UK Security Needs – Food, Trade and Energy

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I have looked at the issue of energy, food and water security a few times and as a companion to the previous piece on the strategy I thought a follow up would be useful.

This isn’t an exhaustive list but concentrates on resources, energy, food and trade.

The Conservative party, to their credit, highlighted the issue a number of times pre-election, even though they indulged in a spot of scaremongering. In October 2009 the Shadow Energy Minister, Greg Clark MP, delivered a speech on the issue titled Keeping Britain’s Lights on. For maximum showbiz effect, it started with the lights off and raised the spectre of rolling blackouts. There was also a strong inference that we were at the mercy of the Kremlin, all they had to do was turn off the taps and old ladies in bobble hats would be dropping like flies.

In 2009, in the grip of an extremely cold winter, several large industrial users faced restrictions in supply as domestic users were prioritised. These large users had signed up for interruptible tariffs in return for discount pricing so could not really complain, you pays your money and you take your chances. This, however, did not stop the bandwagon jumpers (i.e. press and opposition politicians) seizing upon the issue, evoking the famous phrase ‘keeping the lights on’ yet again.

The Conservative Party’s pre-election strategy paper, A Resilient Nation, devoted a paragraph to the issue of energy security, stating;

The danger that the country now faces of a real risk of the lights going out – inadequate power to keep the economy going – was entirely predictable even before Tony Blair spoke and yet his government did virtually nothing.  Taken together, the lack of resilience in the UK’s stretched power generation, strained energy transmission, insecurity of energy supply and lack of emergency storage is nothing short of alarming. Forming a coherent energy policy, joining domestic with overseas factors, security with long term climate change goals and private sector investment with government policies on resilience of systems will be an urgent Conservative priority on entering office and is an example of an approach that can be applied to other essential sectors

In a supporting Annexe, the paper makes it clear that the armed forces will play a part in addressing the issue of energy security

Reflect energy security concerns in the tasking of the Armed Forces. The MoD should have regard to energy security in the tasking of our Armed Forces, for example the Royal Navy in the security of the sea lanes and the safety of maritime traffic

Beyond this rather bland statement about keeping the sea lanes open how realistically can we shape the armed forces to meet our very real energy and material security issues?

What would their role be, what configuration and equipment would be needed, is it actually the job of the military to contribute to energy security?

Starting with the issues…

Energy

The UK demand for energy is only ever going to go one way, up. Even if a collection of overly restrictive ‘green’ policies succeeds in driving heavy industry offshore, which it seems is increasingly the case, population growth will drive demand for gas and electricity up.

Energy resilience is perhaps one of the most pressing and important issues the UK faces, certainly more important than the threat from Islamic terrorism.

Whatever your feelings on nuclear, global warming, the oil industry or renewable energy, the fact is, today, the UK is a net energy importer and baring some surprise technological development is likely to remain so. With the future of nuclear being made more uncertain in the aftermath of Fukushima, this will create a double impact for the UK.

First, it is likely that demand from Japan for Middle East LNG will increase placing our divertable supply contracts under competitive economic pressure.

Secondly, the issue in Japan (and now Germany)will inevitably delay any build-out of UK nuclear generation capacity,

Combined with a faster than expected reduction in UK oil and gas extraction, wasted investments in renewables such as wind that have hoovered up all the energy investment funds and other factors point to a pressing energy problem for the UK.

Currently, gas for power generation contributes to both baseload and peak loads. Gas is currently sourced from dwindling North Sea fields, pipeline delivered gas from continental Europe (Norway and Russia) and ship delivered Liquefied Natural Gas (LNG) from the USA and Middle East (mostly Qatar)

In 2006 Qatar overtook Indonesia as the world’s largest exporter of LNG and its North Field reserve is the largest in the world with an equivalent capacity of 150 years UK peak demand. The Qatargas II supply chain is a quite staggering project, the South Hook LNG terminal in Milford Haven, 14 new LNG tankers, 30 wells, 2 onshore processing facilities and the supporting infrastructure. It is the largest LNG terminal in Europe and can satisfy 20% of the UK’s demand alone.

The agreement with Qatargas is for a 20 year, non-divertable supply. Within the terms of the agreement, supply cannot be diverted elsewhere if they pay more.

