Northwest Pacific Oil and Gas Industry Risks for the Environment

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Northwest Pacific Oil and Gas Production

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Background information in Oil and Gas Industry

Oil and gas industry has enjoyed history of strong influence in the global arena. The sector contributes substantial amount of revenue to several economies worldwide. Despite the key progresses that major world producers of oil and gas have recorded in the past, a drop in world market prices of oil and gas remains a major challenge for oil marketers, governments, and economists (Inkpen & Moffett 2011). Speculations and sanctions bestowed upon leading producers in addition to various malpractices have led to artificial shortages in the once vibrant industry. Governments of oil producing nations have come up with mechanisms to address key problems affecting world prices, which has negatively affected their GDP growth. While oil marketers grapple with fluctuations of oil prices in the world market along with high transit cost, environmentalists, and state agencies with a role in environmental conservation and protection, have amended policies concerning the environment (Inkpen & Moffett 2011).

Different oil projects initiated by governments and oil marketers have contributed to increase in damages to ecosystem and biodiversity, water pollution, and pipeline construction that collectively pose ecological problems and are health hazards. The paper focuses on both the negative and positive impacts facing oil and gas production and marketing in East of Russia, China, Japan, and South Korea. Influence of major producers towards determination of world prices is another interest aspect the paper seeks to unearth. Apart from Russia, China, Japan, and South Korea, other leading oil producers and exporters with bigger stake in the industry include Kuwait, Iraq, Libya, and Saudi Arabia (Inkpen & Moffett 2011).

East Russia

Russia is one of the key players in the world energy markets. The country tops the list of largest exporters of natural gas, and is second largest oil exporter. Captivatingly, the country is the third largest consumer of energy. Oil and gas exports are key drivers of Russia’s economic growth. Over the last five years, the production of Russian oil has risen substantially and oil prices in the global market have been very high (Heidersbach 2011). The colossal revenue Russia has gained from the industry has influenced Russian economy’s dependence on oil as well as natural gas. Although exorbitant prices of oil in the global market have boosted economic growth of Russia, fluctuations in oil prices increases vulnerability of Russia’s economy, which in the end paralyses the growth and development of the very economy oil industry has always supported when world oil prices are extremely high (Heidersbach 2011). Sudden fluctuations in world prices threaten economic growth of Russia in addition to igniting the sustainability debate regarding Russia’s dependence on oil and gas industry as main source of revenue.

Many problems cloud Russia’s ability to maintain and expand its capacity as a leading producer and exporter of energy. The oil and gas fields that Russia has are aging by the day. The export capacity of crude oil pipeline system controlled by the state-owned Transneft is insufficient. The capital injected in the improvement and expansion of Russia oil and gas production and pipeline system is inadequate (Heidersbach 2011). Therefore, the government has always intervened during horrendous situations of oil and gas scarcity. The move would see the government take full control of the energy sector including energy supplies. The government took severe measures such as dismantling Yukos (an energy company) and acquired its key oil production subsidiary. Russian companies with close connections to the government have used advantage within its reach to purchase energy companies to control over supply of energy (Heidersbach 2011). Russia has maintained close energy ties with Central Asia countries, because many transportation routes in the Asian region are destined toward European Russia. Failure of Ukraine to increase what it pays for Russia’s gas triggered Russia’s attempt to cut off gas supply. However, Russia restored gas supply following uproar from several European countries. Plans are underway to increase supply of oil and natural gas Russia produces. Thus, it calls for development of infrastructure to boost large-scale production and faster transportation of oil and natural gas from Russia to various destinations in Asia and Europe (Heidersbach 2011).

Russian energy trends not only affect countries in Asia and Europe, but also to United States energy markets and economic welfare in most cases. Approximately 25 percent of oil reserves in Russia are located on Sakhalin Island. At Sakhalin, several consortia have commenced producing and exporting oil (Heidersbach 2011). Russia has a long-term plan that would see it export large volumes of natural gas to the United States through pipelines. Cases of Environmental owing to pollution by Russian energy are minimal compared to any other top producers of the commodity worldwide.  

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Source: Energy Information Administration, Russia Country Analysis Brief, February 2005 December 3, 2005

China

Political ideology and progressive growth of population is to blame for inadequate oil reserves in the China. With an estimated population of 1.3 billion people, China rely heavily on other countries for oil among other important resources. The government of the People of Republic of China has forged good relationships with neighbouring countries such as Malaysia. Political differences between China and Malaysia have however created contention between the two neighbours (Vatansever & Rosner 2005). Incidentally, the large supply of oil China imports from Malaysia has left the former with few options as far as economic and political independence is concerned. China Oil and Gas Group Limited is one of the outstanding companies that market oil. The Company is listed in the Hong Kong Stock Exchange. Besides, the Company has invested in natural gas among other energy related business. The ventures of the Company in gas operations include piped city gas business, constructions, distributions, liquefied natural gas, and pipeline design (Vatansever & Rosner 2005).

