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Strategic Advisors in Global EnergyStrategic Advisors in Global EnergyStrategic Advisors in Global Energy
Caspian Crossroads: Accessing, Transporting and Consuming the Caspian's Oil and Gas
Prepared for Camden Conference Energy Symposiumby Hans Stegehstege@pfcenergy.com
30 January 2010
PetroChina Tops 2009 PFC Energy 50http://www.pfcenergy.com/pfc50
Caspian Crossroads | PFC Energy | Page 2
National Oil Companies (NOCs) outperformed International Oil Companies (IOCs) in 2009, rebounding more quickly from 2008 lowsNational Oil Companies (NOCs) outperformed International Oil Companies (IOCs) in 2009, rebounding more quickly from 2008 lows
Caspian at Crossroads of Europe, Asia and the Middle East
Caspian Crossroads | PFC Energy | Page 3Image credits: Xinhua, Getty, EnergyTechStocks, public domain
Primary Energy Balance, 2008 (Oil + Gas, Mtoe)
+547
+67
+42Caspian
-187+95
+42Caspian region has energy…
-100Asia needs energy B t it’ t
Caspian Crossroads | PFC Energy | Page 4
energy… But it’s not as easy as connecting the dots…
GDP Surging in China
Annual GDP Growth 2004 to 2008
World
China GDP experienced 9.6% growth in 2008
Europe
Latin America
North America
World
India too, pacing non-OECD Asia
Middle East
Asia
FSUOECD Asia
OECD Asia saw limited
India
China
AfricaOECD Asia saw limited growth Key Markets
0% 2% 4% 6% 8% 10% 12%
US
India
Meanwhile, North America and Europe lagging
Caspian Crossroads | PFC Energy | Page 5
Source: IMF & World Bank
Note: GDP growth rates are real and based on exchange rates
Global Vehicle Fleet – Poised for Growth
Limited vehicle ownership in Asian markets experiencing strong economic growthLimited vehicle ownership in Asian markets experiencing strong economic growth
Caspian Crossroads | PFC Energy | Page 6
Limited vehicle ownership in Asian markets experiencing strong economic growth creates the potential for significant motor fuels demand growth
Limited vehicle ownership in Asian markets experiencing strong economic growth creates the potential for significant motor fuels demand growth
Oil Demand Growth Driven by Emerging Markets
North America
Europe-0.3%
FSU1.9%
America0.3%
Middle East 3.7%
Non-OECD Asia 4.6%
Latin America 2 6%
Africa 3.5%
OECD Asia -0.9%
2.6%
Global products demand has grown by 1.4% annually on average from 2004-2008
Caspian Crossroads | PFC Energy | Page 7
– OECD markets have experienced either flat or declining demand– Growth lies in non-OECD markets which now contribute over 40% of global oil product demand
Natural Gas Use On the Rise
Global Natural Gas Demand56
tcf
50
52
54
OECD
44
46
48
Non OECD38
40
42
Non-OECD
34
36
38
1992 1994 1996 1998 2000 2002 2004 2006 2008
Caspian Crossroads | PFC Energy | Page 8
1992 1994 1996 1998 2000 2002 2004 2006 2008
China and India to Lead Asian Gas Imports
20bcf/d
China and India: Future Demandfor Natural Gas Imports
12
16
4
8
0China India
2010 2020 2030
China to begin switching from coal to natural gas in 10+ years
India is 3rd largest non OECD consumer of oil for power
Caspian Crossroads | PFC Energy | Page 9
India is 3rd largest non-OECD consumer of oil for power generation, but will soon start switching to gas
Gas Use is Exploding in Many Producing Countries
5-year avg. domestic demand growth Pipe & LNG Pipeline LNG
Gas needed domestically for power, industrialization, desalination
Qatar
UAE10%
12% Bubble size represents domestic market
e.g. Egypt 1.1 tcf
Egypt
OmanIran
Trinidad
8%
g gypIran 4.0 tcf
Indonesia
Turkmenistan Nigeria
Trinidad
4%
6%
Algeria
Malaysia
Libya
2%
Russia 7 tcf exports17 tcf domestic demand4% domestic growth
Caspian Crossroads | PFC Energy | Page 10
0%0.0 0.5 1.0 1.5 2.0 2.5
Exports (2008) in tcf
4% domestic growth
Tehran Steps Up Energy Diplomacy
Ambitious diplomatic outreach to Azerbaijan, Turkey, Turkmenistan, Russia, India and China
Several key goals of this diplomacy:
Ensure uninterrupted stream of– Ensure uninterrupted stream of revenues from crude exports
– Maintain flow of imported refined products and natural gas to addressproducts and natural gas to address domestic imbalances
– Gain access to foreign investment and technology to boost oil and gas gy gproduction, expand refining capacity and develop LNG export capabilities
Increasingly pivotal player in the
Caspian Crossroads | PFC Energy | Page 12
g y p p yemerging East-West, North-South energy flows Source: Fars / RFE/RL
Iran Must Import Energy to Meet Needs
Northeast relatively stranded
Natural gas imports from Turkmenistan
Crude swap deals at Neka
US attempting to limit gasoline
Neka
US attempting to limit gasoline imports via sanctions
Map source: CIA
Chinese investments in Iranian
Caspian Crossroads | PFC Energy | Page 13
Chinese investments in Iranian upstream, downstream and gas sectors continue (~US$ 20 bn)…
Major Gas Export Pipeline Projects in Doubt
Tajikistan China
KyrgyzstanUzbekistan
IPITAPI
Opposition from Iranian Oil Ministry stemming from security concerns– Would face interference from Jundallah (“Army of God”), based in Baluchistan along the
Caspian Crossroads | PFC Energy | Page 14
Would face interference from Jundallah ( Army of God ), based in Baluchistan along the Iran/Pakistan border
US opposition to IPI, tepid support for TAPI
Turkmenistan Diversifies Its Gas Exports
0
60bcm
Turkmen Gas Exports, 2005-2011China Iran Russia
Iran as largest
30
40
50 export destination
10
20
2009 t t R i hit b i li l i
02005 2006 2007 2008 2009E 2010F 2011F
2009 exports to Russia hit by pipeline explosion
Revenues still high thanks to Russia’s new pricing formula
New pipelines to Iran China open up additional export
Caspian Crossroads | PFC Energy | Page 15
New pipelines to Iran, China open up additional export opportunities
Will the BTC Model Work for Nabucco?
