FACTBase Bulletin 31
Perth’s global connectivity in energy Kirsten Martinus Introduction Cities and their global socio-economic influence have long fascinated us. Geddes’ book Cities in Evolution (1915) first defined world cities according to cultural evolution and economic openness, then Hall’s The World Cities (1966, 1984) added the multitude of roles and functions that these places contribute to all aspects of policy, finance, trade, culture, entertainment, science and technology. By the 1990s, the term ‘global cities’ emerged (Sassen, 1991) describing a city hierarchy of strategic transnational networks formed by the complex cross-border dynamics of the spatial distribution of production. The cities at the top of this hierarchy were viewed as global command centres concentrating world financial, political and production power. Much of the recent research has focused on the importance of advanced producer services (APS)1 within this network (Beaverstock, Smith & Taylor, 2000; Taylor, 2001). These firms are critical not only to flows of finance, information and people, but also have considerable political and economic influence. Detailed analysis of the structure and linkages of these firms has paved the way for analysis that identifies hierarchies of nodes and networks within the global economy. Led by a group at Loughborough University in the United Kingdom that has ranked cities according to their position in the network, only two Australian cities – Sydney and Melbourne - were identified as genuinely ‘global’ centres (Alpha cities), with Perth and Brisbane identified as second tier or Beta cities (GaWC, 2013). Using APS to benchmark cities is logical, being strongly seated in observations of economic restructuring from the 1980s with the rise of services and decline of manufacturing (Sassen, 1990; Castells, 1991). Furthermore, simplification and reduction of a complex process through a small number of firm sectors (such as APS) allows hierarchical patterns to emerge. However, the choice to examine only APS may diminish the importance of alternative indicators of a city’s power and influence which incorporate more historic drivers and processes, such as securing resources. The development of Australia’s capital cities through the resource richness of surrounding regions exemplifies this (Tonts, Martinus & Plummer, 2013). This FACTBase Bulletin explores an alternative landscape of power and influence based on the location decisions of energy MNOs. The analysis reveals a different line-up of cities contributing to more subtle, but perhaps just as powerful, set of forces operating in the global network. APS include firms engaged in accountancy, advertising, insurance, management consulting, banking/finance and commercial law. 1
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Method The Platts list of the world’s 100 largest energy companies provided an initial database of energy corporations. Data collection followed Derudder and Hennemann (2013), where all global offices of these companies were recorded and ranked (0-5) depending on their level of importance. The direction of reporting relationships between offices was also recorded to ascertain the level of autonomy and influence of a given location. Overall, this database provided a measure of strategic global importance of every office to each MNO. Information was sourced from extensive Internet searches of corporate and news documents. Data analysis was conducted by assessing overall connections (as per Taylor, 2001), as well as through a city’s relationship matrix which took into account significance of relations and positions of cities in the MNO network (as per Derudder & Hennemann, 2013). NodeXL was used to visualise and analysis the matrix. Given issues in gaining information on exact MNO office locations and significance, as well as the high sensitivity of network calculations, city rankings should be seen more as a broad indicator of its situation within the global network, rather than has a hard and fast ‘league ladder’. Overview of energy landscape Amongst the top 100 energy companies globally, the cities with the most corporate headquarters are Calgary (Canada) and Moscow (Russia) at equal first, Houston (USA) at second, followed closely by Beijing and then Tokyo (Figure 1). According to the US Department of Energy (Table 1), these cities are located in countries known for being major energy producers (Canada, USA, Russia and China) as well as major energy consumers (China, USA, Russia and Japan). There are also significant clusters of cities with corporate energy headquarters in the USA (west coast, east coast and mid-west), South America (Brazil), Western Europe (Germany, England, Spain and The Netherlands), Eastern Europe (Poland, Hungary and Kazakhstan) and South-East Asia (India and China). Perth is not particularly significant with its one headquarter located far from the closest cluster of South-East Asia.
