INTRODUCTION

So far, we have covered five new basic principles (axioms or postulates) of thermodynamics, in addition to the two principles of mechanics (mass conservation and Newton’s second law of motion). These principles are the following: (a) the existence of an equilibrium phase, or the “Minus Second Law,” see Chapter 3; (b) the existence of an equation of state for each thermodynamic phase, or the “Minus First Law,” see Chapter 3; (c) the existence of the empirical temperature θ as a function of state, associated with the “Zeroth Law,” see Chapter 3; (d) the existence of the internal energy U as a function of state, and the heat Q as a path-dependent function, and the expanded energy conservation principle, all associated with the “First Law,” see Chapter 4; and (e) the existence of the absolute thermodynamic temperature T and of the entropy S, as state functions, and the principle of entropy inequality, all associated with the “Second Law,” see Chapter 7. For any physical or chemical process to be possible, the mass and energy conservation principles and the entropy inequality principles must be satisfied.

In the above principles the energy (U or Ek or Ep) is defined on a relative basis, not on an absolute basis, relative to an arbitrary value of energy at a reference state. The internal energy has a clear molecular basis. It is the combined kinetic energy and potential energy of the individual molecules comprising a given phase or system. The absolute temperature T is a measure of the average kinetic energy of the molecules.

Introduction

This article explores the extent to which small states from the Gulf can use clean technology in order to bolster their position both domestically and in the international system to guarantee their energy security. Energy security can be defined as the “assurance of the ability to access the energy resources required for the continued development of national power” (Kalicki and Goldwyn 2005: 9). Traditionally it has meant guaranteeing the provision of affordable, reliable, diverse and ample supplies of oil, gas and other primary energy sources. To this understanding another dimension must be added, namely guaranteeing the “transition from today's energy economy to the new, low-carbon energy economy” (Pascual and Elkind 2010:2).

The current global energy market has undergone tremendous changes over the past 30 years. This has notably impacted the Gulf countries through variations of oil prices. Thus, the price of oil (expressed in dollars of 2012) decreased from just under $100 a barrel in 1980 to less than $50 a barrel by 2002, before it increased again to the 1980 level in 2011 (Figure 1). Furthermore, external shocks, such as the 2009 financial crisis and the explosion of the nuclear power plant in Fukushima due to the tsunami of March 2011, have led to changes in the way people view their energy sources. Nuclear energy has begun to lose its appeal. This is especially so in Europe with the planned phasing out of all nuclear plants in Germany and Switzerland on the horizon by 2030-2050 (Grätz 2012). This change of opinion on nuclear energy by European countries has strengthened the idea that renewable and clean energy is a viable alternative. Under these circumstances, an interesting question to ask pertains to the relevance of clean energy for the oil-rich exporting small states in the Gulf. In other words: what is the impact on energy security of the adoption of clean energy technologies for the small states in the Gulf?

Introduction

The wide availability of renewable energy resources in the MENA region is at the core of several large scale European initiatives to generate clean energy from the southern Mediterranean countries and import part of it to Europe via a panregional ‘super grid’ of high-voltage-direct-current lines. These initiatives, such as DESERTEC, are based on the argument that, with large investments and technology transfer efforts, MENA countries could potentially produce enough energy from renewable sources to satisfy their fast increasing energy demand as well as that of Europe.

Recent studies suggest that there is significant local potential for expanding technological capabilities in solar and wind power in the MENA region, such as production capabilities (manufacturing along various stages of the value chain) (World Bank 2011, Vidican 2012, Fraunhofer ISE 2012). But, for these positive outcomes to materialize, strong commitment from the MENA countries is needed to achieve unprecedented energy market integration and to transform the national and regional energy system.

Yet, the development challenges faced by the MENA region in the aftermath of Arab Spring are enormous, primarily in terms of unemployment and social equality. In addition, most countries, governed by neopatrimonial regimes, have relied for decades on a social contract aimed at maintaining social stability through heavy state intervention and distribution of rents, at the expense of social equality and private sector competitiveness. Hence, the driving force for expanding the renewable energy sector in the MENA region is primarily the promise it holds for job creation and revitalization of the private sector at a time of major political transformations.

