Tag Archives: Energy

How to Build Climate Resilience in Ecosystems

Great Barrier Reef, Australia

Some ecosystems show little response [to climate change] until a threshold or tipping point is reached where even a small perturbation may trigger collapse into a state from which  recovery is difficult .  ….[S}uch collapse may be altered by conditions that can be managed locally…. [This] provides  potential opportunities for pro-active management.…[C]rises in iconic UNESCO World Heritage sites illustrate that such stewardship is at risk of failing. The term “safe operating space” frames the  problem of managing our planet in terms of staying within acceptable levels or “boundaries” for global stressors [Such as climate change]….

Obviously, local interventions are no panacea for the threats of climatic change. For example, melting of arctic sea ice with its far-reaching ecological consequences cannot be arrested by local management. However, ways of building climate resilience are emerging for a variety of ecosystems, ranging from control of local sources of ocean acidification  to management of grazing pressure on dry ecosystems,World Heritage Areas.

The Doñana wetlands in southern Spain provide the most important wintering site for waterfowl in Europe. They contain the largest temporary pond complex in Europe, with a diversity of amphibians and invertebrates. Despite the site’s protected status, the marshes are threatened by eutrophication due to pollution and reduced flow of incoming streams, promoting toxic cyanobacterial blooms and dominance by invasive floating plants that create anoxic conditions in the water. In addition, groundwater extraction for strawberry culture and beach tourism also has major impacts.  Little has been done to control these local stressors, leaving Doñana unnecessarily vulnerable to climate change. UNESCO has just rated this World Heritage Site as under ‘very high threat’.

The Great Barrier Reef is the largest coral system in the world. In response to multiple threats, fishing has been prohibited since 2004 over 33% of the Great Barrier Reef Marine Park, and efforts have begun to reduce runoff of nutrients, pesticides, herbicides and sediments from land. However, these interventions may be too little, too late. Approximately half of the coral cover has been lost in recent decades, and the outlook is “poor, and declining” with climate change, coastal development and dredging as major future threats. The World Heritage Committee has warned that in the absence of a solid long-term plan, it would consider listing the reef as “in danger” in 2015.

More available online Creating a Safe Operating Space for Iconic Ecosystems By M. Scheffer et al, 2015

For the Love of Batteries: Storing Electricity

Districht heating accumulation tower of Theiss, near Krems an der Donau, Lower Austria with 50000 cubic meters volume.  Image from wikipedia

Batteries are a hugely important technology. Modern life would be impossible without them. But many engineers find them disappointing and feel that they could be better still. Produce the right battery at the right price, these engineers think, and you could make the internal-combustion engine redundant and usher in a world in which free fuel, in the form of wind and solar energy, was the norm. That really would be a revolution.

It is, however, a revolution that people have been awaiting a long time. And the longer they wait, the more the doubters wonder if it will ever happen. The Joint Centre for Energy Storage Research (JCESR)...hopes to prove the doubters wrong. It has drawn together the best brains in energy research from America’s national laboratories and universities, along with a group of interested companies. It has money, too. It has just received a grant of $120m from the country’s Department of Energy. The aim, snappily expressed, is to make batteries five times more powerful and five times cheaper in five years…

The first test of any combination of substances that comes out of the Materials Project, or anywhere else, will be to beat the most successful electricity-storage device to emerge over the past 20 years: the lithium-ion battery. Such batteries are now ubiquitous. Most famously, they power many of the electric and hybrid-electric cars that are starting to appear on the roads. More infamously, they have a tendency to overheat and burn. Two recent fires on board Boeing’s new 787 Dreamliners may have been caused by such batteries or their control systems. Improving on lithium-ion would be a feather in the cap of any laboratory… McKinsey, a business consultancy, reckons that lithium-ion batteries might be competitive by 2020 but… there is still a lot of work to do. Moreover, pretenders to lithium-ion’s throne are already emerging.

The leader is probably the lithium-air battery…The lithium-air approach has consequently generated a lot of hype. It has problems, though, which will take years of research to resolve. Lithium-air batteries are hard to recharge and extremely temperamental. The chemical reaction which powers them is not far removed from spontaneous combustion. Lithium-air batteries are thus highly inflammable and require heavy safety systems to stop them catching fire. Luckily, the researchers at JCESR have other irons in the fire. One is the multivalent-ion battery….

