ABU DHABI, United Arab Emirates — President Bush on Sunday harshly criticized Iran for sponsoring terrorist activity from Afghanistan to Lebanon, and he called on nations throughout the world "to confront this danger before it is too late."
The president unleashed his attack on the government of Iranian President Mahmoud Ahmadinejad and on al-Qaeda during the signature speech of his eight-day trip to the Middle East. He also said governments in the region must do more to promote human rights and democratic reforms.
"Iran's actions threaten the security of nations everywhere," Bush told several hundred residents of this wealthy Muslim nation at the Emirates Palace, a $3 billion gold-and-marble hotel believed to be the most expensive ever built. "So the United States is strengthening our longstanding security commitments with our friends in the Gulf."
Backing up his words with weapons, Bush was set to unveil details Monday of a proposed $20 billion arms sale to Saudi Arabia and other Middle East countries. The package will require approval from Congress, where some Democrats have objected to the Saudi portion. "It's a big package that we have offered to the Saudis," said a senior administration official traveling with Bush.
Bush travels to Saudi Arabia on Monday for two days of meetings and social events with King Abdullah bin Abdulaziz in hopes of winning his support for continued pressure on Iran, as well as for the Israeli-Palestinian peace process. In recent months, the king has made overtures to Ahmadinejad, inviting him to the Hajj, the annual Muslim pilgrimage to Mecca, and walking with him arm in arm at a meeting of the Gulf Cooperation Council.
Sunday, January 13, 2008
Sunday, January 6, 2008
ASEAN, China, India race for energy reserve
Michael Richardson, Singapore
When Iranian Muslim clerics, backed by a popular uprising, toppled the Shah of Iran in 1979, it triggered the biggest oil shock since the 1973 Arab oil embargo. The revolution in Iran, one of the world's top sources of petroleum, led to a supply shortfall in the market of approximately 5.6 million barrels of oil per day for nearly six months. This was close to 10 percent of world output in 1979.
The shortfall doubled oil prices, plunging the global economy over the next three years into its longest and deepest recession since World War II. Could this, or something like it, happen again?
The International Energy Agency (IEA), which was formed in 1974 by industrialized economies to develop collective measures to offset oil supply disruptions, has just issued a report warning that today's energy market is more prone than ever to unexpected shocks and that many Asian countries -- including China, India and Southeast Asian oil importers -- are particularly vulnerable because they are increasingly dependent on volatile sources of supply in the Persian Gulf and Africa, and have not yet established sufficiently large oil reserves or put in place effective emergency response arrangements.
Demand in the energy market now is often perceived to be exceeding supply. As a result, political risks assume a higher profile for those who trade and speculate on future prices. The IEA report says that the danger of oil supply disruptions has grown in recent years and will increase in the near future for a number of reasons.
They include continued demand growth (led by Asia), the concentration of remaining oil reserves in a fewer number of countries (mainly in the Middle East, Russia and West Africa), the focus of oil use in land, air and water transport (which is expanding exponentially, especially in Asia), and not enough capacity additions (both upstream, in oil exploration, and downstream, in refining) to keep pace with demand growth.
The IEA's ability to respond to a short-term dislocation in the oil market was tested in September 2005 when Hurricane Katrina severely damaged oil production and refining infrastructure in the Gulf of Mexico, a major energy source for the U.S. When the extent of the damage became clear, the IEA reached unanimous agreement within 24 hours to make 60 million barrels of emergency oil and products available to the market. This had the desired calming effect.
Could Asia deploy a similar response mechanism? Not yet, despite efforts of Japan and other IEA members to encourage it. In Southeast Asia, Singapore and a number of other economies are heavily reliant on oil from the Middle East. Even the region's main oil producers -- Indonesia, Malaysia and Vietnam -- are planning for a future as net oil importers as their oil output declines and domestic demand rises.
In 1986, ASEAN signed a regional Petroleum Security Agreement (APSA). It was designed to allocate crude oil and products among member states in times of shortage. However, the treaty has never been invoked and members cannot agree how it would work in practice.