Nearby is the Dragon LNG terminal, similar to South Hook although smaller, there are other large terminals on Teesside and the Isle of Grain.

In addition to Qatar, the UK imports LNG from, Kuwait, Algeria and Trinidad.

Major gas pipelines include the Langeled and Vesterled routes from Norway, the IUK pipeline to Belgium and BBL pipeline to the Netherlands. These pipelines link the UK to the wider European gas infrastructure and at the height of the Russian supply crisis even allowed the UK to export gas into Europe.

Unless new and extractable UK reserves are found it is likely that by 2030 the UK will be a total gas importer

Shale gas, underground coal gasification and thorium nuclear generators remain intriguing prospects and may yet reduce our dependence on imported energy but it would seem prudent to base our future medium-term plans around imported LNG and pipelines from Europe i.e. Russian/Norwegian gas. In May this year, the UK imported more gas in the form og ship delivered LNG than it did via the pipeline(s) from Norway and the extensive investment in terminal capacity means the UK is now a route to Europe.

LNG requires timely distribution because of evaporation, the natural gas is compressed to form a liquid and although modern LNG carriers have onboard boil off regasification plants, a significant volume is still lost (although some of this is used to power the ship, a neat trick)

Transmission, generation and storage capabilities have seen a variance in investment but many projects are in the pipeline so to speak and the realisation that renewables are going to have to take a back seat to gas and nuclear generation means that even a government in denial must at some point snap out of their ‘green’ trance and start generating more than hot air and wishful thinking.

The recent outspoken criticism of the Renewable Obligation Certificate and carbon reduction targets from the chairman of Aggreko, the temporary power group, must serve as yet another wakeup call to this delinquent government. Robert Soames went on to say;

“The idea that CCS [carbon capture and storage] is going to be able to contribute significantly to power generation inside of 15 or 20 years is bonkers. People who are not engineers seem to have an unrealistic view of what’s going to be possible”

He also accused politicians of “holding hands and singing Kumbaya to the great green God” but warned the reality is it will be many decades before renewable energy can plug the gap left by traditional sources of power.

Whatever happens with the domestic market it is likely that we will increasingly rely on gas imports, delivered to the UK in LNG tankers or via pipelines from Europe, the security of those supplies must be a high priority for the whole of government.

With three major pipelines and at least 4 large scale LNG terminals in operation, it would seem the reception infrastructure is in place. Storage is currently carried out by using mainly natural underground geological features or exhausted gas fields but additional investment in this area should be an obvious means of increasing resilience to supply fluctuation.

Short, medium and long term storage facilities are characterised by the speed of filling and the speed of supply into the grid, a careful blend of all three is needed.

So the UK, with some caveats on storage, has a reasonable gas infrastructure which is actually a testament to those involved, working on despite the attention renewables have obtained recently.

However, just because we have the infrastructure, does not secure supply.

A similar set of complex issues also surrounds oil and refined products, with UK production falling off more rapidly than predicted and the demand for imported products rising.

So it should be clear that the UK faces an uncertain energy future, if current government policies do not address the wishful thinking on renewable energy and start acting in the interests of this country there exists, despite the scaremongering, a real threat to the continuity of supply, especially if storage is not addressed and the supplies from the Middle East are disrupted.

Maritime Trade

The UK is most definitely an island, a large coastline in excess of 10,000 miles and over 600 ports but despite this, the vast majority of maritime port traffic is concentrated in a very small number, about 50.

The increasing tonnage of UK registered merchant shipping has happened despite a decreasing tonnage of Royal Navy ships and it is because of the Tonnage Tax and Seafarers Earnings Deduction make it tax efficient to register in the UK.

The global shipping insurance industry is largely based in London, Lloyds and many other P&I Clubs contribute a significant amount to the UK economy. Shipping agents and brokers also form a large sector.

We should also not ignore the maritime leisure sector; it is huge and supports many jobs.

Food

The UK was at its highest food self-sufficiency since the 19th century in 1980, at the height of industrial food production.

This has steadily declined from 80% to about 60% now.

