New technologies are poised to displace oil as our dominant fuel source
“The Stone Age did not end for lack of stone, and the Oil Age will end long before the world runs out of oil,”
Sheikh Zaki Yamani, Saudi Arabia’s energy minister in the 1970s
This sentiment arguably still chimes with Riyadh’s outlook in 2016 particularly with countries such as China exploring long-term alternative sources of clean energy.
Saudi Arabia’s Vision 2030, announced in April by Deputy Crown Prince Mohammed bin Salman, the first phase of which, the National Transformation Plan, was approved last week by the cabinet in Riyadh, envisages a huge diversification of the Saudi economy away from its dependency on oil production over the coming decades.
In the near term, Saudi Arabia continues to target oil market share, pumping at near record highs, although, as current Saudi energy minister Khalid al-Falih said on June 2 at a meeting of the Organization of Petroleum Exporting Countries “there is no reason to expect that Saudi Arabia is going to go on a flooding campaign”.
Undoubtedly Saudi Arabia’s pumping strategy continues to reflect, at least partly, Riyadh’s desire not to hand market share to its regional rival Iran as the latter seeks to ramp up oil production following the easing of Western sanctions related to Tehran’s nuclear programme.
But it likely also includes a calculation that targeting price over market share is no longer a viable policy.
The higher the price of a barrel of oil, the easier it is to justify the production of energy where the extraction costs are significantly greater than those of Saudi Arabia, especially when low interest rates allow projects to secure cheap financing.
Equally, newly-developed extraction technologies do not disappear.
Saudi Arabia may have hoped to bear down, through increased production, on the ability of the US shale oil industry’s ability to compete but those US producers have, so far, proved tenacious.
Shale oil potentially becomes stranded in the ground if the global oil price is too low to justify its extraction but as the price ticks up, the production comes back on-stream while technological advances may even lower the extractive costs.
But as Riyadh looks out to 2030 it also has to factor into its calculations that major energy-consuming economies, including China, are ploughing money into efforts to develop dependable sources of clean energy.
On the consumer side, Hong Kong itself is already championing the use of electric vehicles but that electricity is still largely sourced from carbon-energy.
The ultimate prize is to create that electricity from a carbon-free energy source.
And one way to do that is by exploring the feasibility of nuclear fusion technology to re-create on planet Earth the conditions that generate the energy that powers the sun and the stars. The International Thermonuclear Experimental Reactor (ITER) Project, after the Latin word iter meaning the way, is a collaboration of 35 nations including China.
The aim, as ITER explains it, is to create “the tokamak… an experimental machine designed to harness the energy of fusion”.
“Inside a tokamak, the energy produced through the fusion of atoms is absorbed as heat in the walls of the vessel. Just like a conventional power plant, a fusion power plant will use this heat to produce steam and then electricity by way of turbines and generators,” ITER says.
Science fiction? Yet in February Chinese scientists in Hefei, the capital of Jiangsu province, managed in their own Experimental Advanced Superconducting Tokamak (EAST) to heat, as the POST reported, “a hydrogen gas – a hot ionised gas called a plasma – to about 50 million Kelvins (49.999 million degrees Celsius). The interior of our sun is calculated to be around 15 million Kelvins.”
Previous experiments by European and Japanese physicists could only hit that temperature for periods of less than a minute. The EAST team maintained that temperature for 102 seconds which was a breakthrough.
Energy produced from fusion technology is many decades away even if it is shown to be achievable but Riyadh understands it is just another example of how the world is seeking alternatives to carbon energy.
Saudi Arabia may not have been looking EAST when it mapped out its 2030 Vision but the Hefei success, and indeed technological advances in shale oil extraction, surely underscore why Riyadh is targeting oil market share, not price, and help explain its determination to diversify the Saudi economy over the next few decades.
As a major energy consumer, China can surely only benefit from this as Saudi Arabia has apparently realised that Sheikh Yamani had a point.
Source URL: http://www.scmp.com/business/global-economy/article/1974989/forget-about-peak-oil-heres-real-reason-saudi-arabia-selling