Elsewhere in Asia, building a strategic oil reserve in China to cushion its turbo-charged and energy-intensive economy from sudden disruptions in global petroleum supplies is proving a tough task, partly because demand for imported oil is surging when prices have recently been nudging record highs. Billions of dollars have been allocated to build some of the giant tank farms for the first phase of China's national oil reserve and then to start buying oil to fill them.
But the IEA study reveals that by September only a relatively small amount of crude oil was in the system, between 15 million and 22 million barrels -- or four to seven days of China's net imports of oil and refined products last year. These imports averaged nearly 3.5 million barrels per day and made up nearly half the country's oil consumption.
The National Development and Reform Commission (NDRC), which oversees energy policy, last year recommended that construction of strategic oil reserves should be accelerated.
Work on the first phase began in 2004 and one of the four sites, at Zhenhai in Zhejiang province on China's east coast, was recently completed. A second site at Aoshan in the same province is nearly finished and some oil has already been taken in. The remaining two sites, at Huangdao in Shandong province and Dalian in Liaoning province, are due to be finished in 2008.
Together, they will hold a total of 102 million barrels, equivalent to 37 days of China's net oil imports in 2005. But the increase in petroleum imports and consumption in the last two years, and reluctance by Chinese authorities to risk driving the global oil price even higher by bulk buying for the reserves, have reduced the coverage capacity of the stock system.
According to the IEA, recent statements from the NDRC indicate that the reserve will hold 88.5 million barrels of oil by 2010, subject to market conditions. This would be equivalent to just under 10 days of projected national oil consumption in that year and 17.4 days of net oil imports.
It would be far short of the government's aim to hold stocks equal to 90 days of net imports by 2020, after the second and third phases of the strategic storage facilities are completed. The whole reserve would then hold 512 million barrels and could be supplemented by commercial stocks of oil companies.
Although China has a headstart on India, Asia's other giant emerging economy, in building a strategic petroleum reserve, it may not end up far ahead at all by the end of the decade. India is due to start work before the end of this year excavating rock caverns at three separate coastal sites to hold 37 million barrels of oil. They are scheduled for completion in 2010.
When filled, they will hold 12.5 days of forecast national oil consumption in that year and 17.8 days of net oil imports -- about the same as China. In addition, the IEA says that by 2010, Indian oil companies are expected to hold a total of 47 days of consumption cover and 72 days of net imports in their commercial stocks. But the agency adds that to have a net import coverage of 45 days, India would need a reserve of 276 million barrels in 2030, by which time the total cumulative costs of building it would amount to around US$25 billion.
For ASEAN, China and India, greater energy security is vital. But it comes with a big price tag and, in the case of ASEAN, a need to agree on coordination measures that can affect national interests.
The writer, a former Asia editor of the International Herald Tribune, is an energy and security specialist at the Institute of South East Asian Studies in Singapore.
When Iranian Muslim clerics, backed by a popular uprising, toppled the Shah of Iran in 1979, it triggered the biggest oil shock since the 1973 Arab oil embargo. The revolution in Iran, one of the world's top sources of petroleum, led to a supply shortfall in the market of approximately 5.6 million barrels of oil per day for nearly six months. This was close to 10 percent of world output in 1979.
The shortfall doubled oil prices, plunging the global economy over the next three years into its longest and deepest recession since World War II. Could this, or something like it, happen again?
The International Energy Agency (IEA), which was formed in 1974 by industrialized economies to develop collective measures to offset oil supply disruptions, has just issued a report warning that today's energy market is more prone than ever to unexpected shocks and that many Asian countries -- including China, India and Southeast Asian oil importers -- are particularly vulnerable because they are increasingly dependent on volatile sources of supply in the Persian Gulf and Africa, and have not yet established sufficiently large oil reserves or put in place effective emergency response arrangements.
Demand in the energy market now is often perceived to be exceeding supply. As a result, political risks assume a higher profile for those who trade and speculate on future prices. The IEA report says that the danger of oil supply disruptions has grown in recent years and will increase in the near future for a number of reasons.
