November 20, 2013

Ukraine and the Persian Gulf States: Cooperation in the Energy Sphere. Part 3

The Independent Analytical Center for Geopolitical Studies “Borysfen Intel” affords ground to the analysts generation for expressing their point of view regarding the political, economic, security, information situation in Ukraine and in the world in general, according to their personal geopolitical studies and analyses.


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can disagree with the editor’s one

Oleksiy O. Volovych

Ukraine and the Persian Gulf States: Cooperation in the Energy Sphere. Part 1.

Ukraine and the Persian Gulf States: Cooperation in the Energy Sphere. Part 2

Ukraine and the Persian Gulf States: Cooperation in the Energy Sphere Part 3

Prospects for Cooperation in the Nuclear and Alternative Energy Sector.

Possessing the world's largest oil and gas reserves, the Persian Gulf countries still realize that traditional energy sources get gradually depleted. By the way, if the level of oil consumption continues to be maintained in the range of 8-10 % per year, by 2030 they will have almost no oil left for export. And this makes them develop nuclear and alternative (renewable) energy.

At present, some Gulf countries, in particular, the UAE and KSA are considered leaders in the development of alternative energy. For example, Saudi Arabia over the next two decades is planning to get 54 MW of energy through facilities of renewable energy. (For comparison: the potential of renewable energy infrastructure in the United States, whose population is 10 times the population of the KSA, at present is 50 MW).

At present, some Gulf countries, in particular, the UAE and KSA are considered leaders in the development of alternative energyDeveloping alternative energy, the Gulf countries focus on the construction of solar and wind power stations. They also consider the possibility of using geothermal power plants and recycling of household waste and garbage to bio-fuel. By the way, the Saudi and Emirate companies allocate funds for construction of solar and windpower stations, not only in KSA and the UAE, but also in other countries.

Considerable achievements of the Persian Gulf states in the alternative energy industry are shown by the location in Abu Dhabi of the Headquarters of the International Renewable Energy Agency (IRENA), created in 2009 by the decision of 75 countries of the world in Bonn. In mid-January 2013 in Abu Dhabi, was held the third meeting of IRENA, which was attended by delegations of 100 states, including Ukraine. Among other key issues discussed at the meeting was adopting the Program of IRENA for 2013, as well as a “road map” of renewable energy up to 2030. At the same time in Abu Dhabi was held the 6th World Summit on Renewable Energy — World Future Energy Summit (WFES).

Iran is the only country in the Persian Gulf, which has a working nuclear power plantNuclear energy industry. At present, Iran is the only country in the Persian Gulf, which has a working nuclear power plant. In the next 20 years, Iran intends to build 19 more nuclear power plants. Today a group of Ukrainian nuclear specialists is working at the Bushehr Nuclear Power Plant. Other countries, except Oman, will build nuclear power plants in the nearest future. Saudi Arabia plans by 2030 to have built 17 nuclear reactors worth 100 billion US dollars, which will be at four nuclear power plants. The first two power plants are planned to be built over the next 10 years. By 2020, the UAE plan to allocate 20 billion US dollars to build four nuclear power plants. In 2011, the Institute of Nuclear Energy Infrastructure of the Gulf (GNEII) — a higher education institution for training nuclear physicists for the CCASG — was opened in the UAE.

Solar energy is the main source of renewable energy in the Gulf countriesSolar energy is the main source of renewable energy in the Gulf countries, where the ratio of insolation per day is 5.2 KW/m². Every square kilometer of territory there gets within a year, solar energy, equivalent to 1.5 million bbl. of crude oil. If you install photovoltaic panels on an area of ​​1.7 square kilometers of the Arabian Peninsula, the energy produced by them will be equivalent to 25 million tons of oil.

