Much like a James Bond thriller, Earth Wars: The Battle for Global Resources takes its reader to far-flung corners of the globe, where ambitious companies work assiduously on strategic projects, which, if successful, have the potential to shift the current configuration of natural resource control. Among these are shale fields in China and Argentina; oil and gas fields in Kazakhstan, Turkmenistan and Siberia; coal and gold mines in Mongolia; uranium mines in Australia; and ultra-deepwater oil fields off the coast of Brazil — not to mention iron ore, coal, lithium and rare earth deposits in Guinea, Indonesia, South America and China, respectively. Also on the itinerary is India’s own Krishna-Godavari basin. In the author’s assessment, “these are some of the most significant energy, metals, food, and water developments” in the “the great battle for control of the world’s resources”.
However, while the book’s clearly written mapping of recent resource discoveries and their implications is pioneering and provocative, it straightjackets itself into an overly simplistic question, “Who will win the Earth Wars?” Will it be incumbent firms, with their host of technological and institutional advantages, or emerging market challengers, backed by huge and rapidly growing domestic markets? In its attempt to squeeze analysis into what is largely a “West versus East” frame, the book fails to convincingly answer its own driving question. It also betrays a western discomfort at the rising presence of “non-white” firms and consumers in a global arena, long the preserve of a handful of colonial powers and industrialised country firms.
First, it seems to lay the blame for rising resource competition squarely on the shoulders of fast-growing emerging markets, omitting to discuss existing consumption patterns in industrialised countries. China is already the world’s leading consumer of oil, gas, coal and other resources, it argues, India is gaining in importance, and 19 emerging market countries will be among the world’s top 30 economies in terms of GDP in 2050.
The strong rise of resource firms from emerging markets, particularly China and India, has suddenly boosted the number of contestants in the ring. Many of them are now large enough to pose meaningful competition to dominant incumbents. The book underscores this point by listing 13 emerging market executives among the “world’s top 25 deal makers from the energy and mining sectors”. Three are from India: Coal India’s Zohra Chatterji (the author is a little behind the curve here since Ms Chatterji was an interim CMD for a few months till S Narsing Rao was appointed in April this year), Reliance Industries’ Mukesh Ambani, and ONGC’s Sudhir Vasudeva. China accounts for four: they are from China National Petroleum, Sinopec, CNOOC and China Shenhua Coal. It points out that while there were just 10 Chinese firms and one Indian company in the 2001 Fortune Global 500 list, there were 46 and eight, respectively, in the 2011 list, most of which are public sector firms with far stronger potential to influence geopolitics than their private sector counterparts.
And what fuels this apparent momentum? Structural shifts within resource industries. “Complex refining capacity is moving away from Europe to the Middle East, Asia, Africa and Latin America. The four biggest refineries now under construction in the world are in Saudi Arabia and India,” with Reliance’s Jamnagar refinery already the world’s largest. Yet, this shift might be akin to one seen in global manufacturing, where lower-value activity moves to developing countries while strategic technology and control continue to vest securely with incumbents. Elsewhere, the book mentions, many of the world’s top firms are quitting refining and marketing to concentrate on the “more lucrative upstream business” of oil exploration and production.
Encouragingly, India ranks alongside China as a global top resource player, leading production and consumption in world energy, renewable energy, metals, food, and even water.
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Six other economies – Brazil, Russia, Australia, Canada, Qatar and Kazakhstan – will also become increasingly prominent, given their abundant energy resources and potential. Christened the “BRACQK”, they are the BRICs of natural resources — that is, fast-growing markets that suck in global investment and displace incumbent economies. Russia is suspected to have major Arctic deposits. Brazil and Kazakhstan might be the epicentre of global deep-water oil activity; Australia and Qatar of new LNG activity; and Canada of oil sand extraction.
Despite its shortcomings, the book is a fascinating journey into the future — in the form of a plethora of recent natural resource finds, extraction and production technologies, and “sunrise” industries that could transform the relative fortunes of nations. For instance, Bolivia, with 70 per cent of the world’s lithium reserve, could catapult to global prominence if lithium-powered electric vehicles take off. The book also provides a valuable, concise discussion of the comparative advantages of the world’s leading resource companies and nations.
The reviewer writes on foreign direct investment issues
EARTH WARS: THE BATTLE FOR GLOBAL RESOURCES
Geoff Hiscock
Wiley; $29.95; 286 pages