natural gas and geopolitics...5. bluestream (2002). turkey demands price and volume reductions for...

http://pesd.stanford.edu/

Natural Gas and GeopoliticsNatural Gas and Geopolitics

2323rdrd World Gas ConferenceWorld Gas Conference9 June 20069 June 2006

David G. VictorDavid G. VictorProgram on Energy & Sustainable DevelopmentProgram on Energy & Sustainable Development

Stanford UniversityStanford University

Program on Energy and Sustainable Development - http://pesd.stanford.edu/ 2

Overview of the StudyOverview of the Study

• Collaboration between the James A. Baker III Institute for Public Policy, Rice University and Program on Energy and Sustainable Development, Stanford University

• Research partners conducted seven historical case studies (see supplemental slides)

• New book fromCambridge University Press


Gas Resources and Potential Demand

White: where the lights are on, satellite imageryBlue Red : Gas resources, with increasing size (USGS)


Atlantic LNGQatargas LNG

Arun LNG

TransMed

YABOG

GasBol

GasAndes

The Belarus Connector

Bluestream

KKKTurkmenistan Export Routes

0 3,000 6,0001,500 Kilometers

ExistingProposed

International Gas Trade Projects: Lessons from History


Overview of this PresentationOverview of this Presentation

1. Changing roles for governments• Winning suppliers are rich in gas and governance

2. Supply security and gas cartels• Few interruptions• Gas cartel unlikely

3. Risks to the ‘Gas Vision’


1. 1. Changing Roles for GovernmentsChanging Roles for Governments

• “Old World”• State-owned enterprises

• Tightly regulated monopolies

• Oil-indexed gas prices

• “New World”• Private operators, financing, and contracting

• Contestable, multiple markets

• Gas-on-gas competition

• The “Real” Hybrid World• National champion energy companies

• Managed markets

• Mixed pricing regimes


From States to MarketsFrom States to Markets

1970 2000

State

Hybrid

Private

Yabog(BoliviaArgentina)

1972

Arun(Indonesia

LNG Japan)1978

Transmed(Algeria Italy)

1983

QatargasLNGJapan1996

Belarus Connector

1996

GasBol1998

Turkmenistan Iran

1997

Trinidad LNG1999

Bluestream(RussiaTurkey)

2002

GasAndes1997

Con

trol

ove

r key

gas

ent

erpr

ises


[

Hibiscus

South Seg

Dolphin

Loran

Teak

Caribbean Sea

Venezuela

Trinidad

Tobago

AtlanticOcean

Gulf of Paria

Columbus Channel

Point Fortin

62°W

62°W

61°W

61°W

60°W

60°W

10°N 10°N

11°N 11°N

[ LNG Facilities

Gas PipelinesExistingProposed

Gas_Fields ]0 50 10025 Kilometers

Confidence for Investors:The Success of Trinidad and Failure of Venezuela


-2,000

-1,500

-1,000

-500

0

500

1,000

1,500

2,000

2006 2010 2014 2018 2022 2026 2030 2034 2038

BC

M

Central, South America North America Europe RussiaOther FSU Middle East North Africa Other AfricaSouth Asia China Asia Pacific Importers Asia Pacific Exporters

Projected Gas Trade Between RegionsProjected Gas Trade Between Regions

Source: Baker Institute World Gas Trade Model (BIWGTM)

Russia

Middle East

N. America

Europe


0

20

40

60

80

100

120

140B

CM

2004 2012 2020

U.S.Europe

Projected US and European LNG ImportsProjected US and European LNG Imports

Source: BIWGTM, Base Case Results


2. 2. Supply SecuritySupply Security

• Rising attention to “gas security”

• How many interruptions? And by whom?

• Could a gas cartel form?


Gas Trade InterruptionsGas Trade Interruptions

1. U.S. Govt. (1981) disallows Algerian shipments in retaliation to price demands.2. YABOG (1987). Argentina refuses to take or pay for full Bolivian shipments.3. GasBol (2001). Brazil refuses full volumes contracted from Bolivia 4. Qatargas (1998). Japan demands price reductions.5. Bluestream (2002). Turkey demands price and volume reductions for Russian gas.

User

1. Russia (1997-1998). Gazprom refuses to transport Turkmen gas to Europe.2. Ukraine (mid-1990s) disputes with Gazprom over volumes and payments for gas

shipments.3. Gazprom (2004) cuts supplies to Belarus (and to Europe via Belarus Connector) in

pricing dispute with Belarus.4. Gazprom (2005-2006) cuts supplies to Ukraine during a pricing dispute but tries to

keep supplies flowing to Europe through cross-Ukraine pipelines.

