geopolitics of energy: new trends in the energy...
TRANSCRIPT
Geopolitics of Energy:
new trends in the energy
scenario
Luiss Guido Carli, Roma
14 November, 2016
Outline
• Defining variables: Geography, Politics, Energy
o What is Geopolitics
o What’s new in politics: geostrategic trends
o New trends in the energy scenario
• Matching variables: major energy trends
o Russia after the Crimea crisis
o MENA and the Gulf: persisting uncertainty?o Some examples: Libya, Syria, Yemen and Iran
o The shale gas (r)evolution and the development of LNG market
• Connecting dots
Defining variables:
Geography, Politics, Energy
What is Geopolitics
“Geopolitics may be defined, crudely, as the
influence of geography upon politics : how
distance and terrain and climate affect the affairs
of states and men. Because of geography, for
example, Athens was a thalassocracy – a sea
empire – whereas Sparta was a land power”
Sir Halford MackinderDirector of the London School of Economics and founding father of geopolitics
(1861-1947)
A minimal definition of Geopolitics
A comprehensive definition of Geopolitics
• Geopolitics is the study of behaviors of States throughout
the relation among politics and geography, in past, present
and future times.
• This discipline considers that land and sea areas, as well as
population, locations, natural resources, are of strategic
and pivotal value in defining international relations at
political and economical level.
• Energy geopolitics is a recent evolution of the traditional
geopolitics, which considers energy crucial in defining geo-
strategical relations.
The energy geopolitics “toolbox”
• Politics to know interests and players
• Geography to know places and borders
• Energy to know available resources and technologies.
These three variables have to be matched to produce
a good geopolitical analysis
…but it is not an easy task…
…many data and information…
…from data to wisdom…
…sometimes there are good examples…
…other times, bad ones…
What’s new in politics:
geostrategic trends
Europe’s persistent decline
2011 2014
Russia-Ukraine crisis and the Crimean war
ISIS declares the Islamic Caliphate
Ebola becomes a global health crisis
International negotiations over the Iranian nuclear program
Attempting appeasement in U.S.-Cuba relations
Elections in India
U.S. Elections 2016
China’s GDP overcome USA’s
The price of oil plummeted
New trends in the energy
scenario
Global population and GDP increase
BP Energy Outlook 2035, February 2015
Primary energy consumption growth slows
BP Energy Outlook 2035, February 2015
The slowdown in demand growth from industry
BP Energy Outlook 2035, February 2015
Fossil fuels continue to provide most of the world’s energy
BP Energy Outlook 2035, February 2015
Energy supply is boosted by unconventional oil and gas
BP Energy Outlook 2035, February 2015
Shale gas and tight oil are thought to be abundant
BP Energy Outlook 2035, February 2015
Drivers of tight oil and shale gas supply in the US
BP Energy Outlook 2035, February 2015
The shifting geography of supply and demand
BP Energy Outlook 2035, February 2015
Picking the main energy trends
BP Energy Outlook 2035, February 2015
• Russia remains the world’s largest primary energy exporter
and the second largest oil and gas producer, with net
exports of 712 Mtoe and total oil and gas production of 1236
Mtoe by 2035.
• The Middle East remains the largest net energy exporter,
but its share falls from 46% in 2013 to 36% in 2035. The
share of production exported, however, declines from 70% to
63% by 2035 as regional demand grows faster than supply,
increasing the domestic utilization of oil. It is projected that
the region’s population will expand 37% by 2035 and that
GDP grows by 88%.
• US switches from being a net importer of energy, to a net
exporter this year (2015).
Matching variables: major
energy trends
Russia after the Crimea
crisis
• Russia remains the world’s largest primary energy exporter
and the 2nd largest oil and gas producer, with net exports of 712
Mtoe and total oil and gas production of 1236 Mtoe by 2035.
• Russia’s primary energy production grows by 14% between
2013 and 2035. The country’s share of global energy
production declines slightly, from 10% in 2013 to 9% in 2035.
• Natural gas production (75 Bcf/d in 2035) is the second
largest in the world. Yet, unlike in the US (the largest
producer), most production comes from conventional reservoirs.
• Fossil fuels account for 87% of primary energy
consumption in 2035, slightly below 2013. Natural gas
dominates the fuel mix with 53% - the same as in 2013.
Russia: facts & figures
BP Energy Outlook 2035, February 2015
Estimated US, Russia and Saudi Arabia petroleum and
natural gas production, 2008-2013
EIA Annual Energy Outlook, 2013
Dear old European customers
Gas prices in Europe ($/tcm): not a market-based approach
…through the north stream pipeline…
…through the blue stream pipeline…
…and through Ukraine
2014: Russia took over Crimea from Ukraine
First move: EU-US sanctions to Russia
EU-Ukraine-Russia: other instruments of retaliation
Russian countermove: looking for new partners
Cooperation with China
Pleasing Chinese appetite for energy
MENA and the Gulf:
persisting uncertainty?
• Among exporting regions, the Middle East remains the largest
net energy exporter, but its share falls from 46% in 2013 to
36% in 2035.
• The middle east will be the second supplier of LNG (2014-
2020) after the US. In the decade (2020-2030) Middle East
production will expand.
• Middle East output increases by a little over 5 Mb/d by 2035.
• The share of production exported, however, declines from
70% to 63% by 2035 as regional demand grows faster than
supply, increasing the domestic utilization of oil.
MENA and the Gulf: facts & figures
BP Energy Outlook 2035, February 2015
BP Energy Outlook 2035, February 2015
Keeping supply disruption in MENA/Gulf Region
Instability in the Middle East, a major risk to oil markets
• Since the advent of the Arab Spring in 2011, supply disruptions
have once again become a key feature in oil markets, reaching 3 Mb/d
in 2014.
