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Gaseous hydrocarbons and the development of producing countries
Conference reports following the original pattern of converting the condensing turbines of single-purpose generating stations to back-pressure working. This is a simple and inexpensive technique that also could pay handsome dividents in the UK. But it has yet to be tried in one single instance. The conversion technique of 1926 has been adopted in all Eastern Bloc countries with unquahfied success. In the USSR there are, of course, special-purpose combined heat/ power stations designed for district heating. Moscow has recently installed new turbines whose characteristics have been determined for the best possible dual-purpose performance.
There is apparently a limit of 500 MW on local heat generation. If a new manufacturing complex is set up requiring heat and power, and a total load of this order is envisaged, it is mandatory that all needs are combined and a central heat/power
station is installed. Of the district heating schemes that merely supply heat and do not g e n e r a t e - t h e majority of the UK's 450 such s c h e m e s - t h e Russians could not begin to estimate numbers. 'Many, many more than 700', they said. There is probably no basically political reason for the Eastern Bloc countries to be so far advanced in numbers, although the local costs of fuel and fuel transport as well as differences in climate may well be the determining factors. It is true to say that elsewhere in Europe small, private-enterprise owners or municipally-owned electricity generating stations have been forced to sell their heat as well as their power to remain viable. Of all European countries that have succeeded in exploiting total energy generation to ultimate advantage, Sweden has probably advanced furthest in the shortest time, technologically if not in terms of popula-
tion served. Coming late into the field for sheer lack of indigenous fuel supplies, and with insignificant hydro resources, Sweden has surveyed the work done by others and has made rapid progress by avoiding the major errors that experience has now shown up. Stockholm, Vasteras and Maim6 are outstanding examples of what can be done including, in one case in Maim6, conversion of a 50 year-old turbine. In the UK we break them up at 30 years of age. There were basic lessons to be leamed in the economics and conservation of energy at this conference. Very apparent was the shortsighted attitude of countries like the UK, which concentrate on only the generation of electricity at the lowest possible cost.
NormanJenkins(UK)
Gaseous hydrocarbons and the development of producing countries International days in Dijon, 17, 18, 19 May 1973 Natural gas is not, in itself, a new energy source. What is new is the recent importance it has gained in the energy balance-sheets of the majority of European countries, in intercontinental energy transmission, and in the supplying of various basic industries. Once a mere by-product of liquid hydrocarbons, it is now autonomous. It gives rise to new questions which geographers, economists, legal writers and political economists tend to answer on the double basis of the specific character of natural gas, in relation to other fuels, and new characteristics in the energy, economic and political context. It is against this background that 'International days on gaseous hydrocarbons and the development of producing countries' were held, organised by the Research Centre on the Law of Markets and International Investments (University of Dijon and National Scientific Research Centre). The participants came from industry
258
(oil and gas companies of the principal countries of Europe, Algeria and Iraq), French and European authorities (EEC), and various universities (including Paris, Dijon, Grenoble, Rabat, Indiana, Baghdad, Oxford, Geneva, Dallas). The recent development of liquifled natural gas tankers, the rise in the price of energy to the consumer countries, environmental constraints, which weigh on industries which are heavy consumers of energy, have already favoured and will increasingly favour the use of gas (residual or not) which thus far has not been exploited or has been flared. However, these changes in the international situation do not mean that a more rapid industrialisation of the producing countries will take place. Careful study of the 10 years' experience in Algeria shows that profound institutional changes are necessary before an underdeveloped economy can base its industrialisation on its hydrocarbon
resources. Development and the growth of independence go hand in hand since there is no real economic development without increased control of the financial surplus obtained from the exploitation of hydrocarbons and the main industrial sectors which can be developed with this surplus. This clearly affects contracts for the international sale of natural gas. Out of about 80 which have been signed up to now, three could be analysed in detail and compared: YPFB (Bolivia) - Gas del Estado (Argentina); ESSO-SNAM (Italy); SONATRACH-EL PASO (USA). In all, but in different ways reflecting the inequality of the parties concerned, the price clauses (basic price and pegging) reveal underlying conflicts: sharpness of competition with other sources of energy on one hand, need for the accumulation of capital on the other. In this respect, the contract SONATRACH-EL PASO
ENERGY POLICY December 1973
Conference reports and the gamble made at that time by both parties on the future price of natural gas show the cost to Algeria of enlarging its market, increasing its independence from Western Europe and tightening its control over its industrial development. Can conventional international law be easily adapted to resolve conflicting relations of this kind? Does not one have to think of a 'law of development' which would explicitly recognise the inequality of the producing and consuming countries? Such were the questions with which these international days were concluded.