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Figure1: Locations of energy corporation headquarters
Table 1: Top energy producing and consuming countries
Top energy producing countries2 Btu units3 World 201 rank 2010 1 1 China 90 98 United 2 75 78 States 3 Russia 53 56 Saudi 4 25 26 Arabia 5 Canada 18 19 6 India 15 16 9 Australia 12 13
Top energy consuming countries Btu units World 201 rank 2010 1 1 China 101 110 2
United States
98
97
3
Russia
29
33
4
India
22
24
5 6 18
Japan Germany Australia
22 14 6
21 13 6
The story shifts slightly when the analysis is broadened beyond global company headquarters to include all corporate offices (Figure 2). 491 cities were found to have some level (on the 1-5 ranking) of functioning corporate office for the top 100 energy companies. Summing these levels in each city provides the pattern of global energy company locations. Higher-value cities denote a stronger overall corporate presence, and therefore a higher strategic importance to the overall global energy network. London and Houston were by far the most important, followed closely by Singapore, Calgary and Moscow, and then Beijing. Perth emerged in the third grouping of cities, ranking as 11th overall (equal
2 3
US Department of Energy http://www.eia.gov/cfapps/ipdbproject/IEDIndex3.cfm?tid=44&pid=44&aid=2 Unit of measure: Quadrillion British thermal units (Btu)
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with Hong Kong). The only other Australian city appearing in the top 25 cities was Melbourne. London, UK Houston, USA Singapore Calgary, Canada Moscow, Russia Beijing, China Jakarta, Indonesia Tokyo, Japan Dubai, UAE Rio de Janeiro, Brazil Perth, Australia Hong Kong Warsaw, Poland Abu Dhabi, UAE Buenoa Aires, Argentina Stavanger, Norway Kuala Lumpur, Malaysia Bangkok, Thailand Aberdeen, UK Bogota, Colombia Seoul, South Korea Paris, France Brussels, Belgium Amsterdam, Netherlands Melbourne, Australia
138 130 102 101 95 73 59 55 54 50 47 47 41 41 39 38 37 37 37 36 35 34 34 34 33 0
20
40
Total corporate presense 60
80
100
120
140
160
Figure 2: Total strength of corporate presence, top 25 cities
Analysis of spatial connectivity of energy corporations Following Derudder and Hennemann (2012), the significance of relations and positions of each office within respective corporate hierarchies establishes and maps connections between cities. Directionality is assigned to the data to account for communication flows (inflows and outflows) from progressively smaller offices to corporate headquarters. This acknowledges the importance of local information flows given that the operations and strategies of MNOs are increasingly influenced by local conditions. Indeed, the last decade of modern business practices has seen traditional top-down governance structures being replaced by bottom-up decision-making as local knowledge on governance, environment, economic and social conditions become progressively critical to the success of local operations. The significance of Perth in the context of these information flows is demonstrated through its central position in the force-directed graph of Figure 3. The position and groupings of cities are assigned using weighted forces determined by total corporate presence (size of disk). Arrows denote information flowing both in and out each city. The closer a city is to the centre of the graph – the greater its strategic importance in the flow of local knowledge to global headquarters. Cities with the lowest corporate presence, and as such the least influence in the energy network, are found at the edge of the graph. 4
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Perth
Figure 3: Force directed graph of 491 cities (Perth in red)
The colours and groups of Figure 3 can be roughly translated to regional territories given that each corporate has its own method of reporting which only loosely adheres to these territorial units. The interaction between the cities is seen more clearly by locating them on a world map (Figure 4). The size of each disk represents the importance of city to the network, while its colour is a city’s regional territory and arrows indicate the direction of local information flows. From this, we can see the key energy territorial units are the Americas (light blue), Middle East/Africa (medium green), Asia/Oceania (dark green) and Europe (dark blue). Cities coloured differently to the territory they are located in are either: 1) too insignificant in the network to be assigned a territory (e.g., cities in pink, yellow, etc); or 2) have high significance outside of their own territorial unit (i.e., Tokyo is light blue, indicating its strong corporate energy relationship to the Americas). Perth appears moderately influential with in the energy network, with connections largely associated with its own territorial unit of Asia/Oceania. The position of Perth, along with in- and out-information flows, are highlighted in red in Figure 5. Notwithstanding its high connectivity across the whole Asia/Oceania region, Perth has key connections with the well-linked cities of Tokyo, Kuala Lumpur, Hong Kong, Singapore, Bangkok, Seoul and Beijing. It also links directly to Western Europe and USA through the well-linked cities of Paris and Houston and lesser-linked cities of Vienna, El Dorado and San Antonio.