Saudi Arabia is going by 2032 to be satisfying a third of its electricity needs through renewable energy, mainly generated by solar power plants. The first solar power plant in Saudi Arabia with power of 25 MW began its work in 2012. The plant will provide electricity to one of the Universities in Riyadh. The next solar power plant with the capacity of 100 MW and cost of 640 million US dollars is planned to be built in Mecca. In its construction will be involved up to two dozen international consortiums uniting 100 companies. The international environmental organization Green Prophet says that within the next twenty years, Saudi Arabia could become an exporter of energy generated by solar power plants.

By 2020, the UAE plans to produce 7% of its electricity through renewable sources. Currently, the Emirates are finishing building the Shams 1 Solar Power Plant with capacity of 100 MW. In the Emirate of Dubai is being built a solar power plant with capacity of 1 GW. The UAE intends to increase the capacity of solar power plants from 67 GW in 2012, to 53 Terawatt in 2021. Over the next 6 years Qatar intends to increase electricity production from solar power plants to 10% in the total balance of electric power. Launching a solar power plant with capacity of 1.800 MW is planned for 2018. Electricity from this power plant will be used for water desalination.

Wind parks in the Gulf are less important as there are actually no powerful winds thereWind parks in the Gulf are less important as there are actually no powerful winds there. But, nevertheless, some countries in the sub-region are interested in the development of this type of alternative energy. Currently in Iran, wind parks produce 300 million KW/h of electricity. By 2015, the production capacity of wind parks is planned to be increased up to 40 GW. In 2013, in Iranian Mandjil is being completing the construction of a wind park with the capacity of 180 million KW/h. Leaders of Saudi Arabia have determined five areas of the country, where in the coming years they are going to build wind parks. In February 2013 in the KSA was announced a tender for the construction of two wind parks (650 MW/h and 1.05 GW/h). Iraq plans in the next 3 years to allocate 1.6 billion dollars for the development of renewable energy, a significant portion of which money will go on the construction of wind parks. The first wind power plant in Kuwait, entered into service in March 2012, can produce 500 KW/h. In 2011, the UAE began the construction of a wind park with the capacity of 30 MW. On the 25-26th of November, 2012, while being in the UAE on an official visit, President Viktor Yanukovych proposed to build in the UAE solar and wind power plants. Now, the Emirate side is considering the proposals of the President of Ukraine at the expert level.

Marine gas hydrates today have been recognized by experts as the most promising alternative fuelMarine gas hydrates today have been recognized by experts as the most promising alternative fuel. According to experts, the amount of methane in gas hydrates may be enough for all the humanity, for at least a thousand years. Experts in France, Germany, the U.S., Canada, Russia, India and Japan are actively working on exploration and development of gas hydrates. The Gulf countries also get interested in them. For example, in December 2012, Iran officially announced about the discovering in its territorial waters of huge deposits of gas hydrates, the energy potential of which is equal to all proven Iranian oil and gas reserves.


Conclusions and recommendations:

1. The new geopolitical situation emerging in the Middle East region as a result of “Arab revolutions” will require a revision of Ukraine's Middle Eastern policy. Since all the Gulf countries hold certain, often diametrically opposed positions in their attitude to the “Arab revolutions”,  Ukraine must carefully build its position taking into account the following principles: dramatic internal transformations in Tunisia, Libya, Egypt, Yemen, Syria and some other Arab countries are purely domestic affairs of the peoples of these countries. In this situation, non-regional countries and international organizations should, above all, promote a dialogue and mutual understanding between the parties of the conflict, without providing any party with priorities or preemptions. No country or international organization has the right to determine the legitimacy or illegitimacy of the presidents of sovereign states, as it is the inalienable right of the peoples of these countries.

2. Taking into account, on the one hand, the complexity of the relations between some countries of the Persian Gulf and, on the other hand, existence of certain problems in relations of these countries with extra-regional countries, it is important to determine the optimal form of cooperation with all the countries of the sub-region, regardless of the relationship between them, and the relations of these countries with the outside world. In the process of development of bilateral relations between Ukraine and the countries of the Persian Gulf should be avoided, if possible, situations where expansion of cooperation of Ukraine with some countries may lead to a complication of relations with others.

