Geoeconomic atlas of world energy. A vision of the future to 2030

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Geoeconomic atlas of world energy.
A vision of the future to 2030

Edited by Vladimir N. Knyaginin.— St. Peterburg: Center for Strategic Research “North-West” Foundation, 2011.— 150 p.

This special edition is an abridged version of the Atlas prepared within the framework of the “Long-Term Energy Foresight of the Russian Federation” project in 2010–2011. This project was initiated by the Russian Ministry of Energy, Rosatom State Nuclear Energy Corporation,
the Russian Federal Tariff Service and the Siberian Coal Energy Company (SUEK).

While working on the Atlas, experts of the Center for Strategic Research “North-West” Foundation focused their attention on the current trends in global economy and energy sector development. Sections of the Atlas cover prospective changes in energy resources, power consumption breakdown and government policies over the next 20–30 years.

V.N. Knyaginin – Head of Research
M.S. Lipetskaya – Head of the Working Group
Working Group: V.Yu. Kopkin, S.V. Kostyushev,
V.D. Nikolaev, L.A. Petrova, Yu.A. Ryabov
The Working Group used materials provided by:N.A. Andreeva, E.Yu. Boze, D.V. Sanatov

Design: N.V. Dynnikova
DTP: N.V. Dynnikova,
K.G. Bulgachenko, M.V. Sidorova
Technical editor: A.A. Guseva
Proofreaders: R.N. Ishbulatova-Elizavetinskaya, A.F. Kolesnik

© Center for Strategic Research “North-West” Foundation, 2011
ISBN 978-5-87417374-6

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Geoeconomic atlas of world energy. A vision of the future to 2030

  1. 1. Center for Strategic Research “North-West” Foundation Geoeconomic atlas of world energy A vision of the future to 2030 St. Petersburg 2011
  2. 2. Center for Strategic Research “North-West” Foundation2 Center for Strategic Research ”North-West” Foundation Geoeconomic atlas of world energy. A vision of the future to 2030 Geoeconomic atlas of world energy. A vision of the future to 2030 / edited by Vladimir N. Knyaginin.— St. Peterburg: Center for Strategic Research “North-West” Foundation, 2011.— 150 p. This special edition is an abridged version of the Atlas prepared within the framework of the “Long-Term Energy Foresight of the Russian Federation” project in 2010–2011. This project was initiated by the Russian Ministry of Energy, Rosatom State Nuclear Energy Corporation, the Russian Federal Tariff Service and the Siberian Coal Energy Company (SUEK). While working on the Atlas, experts of the Center for Strategic Research “North-West” Foundation focused their attention on the current trends in global economy and energy sector development. Sections of the Atlas cover prospective changes in energy resources, power consumption breakdown and government policies over the next 20–30 years. V.N. Knyaginin – Head of Research M.S. Lipetskaya – Head of the Working Group Working Group: V.Yu. Kopkin, S.V. Kostyushev, V.D. Nikolaev, L.A. Petrova, Yu.A. Ryabov The Working Group used materials provided by:N.A. Andreeva, E.Yu. Boze, D.V. Sanatov Design: N.V. Dynnikova DTP: N.V. Dynnikova, K.G. Bulgachenko, M.V. Sidorova Technical editor: A.A. Guseva Proofreaders: R.N. Ishbulatova-Elizavetinskaya, A.F. Kolesnik © Center for Strategic Research “North-West” Foundation, 2011 ISBN 978-5-87417374-6
  3. 3. 3 About this project About this project As major energy market players are in the process of defining their strategies for the decades ahead, Russia has so far lacked its own forecast for long-term changes in global commodity and technology markets, let alone technology shifts in energy production and consumption. The present atlas devised by the Center for Strategic Research “North-West” within the framework of the “Long-Term Energy Foresight of the Russian Federation” project aims to make up the lack of strategic vision and to provide expertise to those involved in decision-making. The atlas is divided into several sections containing an analysis and a forecast for long-term trends, key challenges for further development and unresolved issues for the future. They provide a holistic understanding of global energy markets and potential challenges for producers and consumers of resources. First sections of the atlas are devoted to the external context of the energy sector: trends in social and economic development, core/ periphery areas of economic, demographic and industrial growth, phases of population settlement and current forecasts for energy resources demand growth by industry. Next chapters deal with the analysis of the accessibility and cost of high-carbon energy resources, such as natural gas, oil and coal. They contain basic figures and forecasts for reserves, production, consumption, export and import flows to 2030. These chapters also analyze key advanced technologies and innovation projects. The atlas also features nuclear energy: the uranium market, potential for the construction of new nuclear power plants, information on currently operating plants and new technological developments in the sector. The atlas analyzes several models of the nuclear fuel cycle adopted by different countries. The concluding part of the resources chapter is dedicated to renewable energy. It provides forecasts for wind and solar energy markets as the most lucrative sectors in terms of capital attracted and technological growth. This section also focuses on hydropower and biofuels. In addition to the evaluation of key markets for energy resources the atlas pays special attention to the institutional basis of the sector. It contains sections on government policies in different sectors, including environmental protection, phases of electricity markets regulation and international organizations’ energy initiatives. Maps, diagrams and charts in the atlas are supplemented by timelines of key developments that have occurred and events that are set to happen in the opinion of most experts and market forecasters. The timelines cover the period from 1980 to 2050. All the developments have been selected as to their impact on the markets. Lifecycles for natural gas, oil, coal and electric power markets have been drawn up to describe major milestones in their development.