This increases to nearly 75% for food that can be grown in the UK but this can be misleading because these self-sufficiency percentages are calculated as the farm gate value of raw food for production divided by the value of raw food for consumption, it is, therefore, an economic indicator, not a measure of food security.

The story of our food security is a complex one, whilst we might import over £30 billion per year, in the same period we export just under half that. In terms of diversity, after the UK, the largest suppliers are the Netherlands (6.2%), Spain (5.1%), France (3.5%), Germany (2.7%) and Ireland (2.5%)

The source for individual products is intriguing; Saudi Arabia supplies a significant quantity of the UK’s tomatoes for example. Africa provides about 14% of the UK’s fruit and vegetable imports, with 47% of that coming from South Africa.

These ratios also fail to take into account the nature of goods imported to actually process the food we grow ourselves, fertiliser, fuel, pesticides, animal feed, food processing equipment and farm machinery for example.

The figures underling all these statistics are also sometimes called into question because they rely on-farm surveys and collection techniques that might not always be wholly accurate.

What is obvious though is that as a nation we rely on the global food market, like almost all other industrial countries.

Lots of stats at DEFRA, for those interested and they also publish an excellent summary called the Food Statistics Pocket Book, download here

Threats

The first important thing to recognise is that the world trading system is hugely resilient; it has to be commercially viable.

Importers and exporters have a vested interest in making sure they can trade, it is this point that is often completely misunderstood by those seeking to scaremonger and generate a reason for continuing investment in security or military solutions.

Commercial organisations invest in resilience, supply diversity and recovery capabilities because it makes economic sense to do so, in many ways, corporates have a more mature view of strategy issues than governments, which are largely based on the political horizon. The non-divertable 20 year contracts with Qatar are a great example, the private sector investing $13billion (including £1billion for South Hook at Milford Haven)

However, there are limits to what businesses can do and these limits are often exceeded at points of concentration; a port, a distribution point or choke point. The physical movement of gas, oil or food relies on port facilities, ships, airports, aircraft and pipelines.

Looking at the nature of UK trade it is clear that the scaremongering about maritime security if often overstated.

Although the vast majority (95%) of imports and exports by volume travel by ship this is much less by value, also, 65-70% of both imports and exports by volume are between the UK and Europe where it might be argued the greatest threat is an accident, bad weather and the odd WWII sea mine.

The security threats to shipping in the North Sea are self evidently different than those in the Gulf of Aden.

If we consider the number of shipping movements between the UK and North America those percentages rise even higher, again, minimal security threats exist against this traffic.

Food imports are also overwhelmingly from Europe, excepting certain types of products although as noted above, food production relies on imported products including oil and gas-powered electricity production.

The threat to the UK, therefore, is to a small percentage of shipping that originates outside Europe and North America, about 20% by volume.

The naval lobby, a group that is obviously seeking funding for the Royal Navy is a preference to the other services, often exaggerate both the percentages and threats, seeking to confuse the lame minded politicians who take on face value a load of convincing statistics without any understanding of what lies behind them.

It is a fallacy to think that all the UK’s import of gas comes through the Suez Canal and Straits of Hormuz, this is simply not the case, despite that argument or inference constantly popping up. It is equally untrue to suggest that the UK is any more vulnerable to disruption to the global trading system than France, Germany, Norway or Spain. We are linked to the rest of Europe by a network of sea routes, diverse shipping providers and of course the Channel Tunnel which carried about 15 million tonnes of freight cargo last year, in an emergency, all routes could be significantly increased.

However, LNG supplies from Qatar are a particular concern. LNG ships have to transit the Straits of Hormuz, Bab el-Mandab, and the Suez Canal, all potentially hazardous locations. Because of the volatile nature of LNG extended transits via the Cape will result in higher losses and increased cost so these should concern us all.