The second transformation, besides electric cars, that better batteries might bring about is what is known as grid-scale storage. If this could be done cheaply enough it would revolutionise the economics of wind and solar energy by making the main problem with such sources—that the sun does not always shine and the wind does not always blow—irrelevant. To this end, Argonne’s researchers are working on what are known as flow batteries…Unlike batteries based on cells, flow batteries can be made very large indeed, so they can store vast amounts of energy. Hence the idea of using them to collect surplus power from wind turbines and solar panels and squirrel it away for use later. But their water-based electrolytes limit their potential…

A battery-driven world, then, would electrify parts of the economy, such as transport, that have been recalcitrant, and would encourage the shift from costly (and polluting) fossil fuels to “fuels” such as sunlight that cost nothing. As a manifesto for a revolution, that takes some beating. The question is, will the revolutionaries win, or will the ancien régime prevail?

Excerpts, The future of energy: Batteries included?, Economist, Feb. 2, 2013, at 67

The Golden Age of Coal

Yangzhou industrial area, China

Coal-fired power stations provide two-fifths of the world’s electricity, and there are ever more of them. In the doubling of the world’s electricity production over the past decade, two-thirds of the increase came from coal. At these rates, coal will vie with oil as the world’s largest source of primary energy within five years. As recently as 2001, it was not much more than half as important as oil

The main factor has been the unslakable thirst for energy in China, which in 2011 overtook America as the world’s biggest electricity producer. In 2001, according to the International Energy Agency, a club of rich nations, Chinese coal demand was about 600m tonnes of oil equivalent (25 exajoules). By 2011 China’s coal demand had tripled—a rise from two-thirds of the energy America gets from oil to twice that amount. China’s domestic coal industry produces more primary energy than Middle Eastern oil does.

Other developing economies are just as keen on coal, if not yet on such a grand scale. In India, producing 650 terawatt hours of electricity in 2010 took 311m tonnes of oil equivalent, and the power sector’s coal demand is growing at around 6% a year. The IEA reckons India could surpass America as the world’s second-largest coal consumer by 2017.

Meanwhile in Europe, which likes to see itself as a world leader on climate, they are using more and more of the stuff.

America’s coal business, like the rest of the country’s energy industry, has been upended by the advent of shale gas, now available in unforeseen quantities at unforeseen prices. In April 2012 the price fell below $2 per million British thermal units, or Btus ($7 per megawatt hour). This has made gas increasingly attractive to power companies, which have been switching away from coal in increasing numbers.

The decline of coal.. will be protracted. Coal-fired power stations are built to last—the oldest plant currently operating was built in the 1930s—so unless new rules force them to close, they will be retired gradually. By 2017 or so, reckons Brattle Group, a consultancy, coal use will stabilise again, as gas demand finally makes gas prices dearer than coal. Coal may be down in America. But it is not yet out

Coal in the rich world: The mixed fortunes of a fuel, Economist, Jan. 5, 2013, at 54

Oil Sands of Canada; sticky metal pipes

Canada’s oil sands contain some 170 billion barrels of oil that can be recovered economically with today’s technology (and perhaps ten times that in total). Canada thus has the world’s third-largest proven oil reserves, after Saudi Arabia and Venezuela. And since most oil-rich nations’ reserves are under state control, Canada has the largest reserves that private companies are free to invest in—more than half of the global total, reckons Ken Hughes, Alberta’s energy minister.

Other countries welcome the idea of plentiful energy from a stable democracy. It could reduce the rich world’s dependence on the Middle East. There are “no bribes or body bags”, grins an oil-industry booster. And the potential is immense. A new study by the Alberta Geological Survey estimates that the province has huge resources in its shale beds as well as its oil sands: 3,400 trillion cubic feet of natural gas and 420 billion barrels of oil—numbers comparable to America’s.  However, Canada’s output of 3.5m barrels of oil a day is less than half that of America. (America’s output is set to exceed Saudi Arabia’s; see article.) Several problems hobble Canadian energy: geology, capital, people and pipes.

First, geology. Canadian oil is hard to extract. It mostly comes in the form of bitumen, which is “hard as a hockey puck” at 10°C, as the Canadian Association of Petroleum Producers (CAPP), an industry body, puts it. If it is far below ground, it must be blasted with steam to make it flow, and then pumped out. This process (known as “steam-assisted gravity drainage”) was developed in Alberta. In the past decade, with high oil prices, it has made the oil sands economical to exploit. But precariously so: the best projects break even when oil is $30 a barrel, but many new ones need it to be $80 or more. (West Texas Intermediate is currently $85.)

See also Oi Sands Rush

Canada gets less than it should for its oil because it lacks enough pipelines. Environmentalists oppose them, arguing that pipes leak (which is always possible) and that Canada’s heavy oil causes more greenhouse-gas emissions than other oil (which is true, but not by much). President Barack Obama has delayed the approval of a pipeline called Keystone XL, which would move Canadian oil to America’s Gulf coast. A decision is expected soon.