They include continued demand growth (led by Asia), the concentration of remaining oil reserves in a fewer number of countries (mainly in the Middle East, Russia and West Africa), the focus of oil use in land, air and water transport (which is expanding exponentially, especially in Asia), and not enough capacity additions (both upstream, in oil exploration, and downstream, in refining) to keep pace with demand growth.
The IEA's ability to respond to a short-term dislocation in the oil market was tested in September 2005 when Hurricane Katrina severely damaged oil production and refining infrastructure in the Gulf of Mexico, a major energy source for the U.S. When the extent of the damage became clear, the IEA reached unanimous agreement within 24 hours to make 60 million barrels of emergency oil and products available to the market. This had the desired calming effect.
Could Asia deploy a similar response mechanism? Not yet, despite efforts of Japan and other IEA members to encourage it. In Southeast Asia, Singapore and a number of other economies are heavily reliant on oil from the Middle East. Even the region's main oil producers -- Indonesia, Malaysia and Vietnam -- are planning for a future as net oil importers as their oil output declines and domestic demand rises.
In 1986, ASEAN signed a regional Petroleum Security Agreement (APSA). It was designed to allocate crude oil and products among member states in times of shortage. However, the treaty has never been invoked and members cannot agree how it would work in practice.
Elsewhere in Asia, building a strategic oil reserve in China to cushion its turbo-charged and energy-intensive economy from sudden disruptions in global petroleum supplies is proving a tough task, partly because demand for imported oil is surging when prices have recently been nudging record highs. Billions of dollars have been allocated to build some of the giant tank farms for the first phase of China's national oil reserve and then to start buying oil to fill them.
But the IEA study reveals that by September only a relatively small amount of crude oil was in the system, between 15 million and 22 million barrels -- or four to seven days of China's net imports of oil and refined products last year. These imports averaged nearly 3.5 million barrels per day and made up nearly half the country's oil consumption.
The National Development and Reform Commission (NDRC), which oversees energy policy, last year recommended that construction of strategic oil reserves should be accelerated.
Work on the first phase began in 2004 and one of the four sites, at Zhenhai in Zhejiang province on China's east coast, was recently completed. A second site at Aoshan in the same province is nearly finished and some oil has already been taken in. The remaining two sites, at Huangdao in Shandong province and Dalian in Liaoning province, are due to be finished in 2008.
Together, they will hold a total of 102 million barrels, equivalent to 37 days of China's net oil imports in 2005. But the increase in petroleum imports and consumption in the last two years, and reluctance by Chinese authorities to risk driving the global oil price even higher by bulk buying for the reserves, have reduced the coverage capacity of the stock system.
According to the IEA, recent statements from the NDRC indicate that the reserve will hold 88.5 million barrels of oil by 2010, subject to market conditions. This would be equivalent to just under 10 days of projected national oil consumption in that year and 17.4 days of net oil imports.
It would be far short of the government's aim to hold stocks equal to 90 days of net imports by 2020, after the second and third phases of the strategic storage facilities are completed. The whole reserve would then hold 512 million barrels and could be supplemented by commercial stocks of oil companies.
Although China has a headstart on India, Asia's other giant emerging economy, in building a strategic petroleum reserve, it may not end up far ahead at all by the end of the decade. India is due to start work before the end of this year excavating rock caverns at three separate coastal sites to hold 37 million barrels of oil. They are scheduled for completion in 2010.
When filled, they will hold 12.5 days of forecast national oil consumption in that year and 17.8 days of net oil imports -- about the same as China. In addition, the IEA says that by 2010, Indian oil companies are expected to hold a total of 47 days of consumption cover and 72 days of net imports in their commercial stocks. But the agency adds that to have a net import coverage of 45 days, India would need a reserve of 276 million barrels in 2030, by which time the total cumulative costs of building it would amount to around US$25 billion.
For ASEAN, China and India, greater energy security is vital. But it comes with a big price tag and, in the case of ASEAN, a need to agree on coordination measures that can affect national interests.
The writer, a former Asia editor of the International Herald Tribune, is an energy and security specialist at the Institute of South East Asian Studies in Singapore.
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