But, the process of acquiring and expanding technological capabilities does not happen in a vacuum. Rather it is highly influenced by the institutional structure and dynamics that shape the development process locally. Hence, this chapter aims at probing beyond technical challenges to reveal the underlying interests, incentives and institutions that enable or prevent change. We pay particular attention to the evolving dynamics between alliances of stakeholders that are for and those that are against the development of renewable energy sector.

Introduction

For the last few decades, the Gulf Cooperation Council (GCC) countries have thrived on the hydrocarbon economy to become key players in the energy market. During this time-period, two important issues have emerged: first, the rapid rise of energy demand in the region, and second, the rise of carbon emissions per capita. These two issues have drawn considerable attention to Clean Energy Solution (CES) and its ability to diversify the GCC's energy portfolio. The abundance and availability of natural resources like tapping solar and wind energy across the GCC countries has made the region attractive for low-carbon energy technologies. In line with this, the region has set a course to direct their economic wealth for the development and deployment of green energy technologies. This includes the solar and wind energy projects laid out by the UAE and KSA, as part of energy diversification.

Presently, the GCC countries are home to a majority of the world's hydrocarbon reserves, and own about 40% and 23% of the global oil and gas proven reserves, respectively (Reiche, 2010). GCC countries have committed themselves to longterm contracts with regional and international trading countries as hydrocarbons suppliers. These long-term contracts can have their disadvantages. For instance, extraction of natural resources like oil and gas have led the GCC countries like Qatar, Kuwait and UAE, to drive up their per capita carbon emissions (WWF, 2012). While the UAE and Kuwait have become net natural gas importers (BP, 2011). This portrays the challenge facing the region. How can GCC countries develop a mix of energy technologies to satisfy it short and medium term energy demands?

The development of CES in the GCC countries is fast emerging as a viable solution for multiple economic and social reasons. Luomi (2009) points out that economic diversification, domestic energy security and political legitimacy could avoid political unrest witnessed in the region. The deployment of CES can ensure the freeing up of future oil and gas necessary for domestic consumption. Environmental benefits of reduced air pollution and greenhouse gas emissions would complement the region's plan for sustainable growth and development.

Introduction: Background Of The Study

Energy has always been a key component of the human development process since the very early first steps of humanity in its quest to fulfill its basic needs for food, mobility, communication and production. The sources of energy have historically evolved from the simple human and animal muscle force to the use of the forces of nature like water and wind for mills and ships, followed by the use of coal for the production of steam and power the industrial revolution that started in the 18th century in England. The beginning of the 20th century has witnessed the introduction of oil as a source of energy and has led to a rapid transition in the world energy system, during which oil surpassed coal and became the main energy source of the modern world.

The dominant status of oil in the world economy is mainly due to its very low cost of production and liquid nature, which makes it easy to transport and transform. However, since the introduction of oil as a source of energy, humanity has been more concerned than ever about the availability of the necessary levels of reserves in order to sustain the ever-increasing world demand for energy, especially since the rise of emerging economies like China and India. Indeed, one of the main characteristics of oil and gas is that they are finite resources, as the speed at which they are consumed is much faster than the natural process that produced them over millions of years. There is also increasing concern about the pollution of the environment resulting from the combustion process of hydrocarbons, which is considered by the scientific community to be the main factor behind the climate change issue. The above-mentioned two main concerns have led humanity to reconsider its relationship to nature and its approach to development and ask a number of central questions that we can summarize in the two following main ones: Can we continue to develop indefinitely without taking into consideration the consequences of our model of development on nature? Can we keep consuming natural energy resources without compromising the needs of the future generations?

Elevating the Upstream in the Middle East’s Gulf Oil Producers

Oil is a dominant theme on the international political agenda. The Arab Spring has caused a lot of concern among oil importing countries given the looming threat of supply disruptions. The world's dependence on the Middle East oil is a fact. As Mary Ann Tetreault (2008, 256) points out, “The Middle East is the geographic «center of gravity” of the world oil industry” with over 60% of the world's conventional oil reserves. On these grounds, understanding the functioning of the oil production and exploration sector (also known as the upstream) in the Gulf petroleum-exporting countries is not a whim but a must.

