Eurasia Energy Center

Frederick Kempe, President of the Washington based Atlantic Council talks about the launch of Eurasia Energy  Center the Atlantic Council’s focal point for work related to Black Sea, Caspian, and Central Asian energy issues, such as pipeline politics, the East-West energy corridor, and east and southeast European energy policies. 

Recent security concerns in the Caucasus, January’s gas crisis, and the continued debate over proposed pipelines into Europe make the Center’s efforts increasingly urgent.  The Center will work closely with the Atlantic Council’s Energy and Environment Program to provide innovative analysis on regional and international energy geopolitics.

 

Mr. Alexandros Petersen, the Southeast Europe Policy Scholar at the Woodrow Wilson International Center for Scholars, and Dr. Boyko Nitzov a former Senior Expert for Investment at the Energy Charter Secretariat in Brussels  are the two main reserchers at the newly created center.

  “The geopolitical influence of Eurasian energy is increasingly becoming an intersection for global security and energy supplies.  It affects all areas of our national interests including the environment and trade.  The Council’s new Center will elevate the role of this critically important 21st Century dialogue,” Atlantic Council chairman and former U.S. senator Chuck Hagel said.

Clean fuel subsidized by taxpayers

In the heart of Columbiana county on the Ohio River, where steel blast furnaces came to a halt a few decades ago a unique project is reshaping the region. Washington based Baard Energy is building the only facility in the USA that will convert coal and biomass into liquid jet fuel and diesel. Estimated at $6 billion, the power plant is one of the top ten most expensive infrastructure projects in the world, Tracy Drake, project manager at Columbiana Port Authority, said.

After intense lobbying at the state and federal level, the company is seeking to have taxpayers guarantee billions of dollars in construction loans for the coal-to-liquid plant. Baard Energy also plans to lock in a 25 year contract to supply liquid fuel to the Air Force, which consumes roughly 2.4 billion gallons of jet fuel annually, according to a project summary prepared by the Ohio Environmental Protection Agency and the Army Corps.

“This is a fairly small company that plans to build a $6bn dollars plant with massive subsides from the taxpayers,” Fisk Shannon, an attorney with the National Resource Defense Council said.

Local officials, including the Ohio governor and Congressmen Charlie Wilson and Tim welcomed John Baardson, CEO of Baard Energy, with opened arms hoping the project will revive the economically dead area.  “It’s critical, this project will have a tremendous impact on us locally and will lift a lot of people from poverty,” Drake said.

The company started talks with the Columbiana Port Authority in 2006 to acquire the plot of land for the construction of the plant. One year before it hired the public relations firm Locke Liddell Strategies to lobby the Congress and Department of Energy on coal to liquid fuel. Since 2005, Baard paid Locke Liddell more than $820,000 over a 3 years span. “It was a very difficult process, but we managed to get all the permits needed,“ David Distefano one of the lobbyists said. With his partner Roy Coffe, a former legislative aide to Gov. George W. Bush, Distefano also lobbied the Executive office of the President on “energy legislation pertaining to coal to liquids.”

Baard was also hoping to secure a $2bn loan guarantee from the Department of Energy under the Energy Policy Act of 2005, that authorizes the DOE to provide 80% Federal Loan Guarantees to coal gasification and clean fuels production. However, several outstanding lawsuits have forced the company to pull out at the end of March of the Department of Energy’s loan guarantee program, arguing that the agency is considering the lawsuits as part of its risk assessment of the project.

It is still unclear how viable the project is without money from the federal government. A study published by M.I.T. in 2007 estimates that the construction of a synthetic fuel plant costs four times more than a petroleum refinery. It would cost $70bn to build enough plants to replace 10% of US gasoline consumption, the study shows.

China tapping Afghan resources

Investors are tapping their money in Afghanistan’s rich mineral industry. Known for its vast unexploited mineral deposits and precious stones, Afghanistan has attracted investments in its coal, copper and iron industry. China Metallurgical Construction is investing $3.39 billion in a project to develop the Aynak copper mine, 30 km from Kabul. “Geologically, Afghanistan is a paradise,” Abdel Rahman Ashraf, a German-trained geologist and Afghan President Hamid Karzai’s chief mining and energy adviser, said.
The telecommunication sector has been also thriving in the country after the government passed a liberal telecommunication law and attracted over $1 billion of investments in the mobile phone industry. A few years ago, Afghans had to travel to neighboring Pakistan to make international phone calls. Now more than 5 million Afghans have cell phones and the number of users is expected to double within the next two years. “Companies have made tremendous profits and services have expanded to millions of people. In a country which didn’t have a landline system they have developed a really vibrant and effective cell phone industry,” says Engle.

“Afghanistan is close to big markets like India and China and it could be a transit country for the transportation of good and energy from west to east. We hope one day we will also belong to the modern world,” Ashraf said.

It’s not all paradise, clearly. The rising power of the Taliban, political corruption and illegal opium trafficking all retard economic growth. Although poppy cultivation is down by 19% in 2008, according to a UN report, the Afghan economy is still dependent on the plant and heroin production.

A green shot

A new report that shows U.S. consumer confidence has increased has prompted crude oil to rise to a four-week high. Inventors think that the raise in consumer confidence will drive oil demand up. Since July 2008 oil demand has dropped by 64% . The oil price increased by 5 percent today, according to Bloomberg. Oil futures for June delivery rebounded too and reached 53.65, the highest in a month.

Many believe the recent data signals an improvement of the economy and hope the recession might end by the end of the year. Others are more skeptical.

“Traders are looking at poor statistics and looking at them as bullish because they are better than a month ago,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “These moves are unsustainable because the fundamentals of the market are poor.” Bloomberg

Meanwhile, oil companies have seen their profits shrinking as the price of oil plummeted. Still some companies, like Royal Dutch Shell or BP PLC have reported better than expected first- quarter earnings, due to sucessful oil trading operations.