Risks to the Air Force Mission from

Declining Energy Security

Delivering Air Power through the

Next Great Energy Transition

Wing Commander Mia Clapton

Introduction

‘An energy transition … is inevitable; the only

questions are when and how abruptly or smoothly

such a transition occurs.’

‘An energy transition from one type of fuel to

another is an event that historically has only

happened once a century at most with momentous

consequences.’

United States (US) National Intelligence Council

The Oil Transition

Hubbert’s Curve describes ‘peak’ oil production

Energy Security

Availability Affordability Reliability

Economic Security

Geo-political Security

National

Security

Military Security

The Mission of the RAAF

Air Power Effects for Australia’s Interests

The Global Oil Transition

Establishing the context for identifying Air Force Risks

The scale and breadth of the energy challenge is enormous – far greater than

many people realise.

International Energy Agency (IEA), 2009

Oil Depletion and Peak Oil

Typical oil production

profile for

(a) a single field

(b) a region consisting

of an aggregation

of progressively

smaller fields

The ‘Early Peak’ Argument

The growing gap: Past conventional oil discoveries

Global Average

Annual Crude Oil

Production

(2001-2015)

Global transportation fuel demand

The spectrum of

liquid fuels:

conventional to

unconventional

High EROEI Low EROEI

Volume of

Energy

Discretionary - consumption

and investment

Essentials –

food, welfare,

government, law

Reinvested in

energy extraction

Volume of

Energy

Discretionary - consumption

and investment

Essentials –

food, welfare,

government, lawReinvested in

energy extraction

Energy Returned on Energy Investment and the Impact on Society

Major Recessions since 1970 correlated with oil price shocks

The ‘Late or No Peak’ Argument

IEA Oil production estimates over the years

Crude Oil

Production and

Capital

Expenditure

Brent Crude

Oil Prices

(2000-2015)

Peak Oil and Risk Management

Future supply projections

developed from the Monte

Carlo simulation using

petroleum geology and oil

supply expert analyses

Declining Availability and

Affordability of Oil

Australian Vulnerability to the Global Oil Transition

Oil Depletion and

Australia’s Energy Security

Actual (blue) and predicted (red) Australian crude oil production

Australia’s total oil production and consumption (1992-2014)

Australian Imports of Crude Oil (2012-13)

Australia’s Vulnerability to Declining

Long Term Energy Security

Type of energy used in major Australian industry sectors

Oil Depletion in Australian Government

Inquiries and Research Reports

‘[I]n the committee’s view the possibility of a peak of conventional oil production before 2030 should be a matter of concern.’

‘In view of the enormous changes that will be needed to move to a less oil dependent future, Australia should be planning for it now.’

The Senate Standing Committee on Rural and Regional Affairs and Transport, 2007

‘There is likely to be only moderate preparation by individuals and businesses in relation to the possible decline in oil supplies due to the uncertainty surrounding such an event.’

‘As a result, there is an argument for greater government intervention...’

CSIRO Future Fuels Forum, 2008

Total world oil production

‘[I]t is predicted that we have entered … onto a slightly upward slanting plateau in potential oil production that will last only to about 2016.’

BITRE, 2008

Oil Depletion in

Australian Government Energy Policy

‘The spectre of ‘peak oil’ should … not be used to panic policy makers into wholesale interventions in the market.’

ACIL Tasman, 2011

‘[T]here is a very low probability of reaching global supply limits (so-called ‘peak oil’) in the period to 2035.’

DRET, 2011

Oil Depletion and

Australian Defence Policy

‘[O]n the matter of peak oil, oil shocks and alternatives to oil, Defence’s current policy stance does not sufficiently protect Australia’s Defence capability against foreseeable risk.’

Joint Standing Committee on Foreign Affairs, Defence and Trade, 2009

The Geopolitics of Oil and the

Militarisation of Energy Security

Implications for Australia’s Strategic Interests

‘Our strategic environment is undergoing many points of transition; the assumptions of the past will not necessarily define our future.’

