Powering the Dubai Overshoot

You’ve seen the before-and-after pictures, like a Vegas slug of glass rising in the desert. And, you’ve read the stories about indebted foreign workers leaving their Range Rovers behind, as they flee. Perhaps you’ve seen video of the indoor ski arcade? Or, caught the gaze of the photographer’s eye on the poor, underpaid migrant workers constructing the Burj Dubai. Welcome to today’s obligatory Dubai blog post. Brought to you courtesy of some very hot, sovereign default action as the UAE’s most glittery city announced overnight a request for a stay on debt payments from Dubai World. How could a country so rich in energy resources have gotten itself into such a mess?

It’s generally assumed that just about every Mid-East oil producer is a big, net exporter of oil and while that’s also true for the United Arab Emirates what’s worth noting, or retelling today, is the means by which the UAE, principally because of Dubai (an Emirate within the UAE), started to become a net importer of natural gas. Let’s start with a chart of electricity demand.

UAE electricity demandAs in the rest of the world, though primarily in Asia,  the Mid-East is now finally in the process of transitioning away from using industrial diesel for its power generation–though in many cases starting from very high levels. You can understand why that practice lingered in places like Saudi Arabia for so long, when the cost of oil extraction was effectively near zero. However, Saudi Arabia has now elected to build more NG fired power generation (and even adding Solar) and in places like the UAE, natural gas power generation has now become well established. But in a nice portrait of demand outstripping geology, the UAE now must import LNG to fund its parabolic growth in electricity demand. (part of that demand is also for water desalination). And this is despite the UAE’s very sizeable reserves of natural gas. Worse, at times the UAE has even had to switch back to oil-fired power generation, owing to infrastructural limits to the NG-fired portions of the power grid.  This too offers an insight: it’s easier and faster to put up buildings and build roads than it is to develop oil and gas for production.

Now, let me just pause here and say one of the implications of this story that I really like is that human beings, universally, are overshooters. And the people of the UAE have now shown themselves to be overshooters in classic fashion. The UAE obviously looked at its considerable resource inheritance of oil and gas and then got about the business of attaching as much possible debt to this wealth and future growth as the world could stomach. This is yet another example of an infinite debt philosophy on both the part of the borrowers, and the lenders. And by the way, if you think humanity is going to collectively decide to build sustainable, low-growth economies on a voluntary basis then I say dream on. We’re all overshooters now. (this post continues below the theoretical street level limits of the Al Burj, the not-yet-built rival to the now completing Burj Dubai).

Al Burg

To get the latest data on the UAE’s thirst for LNG, I had to go to the CIA Factbook as the EIA in Washington currently has nothing but a hole to show, for all 2007, 2008, and 2009. I should also mention that Jeff Rubin when he was at CIBC was among the first to really highlight the structure of domestic energy demand among the Gulf State oil producers. You can read a July 2008 piece by Rubin here, just on this subject.

CIA FactBook 2008 UAEAccording to the CIA Factbook, the UAE in 2008 “only” consumed 18% more natural gas than they produced. Now, it’s probably the case that when the data arrives for 2009 on UAE total energy demand we’ll see some form of a crash in electricity consumption. Perhaps in the next few years the great Dubai buildout will largely halt for time and the Emirates will return to developing their natural gas resources. If the economy crashes hard enough, perhaps their NG balance could get back to even.

Finally, I’m thinking of another state that has to import a large amount of energy, has severe water problems on which it has to spend additional energy for conveyance and treatment, and is also in deep fiscal trouble. The State I’m thinking of has also overbuilt for many years, has an opaque government, and is hoping to be bailed out by its overseeing government. The state I’m thinking of now struggles with vast, empty housing stock. And, like UAE, has an enormous “sovereign-wealth fund” (actually a pension fund) that has suffered large losses. Oh, and this state is also filled with lots of overshooters who think there’s no limit to either physical growth, or the growth of debt. Name that state!

-Gregor

Additional Reading:

Dubai Future Projects. (astonishing photographic round-up of planned megaprojects).

Dubai is not a case of sovereign default: Billy Blog.


  • http://twitter.com/anthonybrown anthonybrown

    My home state…. :(

  • http://www.postlinearity.com gregorylent

    life itself is an overshooter … we are not so different than mold or algae in that regard ..

  • http://www.WhenInManila.com VinceGolangco

    California?

  • http://www.WhenInManila.com VinceGolangco

    California?

  • gregor.us

    Yes, though I have perhaps overdrawn the comparison a little. They also share the Utopian tradition, so that's something to consider too.

    G

  • http://synthesis.williamgunn.org MrGunn

    Good old gregorylent. Nice to know you can be counted on to say something vaguely meaningful whenever it's called for. How's that guru shtick working out for you?

  • blairrogers

    I am Governor Jerry Brown
    My aura smiles
    And never frowns
    Soon I will be president…

    Carter Power will soon go away
    I will be Fuhrer one day
    I will command all of you
    Your kids will meditate in school
    Your kids will meditate in school!