Alex Pourbaix of TransCanada, the firm behind the Keystone pipeline, insists that the project will be good for both countries. Canada forgoes a fortune—perhaps $20 a barrel—because it cannot get its oil to the sea. Canadian gas sells at a discount, too: North American prices are far lower than those in Asia.  Another proposed pipeline, Northern Gateway, would carry oil to Canada’s west coast, whence it could be shipped to Asia. Canada would benefit from having a choice of customers. But the government of British Columbia, and various aboriginal groups, have yet to say yes.

To exploit its hydrocarbons, Canada needs capital: some $50 billion-60 billion a year, on recent trends. Such sums are “far more than Canadian capital markets can raise,” says Dave Collyer of the CAPP. Canada gets plenty of foreign investment: Syncrude, one of the biggest oil-sands developers, is a joint venture that includes American, Chinese and Japanese partners. But lately the country has grown frostier towards foreign capital.

In October Canada’s federal government temporarily blocked a $5.2 billion bid by Petronas, Malaysia’s state energy giant, for Progress Energy Resources, a Canadian natural-gas company. It has yet to approve a $15 billion offer by CNOOC, a Chinese state-owned firm, for Nexen, a Canadian oil-and-gas firm. A deadline passed last week; a decision may come next month. Mr Hughes says he is keen on foreign investment so long as foreign firms abide by the same rules as Canadians; but it is not up to the provincial government.

The other big bottleneck is human capital. Hardly anyone lives near the oil sands, so labour must be imported, from other parts of Canada and from abroad. People from 127 countries live in Fort McMurray, says Ken Chapman of the Oil Sands Developers’ Group. They speak 69 languages. The Walmart in town looks like the United Nations, except that all the shivering Africans are buying woolly hats. Mr Hughes expects to see a skills shortfall of 100,000 people in Alberta by 2017. Canada’s immigration rules are more liberal than America’s, but firms still gripe about delays. An Irish worker in Fort McMurray complains of having to fly to Calgary to sit a test of English proficiency. It’s her native language, and the test is online.

Companies poach staff from each other, bidding up labour costs. It would be easier to attract workers to Fort McMurray if the town were more liveable; a one-bedroom flat can cost $2,000 a month. To build more homes, however, the town must wrestle with provincial red tape—and also attract legions of builders, plumbers and electricians, all at inflated wages.

Working conditions in the oil sands are tough. Touch a metal pipe with your bare hand at minus 40 and it sticks. “It’s not for everybody,” shrugs an oil-firm boss. At remote work camps, companies provide hot food, warm cabins, broadband and squash courts. All this is costly. Many firms make equipment elsewhere and truck it in, so that fewer people have to toil in the cold. Some are hoping dramatically to raise the proportion of man-hours worked off-site.

With so many bottlenecks and a volatile oil price, firms are growing cautious. Suncor Energy and Canadian Natural Resources, among others, are putting new investments on hold. “It’s the uncertainty,” says Marcel Coutu, the boss of Canadian Oil Sands, a firm that owns 37% of Syncrude. “No one knows when or whether those pipelines will be built.”

Canadian energy: The sands of grime, Economist, Nov. 17, 2012, at 62

Oil Sands Rush and the New Pipelines: Canada

Oil production from the tar sands is set to rise from 2m barrels a day (b/d) to 3.3m by 2020, or from 58% to 72% of Canada’s total oil output. Getting this oil to market is a mounting worry for Canada’s energy industry and for Stephen Harper’s Conservative government. That is because the necessary infrastructure is opposed both by local communities and by greens, who want to halt development of the tar sands. Per barrel, the extraction of oil from bitumen emits between three and four times as much carbon and other greenhouse gases as conventional oil does, according to the Pembina Institute, an environmental think-tank in Calgary. But other estimates are much lower….

The Obama administration has withheld approval of the Keystone XL pipeline, which would take oil to Gulf coast refiners. (TransCanada, Keystone’s promoter, still hopes for approval.) Mr Harper has courted China as an alternative market for the oil, but that depends on approval of Enbridge’s Northern Gateway project, a C$5.5 billion ($5.4 billion) 1,177km twin pipeline from Edmonton to Kitimat in British Columbia. The route crosses the land of 50 or so First Nations bands (indigenous tribes). More than 4,000 people have registered to speak at the environmental hearings, which began in January.

Last month another energy firm, Kinder Morgan, said it would spend $4.1 billion to double the capacity of the Trans-Mountain to Vancouver, the only existing line to Canada’s west coast. It hopes to start work in 2016. Vancouver’s mayor opposes the idea, worrying that tourism will be wrecked by tanker traffic and spills.

The government is pulling out all the stops to get these projects approved. The budget bill includes sweeping changes to the cumbersome procedures that govern environmental approval of energy projects. These now involve up to 40 federal departments and agencies. Under the bill, only those directly involved would be able to intervene in hearings; fishery habitat will no longer automatically be considered; and most assessments will have to be completed within 18 months. The federal government would have the power to overrule the energy board, but also to cede the assessment process to the provinces. These changes could quicken the prospects of big hydropower schemes in Manitoba, Labrador, British Columbia and Quebec, aimed at exporting electricity to the United States.