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Figure 4: Total network of top 100 Platts energy corporations
Figure 5: Perth’s connectivity in total energy network
Analysis of network inflows and outflows of information provides insight into the differences in influence and control of the energy landscape by regional territories and individual cities. Table 2 gives summary inflow and outflow calculations for the network, with the highest ranked cities of London and Houston establishing inflow and outflow end parameters of 61 and 27 respectively. The average city achieved only 2.44 in each. In the context of incoming connections (Figure 6), the top 25 cities are dominated by Western Europe (9 of the 25 cities or 36%) and Asia/Oceania (6 cities or 24%). However, the importance of Western Europe in the energy landscape declines sharply to 12% (three cities) in the top 25 cities of outgoing connections (Figure 7). As such, there appears to be greater equality in regional influence in terms of network
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outflows amongst the regional units of Eastern Europe (16%), South America (16%), Middle East/Africa (24%) and Asia/Oceania (24%). Perth’s presence in the top 25 cities for both incoming and outgoing connections suggests it is significantly prominent in the overall connectivity of the energy network. However, its inflows at 18 (ranked 15th) are 59% less and outflows at 11 (ranked 12th) are 70% less than that of the highest ranked cities. This wide gap implies that the position of cities must be viewed in the context of relative magnitudes of influence and control, not just rank.
Table 2: Network summary information inflows and outflows
Summary network data metrics Inflows (in degrees)
Outflows (out degrees)
Range
0 to 61
Range
0 to 27
Average
2.44
Average
2.44
Median
0
Median
1
27
London, UK Houston, USA Beijing, China Moscow, Russia Paris, France Tokyo, Japan Körfez, Turkey Rio de Janeiro, Brazil Budapest, Hungary Singapore New Delhi, India Calgary, Canada Vienna, Austria Rome, Italy Perth, Australia Bilboa, Spain Berkshire, UK Madrid, Spain Barcelona, Spain Hague, The Netherlands Dubai, UAE Seoul, South Korea Cairo, Egypt Hong Kong Bogota, Colombia
61
27
61
10
42 20
39
9
30
7
28
0
27 17
26
11
25 24 24
6
20 13
19
5
Strength of outgoing connections
19
4
19 11
Strength of incoming connections
18
1
18
0
18 6
17
3
17
2
17 13 5
16
15 1314 10
14 11 13
0
10
Total connection strength 20
30
40
50
60
Figure 6: Top 25 cities ranked by incoming connections
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27
London, UK Houston, USA Singapore Moscow, Russia Rio de Janeiro, Brazil Jakarta, Indo Calgary, Canada Dubai, UAE Cairo, Egypt Warsaw, Poland Budapest, Hungary Perth, Australia Bogota, Colombia Tripoli, Libya Beijing, China Hong Kong Brussels, Belgium Mexico City, Mexico Algiers, Algeria Lagos, Nigeria Paris, France Abu Dhabi, UAE Bangkok, Thailand Buenos Aires, Argentina Bratislava, Slovakia
61
27 39
17
26
14
3
13 13 16 1314 9
61
24 24
20
19
13 11 11 11 13
25 18
Strength of outgoing connections
11
8
10
42
10
Strength of incoming connections
14 10 13 10 10 10
7 4
10 9
30
9 9 89
2 0
7 9 9 10
Total connection strength 20
30
40
50
60
70
Figure 7: Top 25 cities ranked by outgoing connections
Looking beyond the direct connectivity patterns of each city, it is possible to assess the significance of each city to the overall network by measuring connectivity weightings (local impact of the city) as well as network importance (global impact on the network). Summary data for the overall network is given in Table 3. These calculations provide a measurement of the power held by a city in the overall energy network by calculating the connections lost if a particular city was excluded from the network. The cities of most significance to the overall global energy system are London, Houston and Moscow (Figure 8). Though Perth ranks highly as a key connector (14th out of the 491 cities), its significance in the system is around 86% less than the top city of