  4. 4. Center for Strategic Research “North-West” Foundation4 Introduction This Atlas is one of the results of works on Russian energy foresight. The project was implemented in 2010-2011. Relevance of the project is caused by the fact that major players in global markets choose different strategies to develop their energy systems proceeding from the economic and social development priorities. According to the currently made decisions the technological growth policy, standards and regulations, requirements to the related sectors and consumers, the energy resource base development projects, the external trading partnerships are worked out. The need for its own forecast of long-term changes in the world and macro regional trade and technology markets is obvious for Russia, as well as forecast of technological shifts in the sectors of energy production and consumption. In the next 20 years the growth of the world national economies will require much more energy resources than the current production is able to provide. Increase of energy consumption will be parallel to the economic growth, especially in developing countries. The starting points of this study are questions about the ability of energy resources markets to meet the growing needs of the world economic system, about the ways of national energy balances development in accordance with the principles of safety and efficiency, about the trends in the field of energy technologies, about the new ways of solving the problems of energy security of the national economies. During the energy forecasting to 2030, the authors discovered several key trends that would shape the directions of the sector development. It were they who made the basis for the atlas formation: 1. Theglobalfuelandenergybalanceisexperiencingprofound transformations.The resource limitations are more obvious for carbon energy which is “doomed” to increase its cost: a. Peaks of oil production have already been passed by majority of countries; • Global peak of coal production is planned for the next 10-20 years, the cost of its production is increasing; • Prospects for gas are more favorable – natural gas reserves have increased significantly in recent years, but mainly due to non-conventional gas1 , which is considerably more expensive yet. In particular, several states declared the increase of reserves volume by assessing of shale gas pools; • There will be a rise in cost of hydrocarbon extraction projects, the development of deeper layers of the ocean shelves, in Arctic areas, etc.; • Heavy oil is much more expensive than high-gravity one. If the growth of the resource cost continues, consumers will seek to limit the oil consumption; • New projects of the hydrocarbons extraction are so large- scale that to pay for them in the current situation will be possible only with the involvement of public funds, what is rather difficult, taking into account the general complicated situation with public finances. b. The calculation of the full “lifecycle” of superbig non-carbon technological complexes will be carried out not earlier than 2020. These projects are so complicated, prolonged in operation and scaled concerning the influence on the ecosystems, that economists are not yet able to calculate their real value: • The first calculations of the “lifecycle” were conducted in the nuclear industry, but the assessment of the consequences of accidents at the “Fukushima-1” nuclear power plant (or rather, the complexity of the calculation of these effects), as well as long-term trend of increased cost of building 1 Such countries as Poland, the UK, France, Germany, etc., which are currently engaged in geological exploration, could join the major holders of shale gas along with the U.S. nuclear power plants shows that the “nuclear renaissance”, proclaimed in the early 2000s, is strongly problematizated now; the sector has to scale to new conditions in a short terms – it means to reduce the cost and to improve significantly the safety of the project; • Hydropower has practically no estimates of “lifecycle” cost yet, but there is an obvious conflict of large hydropower plants and other industries, competing for resources, which become the main “apple of discord” in many developing regions – water2 and land. The growth of large hydropower plants is also restricted by the scale of projects, while the small hydropower plants demonstrate relatively poor effectiveness; • In the coming years the estimation of carbon energy “lifecycles” can be expected, what could mean a significant increase of cost for a number of resources. First of all, the cost of carbon dioxide emissions for its issuers will be assessed; • The renewable sources are the only resources, for which the reduction of generation cost is predicted. So far the assessment of available resources exceeds technological capabilities (there is a sense of infinity, low cost or even free resource - “the sun light is free”). The terms of scaling generationonrenewableenergysources(hereinafter–RES) are a key factor that will influence on the transformation of the existing balance in the next 20-30 years. However there are significant difficulties with the widespread adoption of these sources: to integrate the RES into the existing power system or to build alternative networks? Whether the competitiveness with conventional energy sources will appear at the turn of 2030s? How long the systems of state support will be available for the RES in high budget deficits? 