Apart from oil, China has invested its massive resources in building a gas pipeline. The gas pipeline (commonly referred to as Turkmenistan-China Gas Pipeline) connects Asia to Xinjiang in the People’s Republic of China. The population explosion in China has prompted the government to come up with adequate strategies to control birth rate, which advocated for one child for every household (Vatansever & Rosner 2005). The over 1.3 billion people have increased pressure on its limited resources. The gas company has eased transportation of natural gas from China to various destinations around the world.

China depends mostly on Malaysia for oil and oil products despite political differences that has put the two Asian countries at loggerheads for several decades. The country has also expanded its road and railway networks to facilitate transportation of petroleum within China’s major towns and cities (Vatansever & Rosner 2005). World fuel prices have negative effects on prices at which China buy oil from its neighbour, Malaysia. When oil prices go high, the government as well as local oil marketers purchase oil at exorbitant prices.  Since oil marketers bought the precious commodity at higher prices, the increases in price has shifted to local consumers. Motorists and domestic users would purchase the product at relatively higher prices compared to initial prices before increase in world price took effect. The People’s Republic of China has to bear the extra costs charged on oil as well as future fluctuations in price (Vatansever & Rosner 2005).

China has taken firm measures against occurrence of any form of pollution caused by oil or gas. The Republic of China has particularly put in place regulations that would prevent and control Marine pollution from ships. The first comprehensive system of marine pollution regulations took effect from first of March 2010. The enforcing agency of the regulations is The Maritime Safety Administration (MSA). The marine authority play important role of supervising and administering prevention as well as control of marine pollution, usually caused by ship operations (Vatansever & Rosner 2005). According to authorities at the China ports, pollution response companies must vet every ship entering Chinese ports carrying hazardous cargo. Every cargo ship docking at Chinese ports must is required to meet Chinese Maritime Code and Bunkers Convention where appropriate. Hence, different organizations charged with the responsibility of preserving and protecting the environment, have stepped in to save the situation (Vatansever & Rosner 2005).

Japan 

Although Japan limited oil reserves of its own, it is the third largest consumer of oil worldwide after United States and China. The 2008 statistics of BP Energy Survey indicate that Japan consumed approximately 5051.02 thousand barrels of oil every day (2007). The country imported an average of 5031.89 thousand barrels of oil per day during the same period (Kambara & Howe 2007). The increase in oil consumption is attributable to shutdown of various nuclear plants in the year 2003. This caused utilities to attain maximizing point as far as use of oil-fired generating company is concerned. Japan obtains the largest percentage of its imported oil from OPEC, especially countries in the Persian Gulf such as United Arab Emirates, Kuwait, Qatar, Iran, and Saudi Arabia. Over 80 percent of imported oil goes to industrial processes in the manufacture of various products. In reality, Japan has only 59 million barrels of proven oil reserves (Kambara & Howe 2007).

Oil marketers in Japan have been active overseas since the early 1960s following government move to establish a Company run by the state to facilitate oil exploration in overseas countries. Japan National Oil Company (JNOC) discharged its mandate effectively since its inauguration in 1967 until November of 2001. The Prime Minister by then called for its abolishment following increase in the number of bad loans. Since then, Japanese government have been considering liquidating Japan National Oil Company and considering the role, it should have played in funding of the overseas oil projects (Kambara & Howe 2007). Fortunately, one of the leading subsidiaries of JNOC called Japan Petroleum Exploration Corporation (Japex), which authorities successfully listed on the Tokyo Stock Exchange market back in 2003. Apart from oil, Japan is the world’s leading importer of liquefied natural gas. According to 2008 BP Statistical Energy Survey, the 2007 natural gas consumption stood at 90.23 billion cubic metres, which is a 3.07 percent of world total. The refinery capacity of Japan stood at 4597.9 thousand barrels a day and a refinery through put of 3993.81 thousand barrels a day during the 2007 spell (Kambara & Howe 2007).

