Energy and Democratic Leadership: The management of natural resources for development

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Energy and Democratic LeadershipThe management
of natural resources for development

• Willy H Olsen
• Advisor to INTSOK, Norwegian Oil and Gas
  Foundation
• Member of the Governing Board, Revenue Watch
  Institute
• Santander 21 August 2007

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The world needs more energy

• World energy demand is projected to increase by
  over 50 between now and 2030.
• 80 of traded oil will come from just three
  areas
• Russia
• West Africa
• Middle East
• Investment of 17 trillion will be needed
• Technology is an important enabler to deliver the
  energy the world will need

Source ExxonMobil, IEA
3
New alliances is changing the competitive
landscape

• Asian countries offer billion dollar investments
  in infrastructure for attractive oil and gas
  assets
• China, India and Korea are grabbing assets all
  over the world
• Entering deals of limited interest to most IOCs

President Roh Moo-hyunof Korea meetsPresident
Olusegun Obasanjo
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The Chinese footprints in Africa
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The price is a nightmare for the energy poor and
filling the accounts of the rich
Source EIA
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The poverty goal is still just a goal

• Access to energy is critical for the achieving
  the Millennium Development Goals
• Still some two billion poor people has no access
  to modern energy services.
• For the majority of developing countries in
  Africa, Asia and Latin America ensuring access to
  energy for the poor, especially in rural areas,
  is a huge challenge

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The challenge is still enormous

• More than one billion people live on less than a
  dollar a day
• 70 in Africa
• Laos, Cambodia, Burma and North Korea fall into
  the bottom billion group
• They are in the conflict trap
• More than 70 have recently been through a civil
  war or are still in one
• And in the natural resource trap
• More than 30 of the poorest people live in
  countries where resource wealth dominates the
  economy
• And where autocracies tend to outgrow democracies

Source Paul Collier, The Bottom Billion
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Energy is a vital link to tackle poverty

• Energy has helped transform and underpin human
  development over Centuries
• Energy is vital if we are to achieve the
  Millennium Goals
• Energy is needed to increase productivity and
  provide jobs
• Energy has long been a missing element in plans
  to tackle peoples chronic poverty
• Norway has during the last 25 years granted more
  than 10 billion NOK to power sector aid
• Poverty reduction was never an integrated goal

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Mega project has been important but not
addressed the poverty issue

• Sustainable hydropower development has still
  considerable potential in many developing
  countries.
• International development aid has often focused
  on large scale supplies at national or regional
  levels
• Poverty reduction has only recently become an
  issue
• High costs of new connections and rural
  electrification as well as cost of use of
  electricity remains crucial challenges for
  expanding coverage in poor countries

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Removing the burden on women

• Poverty condemns the vast majority of poor people
  to rely on biomass
• Placing a large burden on women and children
• Efficient technologies for the use of biomass
  would ensure that scarce biomass resources are
  effectively utilised,
• Reducing the negative impacts the use of biomass
  women and childrens health

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The resource curse will not go away

• Some 50 countries are rich in hydrocarbon and
  mineral resources
• Resource-rich developing countries have
  experienced
• Low per capita growth rates
• Slow progress in human development
• Social and political instability and violence
• And high corruption
• Escalating global demand for natural resources,
  higher prices and fierce competition is deepening
  the challenge

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Emergency crisis in the energy sector

• Nigeria has large oil and gas reserves
• The country is a major exporter
• Investing 10 12 billion dollars annually in new
  oil fields and new LNG plants
• 70 Nigerians are directly or indirectly
  dependent on forest resources to meet their
  domestic energy needs
• President YarAdua declared emergency in the
  energy sector

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An oil field with no impact on the women

• Africa is producing close to 10 of the worlds
  oil most of the oil is exported
• Africas role as a major gas exporter is growing
• Africa is only consuming 3 of global energy

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Wasting valuable energy resources

• Flaring in Africa 200 TWh of CCGT power
  production
• Enough power for 85 million low-income urban
  households
• Nigeria is reducing flaring but large volumes
  of gas is still not monetized

Source World Bank flaring report
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Oil from Chad flowing to global markets

• If this is development, you can keep it.
• A Cameroonian farmer commenting on the
  Chad-Cameroon Project, seeing his land converted
  into a construction site.

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Who has always access to electricity?

• Burmas new capital Naypyidaw enjoys light at all
  times
• Gas to Thailand represents 43 of export earnings
• India and China competing for a new gas pipeline
• Burmas poor can only dream of access to energy

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Preparing for a life after oil and gas

• Algeria, aware that its oil and gas riches will
  one day run dry, is gearing up to tap its
  sunshine
• New Energy Algeria was set up by the Algerian
  government to develop renewable energies and is a
  subsidiary of Algeria's state-owned oil and gas
  company
• A recent study confirms the potential for using
  renewable energies, especially solar power.

• Work ongoing at the first plant at Hassi R'mel
• The plant will use both sun and natural gas.
• 25 megawatts will come from giant parabolic
  mirrors stretching over 45 football fields

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The challenges

• Poverty reduction requires the development of
  energy systems that can bring electricity to poor
  users
• Distribution is a major challenge
• Affordability limits the focus on mostly
  stand-alone solutions
• Access to power sector investment capital is poor
  due to series of mutually reinforcing political,
  governance and financial risk barriers to
  investment
• Development of adequate public institutions that
  can take on the sector development challenge
• Development of reliable and stable framework
  conditions for private investors

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Good governance is critical

• Governance as the set of traditions and
  institutions by which authority in a country is
  exercised
• The process by which those in authority are
  selected and replaced
• Voice and accountability
• Political stability and absence of violence and
  terrorism
• The capacity of government to formulate and
  implement policies
• Government effectiveness
• Regulatory quality
• The respect of citizens and state for
  institutions that
• govern interactions among them
• The rule of law
• Control of corruption

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Effective and sound institutions required

• Development of effective and sound institutions
  in the energy sector is a major challenge
• Modern power legislation and regulation is in
  place in many countries, but implementation and
  enforcement lag far behind
• Lack of performance monitoring
• Weak reporting on progress and problems
• Weak financial statements

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Where are the Energy Saving Bulbs?

• Energy efficiency strategies under way in many
  countries
• Detailed energy audits in industries,
  institutions and commercial building
• Local government will be required to enforce
  energy conservation
• Distribution of free energy saving bulbs,
  consuming five times less energy and have a
  longer life span than the ordinary bulbs
• Ghana has ordered 6 million bulbs to replace the
  power hungry ones currently in use
• Uganda, Namibia and others are doing the same

Headline in Accra Mail
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The Ministry of Power and Steal

• Oil profits generally seem to find their way by
  some invisible pipeline into private pockets

• Lloyd George,
• British Prime Minister
• 1916-22
• 26 March 1920

Nigerians view during the military regime
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Promote energy literacy through capacity building

• Communities must have a voice in the decision
  making process
• Such inclusion is not always in the interest of
  those in government.
• Capacity and knowledge are key elements to
  empower the poor to participate in the energy
  debate
• No sustained public education on energy
  conservation
• Without the power to claim their rights and to
  pressure the government to ensure access to basic
  services that can develop their capabilities,
  they will remain stuck in poverty

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Expanding public private partnership

• Public-private partnerships can combine the
  public interest and social responsibility of the
  government with the efficiency and responsiveness
  to customer demand of the private sector
• Allocating risks and rewards between the partners
  is not easy
• The private sector cannot be expected to serve
  the poor populations in remote areas without some
  form of public policy support

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Making renewable energy a priority