2. Resource balance becomes more projected globally. a. Today the world energy balance (hereinafter – WEB) is sooner the object not for analytics, but for politics. WEB management is implemented through a powerful state intervention. Energy has become a key issue of both domestic and foreign policy, big part of public expenses is aimed at it. b. At present the world has fragmented design of the future. The general vision, construction of global markets can be contour-formulated to 2030, there are also some forecasts to 2100. But some states have already moved from a scenario-alternative predicting of the future to the system planning. It is still an open question whether the transition from scenario predicting to the regulatory planning will be realized by 2030. c. The authors fixed the presence of the competing visions of the future. Obviously, the interest groups, representing various energy sectors, have a claim to the same resource – private and public investment, and give different, sometimes even contradictory forecasts as a proof. Due to the lack of public finances it is extremely important to invest in a sector that ensures the maximum economic returns both in the medium-term and long term prospects. 3. New type of energy resources consumption appears, it will require to change the architecture of power systems. The structure of energy will depend on the economic growth model realized by the largest consumers. a. Asia claims to become the center of the world economic system. China is the “attacking” leader, and the Asian energy market is the one, closing and determinating the demand and prices for the majority of resources. According to a variety of energy resources China will be a major buyer in the market, but still not the referee. The growth of China 2 Here it means “physical” reduction of hydro potential in some regions due to the development for the needs of agriculture, and due to the climate warming.
  5. 5. 5Introduction will go on as long as its urbanization will, and it likely will not over to 2030. b. The main increase in consumption will occur in the largest urban areas, which are the key consumption centers. But the type of demand is changing within the cities: the “Prosumer model” becomes more widespread (it means the combination of energy producers and consumers); a number of megalopolises turned to the concept of building green, energy efficient, intelligent, postcarbon cities. The general sense of these concepts is the rejection of the extensive growth of the resources consumption, the transition to a new development quality. Many of the metropolises either in developed or in developing countries announced the transition to the superefficient type of growth and the readiness to restructure the municipal services, including construction sector and transport infrastructure in the next 10-15 years, the energy resources consumption will dramatically reduce. c. The new consumption structure, its deconcentration, will require to change the architecture of power systems completely: requirements to networks flexibility are declared, there are graphics of deployment of “Smart Grids”. 4. The global nature of markets, institutional systems and infrastructures building. a. The globalization of decision-making process. Many solutions are institutionalized due to the international consensuses (agreements of the G20, the UN and many other international organizations). First of all, it is about achieving a global consent on the need to reduce carbon emissions. b. Overall institutional and trading systems, the globalization ofmarkets,financesandinvestmentsurgeontheunification of energy markets. c. The globalization of fuels markets. The gas market is globalized following the oil market (it is supported by the LNG transportation projects). There is the globalization of the coal market. Its elements are the growth of international flows, the formation of several macro-regional centers of pricing (markets’ centers), the transition to the short-term contracts dominance, etc. All this new energy markets’ architecture is being formed right now. d. The world leaders, outsourcing and equipment delivery networks were defined in the technology markets, and the key buyers / areas of technological transfer were marked out as well. It is clear who and how will determine the technological development of energy; there is a countable number of contenders for leadership. e. There is an enlargement of power systems, supported by common infrastructure projects (transport corridors, energy corridors, gas transportation infrastructure, etc.) and by the convergence of legal regimes. f. A common system of energy management can probably begin to form by 2030s, but so far combined solutions are planned in this area: global distribution networks and local solutions.