Ever since the era of oil nationalizations, within-country variation in the oil upstream policies pursued by the Gulf countries has been rather limited; in turn, cross-country variation in the region has been large. Within the scope of this research, upstream sector policy looks into the control structures present in the exploration and production sector within the petroleum value chain.1 Upstream control translates into the ratio of upstream production operated by the National Oil Company (NOC) to total production per country.

Over the past four decades, Kuwait and Saudi Arabia have kept the upstream sector largely under state control. If present, IOCs have operated under execution mandates with hardly any decision-making rights. By comparison, Oman, Qatar and the United Arab Emirates (UAE) have made their NOCs share production and profit in the upstream with IOCs to a rather considerable extent (above 40%).

Despite its relevance to the energy security agenda, this variation in upstream sector policies across the Gulf oil producer countries has not been satisfactorily explained so far. This paper focuses on upstream activities because these are the revenue-generating activities within the oil supply chain. They are considerably more relevant to both oil companies and oil producer countries than the ‘midstream’ (i.e. transportation system) or the ‘downstream’ (i.e. refining business), both of which have been historically less profitable.

Introduction

The Arab Spring has radically changed the geopolitical equilibrium of the MENA region, revealing new opportunities for the Gulf Cooperation Council (GCC) to play a more meaningful role in North Africa in the future. This historical transition phase urges the formulation of innovative cooperation schemes able to channel the overall region towards a sustainable and prosper future. The aim of this chapter is to propose a new “triangle of growth” between the GCC, North Africa and the European Union (EU) on renewable energy. This sector, with all its weaknesses and strengths, represents a field of common interest for the three areas and could thus well represent an advanced archetype of cooperation.

A vision for a future triangle of growth

North Africa is endowed with huge renewable energy potential and thanks to the ongoing technological and institutional changes, the countries in the region could start to make use of this potential. Renewable energy technologies, including concentrated solar power, solar photovoltaic, wind, hydro, and biogas could develop significant new industry and service sectors leading to local job creation and manufacturing developments. However, while the renewable energy business is gaining momentum in North Africa, for these programs to be successful, it is crucial to find new and original financing instruments to address both centralized and decentralized renewable energy development.

On this point, a strong complementarity exists between North Africa and the GCC. Long-term investors from the GCC -such as Sovereign Wealth Funds (SWFs)- are increasingly focusing their investments in the renewable energy sector, with the long-term aim of transforming oil wealth into renewable energy technology leadership. Part of the investment could be directed to North Africa, which has among the highest renewable energy potentials in the world and is already promoting several renewable energy projects. This approach would not only pay a long-term economic dividend to the GCC, but also a short-term geopolitical and strategic dividend as far as the political relations with the new regimes emerged from the Arab Spring are concerned.

Introduction

Sustainability is a concept and movement that defines what is needed for civilizations to survive, especially today when facing unprecedented environmental threats. While a new global paradigm is emerging where sustainability is recognized as the future for cities and communities, contemporary Gulf cities are designed and constructed with almost total disregard for local and global environmental issues. Calls for holistic sustainability in the design of these cities go largely unheeded with the luxury of cheap oil and the illusion of timeless energy resources. GCC countries have visions that espouse an environmental and sustainability ethic that are endorsed at high level; the words are there, yet action is not widespread. Gulf cities such as Dubai, Doha, Kuwait or Manama continue to fail to adopt sustainable strategies to minimize environmental impacts and preserve the earth's resources for coming generations.

There is no universally accepted definition of sustainability (Beatley 1995). At a basic level, the various definitions embody the notion that we require a radical rethink of our relationships with one another and with the natural environment, on which we depend for our survival. Societies must adjust to new realities in order to be sustainable, which include changes to ecosystems as an inevitable consequence of past development and urbanisation, and natural limits to population growth. When we apply sustainability principles to the form and function of cities and the public arena, the complexities multiply.