But pipelines are the government’s priority. That is because natural-gas exports, long the mainstay of the energy industry, are threatened by shale gas in the United States (they have fallen by 5% over the past year). While there are legitimate environmental worries, replacing gas exports with tar-sands oil is vital for economic growth, argues Matthew Akman, an analyst at Scotiabank. Investment is pouring into the tar sands, but potential oil exports will outstrip pipeline capacity by 2015.  Unless, that is, existing pipelines are rejigged—and not just Line 9. TransCanada’s 3,000km main line has carried Alberta’s gas to Ontario and Montreal for more than 50 years, but now runs at less than half of capacity. Converting the line to oil, and adding a spur to a refinery at Quebec City, would cost more than C$5 billion and take several years. But it could still beat the Northern Gateway, and be politically more attractive. Refiners in eastern Canada currently use imported crude costing $20-30 a barrel more than western Canadian oil.

The budget bill also includes money to investigate whether green charties are engaging in political activities incompatible with their status. But there are risks—not least to Canada’s international image—in demonising environmentalists. The arguments for developing the tar sands are strong, but the opponents cannot be simply shrugged aside.

Energy in Canada, The great pipeline battle, Economist, May 26, 2012

Rio+20 Earth Summit; agenda and prospects

The Rio+20 United Nations Conference on Sustainable Development is much bigger than its [three] predecessors — Stockholm in 1972,-

Ecological Restoration Alliance to Save Threatened Habitats

Botanic gardens around the world will sign an historic agreement on 23 May 2012 to restore the world’s damaged ecosystems.  Responding to a United Nations target to restore at least 15 percent of the world’s damaged ecosystems by 2020, the following institutions have agreed to work together to form a new Ecological Restoration Alliance:

•Royal Botanic Gardens, Kew, UK

•Royal Botanic Garden Edinburgh, UK

•Missouri Botanical Garden, USA

•Brackenhurst Botanic Garden, Kenya

•Kings Park and Botanic Garden, Australia

•National Tropical Botanical Garden, USA

•Rio de Janeiro Botanic Garden, Brazil

•Instituto de Ecología, A.C. “Francisco Javier Clavijero Botanic Garden”, Mexico

•Royal Botanical Gardens, Canada

The Alliance has ambitious aims, with a plan to restore 100 damaged, degraded or destroyed ecosystems. Restoration projects will be conducted on six continents, drawing on the proven restoration knowledge, capacity and experience of the allied botanic gardens, arboreta and seed banks.  The places to be targeted include tropical forests, prairies, wild places within cities, wetlands and coastal sites – ecosystems that are under threat and are no longer able to provide essential services and resources for sustaining human livelihoods and biodiversity.

Other botanic gardens in China, South Africa, UK, USA and Venezuela are committed to joining or supporting the Alliance. The combined expertise of members will be drawn together to build global capacity for pragmatic yet well-informed ecological restoration. The lessons learned from the initial flagship projects will be applied to other places, enhancing the contribution of restoration to achieving a healthy and sustainable planet. A new generation of practitioners will be trained and guidance provided to industry and governments toward best practices for land restoration. This ambitious 20 year initiative, developed by botanic gardens and facilitated by Botanic Gardens Conservation International (BGCI), responds to urgent global needs expressed in both the UN’s Convention on Biological Diversity and the Millennium Development Goals.

For  more info see Ecological Restoration Alliance 

A Continent for Sale through Queensway

According to The Economist,

Angola…is a partner in a syndicate founded by well-connected Cantonese entrepreneurs who, with their African partners, have taken control of one of China’s most important trade channels. Operating out of offices in Hong Kong’s Queensway, the syndicate calls itself China International Fund or China Sonangol. Over the past seven years it has signed contracts worth billions of dollars for oil, minerals and diamonds from Africa.

These deals are shrouded in secrecy. However, they appear to grant the Queensway syndicate remarkably profitable terms. If that is right, then they would be depriving some of the world’s poorest people of desperately needed wealth. Because the syndicate has done deals with the regimes in strife-torn places, such as Zimbabwe and Guinea, it may also have indirectly helped sustain violent conflicts…

The syndicate is built on links forged during the cold war. It is largely the creation of a man known as Sam Pa. Though he uses several names, he was born Xu Jinghua. After attending a Soviet academy in Baku four decades ago, say people who have looked into his career, he traded with Angola during its civil war, which lasted from 1975 to 2002 and over the years was a proxy battleground for several outside powers, including China, America, Cuba, the Soviet Union and South Africa. Mr Pa is a private and rarely photographed person. His name appears in few syndicate documents. He is believed to exert control through Veronica Fung, who may be a member of his family. She controls 70% of a core company, Newbright International. The two frequently travel in Africa, using the syndicate’s fleet of Airbus jets. They are said sometimes to bypass customs.