Straits of Hormuz; About 15 million barrels of oil per day flow through the Straits of Hormuz, and its 2-mile wide shipping channel, between Iran and Oman. Volume through the Straits has declined in recent years as pipeline build-outs continue but it is still the world’s most vital chokepoint. On average 13 tankers per day pass through the straits on their Eastbound route, with a corresponding empty traffic going the other way. It should be noted that more than 75% of export traffic through the Straits is destined for Asian markets. If the Straits were closed the existing pipeline routes would have to cope but these already carry a significant volume. The East-West Pipeline pair from the East of Saudi Arabia to Yanbu on the Red Sea is rated at just under 5 million barrels of oil per day and 0.3 million barrels per day of liquid gas. The Habshan-Fujairah pipeline is about to commission and this will transport oil from Abu Dhabi to another of the seven emirates of the UAE, Fujairah, on the eastern shores of the Strait. At about 1.5 million barrels per day capacity, this will provide a greater level of security for the oil trading nations on the South Coast of the Persian Gulf. With Iraq returning to some semblance of normality it is quite possible that existing and new pipelines would see greater utilisation, especially through Turkey. As can be seen from the map below a network of gas pipelines also exist in the area although there would need to be significant investment in compression and storage facilities if Qatar LNG were to be transported in this manner.

Bab el-Mandab; The Bab el-Mandab is a chokepoint between the horn of Africa and the Middle East, and a strategic link between the Mediterranean Sea and the Indian Ocean. It is located between Yemen, Djibouti, and Eritrea, and connects the Red Sea with the Gulf of Aden and the Arabian Sea. Most exports from the Persian Gulf that transit the Suez Canal and SUMED Pipeline also pass through the Bab el-Mandab. About 1.8 million barrels per day of oil is moved through the area on its way to Suez and the SUMED pipeline, most destined for the USA and Europe. If it were effectively closed it would place greater pressure on the Saudi East-West pipeline. As piracy in the area continues to rise, security is an increasing concern. Because there are currently no effective diversion routes for LNG products close of the Bab el-Mandab would result in LNG tankers having to go around Africa.

Suez Canal; The Suez Canal is accompanied by the SUMED pipeline which runs parallel to it. It connects the Red Sea and Gulf of Suez in the Eastern Mediterranean with a length of nearly 120 miles. LNG represents about 11% of tonnage and 5% of ships but this is growing especially for Belgian, Italian and UK bound traffic. Because the canal cannot handle the very largest tankers they unload their liquid cargo which is then transited by the 2.3 million barrel per day SUMED pipeline and loaded again at the other end. Closure of the Suez canal and/or SUMED pipeline would require a 6,000 mile, 15-day diversion. This extra journey time would reduce throughput by tying up a finite number of tankers and ultimately drive up costs.

When looking at realistic threats to these three vital chokepoints it is important to consider that the UK is not alone in having a strategic interest.

Traffic is two way and concerns not only the consumer countries but also those producing the oil, gas or other products.

If there were a disruption to anyone or all three, the UK would not stand alone in efforts to resolve the situation.

There is also a difference between vulnerability to disruption and the likelihood of it happening.

If Suez were closed, commercial shipping would simply go around the long way, yes this would add time and cost but in what circumstances would this happen anyway.

Who is going to block the canal and who is going to keep it blocked?

About 1,500 vessels per month pass through the Suez and provide Egypt with in excess of $5 billion foreign currency revenue per year. Along with energy and tourism, it is the largest source of income for the country so any political party that decides to deny itself the two largest revenue sources, for tourism would surely follow any disruption to the Suez, plus the likely suspension of foreign inward development investment is not likely to last long as it finds itself unable to pay its own people.

A more credible scenario is that of terrorism, either attacking the fabric of the canal or ships in transit.

As mentioned above, it is not in Egypt’s interests to allow canal traffic to be reduced and if shipping owners thought there a real threat they would carry the additional risk until it became more economic to re-route, at which point Egypt would have to do something. A scuttled or sunk ship at certain points would be a serious impediment to traffic but due to the vast size of the canal, it is actually not that vulnerable to sustained denial with such pinprick attacks. Unless multiple attacks succeeded it is not likely that any damage would be enduring. That said, the threat of maritime terrorism remains credible and an attack would cause oil price fluctuations if not the closure of the canal.

The Bab el-Mandab is a different prospect, Yemen remains a fragile state and unlike Egypt, has no skin in the game when it comes to revenues from the area. Although it is a much larger geographic area and therefore harder to deny it would be feasible to create the conditions where commercial shipping owners decide the long way around is the preferred option, although I am sure Egypt, having just lost all its SUMED and Suez Canal revenue might have something to say about the matter. Disruption would not be allowed to continue indefinitely.