Jean-MarieMartin, EnergyInstitute, (CNRS) Grenoble
The breakthrough o f natural gas in the consumer countries of Europe (P. Ramain, Energy Institute, Grenoble) The strategy o f the international oil companies with regard to new energy sources (M. Tanzer, New York) The new strategy o f the international petroleum cartel and the role o f prices and participation in Arab oil (M.S. Hasan,
University of Baghdad) Natural gas and industrialisation
(J.M.
Martin, Energy Institute, Grenoble) Rational utilisation o f associated natural gas in the OPEC community: the long controversy and its aftermath (H.S. Zaka-
riya, United Nations) Natural gas and policies o f national independence (G. de Bernis, University of
Grenoble) The development o f natural gas and transformation of legal structures (P.
Manin, University of Paris-Sceaux) Study o f some legal problems concerning the international sale o f gas (P. Kahn,
University of Dijon)
List of reports History o f gaseous hydrocarbons Nouschi, University of Nice)
Gaseous hydrocarbons and international law o f development (J. Touscoz, University of Nice) The strategy of oil companies towards n e w energy sources, (T. Rifai', Arab B. Paris)
opment of the Arab countries, and particularly advocated that they should own, and operate jointly, refineries, petrochemicals plants, tankers and distribution facilities. Dr Pachachi suggested that future long-term sale of participation oil should be linked with the following: Oil companies should undertake to construct export refineries and petrochemical plants in the producing countries, provide the financing for such projects and guarantee the export of the products. The national oil companies would participate in these joint ventures through the supply of crude oil. Oil Companies should offer the national oil companies equity participation in existing refineries and petochemical projects or new refineries and marketing facilities. The national oil companies would pay for this equity participation by the supply of crude oil.
On security of supply of Arab oil to the consuming countries, he emphasised that this is only in question because of 'the political and economic pressures exerted by some great p o w e r s . . . ', and added: 'Thus Arab countries are expected, or considered morally obliged to cater for Organised by the Financial Times and BOAC, London, 18-20 the growing energy needs of the September 1973 United States which blindly supports and abets the arch enemy of the Political realities particular nettle, but then they all Arabs'. From an international viewpoint, the represented the consuming countries. In Dr Pachachi's opinion, 'this most significant paper presented was, Dr Pachachi, however, went on moral responsibility.., should cease without a doubt, the hard-hitting record as neither believing in nor to exist, if the USA continues with indictment of US foreign policy by advocating nationalisation of oil as a the pro-Israeli policy and the rest of Dr Nadim Pachachi, former Secret- political weapon or as a retaliation world community remain silent or at ary-General of OPEC. Dr Pachachi measure. Rather he favoured a con- best adopt resolutions merely conrepresented his views as being fairly certed move towards 51% partici- demning Israel's actions and atrotypical of a 'cross section of moder- pation in all oil companies operating cities while Israel continually defies ate opinion in the Arab world' and in Arab territories. He was against and ignores such resolutions'. quickly defined his position and the nationalisation, he said, because he The use of oil as a political present situation: did not wish to 'antagonize some weapon, he stressed, could now be achieved simply by the Arab oilThe so-called energy crisis and the prob- Common Market Countries who have producing countries adopting a lem of monetary reserves accumulating been sympathetic and friendly to the in the oil producing c o u n t r i e s . . , are Arab cause' and added that: 'It is not coordinated, unified policy to freeze mainly attributable to the short-sighted- in the Arab interest to arouse the their crude oil production at present ness and bad planning of the developed levels. Economically, he went on, fears of the Europeans and the nations, which chose to build their industhis was perfectly feasible for the trial expansion and way of life on the Japanese. The Arab countries could policy of cheap oil, forgetting that the benefit from cooperation with the Arab countries, which could easily hydrocarbon reserves are finite and deple- enlarged European Community and continue at the present production table. Japan in the political and economic levels, particularly with prices rising. It is this political impasse that Dr This set the tone for his contri- fields'. But, he went on tartly, 'The bution - and put the current energy Arabs cannot rely any more on either Pachachi saw as the threat to security problems in their true political light. of the two super powers'. He called of supplies. If this could be resolved Most other speakers at this confer- for closer cooperation of the major then he foresaw the development of ence seemed reluctant to grasp this oil companies in the industrial devel- closer collaboration between buyers (A.
