THE FUTURE OF THE ENERGY SECTOR & GEOPOLITICAL IMPACTIgwe Ikechukwu : PHD Petroleum Economics Candidate, Emerald Energy Institute, University of Port Harcourt, Nigeria.

Phone +2348099589317, Email: igwemartins2010@live.co.uk

Introduction

The future of the energy sector and geopolitical

impacts are unpredictable. New advancement and

discoveries are made everyday. From wind to solar to

thermal to fusion to thorium. The world is

transitioning to a low carbon energy system. Even

with energy demand on the rise, petroleum products

are showing a declining figure in the energy mix.

Based on these changing industry dynamics,

predicting the future has become difficult. This paper

applies the geostrategic lens model to analyze the

future of the energy sector and impact on geopolitics.

Overview of the future of energy sector

Changing Energy Mix

Methodology

Conclusion

References

Carlos, P. (2015): “The new geopolitics of energy”. Columbia

University in the City of New York energy policy.

columbia.edu | September 2015.

Ghanadan, R. and Koomey, J., G. (2005): “Using energy

scenarios to explore alternative energy pathways in

California”. Energy Policy, Vol. 33, No. 9, June 2005, pp

1117-1142.

Jack, S. (2014) “The Future of Energy: Shale, Bringing

Energy Back to the West”. Brent Scowcroft Centre on

International Security's Strategic Foresight Initiative.

Nikita., S, Satu., L. and Olli., S (2017). “Global energy sector

transitions will have an impact on geopolitics,) Government’s

analysis, assessment and research activities

www.tietokayttoon.fi/en

Sarah, O., L. Maren, J., and Molly. A., A (2014): “New

Energy, New Geopolitics Balancing Stability and Leverage”.

A Report of the CSIS Energy and National Security Program

and the Harold Brown Chair in Defence Policy Studies

Vincent., D and Kim., A (2009): “The Four Lenses Strategic

Framework Toward an Integrated Social Enterprise

Methodology” Virtue Ventures LLC A Building the Field

Initiative Version 1.2 - May 2009.

The analysis shows that first, in two of the perspectives,

changing market and technology plays a more central role

in the future of energy market

oWhile government action and geopolitics are driven by

the other two perspectives

oSecondly, the energy market dynamics, supply and

demand factors in the outcome perspective, each made

more vital impacts with the dominance of high and

medium ranking

owhile price volatility and investment flow shows much

of medium and low ranking.

The analysis is premise behind a four by four strategy

lenses which drive us to assess the perspective and the

outcomes that can help governments develop better

policies to achieve their goals as well as help private

actors predict future energy markets and its geopolitical

impacts

From the result, the future energy perspective that

drives change would be market led, supply and demand

driven with government/geopolitical intervention.

Price volatility would continue and presents

investment challenge.

Governments should initiate policies that will reduce

investment risks, guarantee national security,

encourage economic growth, and environmental

sustainability.

Disruption and uncertainties

Four possible perspectives on the energy future

• Shift in economic power

• Demographic change

• Climate change and resource

• scarcity

• Technology breakthroughs and innovation Leading to

efficiency, improvements and the deployment of low carbon solution

Encouraging growth in renewable energy and

energy storage

solutions.

Impacting the balance of demand between

established markets and developing

markets

Shift in energy consumption patterns with

energy consumers becoming

more discerning

Producers, Russia, Saudi and OPEC

■ Target Asian markets

■ Saudi’s market balancer role affected

■ Markets shift to the East

■ conflict or tension

■ Climate uncertainty

Réentrant, new entrants, Iran, Iraq and Mexico:

■ Raises stakes to get back on the market

■Accelerates internal pressures for reform

■ Puts pressure on (OPEC) for cohesion

■ Implications for OPEC countries vary

Consumers:

■ Consumers benefit from surplus

■ Import dependence reduces with

unconventional oil

■ Resource competition in Asia

■ Europe will face challenges

Revenue dependants:

■ Consumers benefit from surplus

■ Import dependence reduces with

unconventional oil

■ Resource competition in Asia

■ Europe will face challenges

The analysis was conducted by utilising a four by

four energy-geostrategic lenses model to assess the

future of energy sector and the geopolitical impacts.

We look at four possible perspectives and potential

outcomes which are options that influences the

energy market and are ranked low, medium and

high respectively

The responses in the different perspectives are

examined and supported by Pascual (2015)

framework, Vincent and Kim (2009) and Johnson,

Whittington and Scholes (2011) strategy lenses.

Figure 5 and 6 explains the scenario analysis and

the future energy perspectives and potential

geopolitical outcomes.

Scenario Analysis

Market Changes

• Free market forces influence market patterns significantly

• Changes in energy sector’s supply and demand dynamics,

Government Action

• Government actions trigger supply constraints

• Government action such as implementing carbon legislation or constraints over licence permit

Technology

• Technological innovation leading to efficiency and the deployment of low carbon solutions such as the electric car

• Focus on E&P and gas for transportation

Energy Geopolitics

• Geopolitics lead countries to be motivated more by self-interest than global alliances

• Political instability and conflict fuel crisis across the globe causing volatility in energy market

Supply Demand Price Volatility Investment Flow

Market

Changes

Medium- Changes

in supply dynamics

constrain supply

High- Oil demand

holds up, gas

demand grows

High-Lower price

for oil, gas price

more resilient

Medium-

Financial flow in

energy market

increases

investment in

energy sector

Governme

nt Action

High-Government

action by licences

and legislation

boost supply (e.g.

Shale, Arctic)

High-Pace of

energy demand

leads government

to manage and

balances

affordability

Low-Oil prices

leads Government

to sell off

inventories

Medium-

Governments

diversification

from oil increases

trade flows

Technolog

y

High- Maximising

supply of existing

resources and focus

on carbon

abatement

High-Energy

demand increases

proliferation of low

carbon

technologies

Medium-The

longer the

volatility of

energy price the

higher the need for

alternative energy

Medium-

Technological

innovations

increases

investment flow

to greener energy

sources

Geopolitics Medium-Supply is

constrained by

government/

geopolitical

intervention

Medium-

Geopolitical

tensions in frontier

areas reduces as

demand for oil

declines

Low-Volatility of

oil price changes

geopolitical

relationships (e.g

U.S.-Saudi

Low-

Geopolitical

disruptions

constrains trade

and investment

flows

Result

A four by four geostrategic lenses

Figure: 1

Figure:2

Figure: 3

Figure: 4

Figure: 5

Figure: 6

Energy Mix and Geopolitical Impacts