3. In the process of developing long-term plans for economic and scientific- technical cooperation between Ukraine and the Persian Gulf basin states it is necessary to take into consideration that this sub-region has entered a phase of deep transformational changes, modernization processes, when competition for markets among the leading economic nations of the world is getting sharper. Therefore, to maintain and strengthen its economic positions in the Middle East sub-region, Ukraine needs to change the structure of exports of goods and services, re-directing it to exports of high-quality and high-tech products, to increasing exports of scientific- technological, engineering services, first of all — in the energy sector.

4. In the energy market of the Persian Gulf, Ukraine will compete with the leading European and Asian countries, which will require systematic activity and coordination of efforts between the Cabinet of Ministers of Ukraine and individual state-owned and private oil and gas companies. Cooperation with the Gulf States could give Ukraine opportunities for mutually beneficial cooperation and implementation of large-scale economic projects. First of all, Ukraine could actively participate in the construction of energy infrastructure in the Gulf countries.

5. Using the geo-strategic location and unique capabilities of Ukraine as a transit country for energy resources from the East to Europe, the Ukrainian government should establish a set of political, economic, scientific and technological measures concerning practical supplies of Middle Eastern hydrocarbons. A special role should be given to comprehensive elaboration of routes by which Iraqi oil and Iranian gas could be delivered to Ukraine. The current unstable situation in these countries and around them, especially regarding Iran's nuclear program, should not slow down the work on the projects of energy transport corridors from the Persian Gulf sub-region to Ukraine.

6. If relevant Ukrainian Ministries and departments take active measures, energy and financial resources in the Persian Gulf sub-region in 5-10 years can play a key role in solving Ukraine's tasks of diversification of energy carriers’ supply and creation of a reliable system of energy security. First of all, this is due to the fact that over the next three decades, the Persian Gulf region will continue to play a dominant role in the world oil and gas market.

7. President of Ukraine Viktor Yanukovych and Prime Minister M. Azarov and former Minister of Foreign Affairs of Ukraine K. Hryshchenko's visits  to the UAE, Qatar and Iraq have given new impetus to further deepening of the political dialogue and intensified cooperation with these countries in various fields, and above all – in energy sphere. These visits show that only under the condition of constant political dialogue with the countries of the Persian Gulf at the highest level, positive results can be achieved. At the moment it is necessary to hold talks at the highest level with the leaders of Iran, Kuwait and Saudi Arabia.

8. Based on the fact that the share of oil in the energy balance of Ukraine, like in the balance of other countries, is constantly decreasing due to the increase in natural gas consumption, its optimal potential suppliers for Ukraine from the Gulf sub-region are Qatar and Iran. Natural gas from these two countries can be delivered to Ukraine both, in the form of LNG, and by those gas pipelines, construction of which is planned by these two countries through Turkey and on to Europe.

9. Traditionally, the Gulf countries host powerful multinational oil companies and consortia, owning not only the latest technologies, but also considerable capitals. With few exceptions, Ukrainian oil and gas companies do not have such capital, but, as a rule, they have a qualified staff and quite decent modern technologies. Thus, to gain a foothold in the energy market of the Persian Gulf, Ukrainian companies should enter consortia with leading countries of Europe, the USA, Russia, China, Japan, South Korea, India and other countries.

10. The global financial crisis had actually not affected the banking system of the Arab Gulf States, the latter even have profited greatly by strengthening their role as a reliable custodian of deposits from around the world. Thus, the Arab states of the Persian Gulf remain one of the largest reservoirs in the world to host free capital and, accordingly, prospective investors into Ukraine's economy, particularly into the energy industry. It is more profitable for Ukraine to attract investments from Gulf countries for production of domestic energy resources, modernization of the energy infrastructure, in particular, oil refineries, gas transportation system, construction of LNG and oil terminals, production of the necessary equipment and equipment for oil and gas pipelines, than to import energy from these countries.