Mr Pa has several Chinese partners, according to a 2009 American congressional report. The daughter of a Chinese general, Lo Fong Hung, married to Wang Xiangfei, a well-connected banker, controls 30% of Newbright. Mrs Lo is the public face of China International Fund and China Sonangol. She is listed as a director of dozens of interconnected companies. The business’s operations were initially entrusted to the head of a privatised engineering firm from the mainland, Wu Yang. Later, African partners took over.

Although the Queensway syndicate has sometimes been suspected of being an arm of the Chinese government, there is little evidence of that. Indeed, it has often been the butt of criticism from Chinese officials. More likely it was set up to take advantage of a new strategy by the Chinese government, known as the “going out” policy. In 2002, after decades of commercial isolation, China started encouraging entrepreneurs to venture abroad. Short of contacts, Mr Pa teamed up with Hélder Bataglia, a Portuguese trader who had grown up in Angola and had links to Latin America. Together in 2004 they visited Néstor Kirchner, the president of Argentina, and Hugo Chávez, the president of Venezuela. Mr Chávez welcomed them on his weekly television show “Aló Presidente”, where Mr Pa grandiloquently declared: “This is an historic day because we are taking part in your programme.”…..

In late 2004 Mr Pa travelled to Angola. He knew President José Eduardo dos Santos, having first met him as a student in Baku and later traded with his guerrilla army. Mr Pa’s new partner, Mr Bataglia, also knew the guerrillas from having supplied them with food during the civil war. They were joined by a third trader, Pierre Falcone, a French Algerian who has long enjoyed close links with the Angolan elite and particularly the president.

Together the men persuaded the Angolan elite to channel their fast-expanding oil exports to China through a new joint venture, called China Sonangol. Mr Vicente, boss of Angola’s Sonangol, became its chairman. Contracts, signed in 2005, gave the company the right to export Angolan oil and act as middleman between Sonangol and Sinopec, one of China’s oil majors.

China Sonangol threw itself into the business, according to Angolan oil ministry records and applications for bank loans backed by oil shipments. The official statistics are incomplete, but good sources have concluded that almost all of China’s imports of oil from Angola—worth more than $20 billion last year—come from China Sonangol. By contrast, China’s state-owned oil companies have no direct interest in Angolan oilfields, one of their two biggest sources of crude. Their names do not show up on the map of concessions.

By 2009 the syndicate was trading a lot of Angolan oil and decided to expand to other African countries. Mr Vicente, both head of the Angolan state oil company and of China Sonangol, flew to Guinea in 2009 to arrange a deal for the syndicate. One of the people he met was Mahmoud Thiam, Guinea’s minister of mines, whose government had come to power the same year in a coup. Mr Thiam is an American citizen who studied at Cornell University and had previously worked as a Wall Street banker at Merrill Lynch and UBS.

With Mr Thiam’s support, the syndicate won the chance to become a partner in a new national mining company. This would control the state’s share of existing projects and, much more important, gain control of future projects in what is a relatively undeveloped mineral territory. Guinea contains the world’s largest reserves of bauxite and its largest untapped reserves of high-grade iron ore. Under a contract signed by Mr Vicente, the syndicate got an 85% share in a venture called the African Development Corporation. The government received the other 15%. The venture won exclusive rights to new mineral concessions in Guinea, including the right to negotiate oil-production contracts in the Gulf of Guinea. In return, the syndicate promised to invest “up to $7 billion” in housing, transport and public utilities, according to the government of Guinea (GDP $4.5 billion).

Ultimately this deal foundered on a Guinean election, but at the time the Queensway syndicate was so pleased that it reportedly gave Guinea’s military ruler a helicopter as a present. Mr Thiam began to travel with representatives for the syndicate—though in a response to our questions (and as the only person to reply to us) he says he was representing the Guinean government’s shareholding in the joint venture and he denies ever having become one of its employees. Mr Thiam went to Madagascar for the negotiation of a deal modelled on the one he made on Guinea’s behalf. Simultaneously, he carried on as mines minister for another year.

Around the same time, Zimbabwe also caught the syndicate’s eye. Mr Pa met Happyton Bonyongwe, the head of the Central Intelligence Organisation (CIO), the country’s notorious secret police, which helps to keep Robert Mugabe in power. Mr Pa’s plane frequently showed up at the Harare airport and he bought properties in the capital, including the 20-storey Livingstone House. His two original partners, Mrs Fong and Mrs Lo, became directors in a new company, called Sino-Zimbabwe Development Limited, which received rights to extract oil and gas, and to mine gold, platinum and chromium. In return, the company publicly promised to build railways, airports and public housing. These pledges were valued at $8 billion by Mr Mugabe’s government.