London. This score is particularly relevant for assessing this network given that the spatial distances (in terms of importance of ties) of all cities from all others is exactly even (closeness centrality of 0.0001, except for outliers which score zero). That is, the high degree of inter-connectedness between all cities has created a network where each city has equal access to all other cities. Therefore, it is perhaps due to its relative physical isolation that Perth rates most poorly in calculations of the importance of the networks of its networks (and their networks, and so on; also known as eigenvector centrality). This is best explained by comparing Perth’s rank of 17th (70% less than highest ranked) to the 11th rank of The Hague, despite Perth having a higher rank in all other measures. Indeed, The Hague did not rank in the top 25 by influence (outgoing connections), and only 20th in relative importance (incoming connections) and 18th in network significance. Nonetheless, its higher score in overall networkedness 8
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indicates that is closely linked to some very well-connected cities. Closer examination of its immediate connections finds strong links to interregionally focused cities, namely in Western Europe (e.g., London with strong global connections and Madrid with strong Africa/Middle East connections), Eastern Europe (e.g., Moscow with strong Africa/Middle East connections) and the Middle East/Africa (e.g., Cairo and Algiers, both having strong European connections). Perth’s connectivity is provided in the analysis of Figure 5 (p.5). Its connections are particularly strong, in both level and number, intra-regionally in Asia/Oceania (dark green dots). That is, other than Tokyo which is inter-regionally wellconnected to the Americas (light blue dots), its key regional connections are those which also have stronger intra-regional connections.
Table 3: Summary of network significance and overall connectedness
Summary network data metrics Network significance Overall connectedness (Betweenness centrality) (Eigenvector centrality) Range 0 to 54931.27 Range 0 to 0.029 Average 1051.15 Average 0.002 Median 0 Median 0.001 London, UK
54,931
Houston, USA Moscow, Russia
41,946 32,502
Beijing, China
19,586
Singapore
18,023
Paris, France Rio de Janeiro, Brazil
17,168 16,010
Körfez, Turkey
11,038
Budapest, Hungary Calgary, Canada
10,901 10,494
Tokyo, Japan
9,484
Dubai, UAE
7,892
New Delhi, India Perth, Australia
7,585
7,844
Vienna, Austria
7,077
Brussels, Belgium Barcelona, Spain
7,067 6,743
Cairo, Egypt
6,651
Warsaw, Poland
6,020
Berlin, Germany Johannesburg, South Africa
5,408
Madrid, Spain
5,271
Mexico City, Mexico Algiers, Algeria
4,907
Kuala Lumpur, Malaysia
4,856
5,445
5,263
0
10,000
Network significance 20,000
30,000
40,000
50,000
60,000
Figure 8: Network significance to local information flows (between centrality)
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London, UK Houston, USA Moscow, Russia Beijing, China Tokyo, Japan Singapore Paris, France Rio de Janeiro, Brazil Dubai, UAE Calgary, Canada Hague, The Netherlands Cairo, Egypt Madrid, Spain Stavanger, Norway Rome, Italy Tripoli, Libya Perth, Australia Seoul, South Korea Brussels, Belgium Budapest, Hungary Algiers, Algeria New Delhi, India Caracas, Venezuela Vienna, Austria Berkshire, UK 0.000
Level of overall connectedness 0.005
0.010
0.015
0.020
0.025
0.030
0.035
Figure 9: Overall connectedness of top 25 cities (eigenvector centrality)