11. In the process of development of cooperation between Ukraine and the Gulf states in the energy sphere, unique economic opportunities available in Ukrainian agriculture should be used to the full. That is, in the conclusion of bilateral intergovernmental agreements on the supply of Ukrainian agricultural products to the Gulf countries should be, if possible, put forward conditions to attract Arab investments into the development of not only agriculture, but also of the energy sector of Ukraine.

12. Extremely important and promising may be Ukraine's cooperation with the Gulf States in the field of development and application of technologies for the extraction of methane from gas hydrates of continental shelves, which, in particular, is mentioned in the Memorandum between Ukraine and Qatar of May 8, 2012. In our view, it is desirable as quickly as possible to make arrangements for the implementation of the provisions of the Memorandum, and to consider the issue of cooperation with Iran in the joint development of gas hydrates in the Gulf of Oman and the Black Sea. In Ukraine, as well as throughout the world, technologies of extraction of methane from gas hydrates are being developed, and this requires considerable money. The Persian Gulf countries have it.

13. Ukraine could enter the Persian Gulf countries' market of alternative energy, through working with powerful multinational companies implementing or having the intention to implement energy projects in the countries of the Persian Gulf, and in Ukraine (ExxonMobil, Royal Dutch Shell, Siemens/KWU, Westinghouse, Chevron, Millennium Energy, General Electric, Total, AREVA, Samsung and others).

14. Most of the bilateral agreements signed between Ukraine and the leading countries of the Persian Gulf (Iraq, Iran, UAE, KSA, Qatar) are mainly declarative and do not end with the conclusion of contracts. Among the reasons for the lack of transition from intentions to actions, we may mention  the following: the lack of a regular and continuous interaction with partners; unstable financial condition of most Ukrainian state-owned and private companies; frequent change of leaders of the relevant Ukrainian Ministries and companies and, as a result, — the lack of continuity in their activities; the inability of the vast majority of Ukrainian companies to work in specific conditions of the Arab countries, the lack of a permanent and sufficient financial, informational, and diplomatic support for Ukrainian companies on the part of  the state.

15. In advancing Ukraine's national interests in the Middle East, the area of the Persian Gulf included, should be taken into consideration specific features of the Middle East region — political, social, economic, cultural, mental and civilization ones. This provides for the development of the Concept of foreign policy and foreign economic activity of Ukraine in the region up to 2030. Middle East policy of Ukraine should not depend on political affiliation, level of education, competence and erudition of Ukrainian government officials at various levels.

16. Promotion of Ukraine's national interests in the Middle East and in the Persian Gulf region provides for active information-analytical work, aimed at explaining the basic principles of domestic and foreign policy of our state, formation of favorable attitude to Ukraine in parliamentary, governmental and non-governmental circles of this region. However, now in the countries of the Middle East and Persian Gulf virtually there are no Ukrainian permanently and effectively acting cultural and information centers, correspondent points of Ukrainian state-owned media. Abilities of information activities of Ukrainian embassies are extremely limited because of lack of manpower and money. Information about Ukraine, not always objective, the Middle East Media receive mainly from Russian and Western news agencies.

To create the necessary information products, its constant proliferation in the Middle East, an appropriate information-analytical center should be established in Ukraine, and it should work closely with the Ministry of Foreign Affairs, RNBO, SBU, specialized committees of the Verkhovna Rada, Administration of the President of Ukraine, the Ukrainian Chamber of Commerce, National Academy of Sciences, Research Institutes in order to:

  • form a positive image of Ukraine in the Middle East;
  • informationally accompany political and economic interests of Ukraine in the Middle East;
  • informationally accompany important high-level visits;
  • constantly interact with leading Middle East information agencies and most influential media;
  • spread information about the economic potential of Ukraine, in particular, about its capacity in the energy sector, activities of the relevant Ukrainian state- owned and private agencies and companies;
  • neutralize information diversions against Ukraine and its national interests.