  6. 6. Center for Strategic Research “North-West” Foundation6 The structure of the Atlas The Atlas is divided into several sections containing an analysis of long-term trends, key objectives for further development and unresolved issues for the future. In complex they provide a holistic understanding of the modern picture of the global energy markets development and potential challenges for producers and consumers of resources. The first sections of the atlas are devoted to the analysis of the external context for energy: trends of socio-economic development, the core and peripheral areas of economic, demographic and industrial growth, assessment of phases of the settlement system in different regions, existing forecasts for energy resources demand growth by industry. Next chapters deal with the analysis of the accessibility and cost of key resources of the existing carbon energy, such as natural gas, oil and coal. They contain basic figures and forecasts for reserves, production, consumption, export and import flows to 2030. These chapters also analyze advanced groups of technologies and innovation projects, which, in the authors’ opinion, will be claimed mostly by the fuel resources sector over the next 20 years. The atlas also features nuclear energy: the uranium markets, potential for the construction of new nuclear power plants, currently operating plants, new technological ways for sector development. The Atlas analyzes the final part of the nuclear fuel cycle, which has now several different versions, as well as the decommissioning of active or stopped facilities. The concluding part of the resources chapter is dedicated to renewable energy. It provides the existing potential and forecasts for markets, which recently have become the lucrative sectors in terms of capital attracted and technological growth, - wind and solar energy markets. An estimation of technological maturity is given for these markets. This section also focuses on hydropower – the most technologically mature carbon-free energy sector; provides data on the potential of biofuels as one of the most likely competitor on motor fuel markets. In addition to the estimation of key markets of energy resources theatlaspaysspecialattentiontotheinvestmentandinstitutional basis of the sector, as well as to the infrastructure. It contains sections on government policies in different sectors, including ecology; phases of electric power markets regulation; urban energy policy; integration of electric power markets; policy and international organizations’ initiatives in the sector. Maps, diagrams and charts in the atlas are supplemented by timelines of events that have occurred in the analyzed sector or that are set to happen. The timelines cover the period for 70 years – from 1980 to 2050. All the events have been selected due to the degree of their impact on the markets – “indicative”, which illustrate the described trends, or “bifurcation points”, which lead to the system changes. Lifecycles for natural gas, oil, coal and electric power markets have been drawn up to describe major trends of their development in historical prospect. Lifecycles of technological growth are described for a number of new technologies of the carbon energy, solar, wind and bioenergetics sectors.