General D.J. Hurley, Chief of the Defence Force

The Geopolitics of Oil: Energy Exporters

The Strategic Energy Ellipse

The Geopolitics of Oil: Energy Importers

‘In the future, nations will go to war over resources, especially those nations prone to resource scarcity. Of all of the world’s resources, none is more likely to provoke conflict between nations in this new century than oil.’

Jim Puplava, 2014

World Oil Chokepoints

The Geopolitics of Oil:

The Extreme Case of State Failure

The Militarisation of Energy Security

‘The issue of energy security is one in which governments, and defence organisations, will increasingly have to be engaged… States who perceive that energy security is impacting on national survival are likely to challenge conventional interpretations on the legality of the use of force.’

UK Ministry of Defence, 2010

Australia’s Strategic Defence Interests

and Objectives

A secure Australia

A secure nearer region

A stable Indo-Pacific region

A rules-based global order

Defence Policy Response to the

Militarisation of Energy Security

‘[I]ncreased demand for imported commodities is unlikely to lead to major interstate conflict as long as the global market operates freely, since it is cheaper to pay for a commodity than to go to war for it.

However, the likelihood of miscalculation is higher where conflicting territorial claims and resource imperatives overlap, such as in the South China Sea.’

Department of Defence, 2013

‘Around 40 per cent of the world’s offshore oil production comes from the Indian Ocean. Over the next 20 years, the Indian Ocean will see a substantial increase in intra-regional maritime trade, including in energy…’

‘The Indian Ocean region is also likely to become a more significant zone of competition among major powers, with China, India and the United States all increasing their levels of military activity in this region.’

Department of Defence, 2016

The Militarisation of Energy Security

and the Implications for Air Force

Declining Reliability of Liquid Fuels

Australian Vulnerability to Disruption of Supply

Australia’s Declining

Domestic Refining Capacity

Liquid fuel infrastructure in Australia (as at 2013)

Australia’s Increased Reliance on

Petroleum Product Imports

Australian Imports of Petroleum Products (2012-13)

Australia’s Liquid Fuel Supply Chain

Australia’s major import shipping routes – petroleum products.

Shipping Lanes and Strategic Passages in Pacific Asia

‘Liquid fuel in transit to Australia through some of the world's geopolitical hotspots is not fuel security, it is wishful thinking.’

Engineers Australia, 2015

Australian Commercial Stockholding

Practices

:Australian Supply Chain – Stocks as days consumption cover

‘Australia does not hold government-controlled or regulated industry stocks for drawdown in an emergency, and our capacity for short-term surge production and fuel-switching is limited.’

Energy White Paper, 2012

Australian obligations to the

International Energy Agency (IEA)

Responses to Australia’s vulnerability to

liquid fuel disruption

‘Apart from the highly exceptional

circumstances that could arise from major

unforeseen national, regional or global

security events, the Australian Government

believes that … energy security developments

considered possible in the foreseeable future

can be managed effectively using existing

energy security mechanisms and market

responses.’

Energy White Paper 2012

‘Energy security assessments

should not consider ‘national

security’ settings and

scenarios in which crude oil

or product supply is disrupted

for an extended period by

widespread military conflict.’

Australian Institute of Petroleum, 2015

‘Energy and economic security issues

are distinct from national security

issues.’

The National Security, Economic

Security and Energy Security Nexus

‘There is little comfort in an

energy security assessment

that is only valid during

times of peace and regional

stability.’

John Blackburn AO

Recommendation 1

‘The Australian Government undertake a

comprehensive whole-of-government risk

assessment of Australia's fuel supply,

availability and vulnerability. ‘

‘The assessment should consider the

vulnerabilities in Australia's fuel supply to

possible disruptions resulting from military

actions, acts of terrorism, natural disasters,

industrial accidents and financial and other

structural dislocation.’