Baku-Tbilisi-Ceyhan began pumping oil from Azerbaijan in 2006, allowing Caspian crude to bypass Russia
Multi-year lobbying effort to push through– US government– Oil companiesOil companies– Local political will
Can it translate forCan it translate for a gas pipeline?
– Geopolitics?– Supply?Supply?– Company support?
– Limitations of gassupplies via
Caspian Crossroads | PFC Energy | Page 16
pipeline
Georgia Conflict Exposed Transport Risk
Russian invasion halted East-Westhalted East West flow of goods
Baku-Supsa closed as precautionas precaution
Railway bridge bombed
Reports of bombing along pipeline route
BTC already shutBTC already shut down due to explosion in Turkey
Caspian Crossroads | PFC Energy | Page 17
Role of Russia?
Russia does not want Caspian gas to reach Europe
South Stream as opposing project to Nabuccop j
Sister pipeline, Nord Stream, would also bypass pesky Ukraine
Source: Pismestrovic, Kleine Zeitung / CartoonArts International
Russia has gas, but needs much of it for domestic consumption– Major export-oriented projects (Yamal peninsula, Kovykta, Shtokman) to
require tens of billions of dollars
Caspian Crossroads | PFC Energy | Page 18
require tens of billions of dollars– Gas exports to China by 2013? 2015? 2020?
Sino-Russian Relations Help Drive ESPO Pipeline
US$ 15 bn to RosneftRosneft
US$ 10 bn to Transneft
20-year oil supply deal for China
Kozmino deliveries started in DecemberDecember
Refinery cooperation?
Caspian Crossroads | PFC Energy | Page 19
Takeaways
Pipeline projects are hard wherever you are, and especially so around the CaspianChina is the most viable alternative export route for Caspian oil and
i th f bl f tgas in the foreseeable future– China has succeeded in reaching deals with a variety of Caspian players,
including Russia, Kazakhstan, Turkmenistan and Iran– Pakistan and India are largely still struggling to reach this level of cooperation,
mainly due to physical geography and regional geopolitics
Iran risks overextending itself, particularly in gas, and must balance a larger security context as wellI di f d i t li i ( d LNG) i i ll f thIndia forced into supplies via sea (crude, LNG), principally from the Middle East
Caspian Crossroads | PFC Energy | Page 20
Strategic Advisors in Global Energy
Main regional offices:PFC Energy consultants are present in the following locations:
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the following locations:
Beijing
Brussels
Delhi Tel (60 3) 2172 3400Fax (60 3) 2072-3599
PFC Energy, ChinaKerry Center N-11371 Guanghua RoadChaoyang DistrictBeijing 100020 China
P.O. Box 11118Manama- BahrainTel (973) 7705 8880
North AmericaPFC Energy, Washington D.C.1300 Connecticut Avenue, N.W. Suite 800
Ho Chi Minh City
Houston
Kuala LumpurBeijing 100020, ChinaTel (86 10) 6599-7937Fax (86 10) 6530-5093
EuropePFC Energy, France19 rue du Général Foy75008 P i F
Suite 800Washington, DC 20036, USATel (1 202) 872-1199 Fax (1 202) 872-1219
PFC Energy, Houston4545 Post Oak Place, Suite 312 Houston Texas 77027 3110 USA
Lausanne
London
Manama
Mumbai 75008 Paris, France Tel (33 1) 4770-2900Fax (33 1) 4770-5905
PFC Energy International,Lausanne19, Boulevard de la Forêt 1009 P ll S it l d
Houston, Texas 77027-3110, USA Tel (1 713) 622-4447 Fax (1 713) 622-4448
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New York
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www.pfcenergy.com | info@pfcenergy.comMain regional offices are shown in blue.
Washington, DC
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