  7. 7. 7Economy and consumption Consumption Long-term trends in the sphere of energy resources consumption 1. Sectors pretending to the maximum growth rate with the high potential of resources demand are: a. Transport sector. According to the IEA forecasts, energy consumption by transport will increase by 50% by 2030, by 2050 it will be 80% against 20083 . The growth of consumption in the transport sector is caused by both the automobilization and the placing of the transcontinental traffics which will require a substantial expansion of sector fuel base. Different world regions should singly answer the question what fuel will be most widespread - benzine or alternative motor fuel resources - biofuels, LNG, fuel from coal or electricity. 3 Transport, Energy and CO2 // IEA/OECD, 2009 b. The housing sector is likely to experience radical transformations over the next 20 years. There is a high level of energy consumption at the household in modern cities; this is caused by the features of the housing, utilities and transport infrastructure functioning, by the specific of consumption culture. At the same time a new investment cycle is being launched in the real estate, the basis for this cycle will be the efficient use technologies. c. New industry. Among the industries that show the maximum growth rate the following could be mentioned: the petrochemical industry, production of composite materials, electronics, sophisticated electronics, robotized systems, production based on biotechnology, etc. It is the regions that specialize in these sectors will require the energy infrastructure. 21862 14167 7601060 242 54 0 5,000 10,000 15,000 20,000 25,000 Highways Railways Comparison of infrastructure Source: China Metals USAChina 162 152 59 12 11 6 3,4 1,8 0 20 40 60 80 100 120 140 160 180 China India Indonesia M exico Brazil South Korea EU U SA People per 1 vehicle Source: SMMT (km per 1 million people) Roads 1990 2005 2030 1990 2005 2030 1990 2005 2030 20 15 10 5 0 20 15 10 5 0 20 15 10 5 0 North America Europe Asia Pacific Marine Aviation Rail Heavy duty Light duty Light duty vehicle demand will decline by about 20% in North America and by one-third in Europe In Asia Pacific, transportation demand will nearly double from 2005 to 2030 Transportation demand by region (millions oil equivalent barrels per day)
  8. 8. Center for Strategic Research “North-West” Foundation8 2. Among the main changes, which can occur in transport sector, the following can be mentioned: a. Future volume of motor fuel demand. According to the most of forecast centers an essential expansion of fuel base of transport sector can be expected in the next 20 years. For instance, Exxon analysts consider economical and hybrid cars the most quick-growing sector of transport field: 1.2 billion economical cars will be used in 2030 (400 million more than now), and 80% of their demand will be shared in South-East Asia, 1/3 from them — for China. In North America the demand on economical cars will grow by 20%, in Europe — by 30%. The share of traditional cars will decline from 99% (now) to 85% (in 2030). 15% will be shared by cars with different hybrid engines. The graphic below shows the forecasts of sector growth for different world regions. On the contrary the ВР Company consider that though the new fuel types will become more popular, they won’t change the situation radically. Traditional fuel will remain the only important for the industry, but by 2030 the growth of its consumption will stop. b. The change of principles and structure of transportation organization (air traffic, rail transport mentioned earlier, etc.). c. The possible technological modernization of shipbuilding (transition to significant lighter and more high-speed ships, which reduce the cost of sea shipping). 3. Geographical centers of energy consumption have different characteristics of demand: a. Most analytic centers expect in BRICS, Mexico and the Middle East maximum increase in energy resources consumption to 2020-2025, and then the growth slowdown is possible. Sectors, ensuring the demand, are – traditional industry, transport and housing. b. Europe, Japan and the USA show medium rates of industrial production growth with the restructuring of sector structure and production geography. This is the area of localization of the most high-tech kinds of activity, which concentrate in megalopolises or urban districts and have demand characteristics different from the one of low limits industry in developing regions. Some reduction in need in energy resources is predicted in these regions even with the positive