Conclusion Understanding how cities rank in terms of connectivity has produced an interesting way for us to view and interpret our position in and command over a wider global system. Nonetheless, the use of advanced producer services, based on their rising economic importance in the 20th Century, overly simplifies the power and influence of cities. This FACTBase Bulletin explores an alternative geography of corporate energy as a means to understand more historic drivers and processes. Whilst Perth holds a lower rank in APS amongst Australian cities, it emerges as Australia’s most global city in terms of energy with particular strong ties to the Asian region. Excluding the BP refinery in Kwinana, this has occurred over a relatively short time period given that it has only substantively been in the energy industry since the 1980s. This report finds its prominence to be both in absolute corporate presence as well as connectedness to the energy network. Perth appears to be more prominent in the world energy market than it is influential as calculated by its own higher strength of in- versus outflows of local information. However, its ranking in the overall network for these measures reflects the opposite (having higher outflow than inflow rank). Similarly, it ranks well in terms of overall network significance and connectedness. The significantly larger gap between Perth and the energy network leaders of London and Houston than between Perth and lower ranked cities across all measures suggests large imbalances in the magnitude and distribution of power. This implies that
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Perth is not as dominant in the energy landscape as rankings would suggest. References Beaverstock, J., Smith, R. & Taylor, P. (2000) World-city network: a new metageography? Annuals of the Association of American Geographers, 90(1), 123-134. Castells, M. (1991) The Informational City: Economic Restructuring and Urban-Regional Process. Blackwell: Oxford. Derudder, B. and Hennemann (2012) An alternative approach to the calculation and analysis of connectivity in the world city network. GaWC Research Bulletin 401. Fiott, D. (2009) China’s PLAN: securing supplies and sailing into blue waters? Madariaga Papers, 2(6). GaWC (2013) GaWC Research Bulletins. http://www.lboro.ac.uk/gawc/publicat.html
Available
at:
Geddes, P. (1915) Cities in Evolution. London: Williams and Norgate. Hall, P. (1966) The World Cities. London: Weidenfeld and Nicolson. Hall, P. (1984) The World Cities. 3rd edition. New York: St. Martin's Press. Sassen, S. (1990) Economic restructuring and the American city. Annual Review of Sociology, 16, 465-490. Sassen, S. (1991) The Global City. Princeton: Princeton University Press. Taylor, P. (2001) Specification of the world city network. Geographical Analysis, 33(2), 181-194. Tonts, M., Martinus, K. & Plummer, P. (2013, in press) Regional development, redistribution and the extraction of mineral resources: The Western Australian Goldfields as a resource bank. Applied Geography, http://dx.doi.org/10.1016/j.apgeog.2013.03.004
About FACTBase The FACTBase project is a joint venture between the University of Western Australia and the Committee for Perth, an influential memberbased organisation driven by a diverse assembly of Perth’s leaders. Members collaborate with business, government and community groups
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to actively improve the liveability of our city, resulting in a real and enduring contribution to Perth and the metropolitan area. One of the only broad-reaching projects of its kind to be undertaken in the southern hemisphere, FACTBase condenses the plethora of databases and studies on the subject of liveability and analyse what’s happening in Perth through words, maps and graphs.
About the Author Kirsten Martinus is an Assistant Professor of Human Geography at The University of Western Australia.
Copyright This paper is copyright of The University of Western Australia and the Committee for Perth. While we encourage its use, it should be referenced as: Martinus, K. (2013) Perth’s global connectivity in energy, FACTBase Bulletin No. 31, The University of Western Australia and Committee for Perth, Perth. Contacts For further information on the FACTBase project contact: Marion Fulker, CEO, Committee for Perth 0419 048 665 or
[email protected] Dr Kirsten Martinus, Assistant Professor - Human Geography, School of Earth and Environment, The University of Western Australia 0431 435 602 or
[email protected]
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