World energy supplies
ENERGY POLICY December 1973
259
There is apparently a limit of 500 MW on local heat generation. If a new manufacturing complex is set up requiring heat and power, and a total load of this order is envisaged, it is mandatory that all needs are combined and a central heat/power
station is installed. Of the district heating schemes that merely supply heat and do not g e n e r a t e - t h e majority of the UK's 450 such s c h e m e s - t h e Russians could not begin to estimate numbers. 'Many, many more than 700', they said. There is probably no basically political reason for the Eastern Bloc countries to be so far advanced in numbers, although the local costs of fuel and fuel transport as well as differences in climate may well be the determining factors. It is true to say that elsewhere in Europe small, private-enterprise owners or municipally-owned electricity generating stations have been forced to sell their heat as well as their power to remain viable. Of all European countries that have succeeded in exploiting total energy generation to ultimate advantage, Sweden has probably advanced furthest in the shortest time, technologically if not in terms of popula-
tion served. Coming late into the field for sheer lack of indigenous fuel supplies, and with insignificant hydro resources, Sweden has surveyed the work done by others and has made rapid progress by avoiding the major errors that experience has now shown up. Stockholm, Vasteras and Maim6 are outstanding examples of what can be done including, in one case in Maim6, conversion of a 50 year-old turbine. In the UK we break them up at 30 years of age. There were basic lessons to be leamed in the economics and conservation of energy at this conference. Very apparent was the shortsighted attitude of countries like the UK, which concentrate on only the generation of electricity at the lowest possible cost.
NormanJenkins(UK)
Gaseous hydrocarbons and the development of producing countries International days in Dijon, 17, 18, 19 May 1973 Natural gas is not, in itself, a new energy source. What is new is the recent importance it has gained in the energy balance-sheets of the majority of European countries, in intercontinental energy transmission, and in the supplying of various basic industries. Once a mere by-product of liquid hydrocarbons, it is now autonomous. It gives rise to new questions which geographers, economists, legal writers and political economists tend to answer on the double basis of the specific character of natural gas, in relation to other fuels, and new characteristics in the energy, economic and political context. It is against this background that 'International days on gaseous hydrocarbons and the development of producing countries' were held, organised by the Research Centre on the Law of Markets and International Investments (University of Dijon and National Scientific Research Centre). The participants came from industry
258
(oil and gas companies of the principal countries of Europe, Algeria and Iraq), French and European authorities (EEC), and various universities (including Paris, Dijon, Grenoble, Rabat, Indiana, Baghdad, Oxford, Geneva, Dallas). The recent development of liquifled natural gas tankers, the rise in the price of energy to the consumer countries, environmental constraints, which weigh on industries which are heavy consumers of energy, have already favoured and will increasingly favour the use of gas (residual or not) which thus far has not been exploited or has been flared. However, these changes in the international situation do not mean that a more rapid industrialisation of the producing countries will take place. Careful study of the 10 years' experience in Algeria shows that profound institutional changes are necessary before an underdeveloped economy can base its industrialisation on its hydrocarbon
resources. Development and the growth of independence go hand in hand since there is no real economic development without increased control of the financial surplus obtained from the exploitation of hydrocarbons and the main industrial sectors which can be developed with this surplus. This clearly affects contracts for the international sale of natural gas. Out of about 80 which have been signed up to now, three could be analysed in detail and compared: YPFB (Bolivia) - Gas del Estado (Argentina); ESSO-SNAM (Italy); SONATRACH-EL PASO (USA). In all, but in different ways reflecting the inequality of the parties concerned, the price clauses (basic price and pegging) reveal underlying conflicts: sharpness of competition with other sources of energy on one hand, need for the accumulation of capital on the other. In this respect, the contract SONATRACH-EL PASO
ENERGY POLICY December 1973
Conference reports and the gamble made at that time by both parties on the future price of natural gas show the cost to Algeria of enlarging its market, increasing its independence from Western Europe and tightening its control over its industrial development. Can conventional international law be easily adapted to resolve conflicting relations of this kind? Does not one have to think of a 'law of development' which would explicitly recognise the inequality of the producing and consuming countries? Such were the questions with which these international days were concluded.