economic growth rate. c. Transition economies (postindustrial or just entering the industrial stage states — East Europe, CIS, some states of Asia, Latin America, the most of African states) are yet a “blind” area for many forecasts. The volumes of future energy resources demand will depend on the type of economic development, which they turn to, which industries they will specialize in. 4. The consumption pattern is changing in the largest cities: a. Deregulated energy markets generate the “stochastic” demand. It is connected with the spatial deconcentration and change of economic activity character. The notions of quality and energy accessibility, volumes and peak demand localization are changing. In the postindustrial city the daily schedule of citizens’ life and the periods of the main services differ significantly from traditional notions of peak hours in the city, the so-called “Fordist type”4 . In particular, the consumption of energy and other resources increases in the night time, and it is practically impossible to predict the period and sources of peak demands. b. The asymmetric demand growth is primary electric power demand and reduction of need in heat. This is on the one hand connected with new technological principals of building: improvement of heat reservation systems in buildings (heat insulation and recovery, etc.) and gradual transition from heating to warming (through the air supply systems and electric heat sources), and on the other hand connected with the enhanced use of electricity in transport, including private one. c. The “digital energy” demand is the increasing volumes of use of digital devices, which create a scale demand of electric power (the value of this parameter is predicted 25% for separate states of America by 2020). 4 Cities with the traditional industry dominance. Oil 10 20 30 40 2000 2010 2020 2030 2.6% p.a. 2.9% p.a. World power generation Renewables Hydro Nuclear ThousandTWh 0 10 20 30 2 4 6 8 10 China South KoreaThailand Malaysia 2030 2009 1990 MWhpercapita GDP per capita, $2009 PPP, thousands Electricity and income since 1990 1990 0 Coal Gas
  9. 9. 9 5. Increasing scale of involving “local” (or distributed) energy sources and exploit them players into markets. Modern technological solutions promote gradual increase of the role of separate consumer in the market, and appearance of “consumer-producer” in one. 6. Information support of networks is able to change the system of relations “producer-consumer” significantly. Enhancement of demand management from consumers’ side: the use of new methods of accounting and individual control, including on-line. Creation of smart grid is the answer to increasing decentralization (scale reduced) of generation and consumption. Thus, the emergence of electric cars and the local (house) generation formed a need in integration of these utilities into a single network, what, on the one hand, would favour the solving the problems of uneven load distribution, on the other hand, would stimulate the demand for equipment of local generation or electric cars. For example, in the concept of such technological corporation as Siemens electric vehicles are considered not only as objects of consumption, but also as a source of electricity. 7. There is a gradual removing of barrier between the consumer and the producer and issue of new types of players into the market – the seller of objects with embedded power; owners of local generation facilities, which can be connected to a single network. Economy and consumption
  10. 10. 10 Center for Strategic Research “North-West” Foundation 19% 39% 32% 10% 2010 1,542 18% 37% 35% 10% 2030 1,574 24% 27% 37% 12% ЕU 2010 1,219 24% 24% 42% 10% ЕU 2030 1,242 27% 24% 36% 13% 2010 319 30% 16%41% 2030 296 34% 11% 47% 8% 2010 112 37% 14% 41% 2030 162 29% 22% 36% 13% 2010 436 30% 23% 34% 13% 2030 502 48%11% 31% 10% 2010 1,379 47%19% 26% 8% 2030 2,274 28% 11%48% 13% 2010 408 36% 19%32% 13% 2030 807 26% 28% 27% 19% 2010 388 24% 32%25% 19% 2030 645 17% 15% 63% 5% 2010 484 18% 16% 61% 5% 2030 642 35% 31% 22% 12% 2010 436 36% 31% 21% 12% 2030 624 29% 25% 31% 15% OECD Asia-Pacific countries 2010 555 31% 19%34% 16% 2030 564 India: continuation of basic industrialization Japan: trend reversed: economic growth with falling resource consumption Russia: effeciency in consumption with current consumption breakdown China: consumption growth ensured by rise in mobility. Better energy efficiency in industry and residential sector The Caspian: maintenance of current trends Africa: Growth ensured by South and North Africa. Continent's industrialization