The Straits of Hormuz is an intriguing prospect because the most likely suspect, Iran that is, getting up to mischief by making threats or actually carrying out real interdiction of shipping would be playing a dangerous game of brinkmanship.

Iraq, Kuwait, Bahrain, the UAE and Saudi Arabia would all be drawn into any conflict, as would the Western nations in support, China might even get its sleeves rolled up because 75% of traffic through the straits is Eastbound and given that much of Iran’s foreign income generation activity also relies on the Straits any action would necessarily have to be short term.

Because of their economic mismanagement Iran has to import food and even petroleum products, they rely on a small number of refineries and in reality, if they attempted to shut the Straits they would suffer a very serious reprisal and any disruption would be over in 2 weeks, move along here, nothing to see, oh, except the Iranian economy in tatters.

It would not be sensible for Iran to carry out its sabre rattling threats because, in reality, the sabre-rattling occurs in front of a mirror.

Logic does not always come into it though so we should never discount the actions of Iran, they remain a threat (hence pipeline building)

A much more likely threat is that to individual Gulf nations and facilities but again, this risks a wider conflagration and ignores the continuing efforts of everyone in the region to negate the strategic importance of the Straits by busily building pipelines. In fact, with sufficient investment in pipelines, it is possible that the most vulnerable nation to blocking the Straits of Hormuz would be Iran itself.

Perhaps we should threaten them with closing the Straits!

Non Military Solutions

The sooner the UK government realises that the ‘power projection is not necessarily always the best solution for UK security the better.

The problem is that despite the best intentions and fine words of this government when it comes to budgets its business as usual.

It might come as a surprise to read this on a defence blog and military capabilities are about much more than securing energy supplies and fresh strawberries, but we should also consider the wide-angle.

With oil prices so high, oil fields in UK waters that were once considered uneconomic to exploit will now become viable. It is certainly in the national interest to use public funding to increase exploration and technology development because oil should be considered a strategic concern. Perhaps the recent Scottish political climate is clouding the investment issue, if devolution leads to independence then which nation would reap the benefits of ‘British’ investment.

Why are we not investing public money in exploration around the Falkland Islands?

There is little doubt that the UK has not used its North Sea windfall wisely, with what is left and the prospects of more fields, the nation needs to take a longer-term view and realise the market is not always the answer.

Greater cooperative investment in infrastructure in the Gulf region should also not be ruled out, especially in conjunction with Saudi Arabia, Qatar, the UAE and Oman, our traditional and historic allies in the region.

Security around our ports and pipelines should be increased but this is a civil matter, apart from specialist capabilities like mine countermeasures. Our police are now armed and highly competent, is there any reason why an armed coastal security force, scaled and equipped for the most likely threats of terrorism and smuggling, is not possible?

The South Hook LNG terminal cost just under a billion pounds, or about the same cost as money wasted on FRES and associated projects (with nothing to show for it) so far, less than half the cost of delaying CVF the first time or one-twentieth of the cost of our involvement in Afghanistan and Iraq so far.

Puts things into perspective doesn’t it.

Military Solutions

Despite my belief that non-military spending should be prioritised over military spending or at least food and energy security not used as all-encompassing arguments for yet more military expenditure, there is an absolute need for military capabilities to integrate into the resilience and security matrix.

It is in the national interest to do so.

If we accept that sometimes military solutions are the answer to an unpleasant question we need to indulge in a spot of critical thinking, how best to apply our military and diplomatic levers to ensure continuity of supply into the medium and long term of these most essential of resources.

It is at this point that thoughts of matter maritime come into the picture, it is hard not to think that a naval solution is an answer because, well, we are talking about ships after all but all three services must be considered equally.

Being dispassionate, given a finite budget and some radical joined-up thinking/doing, investing in expeditionary military forces does not provide a good return on investment when considering energy and food security.

Investing in these things does not protect shipping against the most likely threats because their high cost means few numbers and only limited effectiveness but we cannot ignore the security aspects of maritime trade and it is here where all three services have to properly justify themselves.

Personally, I think our greatest contribution to the collective security in the area and thus by definition, a significant contribution to energy security at home, should be in developing local capacity and capabilities, training and working in local security partnerships for example.