Japan has more than 200 commercial ports, many of which are off-limits to ships from foreign countries. Only about 68 ports are operational in the wake of post-quake Japan. The rest have sustained serious damages resulting from the quake and Tsunami. Apparently, the needs of Japan have changed since occurrence of the devastating earthquake and Tsunami (Kambara & Howe 2007). The two major calamities immensely affected the economic growth as different development projects stalled. The overall effect on the country’s GDP was severe and costly, especially considering that Japan imports oil among other energy products. Japan’s needs have changed significantly since occurrence of the earthquake. The energy gap Japan experiences is a threat to the global economy (Kambara & Howe 2007). An estimated five million automobiles could face a delay or not produced at all due the looming oil shortages in Japan. Japan has taken necessary precautions against oil shortages that could paralyze its vibrant automobile industry.

The country has a considerable number of oil and gas companies that have ensured continuous importation and supply of oil to major manufacturing industries in he economy of Japan. The major Subsea oil and gas companies Japan within Japan territory include Cosmo oil, Hamanaka chain, Hamanaka International, Inc, Inpex Corporation, and Japan Drilling Company Ltd. Other key oil corporations include Shanghai Saige Composite materials, and Teikoku Oil. Inpex Corporation explores Oil gas in Japan while Japan Drilling Company Ltd is an offshore drilling contractor (Kambara & Howe 2007). Therefore, alarming oil and gas shortages poses a great threat to the third largest economy and fifth largest energy user globally. The unprecedented fluctuation in world oil prices threatens growth of Japanese once vibrant automobile industry.

South Korea    

The Republic of South Korea has no domestic Oil reserves hence must import crude oil. Oil constitutes the largest share of total energy consumption in South Korea. However, the share has declined in the recent past (Karleskint et al 2006). The BP Statistical Energy Survey (2008), shows that South Korea consumed an average of 2371.46 thousand barrels of oil a day in 2007. The consumption rate constitutes over 2.72 percent of the world’s total. Following South Korea’s absolute reliance on oil imports, it has put in place a policy that deals with securing and diversifying the supply of oil in the country. The country focuses on fulfilling both its short-term and long-term oil needs (Karleskint et al 2006).

Korea has developed a strategic petroleum reserve as part of short-term strategies. The national oil company manages the petroleum reserve. The reserve acts as security against disruptions in supply of oil. The national oil corporation discovered natural gas deposits at the offshore Donghae-1 field in South Korea in 1998 (Karleskint et al 2006). Production of natural gas came into effect in 2004 with average production of 50 million cubic daily by 2005. The Korea Gas Corporation (KOGAS) is the sole importer and distributor of natural gas in the Asia country. Korea National Oil Corporation (KNOC) is the sole national oil and gas corporation of South Korea. It is also one of the most important industrial companies in the Korean Peninsula (Karleskint et al 2006). Korea has long-term plans of increasing production from overseas fields by 35 percent imports by 2020.

Damage to ecosystem and biodiversity

The ecosystem constitutes the entire living organism interacting with each other to produce a sustainable system. It is the basic unit of ecology, hence bringing the need to conserve it for the thriving of the living organism. Biodiversity constitutes all the various species of the organism in an environment. The two have a direct relationship since when the ecosystem undergoes damage; the latter will also receive the same amount of damage.  Oil spills have a direct relationship to the thriving of ecosystem and the biodiversity. An oil spills occurs when there is release of oil in the environment, usually occurring accidentally. The oil spread on a wide area, especially if spills in the oceans, due to the presence of tides and wind. The coverage of the oil spills makes the effect of oil be felt at a higher magnitude around the world. The oil spills have a negative effect on both because of its ability to prevent the passing of oxygen. Therefore, the damage factor of oil spills on the environment lies on the fact that it deprives the two of oxygen. Oil and gas industry have remained in operation for a prolonged period, and in most cases, they have carried out their operations in the most sensitive places in the globe. Most of the affected parts are the mangroves, coral reefs and desert. The mining process is not instantaneous and, therefore, calls for those that are carrying out the process to reside at the place of exploration. The following are some ways in which the oil spills damage the ecosystem and the subsequent biodiversity:

In the course of transporting oil, there might be leakage that causes the oil to spread on the water surface forming a thin layer called oil slick (Manivanan, 2008). The spreading depends on the density and composition of the oil, and the layer continues being thin until it forms a rainbow like shape called sheen. This always causes the effect on the marine birds, mammals, fishes and other sea animals because of the oil contamination capability. The layer formed by the oil usually acts as a coat which prevents the passing of oxygen into the inner parts of the sea; consequently, introducing suffocation in the ecosystem. Therefore, the living organisms in the sea will die due to lack of oxygen besides the swallowing of oil that is always toxic to the animals’ health. This causes the shrinkage of biodiversity in the ocean ecosystem because most of the animals and plants would have died due to contamination and suffocation.