Sustainability and cities is a fundamental issue long overlooked due to limited understanding of development. As Layard and Batty (2001) suggest, sustainable development thinking has substantial implications for housing, urban design, planning and property development as well as transport and waste. There is a need in the Gulf, with its unique culture and demographic profile, for these principles to be applied to architecture and urbanisation in an inclusive manner such that all stakeholders have a place in the emerging cities. The paper argues that while traditional architectural patterns and approaches have lessons for today, it is not sufficient to simply bolt these ideas onto new designs or use them for superficial aesthetic effect.

Climate change is a global phenomenon and requires coordinated global responses. It is extremely important that all nations, including major Gulf Arab oil producers, participate in the effort and implement policies to contain greenhouse gas (GHG) emissions.

At the same time, all realistic scenarios of global energy supplies point to the continuing use of fossil fuels. It may already be a huge challenge to contain the use of coal - the worst emitter of CO2 unless coupled with carbon capture and sequestration (CCS) - and this is probably only achievable with greater reliance on oil and, especially, gas. Thus the Gulf countries will be called to continue exporting fossil fuels and/or various products derived from the same.

The countries of the Gulf Cooperation Council (GCC) and other producers thus face a dilemma between continuing development and use of their fossil fuel endowments and increasing reliance on low carbon sources, such as nuclear, solar or wind. This collection of essays explores various facets of this dilemma.

In the first chapter, Giacomo Luciani proposes a political economy analysis of energy prices and policy motivations in the Gulf. He argues that energy prices are in most cases not “subsidized”, and the opportunity cost of domestic consumption of hydrocarbons should not be measured by the difference between domestic and international prices. The economic case for substituting low carbon sources for the domestic consumption of hydrocarbons is not as cogent as frequently maintained in the short run, although extrapolating current trends into the future leads to unacceptable outcomes. He also argues that different low carbon technologies are differently adapted to the prevailing decision-making processes in the region and public-private sector relations.

In Chapter 2, Bianca Sarbu asks: Why have oil producer countries in the Middle East's Gulf region pursued different policies in the upstream sector since the era of oil nationalizations? She explores various possible explanations of differing policy approaches, from the geologic-technological, to the economic and politicoinstitutional.

Introduction

The GCC countries hold significant fossil energy resources, which are mostly exploitable at low to moderate cost. Therefore, power generation relies almost exclusively on conventional technologies. Yet, a high potential for renewable electricity generation also exists, which has not been exploited so far because of the significantly higher cost compared to conventional energy generators.

In technological terms, renewable energy generation in the electricity sector is more mature than in other sectors, especially the transport sector. Thus, integrating renewable power plants in the GCC region and therefore replacing existing gas power plants may avoid global CO2 emission even more efficiently, in technical and economical terms1, than applying state-of-the-art renewable technologies in the transport sector within the EU. Subsequently, the displaced gas of the GCC region can be exported to global energy markets and used, amongst others, in the transport sector.

Apart from the substantial environmental benefit of greater reliance on renewable sources, security of power supply becomes increasingly important. The Middle East has faced a power demand increase of 56 percent during the last decade caused by strong demographic growth and representing four times the global rate of growth (The Economist, 2012). Taking into account the fact that a very large share of Saudi Arabia's and all of Qatar's power generation is based on natural gas fired plants, the rapidly increasing power demand requires a disproportionate share of their domestic natural gas resources in the future. Moreover, only 40 percent of, in particular, Saudi Arabian gas resources are constituted by non-associated2 gas (Abi- Aad, 2012). Because domestic gas production is not sufficient to satisfy all potential demand, Saudi Arabia also relies on crude oil and oil products for power generation, the opportunity cost of which is even higher. Extrapolating current trends, Saudi Arabia might become an importer of natural gas or cease exporting oil within the next 20 years in order to meet domestic power demand. Renewable electricity opens the opportunity to supply electrical energy without depending on energy imports from neighboring countries even in times of increasing domestic power demand.