By 2009 the Queensway syndicate spanned the globe from Tanzania and Côte d’Ivoire to Russia and North Korea and on to Indonesia, Malaysia and America. It had bought the JPMorgan Chase building at 23 Wall Street in New York.

Nobody should begrudge an entrepreneur commercial success. And China needs the raw materials that the Queensway syndicate can supply. However, there are three worries about the syndicate’s conduct.  The first is personal gain. The terms under which China Sonangol buys oil from Angola have never been made public. However, several informed observers say that the syndicate gets the oil from the Angolan state at a low price that was fixed in 2005 and sells it on to China at today’s market prices. The price at which the contract was fixed is confidential, but Brent crude stood at just under $55 a barrel in 2005; today it is trading above $100.

In return for Angolan oil, the syndicate promised to build infrastructure, including low-cost housing, public water-mains, hydroelectric plants, cross-country roads and railways, according to the government. The country desperately needs such things, to be sure. But their value is unlikely to exceed several billion dollars. That looks like a poor deal for the Angolan people.

In Angola accusations of personal enrichment percolate up towards the top of the state structure. In 2006 the head of the external intelligence service, General Fernando Miala, alleged that $2 billion of Chinese money intended for infrastructure projects had disappeared. He claimed that the funds had been transferred to private accounts in Hong Kong by senior officials, though without naming people mentioned in this article. The general was swiftly sacked, tried and imprisoned (he may, however, now be about to make a comeback to government).

Parts of the Angola-China oil trade appear to be contaminated by conflicts of interest. The Angolan president’s son is said to be a director of China Sonangol, the main trading partner of the state oil company. The Economist’s requests for comment to the companies went unanswered. As well as running both the state oil company and its main customer, Mr Vicente is a director of private shell companies linked to the syndicate. Although these may exist for tax purposes, a report on foreign corruption, prepared last year by the American Senate, reveals that Sonangol was deemed so corrupt in 2003 that Citibank closed all its accounts. The report also says that Mr Vicente personally owns 5% of Sonangol’s house bank which has assets worth $8.2 billion. According to the IMF and the World Bank, billions of dollars have disappeared from Sonangol’s accounts. At one point, Sonangol awarded Mr Vicente a 1% ownership stake in the company he chairs. He was forced to give it back after a public outcry in Angola.

In Guinea criticism is focused on the former mines minister. An unpublished 2009 WikiLeaks cable quotes an American mining executive, whose company stood to lose business in Guinea because of the syndicate, complaining that Mr Thiam has “personally benefited from promoting [the] China International Fund”. Mr Thiam denies this. As a former Wall Street banker, he already had money before he returned to the country of his birth.

The second complaint about the Queensway syndicate is that in Africa it has failed to meet many of the obligations it took on to win mining licences. Zimbabwe is still awaiting even a fraction of its promised infrastructure. Guinea never received the 100 public buses that were meant to arrive within 45 days of the 2009 deal.

The situation in Angola is more complicated, though also disappointing. Chinese contractors have built some housing and railway lines and the projects were at first financed by the syndicate. Signs saying “China International Fund” appeared on construction sites. But in recent years they have been replaced by those of other Chinese companies. According to Western diplomats and Chinese businessmen, the syndicate stopped paying bills for more than eight months in 2007. All work stopped, 2,000 Angolan day labourers were fired on the Benguela railway project and only a Chinese cook remained on duty. Western diplomats suspected the syndicate was banking on being bailed out by the Angolan government, which had staked its legitimacy on infrastructure development. Soon enough, the government issued treasury bonds worth $3.5 billion to finance the projects. Subcontractors are now paid directly by the Angolan state.   Six years after the syndicate arrived more than 90% of the residents of the capital, Luanda, remain without running water. Meanwhile, the syndicate has continued to prosper.

The third complaint against the Queensway syndicate is that its cash props up certain political leaders and thereby fuels violent conflicts. For instance, in Guinea the syndicate came to the rescue of the junta. In September 2009 government men went on the rampage, raping women by the score and massacring more than 150 protesters in a sports stadium, which triggered EU and African Union sanctions. A month later, the syndicate signed its minerals deal, transferring $100m to the cash-strapped junta. Bashir Bah, a member of the opposition, condemned the deal. “First of all it is immoral, and second of all it is illegal,” he said.