Jean-MarieMartin, EnergyInstitute, (CNRS) Grenoble
The breakthrough o f natural gas in the consumer countries of Europe (P. Ramain, Energy Institute, Grenoble) The strategy o f the international oil companies with regard to new energy sources (M. Tanzer, New York) The new strategy o f the international petroleum cartel and the role o f prices and participation in Arab oil (M.S. Hasan,
University of Baghdad) Natural gas and industrialisation
(J.M.
Martin, Energy Institute, Grenoble) Rational utilisation o f associated natural gas in the OPEC community: the long controversy and its aftermath (H.S. Zaka-
riya, United Nations) Natural gas and policies o f national independence (G. de Bernis, University of
Grenoble) The development o f natural gas and transformation of legal structures (P.
Manin, University of Paris-Sceaux) Study o f some legal problems concerning the international sale o f gas (P. Kahn,
University of Dijon)
List of reports History o f gaseous hydrocarbons Nouschi, University of Nice)
Gaseous hydrocarbons and international law o f development (J. Touscoz, University of Nice) The strategy of oil companies towards n e w energy sources, (T. Rifai', Arab B. Paris)
opment of the Arab countries, and particularly advocated that they should own, and operate jointly, refineries, petrochemicals plants, tankers and distribution facilities. Dr Pachachi suggested that future long-term sale of participation oil should be linked with the following: Oil companies should undertake to construct export refineries and petrochemical plants in the producing countries, provide the financing for such projects and guarantee the export of the products. The national oil companies would participate in these joint ventures through the supply of crude oil. Oil Companies should offer the national oil companies equity participation in existing refineries and petochemical projects or new refineries and marketing facilities. The national oil companies would pay for this equity participation by the supply of crude oil.
On security of supply of Arab oil to the consuming countries, he emphasised that this is only in question because of 'the political and economic pressures exerted by some great p o w e r s . . . ', and added: 'Thus Arab countries are expected, or considered morally obliged to cater for Organised by the Financial Times and BOAC, London, 18-20 the growing energy needs of the September 1973 United States which blindly supports and abets the arch enemy of the Political realities particular nettle, but then they all Arabs'. From an international viewpoint, the represented the consuming countries. In Dr Pachachi's opinion, 'this most significant paper presented was, Dr Pachachi, however, went on moral responsibility.., should cease without a doubt, the hard-hitting record as neither believing in nor to exist, if the USA continues with indictment of US foreign policy by advocating nationalisation of oil as a the pro-Israeli policy and the rest of Dr Nadim Pachachi, former Secret- political weapon or as a retaliation world community remain silent or at ary-General of OPEC. Dr Pachachi measure. Rather he favoured a con- best adopt resolutions merely conrepresented his views as being fairly certed move towards 51% partici- demning Israel's actions and atrotypical of a 'cross section of moder- pation in all oil companies operating cities while Israel continually defies ate opinion in the Arab world' and in Arab territories. He was against and ignores such resolutions'. quickly defined his position and the nationalisation, he said, because he The use of oil as a political present situation: did not wish to 'antagonize some weapon, he stressed, could now be achieved simply by the Arab oilThe so-called energy crisis and the prob- Common Market Countries who have producing countries adopting a lem of monetary reserves accumulating been sympathetic and friendly to the in the oil producing c o u n t r i e s . . , are Arab cause' and added that: 'It is not coordinated, unified policy to freeze mainly attributable to the short-sighted- in the Arab interest to arouse the their crude oil production at present ness and bad planning of the developed levels. Economically, he went on, fears of the Europeans and the nations, which chose to build their industhis was perfectly feasible for the trial expansion and way of life on the Japanese. The Arab countries could policy of cheap oil, forgetting that the benefit from cooperation with the Arab countries, which could easily hydrocarbon reserves are finite and deple- enlarged European Community and continue at the present production table. Japan in the political and economic levels, particularly with prices rising. It is this political impasse that Dr This set the tone for his contri- fields'. But, he went on tartly, 'The bution - and put the current energy Arabs cannot rely any more on either Pachachi saw as the threat to security problems in their true political light. of the two super powers'. He called of supplies. If this could be resolved Most other speakers at this confer- for closer cooperation of the major then he foresaw the development of ence seemed reluctant to grasp this oil companies in the industrial devel- closer collaboration between buyers (A.
World energy supplies
ENERGY POLICY December 1973
259