    [Chorus:]
    California Uber Alles
    California Uber Alles
    Uber Alles California
    Uber Alles California

    Zen fascists will control you
    100% natural
    You will jog for the master race
    And always wear the happy face

    Close your eyes, can't happen here
    Big Bro' on white horse is near
    The hippies won't come back you say
    Mellow out or you will pay
    Mellow out or you will pay!

    [Chorus]

    Now it is 1984
    Knock-knock at your front door
    It's the suede/denim secret police
    They have come for your uncool niece

    Come quietly to the camp
    You'd look nice as a drawstring lamp
    Don't you worry, it's only a shower
    For your clothes here's a pretty flower.

    DIE on organic poison gas
    Serpent's egg's already hatched
    You will croak, you little clown
    When you mess with President Brown
    When you mess with President Brown

    [Chorus]

    DK's

    California all the way!

  • simon

    Singapore?

  • http://www.worldofwallstreet.us/ MontyHigh

    Great post. Real life lesson there on overshooting. Did you realize $147 oil was an overshoot? Is gold already in an overshoot? How do you recognize when an overshoot as run out of momentum? Lots of things to think about.

  • http://fecal.org/ Jack Damn

    Fascinating stuff. I did not know much about the NG consumption in the Middle East.

    Finally, I’m thinking of another state that has to import a large amount of energy, has severe water problems on which it has to spend additional energy for conveyance and treatment, and is also in deep fiscal trouble.

    Obviously Maine.

  • Neurobot

    Über Alles

  • http://www.competitivefutures.com/blog ericgarland

    Dead Kennedys reference => 65,000,000 points

  • http://myemergingvoice.com/ Paul H

    nice to see you looking into this, from what I have seen, Qatar looks as thought it will be the net winner in this.

  • gregor.us

    Cheers. By the way, if this is your tweet page I like your picture of Freud. In fact, your handle suggest Milton Erickson's psychologist notion of “my voice will go with you.”

    G

  • http://myemergingvoice.com/ Paul H

    now that I doubt … I did write up an article earlier this year on Qatar & Dubai energy reqs, you can view it here http://myemergingvoice.com/blog/?p=276 & delete once consumed.

    P

  • gregor.us

    You got it!

  • gregor.us

    Hi. I grant that 147 was an overshoot but only in a context where we understand that the advance from 30 to 100+ over 5 years was not an anomalous, or an overshoot.

    Good to see you Monty.

    G

  • gregor.us

    Yeast too.

    How about the brain–do you suppose that is in overshoot, or perhaps still underutilized?

    G

  • cougar_w

    Overshoot state: California, easily. Budgets completely FUBAR at the state and local levels. Energy situation is hopeless.

  • cougar_w

    Huh? He's right you know. There are biologists who spend their life's work studying population dynamics and system oscillations. I was very nearly one of them, fascinating subject area.

    The fact that life overshoots is instructive; we didn't invent the model, we just perverted it. Overshoot kills individuals not whole populations, so it remains adaptive. One could make the case the high-r “supertramp” species are overshoot specialists. Humans tend to behave the same way without being strictly high-reproducers because at an economic level those who win the race keep the spoils, and society then absorbs the losers. There is no individual incentive not to overshoot so long as this is the case.

  • http://synthesis.williamgunn.org MrGunn

    gregorylent is either a really, really smart guy or someone who drops little aphorisms into random conversations to seem smart. I tried for some time to draw him out on friendfeed to see if there was substance behind his cute little saying, but all I got back was “you scientists think you're so smart” static. Eventually he went away.

  • gregor.us

    You got it!

  • gregor.us

    Hi. I grant that 147 was an overshoot but only in a context where we understand that the advance from 30 to 100+ over 5 years was not an anomalous, or an overshoot.

    Good to see you Monty.

    G

  • gregor.us

    Yeast too.

    How about the brain–do you suppose that is in overshoot, or perhaps still underutilized?

    G

  • cougar_w

    Overshoot state: California, easily. Budgets completely FUBAR at the state and local levels. Energy situation is hopeless.

  • cougar_w

    Huh? He's right you know. There are biologists who spend their life's work studying population dynamics and system oscillations. I was very nearly one of them, fascinating subject area.

    The fact that life overshoots is instructive; we didn't invent the model, we just perverted it. Overshoot kills individuals not whole populations, so it remains adaptive. One could make the case the high-r “supertramp” species are overshoot specialists. Humans tend to behave the same way without being strictly high-reproducers because at an economic level those who win the race keep the spoils, and society then absorbs the losers. There is no individual incentive not to overshoot so long as this is the case.

  • http://synthesis.williamgunn.org MrGunn

    gregorylent is either a really, really smart guy or someone who drops little aphorisms into random conversations to seem smart. I tried for some time to draw him out on friendfeed to see if there was substance behind his cute little saying, but all I got back was “you scientists think you're so smart” static. Eventually he went away.