John Roberts on The Caspian and Global Energy Security

Comments 1-2 of 2

Bernard D Ryan says: 04 Feb 2010 10:59

I hope to attend this meeting

Horst Siedschlag says: 14 Jan 2010 18:16

Again, a highly topical event, dealing with a region geographical on Europe's periphery and therefore easily overlooked, but of crucial importance due to its geostrategic location (neighbouring Russia, Turkey, Iran and China) and its vast energy resources.

About this Event

04 Feb 2010 @ 12:45

Pipeline Politics: The Caspian and Global Energy Security

Powerpoints:

Download the Presentation slides here

Leading Energy Security Specialist, John Roberts was the speaker for the fourth in a series of IIEA events on EU Energy Security Policy. The series thusfar has focused on the security of gas supply, and as a specialist in this area Mr Roberts focused his presentation on gas.

Main points of lecture in order of appearance:

-EU gas consumption is in decline. The EU will need 70-80 extra BCM between 2005 and 2020 to meet projected demand.

Anticipated Decline in EU consumption poses security of demand concerns for Russia

-Short term supply of gas remains dependent on a steady flow from Russia.

-Russia’s production capacity is in decline. Production from its major fields has peaked and there is a serious need for Investment to develop new sources of gas.

-Russia relies on imports from the Caspian Sea region to meet its exports to the EU

-Turkmenistan is now a “fundamental” gas producing nation

-Nabucco is the “missing link” for the transport of Caspian gas to the EU.

-The EU has a role to play in resolving the political issues which currently affect Nabucco

-Unconventional gas can return the EU to its status as a gas producing region by 2020.

Summary of Lecture:

Mr Roberts began his lecture with the observation that ¾’s of the gas that is traded across the EU arrives and departs via pipelines. Pipeline dependency leaves the EU vulnerable to supply shocks. Differentiating the nature of gas supply to other fossil fuels Mr Roberts noted that a disruption in supply is more detrimental to gas infrastucture and takes longer to reinstate than a similar disruption to oil supplies. For these reasons, gas requires alternative supply routes and storage faciities. According to Roberts, “ Gas is thus an issue that concerns both the terms and conditions of actual supply arrangements and the terms and conditions of third country transit for some current or prospective suppliers to the EU “

Despite these issues Mr Roberts pointed to gas as the “simplest solution” to the EU’s energy security challenge making the following points; Construction of gas power plant is easier than alternatives; it is relatively clean in terms of CO2 emissions; it can be used as a back up to wind power and it is interchangeable with coal fired plant.

Mr Roberts highlighted the sharp decrease in EU gas consumption which is expected between now and 2020 and discussed the implications for supplier countries such as Russia. He estimated that the EU will need 70-80 extra BCM between 2005 and 2020 to meet projected demand.

Whilst supply can be met by three predictable suppliers in the long run; Norway, North Africa and Qatari LNG much still depends on the presence of a steady supply of gas from Russia. Commenting on the relationship between Russia and the EU Mr Roberts said; “Uncertainty of demand is a problem for Russia, uncertainty of supply is a problem for the EU”. He highlighted a diverging approach to energy between the two- Russia views supply arrangements as “long-haul” bilateral relationships whereas the EU does not favour long-term agreements and is more concerned with the creation of a competitive functioning internal market for energy.

Mr Roberts remarked that Russia’s production capacity is in decline for a number of reasons. He highlighted the following; A high level of domestic per capita consumption(3 times that of the EU), a great degree of waste in its production process(Russia “flares” 50-60 bcm of gas per annum) and a non-funtioning demand control price mechanism. Russia now depends on imports to meet its exports. Production from its major fields has peaked and there is a serious need for Investment to develop new sources of gas. Yamaal province, in the northwest of Siberia is viewed as the “next frontier” of Russian gas exploration but construction costs are high in this geographically remote Arctic region. The Nordstream pipeline is on track to carry gas from Russia’s Shtockman field by 2018. The realization of the Southstream project may be more difficult, with the two partners on the project ENI and Gazprom required to meet 100% of the €25bn construction costs upfront.

Mr Roberts highlighted Russia’s “conundrum’-The Caspian sea area, Turkmenistan in particular, is central to its ability to supply the EU with gas. Traditionally, Russia bought Caspian gas cheaply and sold on to the EU at a higher price. 2007’s rise in EU gas prices encouraged Caspian sea countries to consider supplying the EU themselves.

Mr Roberts described Turkmenistan as a “fundamental’ gas producing nation of great importance to the EU’s future security of supply. Of the 6 major gas rich countries, Mr Roberts classifies Turkmenistan as one of three “serious mass gas exporters” Qatar and Russia being the other two. Unlike many gas resource rich countries it does not prioritise oil over gas (Many of the Persian gulf countries do not export gas and use it exclusively to maintain pressure in their oil fields). The world’s 4th largest field South Yolotan-Osman, with an estimated 4 trillion cubic metres of gas, is located in Turkmenistan. China has moved quickly to exploit Turkmenistan’s potential. In July 2007, the Chinese reached agreement to construct a pipeline between Turkmenistan and China. This 3000km pipeline was completed in December 2009 with the potential to transport 40 BCM of gas annually within 3-4 years.

Iran occupies a pivotal position as a transit country in the transport of Turkmen gas to the EU. It currently has major plans for gas exploration and the construction of LNG terminals.

Mr Roberts was optimistic with regards prospects for the Nabucco pipeline but highlighted political difficulties with the potential to delay the project further. The 5 transit countries (Turkey, Romania, Austria, Hungary and Bulgaria) and the 6 gas companies( RWE, OMV, MOL, Transgaz, Bulgargaz, BOTA?, RWE) involved in the project will meet 30% of the costs upfront. Mr Roberts reported that Turkmenistan was ready to supply Nabucco when it reaches beyond the Caspian. Importantly, the first transportation of Turkmen gas(10bcm) to the EU will take place this year.

Turkey is central to the realization of the Nabucco project. Mr Roberts highlighted political isssues between Turkey and Azerbaijan with the potential to delay the project. He sees a role for the EU in negotiating a diplomatic solution to this issue.

He concluded with a discussion of the ‘game-changing’ potential of unconventional gas such as tight gas, shale gas and coal bed methane gas in the EU’s supply mix after 2020. Pointing to an abundant indigenous supply, Mr Roberts remarked that technological advances could return the EU to a gas producing region once more by 2020.

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