[Oilguy]

As global energy supplies come under increasing attack by non-state actors and private energy holdings become key targets of political maneuverings and criminal activities, Oilprice.com discusses the nature of the growing threat and how to reverse the risk with “smart power.”

To help us look at these issues we got together with Corporate intelligence specialists Jellyfish Operations and security expert Jennifer Giroux.

Michael Bagley is the president of Jellyfish, a global boutique intelligence firm that combines on-the-ground intelligence collection and analytics with an unprecedented country-to-country economic diplomacy program

Jennifer Giroux is a global security expert who specializes in emerging threats to energy infrastructure in conflict-affected regions.

In the Interview Michael & Jennifer talk about the following:

• Why the risk to global energy supplies is increasing
• Violent entrepreneurialism: Why piracy is on the rise
• The most immediate threats to global energy security
• Which countries are most likely to see attacks in the future
• Why Saudi Arabia could be the next country to have its energy infrastructure come under attack
• Why energy companies assets are becoming key targets.
• How energy companies can create opportunities in Conflict-Affected Regions
• Why companies need more than just intelligence to operate in hostile environments

Interview conducted by Jen Alic of oilprice.com

Oilprice.com: Energy supplies have always been at risk, particularly due to geopolitical maneuverings, transit through countries in conflict and those suffering from ongoing political instability, as well as piracy on the high seas. You have both mentioned that the risk to global energy supplies is increasing. How do you support that claim?

Jennifer Giroux: There is a plethora of energy location and armed conflict data that shows a correlation between conflict or conflict prone regions and oil and gas producing and/or transit states, both onshore and offshore.

While developing the Energy Infrastructure Attack Database (EIAD), we have seen a general rise in attacks on energy assets. In the last decade there has been an average of 327 reported attacks on energy infrastructure globally, and this figure is likely higher due to the fact that not all attacks are reported through open sources.

Pooled together, the data reveals that not only are energy companies increasingly operating in risky, volatile environments and conflict zones, but their assets are becoming key targets for political and criminal reasons.

Michael Bagley: More specifically, non-state actors from Mexico to Colombia, to Nigeria, Iraq, Pakistan and beyond are leveraging their terrain in dynamic ways. They are using energy infrastructure targeting as a tool to air political grievances in a calculated manner. For example, to garner illicit funds by stealing oil products and kidnapping energy sector employees, but also to generate global media attention that not only provides a springboard for groups to publicly challenge a state but also to inspire similar targeting behaviors in other regions.

Jennifer Giroux: Another interesting insight from EIAD shows that while energy attacks are dispersed they tend to have a contagion or clustering effect in certain countries. In such cases, we find that energy infrastructure is targeted on a monthly, weekly, and at times daily basis – leading to broad disruptions that have national and international effects. This has been the case in Egypt’s Sinai Peninsula, where natural gas infrastructure has been targeted on a monthly basis since February 2011 and disrupted energy supplies for Israel and Jordan. Yemen, too, has seen persistent attacks on the Marib-Ras Isa oil pipeline, for instance, that has led to a several-month shutdown that cost the country billions in revenue and shorted global supplies.

Michael Bagley: While those cases represent politically motivated attacks, in Nigeria the oil theft and sabotage business has resulted in Shell declaring force majeure on Nigerian Bonny Light crude oil and shut down 60,000 barrels per day of oil. Offshore, energy carriers are being targeted throughout the Gulf of Guinea, making this the new maritime piracy hotspot. Overall, this is a highly complex issue that makes it increasingly difficult for energy companies to navigate and operate in such spaces.

Oilprice.com: Geographically, what are the most immediate threats to global energy security?

Full Interview at: http://oilprice.com/Interviews/The-Most ... rview.html

[Timo]

So the question remains; how do the masses of the people, the poor unfortunates who have seen their ancestral lands commandeered and despoiled for the wealthy few, extract retribution? That is the question correct?

The wealthy few? Hardly. Miore like everyone else on the planet, except them. Those pesky natives are spoiling our gluttony. How dare they think that they have control of their own natural resources! I have one of the biggest oil companies in the world! I have the might of the world's most powerful militaries at my disposal. If they won't let me have what i want, then i'll just take it by force.

[AdTheNad]

So the question remains; how do the masses of the people, the poor unfortunates who have seen their ancestral lands commandeered and despoiled for the wealthy few, extract retribution? That is the question correct?

Is the answer stronger property rights for corporations?

[Pops]

A pipeline bomb or whatever is a tactical problem.

The true strategic threat is when the cost of extracting oil becomes too high for the myriad marginal uses that keep the economy pumped up, sorta speak.

This is happening now, every economic report talks about gasoline price. Driving in the US is down and consumption overall is no great shakes. There must be something not happening at the end of those trips that aren't being made.

Demand destruction will lower the price below the level required for "New Technology" to break even. After all, oil companies don't extract oil to make energy, they do it to make money. Of course, oil Countries dependent on revenues for survival might decide to defend a certain price (like SA has said they would do and in fact will do next month) and this could well accelerate the problem if they misjudge the price point to defend.

[ian807]

The less immediate threat is almost invisible. It's declining energy return of the world's remaining oil. It takes energy to get oil from various inputs, including from oil itself. Oil has to support not just the activities that support civilization (mostly transportation), but also the location, acquisition, extraction, refinement and distribution of petroleum products.

Reliable figures are hard to come by. It looks like we had a 100:1 energy return on oil production in Texas in the 60s. These days, it looks like the best we can do is about 10:1 (http://fossil.energy.gov/programs/reser ... _Sheet.pdf). A 10-fold decrease in 50 years.

What a minimal energy return is to run civilization AND to continue to get oil out of the ground profitably, is frankly unknown. You can be sure, however, that as it takes more and more energy to extract oil, that it will get more expensive. At a certain point, I can imagine that we use more energy getting the stuff than we get out of it, assuming the price is high enough. At that point, however, the interdependent supply chains that support both civilization and oil extraction become financially as well as energetically unsupportable, after which decay happens quickly.

We have about 40-some years of conventional oil left, with a decreasing energy return all the way down. When does it become critical? 40 years? 20? 10? It's difficult to predict when. It's not at all difficult to predict that it will happen well before the end of this century.

[Pops]

Good summary Ian, here's more:

Limits to Energy Return On Investment Calculations
http://oilprice.com/Energy/Energy-Gener ... tions.html

[Pops]

Oops, forgot thepicture:

[SeaGypsy]

Hey Pops, I can spot a problem with that graphic, there are still mega amounts of coal in the ground. I don"t doubt that there will be an energy cliff, or the logic of EROEI being the driver of such. There is also no accounting for nuclear. Not really a properly detailed proposal, more like a high school lecture.