The oil spills can also reduce the insulating ability of the fur bearing animals such as sea otter (Calow, 2009). This reduces the mechanism activity of the organism in covering themselves from harsh elements. The animals living in the sea also need to insulate themselves from the extreme condition in the sea; consequently, the destruction of the insulating ability will mean that the animal will be much vulnerable to these conditions. Hence, the oil destroys the habitat for the animals making the ecosystem be unsuitable for the inhabitation by the animals. Poisoning of other birds and mammals can also occur when they are trying to clean themselves with the tendency of swallowing the oil (Manivanan, 2008). For instance, fishes are in danger because they usually ingest oil through their gills thus leading to their death. The oil spills also reduce the reproduction rate of fish hence reducing the number of fish in the habitat.

The oil spill also has a negative effect when it reaches the coast. It causes interference in the human activities especially on the shoreline such as fishing (Fingas, 2011). Once the oil has poisoned the fish, they will always be vulnerable in tidal areas where they bump into the oil especially when tide is low.  This will lead the government into banning the fishing because of the poisoning the fish will cause to man. The poisoning come as the result of man being in the same food chain with fish hence the poisoning will travel up the food chain. This causes man to be vulnerable to the poisoning that may ultimately lead to deaths. The banning by the government will eventually reduce the operation in the seafood market thereby having a direct effect on the daily activities in the ecosystem. Oil spills on the beach sand, and gravels will always inhibit the inhabitation by vegetation hence reducing the amount of vegetative matter along the shoreline.

The oil spills can also have effect on the recreational activities of man. This happens when the oil spills covers rocks and boulders on the shoreline hence reducing their beauty. The beauty is what always acts as a tourist attraction hence the covering will always reduce the recreational effect the features at the beach.

The oil spills also have effect on the wildlife environment. This normally have effect on the wild animals living near the sea since they can also get poisoning by the oil waste (Fingas, 2011). These wild animals are living in the harsh ecosystem brought about by oil waste since they can ingest the oil accidentally. The digested oil can interfere with their reproductive system and their usual behaviors; consequently, reducing the population of the animals in the ecosystem.

The oil spills in the sea have a negative effect on the industries involving sea water. The industries will have to increase the overhead cost in purifying water hence their activities in the ecosystem would have undergone interference. 

Even though, the oil and gas production may prove significant in to the daily activities of man, there is a need to take precautions whenever there is transportation to reduce on the chances of oil-spills. The oil spill causes the ecosystem inhabitable for the organism, leading to the death of most of the organism; eventually reducing the biodiversity in the environment. The industry should ensure that they put the appropriate measures in ensuring that they have reduced the susceptibility of oil spills in the environment.

 

Oil spills and water pollution

Water is essential for the lives of a human being hence bringing the need to discuss water pollution in relation to the production of oil and gas since the latter proves to be significant in the daily economic activities of man. Discussing this will help in determining ways of making the production of oil be compatible to the healthy living of man. Oil spills, which ends up in the sea, always accounts for a larger percentage in them pollution of water. Apart from the oil from the ships, the oil spills account for about 12% of the oil that seeps gets into the sea (Martínez-Gómez et al, 2010). The increased population and affluence has lead to increas transportation of oil thereby increasing the number of oil spills. Statistics show that half of all hazardous spills in water arise from oil products with the daily reporting of the spills. The following are the ways in which the oil and gas production influence water pollution:

Oil compounds are generally the hydrocarbons consisting of hydrogen and carbon. These compounds combine to form a toxic compound in the waters thereby interfering with the components of water. This in turn makes water to lose its property and gain the toxicity of the resulting compound formed between carbon and hydrogen. These compounds lead to the contamination of water hence the ultimate pollutions. The accelerated pollution capability of oil arises as the result of the aromatic compounds that always causes the greatest problem in the waters (Calow, 2009). The most harmful aromatic compound is the poly-cyclic aromatic hydrocarbons (PAHs) (Effects of Oil Spills on Wildlife, 2010).

PAHs always pollute the waters thereby making the latter be harmful to the plant and animal life since it interferes with the metabolic activity and the ability of the animals to regulate water. The pollution of water by the oil spills always affects the fish cancer and contributes largely in damaging the fish embryos.

Chronic oil pollution in the Pacific Ocean has resulted to death of many seabirds every year. Oil does is immiscible to water. This makes the oil available for the birds’ feather to absorb the oil that in turn reduces the bird’s buoyancy and waterproofing capability. Consequently, the birds will suffer from hypothermia that ultimately causes deaths.