The deal caused outrage even inside the government. The prime minister, Kabine Komara, a relatively powerless figure, protested about ministers’ conduct to other officials. A memo from the prime minister’s office, dated November 26th and leaked to Global Witness, declared: “The council of ministers did not discuss or bring up the question of creating a national mining company. What’s more it is not acceptable that a foreign company could become a shareholder in such a company, as it would grant the company, ipso facto, the ownership of all the current and future wealth of the country.” Mr Thiam denies any knowledge of Mr Komara’s complaint.

According to international institutions, the military leaders, who backed Mr Thiam, needed the syndicate’s money if they were to hold on to power. A World Bank official told Western diplomats the junta would “sell the country short on mining revenues and tell the international donors to get lost”. The junta eventually fell and, following elections last year, the minerals deal is now in limbo.

In Zimbabwe the situation is even more egregious. The finance minister, an opposition member of the governing coalition, has blocked extra funding for the CIO, presumably because it backs Mr Mugabe. And yet, it is suddenly flush with cash. In recent months it has reportedly doubled the salaries of agents, acquired hundreds of new off-road vehicles and trained thousands of militiamen who are now in a position to intimidate voters during next year’s elections. Several sources who have looked at the deal concluded that the money came from Mr Pa. They say he struck a side deal with the CIO that gives him access to Zimbabwe’s vast diamond wealth—controlled in part by the CIO. The diamonds were for some years banned from reaching international markets because of global industry prohibitions over violence routinely inflicted on Zimbabwean miners. Yet, Mr Pa is said to buy them and apparently makes payments directly to the CIO, bypassing government coffers.

Little is certain about China Sonangol and China International Fund. Our repeated questions to the companies and their representatives went unanswered. The documents and witnesses we tracked down around the world paint an incomplete picture. But they raise questions of immense public interest.

Oversight of the Queensway syndicate’s businesses is almost non-existent. A decade ago Mr Vicente forbade foreign oil companies in Angola to publish even routine data, on threat of ejection. Since then Sonangol has published some information on its operations. But oil contracts are treated as state secrets. Revenues from deals with the syndicate go to an opaque agency controlled by the president whose accounts are off-limits even to government ministers. Although Sonangol scores reasonably for some criteria, such as revenue, in rankings by Transparency International and Revenue Watch, two lobbies for corporate openness, it still receives bottom rankings for safeguards against corruption.

The syndicate itself is even more opaque. Who ultimately benefits by how much from the lucrative deals is not clear from public records. The syndicate’s corporate structure is fiendishly complex. Individual companies are not vertically integrated—it is not a group in the usual sense. There is no holding company, though the same people keep cropping up as directors in the records of affiliated companies, which are often owned by shell companies registered in lightly regulated tax shelters. Final beneficial ownership is impossible for an outsider to establish.

All this means that the syndicate taints China’s “going out” policy, a cornerstone of the country’s rise in recent years. When the policy works, African resources are swapped for aid, commercial financing and payments in kind such as public infrastructure. But with the syndicate, billions of dollars meant for schools, roads and hospitals have apparently ended up in private accounts. Rather than fixing Africa’s lack of infrastructure, Chinese entrepreneurs and Africa’s governing elites look as if they are conspiring to use the development model as a pretext for plunder.

Excerpts, China International Fund: The Queensway syndicate and the Africa trade, Economist,Aug. 13, 2011, at 21.

 

The Future of Nuclear Industry after Fukushima:unbeatable renaissance

US investors have been far too focused on the domestic policy toward nuclear power plants and the long lead time required building new reactors. But the reality is that the nation has only one new reactor under construction right now and nine in advanced stages of planning. Compare that to the 27 reactors under construction in China and the 50 additional reactors in advanced stages of planning.  While the US has growth stories of its own, the growth story for nuclear power, much like the growth story for oil and natural gas demand, is centered in the emerging markets.

61 reactors are under construction around the world, with a total maximum capacity of 65 GW. Furthermore, as Jim Fink describes in his recent Investing Daily article, Investing in Nuclear Power Remains a Compelling Choice , in addition to the 61 nuclear reactors under construction right now, 150 more are planned to come online over the next 10 years.

China is home to almost half of all nuclear power capacity (measured in GW) under construction. If we add in India, Russia and South Korea, the total jumps to well over 80 percent. The US, France, Canada and other developed markets are building reactors, but these projects account for only a tiny share of the 65 GW of capacity under construction.

Emerging markets have been even more vociferous in their defense of nuclear power. Five days after the earthquake crippled the Fukushima Dai-ichi plant, China halted approvals for new reactors until a safety review could be conducted and new safety plans put in place. But inspections are already winding down, and the country plans to release its new safety plan and resume approvals in August. Senior Chinese officials have indicated that the country will meet its target of 70 GW of nuclear power capacity by 2020 despite the post-Fukushima freeze.  China can rightfully claim that its fleet of reactors is among the safest in the world because the country is building third-generation plants such as the Westinghouse AP1000, an advanced reactor that can be cooled without access to external power sources. This feature would have prevented the partial meltdown at Fukushima.

