NAMUN2015 Joint-Crisis Committee FUELLING THE FUTURE vs. TM SINOPEC Energy lives here Background Guide TO THE DELEGATES, Welcome to the Fuelling the Future Joint Crisis Committee, here at the North American Model United Nations 2015 conference! One of our main goals in designing the Joint Crisis committees for this year, and indeed what we see as one of Model UN’s greatest values, is to provide a forum for engaging with issues both from today and in the future. More than an opportunity to consider such problems and potential solutions, we hope the committees allow you as delegates to apply your critical thinking, teamwork, and rhetorical skills to them in a dynamic environment. At the same time, we want this to be equally as enjoyable an experience as it is intense. Please do not hesitate to communicate with any of us should any questions or concerns arise during your time here at NAMUN 2015. Alternatively, we very much welcome any ideas for improvement you may have—NAMUN has always been the beneficiary of the outstanding delegates that have participated in it, and we believe that listening to them can only improve the conference. In the spirit of Model UN and meeting delegates from a great diversity of schools and places, we look forwards to seeing you at NAMUN! Signed, Benjamin Pan Director of Joint Crisis Committees Sameer Chhabria Vice Director, Fuelling the Future Kelsey Wiseman, Sevda Sparks Committee Chairs 1 Central Azeri oil platform in the Caspian Sea INTRODUCTION Throughout the 21st century, oil has assumed an incredibly important role in industry, and thus the global economy as a whole. This unassuming black liquid, the remnants of prehistoric life forms transformed by time and geological pressure, fuelled the industrialization of the past century that has enabled so many products of this one. As a finite resource however, oil is nearing a theoretical apex point—“peak oil”. Given how pivotal oil is for transportation alone, peak oil will compel every industry to fundamentally and unprecedentedly adapt.1 Today, transportation is the primary consumer of petroleum: personal vehicles, buses, motorcycles, 1 Daniel Yergin, “What’s Wrong with Peak Oil,” The Wall Street Journal, September 1, 2011, http://online.wsj.com/news/articles/SB100014240531119 04060604576572552998674340. 2 aviation, and trains are all fuelled by oil or its derivatives.2 In the United States for instance, “the transportation sector accounts for 70 percent of oil consumption.”3 Oil scarcity however, will not only make the transportation industry vulnerable. In fact, many other prominent industries rely on oil. The military, for instance, is a major user of oil. The decline of oil supplies thus could push many countries into precarious conflicts, and it is not implausible to suggest that wars may occur in dealing with petroleum scarcity. This could change the international balance of power, and could strain the political relations between major super powers, including Russia, the United States, and China. Moreover, given that oil is used for heating and electrical generation, peak oil combined with anthropogenic climate change may have significant consequences. Lastly, crude oil is used as a starting material for several reactions in the production of industrial chemicals with wide ranging uses. Oil then is more than a commodity, for it is now a necessity. With all these uses, oil is an essential component of today’s economy on a scale that is arguably unrivalled by any other.4 With the world’s overuse of oil and as the world’s demand for it continues to climb, peak oil is a problem that states, corporations, and individuals unavoidably will have to confront this century. Major energy companies like ExxonMobil and Sinopec—for which oil today lies at the centre of their businesses—are thus faced challenges that are likely unparalleled by any other. This committee asks you, as officers of these two corporations fifty years in the future: how will you cope with the economic and geopolitical implications of rapidly rising prices and the rapidly declining supplies of what is currently our chief source of energy? How will you navigate through territorial disputes, manage disruptions in extraction and production, balance exploration with alternative energy research, and mitigate souring public opinion as the world enters a new era? 2 “What is Oil Used For?” Environmentally Conscious Consumers for Oil Shale, Accessed November 26, 2014, http://www.eccos.us/what-is-oil-used- for. 3 Christopher R. Knittel, “Reducing Petroleum Consumption from Transportation,” Journal of Economic Perspectives 26, no. 1 (2012): 93-118, http://web.mit.edu/ceepr/www/publications/reprints/Reprint_238_WC.pdf. 4 “What is Oil Used For?” 3 The Oil Industry The oil industry first began its ascension in importance approximately 150 years ago. Since then, as it has become increasingly integral to global economies, talks of peak oil have become increasingly salient.5 Peak oil is defined as the conceptual point at which global petroleum production will begin to decline. Outlined