Projection of Energy


Research Intelligence Unit - www.riunit.com

We live in what historians may some day call the fossil fuel age, presently coal, oil, and natural gas supply 93% of the world's energy, water power accounts for only 1%, and the labour of men and domestic animals accounts for the remaining 6%. This is a startling reversal of corresponding figures, to only a century ago. Then fossil fuels supplied 5% of the world's energy, and men and animals 94%. Five sixths of all the coal, oil, and gas consumed since the beginning of the Fossil Fuel Age has been burned up in the last 55 years. These fuels have been known to man for more than 3,000 years. In parts of China, coal was used for domestic heating and cooking, and natural gas for lighting as early as 1000 B.C. The Babylonians burned asphalt a thousand years earlier. But these early uses were sporadic and of no economic significance. For Fossil fuels did not become a major source of energy until machines begin running on coal, gas, or oil were invented. Wood, for example, was the most important means of fuel until the eighteen hundreds, when it was replaced by coal, and then in turn by oil, even within the Unites States.
Once in full swing however, fossil fuel consumption accelerated at a phenomenal rate. All the fossil fuels used before 1900 would not have lasted five years at the rate of consumptions in this day and age, annalist feel. While nowhere are these rates higher and growing faster than in the United States. Each American has at his disposal, each year, energy equivalent to that obtainable from eight tons of coal. This is six times the world's per capita energy consumption. Though not quite so spectacular, corresponding figures for other highly industrialized countries also show above average consumption figures. The United Kingdom, for example, uses more than three times as much energy as the average world.
New Players
As many of the gulfs based financial institutions and government agencies, are looking to invest in petroleum related ventures overseas, Indonesia may perhaps offer a potentially ideal destination for eager investors. Even while the magnetism for investment in the gulf region, remains resolute. Oil is one of Indonesia's largest exports and one of the largest sources of government revenue. Oil exports were instrumental in pulling Indonesia out of recession after the Asian financial crisis of 1997-98. Now that the country has exited from the supervision of the International Monetary Fund and the deficit financing it included, the government depends on oil revenues even more.
However Indonesia's oil wells are drying up faster than new fields are being tapped. Having already exploited its largest and most accessible deposits, Indonesia is trying to persuade oil companies to explore smaller, more remote sites. But are regularly faced with concerns about security, corruption and local unrest, oil companies our known to have held out for a more stable political and regulatory climate and more favorable terms in the past in order to venture in to the Islands.
President Suharto, who ruled Indonesia for 32 years until he was ousted amid the riots of 1998, utilized oil revenues to develop the nation and to enrich his family. An audit of the company's books ordered by the International Monetary Found (IMF) and covering just two years, 1997 and 1998, found that corruption and other "inefficiencies" cost Pertamina (Indonesia's national petroleum company) at least $4 billion.
Nevertheless, new assertiveness in the provinces and the fall of the Suharto government has also emboldened villagers to demand more money and jobs from foreign investors. A ChevronTexaco unit, Caltex Pacific Indonesia, has seen more than its fair share of trouble, from villagers burning company vehicles to farmers lighting bonfires at its wells. Caltex, which produces half of Indonesia's oil, still suffers routine pilferage of its equipment but otherwise indicates that its operations are carried out normally.
Meanwhile, the Asian region’s two power-house economies, India and China have been pro-actively seeking opportunities offshore in areas such as the refinery of petroleum, oil exploration and real estate. China’s total foreign currency reserves for 2005 were estimated at $819 billion, easily making it the largest reserve holder in the world. This year’s holdings are expected to top $1 trillion, placing China ahead of the US Federal Reserve holdings. At the same time huge populations that can translate into economic power for China and India could also prove to be a double-edged sword if social, political, and environmental challenges are not skillfully managed, while possessing the weight and dynamism to transform the 21st-century global economy.

The Gulf Region

Admirably the UAE and Saudi Arabia continued to attract the highest flows with $12 billion and $4.6 billion respectively whilst Turkey claimed $9.7 billion an UN report claimed recently, whilst stating that it had identified a trend of increasing foreign direct investment (FDI) at the inter-regional level within the service sector industries such as finance and telecommunications. Having said that, vital grounds for resulting in such a growth remains at strong economic growth, rising demand for oil and an improved investment environment within the region of the gulf.

Saudi Arabia posted its highest budget surplus in 2005 registering 58 billion dollars whilst its GDP grew by 6.5 per cent according to the Saudi Arabian Monetary Agency (SAMA), or Central Bank. This GDP growth represents an improvement of 1.2 per cent form the previous year whilst the budget surplus are more than twofold the 26 billion achieved in 2004. Whereas, the surplus for the year 2003 registered at 12 billion.

Parallel improvements are also reported from across the board for oil exporting countries in and outside the gulf region. According to some estimates, Tehran’s oil revenue is expected to top $55 billion this year, bringing OPEC’s second principal oil producer’s total export revenues to a quantity of $300 billion over the past eight years. Likewise, Venezuela is expected to collect about $37 billion this year in oil earnings whilst Russia is projected to gather approximately $110 billion from petroleum exports in addition to receiving vast revenues from supplying around one quarter of Europe’s natural gas.

Oil exporting nations were also found to be very active in the growth of foreign direct investment (FDI) outflows, reaching a value of some $16 billion, up 50 per cent from 2004. Leading off-shore investing states were given as UAE, Kuwait, Saudi Arabia, Bahrain and Turkey coming in last but not least. Motivating the private sector investment off-shore has of course been the mounting income from natural resource extraction of oil and gas. In addition to inter-regional investment, the increased wealth is finding its way to Asia, Africa and the developing world according to the UN Investment report.

Emerging Trend

In a recent move, the Malaysian government initiated tax cuts and incentives for its escalating Islamic Finance industry that was aimed at inviting a large potion of the estimated $2 trillion of oil wealth from overseas. With a strong sense of intuition and insight of a global investment environment that is currently in a state of flux the countries policy makers expect the most recent incentives to strengthen the inflow of funds from the Gulf region further. Earlier this year, the government said the tax rate for companies will be cut to 27 per cent in 2007 and 26 per cent the following year from 28 per cent. Other measures to be taken, including a 10-year tax exemption for Islamic banks and insurers, that conduct business in foreign currencies and managers of Islamic funds for foreign investors, these ramifications may help Malaysia competitively over Bahrain and Singapore.

However, the Muslim world’s largest economy, Turkey, has been sluggish to execute measures to promote Islamic finance within its shores. Whilst the current government has expressed support in principal, large sections of the countries population are said to be defying the transformation in this direction due to the perception that it is linked to a radicalization of Islam. Restrictions on the use of the word Sharia or Islamic can also be observed, while resorting to measures of having such terms alternated with phrase such as ‘participation banks’’ and ‘specialized finance houses’.

Nonetheless, the current trend has also encouraged the UK government to embrace the concept and introduce an institutional and regulatory framework that is designed to attract more investment in the area. Amongst the list of banks currently offering Islamic Financial services in the United Kingdom, is Lloyds TSB. The British finance minister Gordon Brown believes this can help Britain to become the gateway to Islamic finance and trade, a move which is looked upon favorably by the country's Muslim leaders.