Russia also ordered a safety review of its nuclear power plants, but the government has unequivocally stated that it will not abandon nuclear power and will continue to build new power plants. Russia also continues to build plants in other nations, including planned Russian-designed reactors in Turkey and Belarus. In fact, the latter deal was inked after the earthquake hit Fukushima Dai-ichi.

Russian Prime Minister Vladimir Putin has long been a proponent of nuclear power and has criticized Germany’s anti-nuclear stance on several occasions. For example, at a conference in late 2010, Putin chided German business leaders about the country’s plan to gradually phase out its nuclear reactors, observing that “The German public does not like the nuclear power industry for some reason” and adding “I cannot understand what fuel you will take for heating.” He followed up this comment with an incisive joke: You do not want gas, you do not develop the nuclear power industry, so you will heat with firewood?…Then you will have to go to Siberia to buy the firewood.”

But Germany’s decision to accelerate the closure of its nuclear plants will have Russian gas producers laughing all the way to the bank: Germany will need to import more natural gas to offset lost nuclear power capacity and provide baseload power to support the country’s growing dependence on renewable energy sources. Germany already imports more than half of its natural gas from Russia.  Russia’s aggressive build-out of nuclear plants in recent years is partly motivated by a desire to free up more natural gas for export. Ironically, this means that Russia is building nuclear power plants to support Germany’s efforts to shut down its domestic reactors.

Finally, India also ordered a safety review of its nuclear reactors, but Prime Minister Manmohan Singh has emphasized repeatedly that India must make use of nuclear power to meet its growing demand for electricity and emissions targets. Singh stated that safety standards for new Indian reactors would be world-class and that the country stands by its target of increasing nuclear capacity from about 5,000 megawatts ( MW ) today to 20,000 MW by 2020. Singh stated that further expansion is possible after 2020, though no firm decisions have been made.

In the immediate aftermath of Fukushima, many speculated that the Fukushima disaster would strangle the global nuclear renaissance. This jaundiced projection hasn’t come to fruition. Countries that were already anti-nuclear have hardened their stance, but the growth story is intact in China, India, Russia and other emerging markets. In short, the worst accident since Chernobyl has had a surprisingly modest impact on the global nuclear power industry.

Elliott Gue, Developing Markets Driving Growth for Nuclear Energy, NASDAQ, Aug. 3, 2011

Fracking in the European Union

Poland may have western Europe’s largest reserves of shale gas. A dozen global gas-exploration companies have promised to drill as many as 120 test wells over the next few years to find out. The prize could be trillions of cubic metres of gas. It is “a huge and expensive gamble”, says Tomasz Maj, the head of Polish operations for Talisman Energy, one of the exploration firms….But the extraction of shale gas is controversial. It requires fracking: blasting fissures in subterranean rock and pumping in water and sand, and occasionally nasty chemicals, to force out the gas. France won’t do it. There is local resistance in the Netherlands. Yet other countries’ qualms may make fracking more attractive for Poland. If others won’t frack, they will probably buy Polish gas.

European energy policy is in turmoil. Germany decided last month to abandon nuclear energy. A referendum in Italy on June 12th also said “no thanks” to nuclear power. Reliable sources of energy are inadequate to meet future demand. Poland sees an opportunity.  “We’ll never be an oil state, but we could become a Norway,” says Andrzej Kozlowski of PKN Orlen, an oil company in which the government has a 28% stake. The Polish government is keen to attract firms with experience of fracking in North America, such as ExxonMobil and ConocoPhillips. It has awarded nearly 90 concessions so far. These are cheap, and production royalties will be low. But firms will be penalised if they fail to drill the promised test wells…Fracking is a completely new industry for Poland, so the government is anxious to get the rules right. Taxes must be low enough to encourage investment, but high enough to raise revenues. Getting neutral advice on the environmental risks is not easy. Fracking can damage the water table, disrupt communities and even cause earthquakes. (In Britain on May 31st Cuadrilla Resources said it was halting a fracking operation near Blackpool, pending investigation of two small earth tremors which it may have triggered.)

The French government imposed a moratorium on fracking on May 11th. In Britain, by contrast, a parliamentary committee was friendly to fracking. EU law allows member states to exploit their natural resources as they see fit, but subject to minimum environmental standards. The European Commission is due to roll out its long-term energy strategy in November, which could affect fracking. But Poland, whose six-month presidency of the European Council begins in July, is in a good position to influence what it says. On June 21st Poland was the only EU member to vote against a proposed tightening of carbon-emissions targets for 2020.

Energy in Poland:Fracking heaven,Ecomomist, June 25, 2011, at 79