Transit Country

1. Algeria (1981 to 1983). “Gas Battle” with Italy, the United States and others.2. Arun (2001). Civil unrest in Aceh disrupts shipments.3. GasAndes (2004). Argentine government curtails shipments to Chile.

Supplier

Examples from 7 Case StudiesInitiating Party


A Gas Cartel Is UnlikelyA Gas Cartel Is Unlikely

Others35%

UAE4%

Saudi Arabia4%

Qatar7%

Iran15%

Russia32%

United States3%

Distribution of Proved Gas Reserves Implies Concentration

US EIA; Proved gas reserves (2002)


3. 3. Risks to the ‘Gas Vision’Risks to the ‘Gas Vision’

• Will supplies materialize?• Incredible governments, politicized resources

• Will demand materialize?• Competition from coal and nuclear for electric power• Emerging gas markets in China and India


Russian Natural Gas Production:Russian Natural Gas Production:Historical & ProjectionsHistorical & Projections

0

100

200

300

400

500

600

700

1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 2018

BC

M

Urengoyskoye

YamburgskoyeMedvezh'yeZapalyarnoe

DeficitTotal Production

Source: IEA 2002, Stern, J.P. 2005


Credibility: The ‘Commitment Problem’Credibility: The ‘Commitment Problem’

1. State supplies credibility• “Old World” : state provides capital, enforcer, guarantor (e.g.

Transmed)• “New World”: credibility through transparency, reputation• “Real” World: one-off deals, erratic credibility

2. Realign incentives• Partner with locals political leverage AND exposure

3. Engage international institutions?• Provide capital and leverage broader relationship (e.g. GasBol)• External accounts


0

100

200

300

400

500

600

700

2002 2010 2020 2030

BC

M

Will Demand Materialize?Will Demand Materialize?Projected European Gas Consumption

Source: IEA-WEO 2004

ElectricPower

Residential /Commercial

Industry


Gas Growth in Major Developing CountriesGas Growth in Major Developing Countries

0

50

100

150

200

250

2000 2020

BCM

Other

Residential

Chemical/Fertilizer

ElectricPower

0

50

100

150

200

250

2000 2025

Other

Fertilizer

ElectricPower

Sources: China: IEA; India: Hydrocarbon Vision 2025

China India


Conclusions:Conclusions:

• Governance drives investment

• “Real” world is a hybrid market

• A fungible, global market delivers security?

• Where governments aren’t credible, gas is left in the ground

• Gas-to-power highly uncertain


Supplemental SlidesSupplemental Slides


Seven Historical Case StudiesSeven Historical Case Studies

Shepherd & Ball6. Trinidad LNG to U.S.

Hayes2. Algeria to Italy

Olcott4. Turkmenistan (to Iran, to Russia, to Pakistan & India)

Hashimoto5. Qatar to Japan

Mares7. Southern Cone (Bolivia to Argentina; Argentina to Chile; Bolivia to Brazil)

Victor & Victor3. Russia to Poland and Germany

Lewis & von der Mehden

1. Indonesia LNG to Japan

AuthorBuilt Projects


The Importance of Governance: Why many gas The Importance of Governance: Why many gas resources don’t get monetizedresources don’t get monetized

NA--10.15.51.7%5.9Brazil15

1211.819.22.81.8%6.3Nigeria14

819.230.87.51.8%6.4Qatar13

1310.533.28.82.3%7.9Australia12

639.472.64.32.3%8.1Indonesia11

NA--29.44.32.3%8.1Venezuela10

461.182.84.72.3%8.1Algeria9

NA--2.4NA2.5%8.7Iraq8

368.473.49.22.6%8.9Norway7

204.955.1NA2.7%9.4Turkmenistan6

177.144.47.54.5%15.5UAE5

918.5549.98.78.7%30.0United States4

NA--61.07.29.4%32.4Saudi Arabia3

233.579.05.89.7%33.6Iran2

1131.8578.65.524.0%83.0Russia1

Export Rank

Total Exports(Bcm)**

Gas Production

(Bcm)**

General Investment Risk Index

Reserves and Resources*(Tcm) % world

*Reserves and resources data from USGS (2000); **Production and exports from BP (2004).

natural gas and geopolitics...5. bluestream (2002). turkey demands price and volume reductions for...

Documents