Rural and Regional Affairs and Transport

References Committee, 2015

Defence Policy Response to Australia’s

vulnerability to liquid fuel disruption

Recommendation 6

‘Defence adopt a more assertive strategy with regard to oil shocks and alternative fuels, with the specific purpose of providing a capability to mitigate risk due to a dependence on oil-based fuels.’

‘Defence should provide such a capability, sufficient to maintain an identified core capability, within a timeframe of 10 years.’

Joint Standing Committee on Foreign Affairs, Defence and Trade, 2009

Military Energy Security and Defence

Operational Energy Vulnerabilities

‘Fossil fuels, while the lifeblood and

enabler of air power, are also its

Achilles’ heel.’

Group Captain Maurice Dixon,

Royal Air Force (RAF)

Operational Energy

‘The energy required for training,

moving, and sustaining military

forces and weapons platforms for

military operations.’

US Department of Defense, 2016

The Logistics and Financial Burden of

Operational Energy

Defence’s Operational Energy Use

Defence Fuel Use Location

8%

59%

33%

Army

Navy

Air Force

Defence Fuel Consumption

Defence Fuel Supply Chain

Vulnerabilities

‘Fuel is a critical enabler for all Defence activities and has the potential

to be the greatest supply chain risk in the medium to longer term.’

Joint Logistics Command, 2010

‘Fuel storage and supply is a

critical limiting factor for air

bases.’

Australian Defence Force Posture Review, 2012

Diversifying fuel sources:

The interoperability imperative

Energy considerations for future

Defence capabilities

‘As we are making capability decisions often with 30-year outcomes, energy

needs to be properly conceptualised from the tactical to the strategic level,

and will need to be more prominent in capability decisions.’ Air Vice-Marshal Hart, 2014

Defence Fuel Management:

Organisation, Governance, and Culture

Strategic

Policy

Executive

Joint

Capability

Coordination

(JCC) Division

Joint Logistics

Command

(JLC)

Estate and

Infrastructure

Group (E&IG)

Three

Services

-Defence’s

strategic policy

- engagement with

industry

-Overall energy

preparedness and

integration

-Set strategic fuel

policy

-manage the fuel

supply chain

- purchase fuel

- act as the

technical authority

for fuel

- Design,

construct,

maintain and (for

some

establishments)

operate the

Defence Fuel

Installations

(DFIs)

-Set fuel

consumption

targets

- allocate funds for

the purchase of

fuel

-Determine

reserve

stockholding

requirements

The fragmented nature of Defence Fuel Management

Implications for Air Force relating to

Defence operational energy vulnerabilities

Key Findings

The oil transition presents a classic

risk management problem

Where national security meets energy

security, Australia is vulnerable

Australian Government policy fails to

address the link between economic

security, energy security and national

security

Declining energy security will challenge

the Air Force’s ability to achieve its

mission

Recommendations for Future Work

Recommendation for future research

Economic Security

Geo-political Security

National

Security

Military Security

Energy Security

A better understanding of the National Security and Energy Security Nexus in Australia

Recommendation for Air Force

Develop a risk management strategy to analyse, evaluate and treat the identified risks.

Questions?

Defence Policy Response to Australia’s

vulnerability to liquid fuel disruption

Reliance on Commercial

Providers

‘In the event of an oil shock

Defence will have access to a

proportion of fuel oil available in

the domestic market’. Department of Defence, 2009

‘It is not the role for fuel

suppliers to hold buffer stocks to

guarantee the ongoing business

operations of major fuel users

during a major fuel supply

disruption.’

Australian Institute of Petroleum, 2013

‘[As] World War Two experience

faded from the collective memory

of policymakers, as the defence of

Australia became a less

immediate concern… national

emergency fuel legislation moved

away from a defence focus.’

Martin White, 2013

Reliance on Australian Liquid

Fuel Emergency Legislation

‘In the event of a sudden scarcity of

oil, Defence would have recourse to

a framework established under

federal legislation...’

Department of Defence, 2009