• Libyan production fluctuated throughout the year, civil war limited
output from Syria, unrest continued in Nigeria, the Sudan and
Yemen, and international sanctions on Iran limited output.
• Total supply disruptions in 2014 were well above the historical
average of roughly 400 Kb/d. The historical peak in supply
disruptions -of a little over 4 Mb/d- was reached in 1991, as a result of
the Iraq-Kuwait war and the collapse of the Soviet Union.
• Heightened levels of geopolitical risk and uncertainty suggest
that supply disruptions may well remain elevated through the
medium-term.
Keeping supply disruption in MENA/Gulf Region
Some examples: Libya,
Syria and Iran
Libya is a member of the
Organization of the Petroleum
Exporting Countries, the holder
of Africa's largest proved crude
oil reserves, and an important
contributor to the global supply
of light, sweet crude oil.
Libya: proved reserves
Libya's rank as a producer and
reserve holder is less significant
for natural gas than it is for oil.
In 2011, Libya's oil exports suffered a total disruption during the civil war, and the sporadic
production that occurred was consumed domestically. Libya's oil production recovered in
2012, but remaining lower than levels prior to the civil war. In 2013 and 2014, Libya
experienced major swings in its crude oil production. Libya typically exports most of its
crude oil (70% to 80%) to European countries, with Italy being the leading recipient.
Libya: imports and exports of oil&gas
Libya's natural gas production was almost entirely shut in 2011. Natural gas production
soon recovered in 2012 and stayed relatively unchanged in 2013. About half of its natural
gas production is exported to Italy via the Greenstream pipeline.
Syria’s energy challenge
Syria's oil and natural gas production has declined dramatically since March
2011 because of the conflict and because of the subsequent imposition of
sanctions especially by the United States and European Union.
Syria: imports and exports of oil&gas
Syria's crude oil exports have declined significantly since 2011, and the
country is having difficulties importing refined petroleum products.
Syria does not currently possess the ability to export liquefied natural gas
(LNG), nor are current production levels sufficient to justify exporting natural
gas volumes via pipeline.
• Iran holds the world's fourth-largest proved crude oil reserves
and the world's second-largest natural gas reserves. Despite the
country's abundant reserves, Iran's oil production has
substantially declined over the past few years, and natural gas
production growth has slowed: international sanctions have
profoundly affected Iran's energy sector.
• Sanctions have resulted in cancellations of new projects by a
number of foreign companies, while also affecting existing projects.
Following the implementation of sanctions in late-2011 and mid-2012,
Iranian production dropped dramatically.
• Although Iran had been subject to four earlier rounds of United
Nations sanctions, the much tougher measures imposed by the
United States and the EU have severely hampered Iran's ability to
export its oil, which affected Iran's oil production.
Iran facing international sanctions
Iran: imports and exports of oil
Iran: imports and exports of oil
Iran is the 2nd proved natural gas reserve holder in the world, behind Russia. Iran holds
17% of the world's proved natural gas reserves and more than 1/3 of OPEC's reserves.
However, the vast majority of Iran's gas reserves are undeveloped and exploration is not a
priority of the iranian Government
Iran: imports and exports of gas
The shale gas (r)evolution
and the development of the
LNG market
World Shale Resources
U.S. ENERGY INFO. ADMIN, (June 2013), available at http://www.eia.gov/analysis/studies/worldshalegas/pdf/fullreport.pdf
Shale resources are widely dispersed throughout all regions of the world, but
the United States has the best conditions
Shale Oil and Shale Gas resources
US supremacy in shale gas production
McKinsey Global Institute, July 2013
US shale gas resources
U.S. Energy Information Administration, EIA www.eia.gov/oil_gas/rdp/sgale_gas.pdf
US natural gas production by source
EIA Annual Energy Outlook, 2014
• From 2006 to 2013, US shale gas production grew from 29 Bcm to 265 Bcm(increase from 5.5% to 38.7% of total US natural gas production).
• The US shale revolution had a material impact on global LNG markets and trade,albeit indirect and partially offset by other major global events such as theFukushima earthquake in Japan.
• US shale production contributed to a substantial reorientation of the global LNGmarket by removing many projected US LNG demand from the market.
• The increase of shale production progressively reduced the US appetite forimported LNG from Qatar and other supply sources. This occurred just as QatariLNG production capacity grew to its peak, Russia and Yemen joined the fleet ofglobal suppliers and the global financial crisis and surging oil prices in 2008-2009precipitated a global softening of energy demand.
• Finally, the Fukushima accident (03/11) led the Japanese Government to shutdown all nuclear reactors, re-tightening the global LNG markets that began toreverse these trends. LNG imports grew of about 25% to support the thermalpower needed. The Japanese LNG demand has absorbed the global surpluses.
Shale gas as a game changer
Sheiks vs. Shales
Global LNG Trade in 2006
Before the shale boom became well-established in 2010, US was
considered the global LNG import market
ENERGY LAW JOURNAL, Volume 35, No. 2 2014
Global LNG Trade in 2013
After the shale gas revolution, the US became global exporters, mostly
converged to the Asian market
ENERGY LAW JOURNAL, Volume 35, No. 2 2014
Price Evolution for Oil, Natural Gas, and LNG
Before 2011 LNG oversupply contributed to the decline of spot price for natural gas
in NW Europe and short term price for LNG in Asia.
This, combined with high oil price and oil index
Bloomberg Energy, 2014