)
– Harness the Atlantic energy revolution: geopolitical and governance
potentials (collective)
– Channel SE4All initiative in the Southern Atlantic
– Guide the new ‘offshore’ revolution
– Mediate long-term solutions between:
•
•
•
•
Fossil Fuels and Low Carbon
IOCs and NOCs
Importers and Exporters
Developing and developed countries
Implications: Brazil’s Shifting ‘Strategic
Horizon’
• Energy independence = increased geopolitical flexibility
– Iran example
– Military expenditure (rising, but less than other BRICS countries)
• Still, only ‘limited’ flexibility vis-à-vis China and India
• South-South projection should be ‘strategically-hedged’ by
a new strategic projection into and across the ‘Atlantic
space’
• A new Southern Atlantic within an ‘Atlantic Basin’
community
Implications: The US’s Shifting ‘Strategic
Horizon’
• Energy
Strategic Suggestions: The Brazil-US
Strategic Energy Dialogue and the ‘Atlantic
Energy Forum’
• The US and Brazil should consider a new strategic
energy partnership that embraces the Atlantic Basin
as its central guiding principle
• Advantages for Brazil
• Advantages for US
• Advantages for the Atlantic
• Advantages for the World
Broader Strategic Implications
• A heightening, relative strategic significance of the Southern Atlantic.
– Long forgotten, neglected or ignored (even by Latin Americans and Africans
themselves), the Southern Atlantic is now becoming the most dynamic strategic
sub-region of the world upon our emerging geopolitical and global energy flow
maps
• As the potential hinge between alternative visions of the global order,
the Southern Atlantic could hold the key to the future of the Atlantic
Basin and the world.
– Once a kind of marginal ‘geopolitical antipode’ to the eternally central ‘heartland’
of the ‘supercontinent’ of Eurasia, the Southern Atlantic is now displacing, at least
partially, the broader ‘Eurasian heartland’ (including its Middle East component)
in terms of relative significance along the strategic horizon.
• The Southern Atlantic now hangs in the balance
– between the Northern Atlantic and Asia-Pacific between fossil fuels and low
carbon,
– between outmoded land-based conceptions of geopolitics and global governance
and new projections of the global map which highlight the ‘seascape’ and the
potential for new forms of transnational cooperation and governance, and,
finally,
– between the repetitive obsolete global re-articulations of ‘North versus South’
and innovative new forms of North-South-East-West collaboration and the
creation of a new Atlantic Community.
References and Further Reading
• The ‘Atlantic Basin Initiative’ (ABI): http://transatlantic.saisjhu.edu/events/2012/Atlantic%20Basin%20Initiative/Atlantic%
20Basin%20Initiative
• The ‘Atlantic Energy Forum’ (AEF): Inaugural meeting agenda
(November 8-9 in Cancun) and AEF brochure, available upon
request
• “Towards a New Atlantic Community” White Paper of the
Atlantic Basin Initiative, 2014
• “Atlantic Energy and the Global Energy Flow Map,” a paper for
the Atlantic Future project of the EC (FP7), 2014
• “Atlantic Energy and the Strategic Horizon,” CIDOB, 2013
• Energy and the Atlantic: the Shifting Energy Landscapes of the
Atlantic Basin, OCP and German Marshall Fund, 2012
• All of the above are available on the CTR JHU SAIS website.