in M. King Hubbert’s seminal 1956 paper, this is distinct from oil depletion: it does not refer to the point at which there is decreasing or no oil, but rather to the economically maximal point of production. In other words, oil production declines when there are other more economical forms of energy available.6 This may thus be brought about by advances in alternative energy sources, or the exhaustion of conventionally or easily recoverable oil7—the source of the majority of today’s oil. Source: The University of Texas at Austin, Jackson School of Geosciences 5 “Oil,” David Suzuki Foundation, Accessed November 26, 2014, http:// www.davidsuzuki.org/issues/climate-change/science/energy/oil/http://www. davidsuzuki.org/issues/climate-change/science/energy/oil/. 6 “Peak Oil?” Cornell University, Accessed December 27, 2014, http:// www.geo.cornell.edu/eas/energy/the_challenges/peak_oil.html. 7 Ibid. 4 This point is estimated to occur anywhere from 2026-2037, though actual significant declines in production have been continuously postponed due to new and innovative techniques in production.8 On average during 2011, 83.6 million barrels of oil were produced each day, representing a 163% growth since 1965.9 As petroleum prices have increased, unconventional sources of oil and natural gas have increasingly been looked to as economically viable sources of energy. Indeed, energy analysts predict that unconventional sources contain greater reserves of energy resources than all undiscovered remaining conventional ones.10 Oil sands, oil shale, and shale gas are examples of such sources that have grown in prominence as technologies such as oil sands extraction and fracking have increased in usage. Source: Cornell University College of Engineering 8 “Peak Oil Models Forecast China’s Oil Supply, Demand,” Oil & Gas Journal, Accessed November 26, 2014, http://www.ogj.com/articles/ print/volume-106/issue-2/drilling-production/peak-oil-models-forecast- chinarsquos-oil-supply-demand.html. 9 “How Much Oil Does the World Produce?” EnergyTrends Insider, Accessed December 24, 2014, http://www.energytrendsinsider. com/2012/06/25/how-much-oil-does-the-world-produce/. 10 “EXPLORATION & INNOVATION: GEOSCIENTISTS PUSH THE FRONTIERS OF UNCONVENTIONAL OIL AND GAS,” JSG News, Accessed December 27, 2014, http://www.jsg.utexas.edu/news/2008/04/exploration- innovation-geoscientists-push-the-frontiers-of-unconventional-oil-and- gas/. 5 There are two main processes associated with the oil industry: energy exploration and energy production. The former refers to the search for oil and energy under the Earth’s surface, while the latter is the process of recovering these found resources for use. Since most oil is buried deep underground, drilling is often necessary to confirm its presence and later to extract it. Although the science behind the search for oil and energy has drastically improved, there is no guarantee that the arduous and hazardous work put into the drilling process will be worthwhile.11 According to British Petroleum, companies have “drilled more than two million wells around the world in hopes of striking oil. Many of the early wells turned out to be dry.” The Issues at Stake Geography & Territorial Disputes While oil is nearly ubiquitous across many geographical regions, Saudi Arabia, Venezuela, Iran, Iraq, Kuwait, United Arab Emirates, the Russian Federation, Libya, Kazakhstan, and Nigeria are its ten largest sources.12 These reserves, however, are not endless, even though we may be exploiting them as if they are. There are certain contested areas where oil has been found—in the Arctic and the South China Sea, for instance. These already fiercely disputed territories may prove even more contentious as peak oil nears and as easily recoverable reserves are exhausted. China, for one, has been embroiled in a conflict with the Philippines (as well as, to a lesser degree, with Vietnam, Malaysia, and Brunei) over “overlapping claims” in the South China Sea. Both China and the Philippines claim to have economic rights to the waters, which include certain oil reserves.13 Another relevant disputed territory is the Arctic, involving Canada, the United States, Denmark, Russia, and Norway. Similar to the South China Sea, there are oil reserves within the contested Arctic regions 11 “Finding Oil and Gas,” BP, Accessed November 26, 2014, http://www. bp.com/en/global/corporate/about-bp/what-we-do/finding-oil-and-gas. html. 12 Mamta Badkar, “15 Countries With The Biggest Oil Reserves,” Business Insider, May 11, 2012, http://www.businessinsider.com/15-countries-with- the-biggest-oil-reserves-2012-4?op=1. 13 “Q&A: South China Sea dispute,” BBC News, Accessed December 4, 2014, http://www.bbc.com/news/world-asia-pacific-13748349. 6 as well. These waters are expected to become even more controversial as this disagreement is exacerbated by sea ice melts and as more waterways are freed for exploration.14 Climate Change In recent decades, climate change has become a significant problem and a topic of interest to politicians and scientists alike.