This goes against the ‘strong navy’ mindset, where a strong navy is defined by expeditionary strikes and amphibious capabilities. An alternative vision of a strong navy might see a different structure, better suited to preventing conflict than applying force after intelligence and diplomacy failures.

Currently, we have the forward basing of a number of Royal Navy mines countermeasures vessels, as I have mentioned before, this is a capability area in which the UK excels.

This is exactly what I am talking about, we are already doing it albeit on a small scale, I want a greater priority given to this kind of activity

Given the interests of the producer, nations is to make sure that they can continue to make money out of the oil, gas and shipping traffic it is hard to envisage a scenario where host nation support would be anything but forthcoming with open arms.

The justification for an expeditionary force, usually maritime and centred on CVF is more often than not preceded by a collection of statistics about imported goods, history, the maritime industry, energy, and food security. These are usually impressive; 95% of our imported good comes by sea, without food imports we would be starving within 90 days, thousands of jobs relying on the maritime industry and other equally convincing statements that immediately make you think, isn’t it obvious, we need a strong navy.

The deep and fundamental flaw with this argument though is that it fails to make a link between the ‘we are a maritime nation’ position on the left and the strong navy on the right.

There is a void in the middle; advocates just assume that everyone ‘gets it’

There is no doubt in my mind that the UK is a maritime nation, there is no doubt in my mind that an effective and relevant Royal Navy can make a key contribution to UK security and interests but I start from a sceptical position when it comes to making a causal link between this protective role and the expeditionary strike role as personified by CVF.

The other fundamental problem is, no one ever questions the underlying statistics and as we know, statistics can tell you anything.

I know I get a hammering for being anti-Navy as if they are some sort of religion but this could not be further from the truth, just because I don’t agree with the prevailing priorities and aspirations of CVF advocates does not all of a sudden make me anti navy.

The first and obvious source of information for how a Royal Navy can protect the British way of life is of course the Royal Navy website. Some time ago they published a very well written report on the importance of maritime trade (click here to read in full)

The campaigning group Save the Royal Navy also looks at this subject in its 2009 article, 10 Reasons Why

The Phoenix Think Tank looks at the issues here

This is where things get interesting because a strong Royal Navy can be defined in many ways.

On the one hand, we have the Royal Navy’s vision of a force centred on 2 strike carriers, surrounded by a surface combatant force, a number of submarines and associated logistic and secondary capabilities.

But I fail to see how this force as constituted in the real world, not the fantasy world, actually contributes to real world modern security threats.

The Royal Navy suffers particularly from what I call ‘tradition drag’ because of its historic pre-eminence in the world naval rankings but this is 2011 and the UK no longer dominates world trade. This constant reference to the Royal Navy’s position in the world is incredibly damaging and snuffs out any constructive debate of what it should look like.

If we are too concerned with ‘measuring up to other powers as some abstract concept we take our eyes off what is actually needed.

There is a lot of talk about being a first rank naval power but frankly, being rank 1 or 7 is irrelevant and shows the level of debate.

What is important is that the Royal Navy and other services are relevant to the needs of UK defence and security, rank has nothing whatsoever to do with it.

We shouldn’t care whether the Royal Navy is ranked 1st or 71st as long as it is relevant to the national need and the same goes equally for the other two services.

Yes, we are an island

Yes, the UK maritime industry is huge

Yes, the vast majority of trade sails rather than fly’s

Yes, the UK must not become ‘sea blind’

Yes, we are an island!

But all three services have to make credible and convincing cases for every last pound note because if we are talking about real security and resilience, there are many more cost-effective means of spending the public’s hard-earned cash.

If there were a large scale security threat around those three chokepoints mentioned above it would be a global issue and the obvious argument is that the UK would have to contribute its fair share to any coalition force involved but by investing a greater relative share of our national budget into developing local security, diplomacy, obtaining timely intelligence and influence in the area we might not get to that point.

There is also a strong argument for investing funds that might have been earmarked for military capabilities in energy and food resilience, given that energy and food are fundamentally important to the prosperity and survival of the United Kingdom.

Do we invest in continual maintenance or foot the repair bill?

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