postponed? Europe: Slight growth. A new consumption paradigm? Middle East: maintenance of current trends Unted States: Slight growth. A new consumption paradigm? Australia: growth ensured by industry and residential sector Latin America: further industrialization and rise in mobility Energy consumption by country and region, IEA reference case scenario, mtoe Industry Transport Residential sector Other World energy consumption by sector, IEA projections, mtoe 11%10% 28% 27% 34% 2010 30% 28% 32% 2030 8,423 11,045 11% 10% 8% 13% High-carbon generation Post-carbon generation Post-carbon distributed generation Centralized asymmetric grids Centralized superconductive grids Symmetric grids EnergyefficiencyQuota-basedconsumptionConsumptionmanagement Industrial-like energy systems Energy efficiency+" Carbon-free energy sector "New energy paradigm" Resource-producing cities "Energy efficiency" Russia China USA, EU Japan? India Saving in consumption efficient lighting co- & trigeneration Efficient and ecofriendly solutions (higher efficiency factors, decreased ecosystem load) Energy consumer- producer paradigm Flexible system architecture Trends in energy consumption as defined by respective strategy papers of several countries ЕU–2030 USA–2030 China–2030? Russia–2030 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 Primary energy consumption, 2010 Primary energy consumption, 2030 Energy consumption, IEA reference case scenario, mtoe, 2010–2030 U SA China EU Russia Africa India M iddleEast Latin Am erica Japan Brazil Caspian region 0 Breakdown of final energy consumption by industry, 2010–2030 Source: Center for Strategic Research “North-West”, based on IEA World Energy Outlook 2010, DOE, national energy development strategies
  11. 11. 11Resource balance Breakdown of primary energy consumption by source, 2010–2030 24% 37% 24% 10% 1%4% 2010 20% 32%23% 11% 1% 13% 2030 17% 35%25% 14% 2% 7% 2010 10% 28% 28% 14% 2% 18% 2030 43% 17% 14% 1%2% 15% 30%19%28% 2% 6% 2030 20% 17%60% 3% 2010 17% 17% 62% 1%2%1% 2030 17% 21%53% 6% 2%1% 2010 14% 18% 52% 9% 3% 4% 2030 66% 17% 3% 1% 3% 10% 2010 56% 19% 8% 6% 3% 8% 2030 42% 23%6% 1% 27% 2010 40% 25% 10% 3% 3% 19% 2030 2% 51% 47% 2010 2% 44% 51% 1% 2% 2030 16% 21% 13% 1%1% 48% 2010 13% 18% 16% 2%2% 49% 2030 6% 39% 9%1% 13% 32% 2010 4% 31% 15%3%11% 36% 2030 2010 2,281 2,353 1749 1831 496 482 169 241 688 781 2,131 3,568 620 1,204 596 940 655 868 245 386 44 20% 1% 10% 21% 2010 569 4% 36% 23%2% 10% 25% 2030 812 52% 28% 11% 3% 5% 2010 4,463 45% 24% 14% 7% 6% 4% 2030 7,434 of which Brazil gas to gradually replace coal India: switch to gas and rise in oil consumption Japan: removal of oil and coal, growth of gas. Renewable energy to replace nuclear? Russia: egologization of the energy mix, growth of nuclear, hydro and gas China: slow transition to low-carbon energy mixThe Caspian: conservation of the current energy mix Africa: switch from local to global resources Europe: transition to post-carbon energy United States: transition to post-carbon energy Asia Pacific (including China and Japan): Latin America: switch to gas and renewable energy Middle East: switch to gas 4% 5% 24% Final energy consumption by country and region, IEA reference case scenario, mtoe 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 Electricity generation by energy source, 2010, TWh 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 Electricity generation by energy source, 2030, TWh Wave CSP PV Geothermal Wind Bio Hydro Nuclear Gas Oil Coal 1% U SA EU Caspian Japan Asia Pacific Russia India China South Am erica Africa M iddleEast Brazil M iddleEast 25% 29% 22% 7% 3% 14% World 16,014 mtoe 2030 27% 33% 21% 6% 2% 11% World 12,271 mtoe 2010 U SA EU Caspian Japan Asia Pacific Russia India China South Am erica Аф рика Brazil Oil Gas Coal Nuclear Hydro Renewable Source: Center for Strategic Research “North-West”, based on IEA World Energy Outlook 2010, Russian Energy Ministry
  12. 12. Center for Strategic Research “North-West” Foundation12 Gas: 2010–2030 The dynamics of the energy resource base over the last decade 1. The increase of absolute indicators of proven natural gas reserves in recent years, mainly due to the new technologies of production and spread of geological exploration to all new territories. Between 1988 and 2010 the amount of reserves grew to 185 trillion cubic meters or more than in 1.8 times. 2. Energy resource base enhancement. The growth of reserves occurred mainly due to the following reasons: a. After-estimation of nonconventional gas reserves. In particular, the opening and scale commercial exploitation of shale gas reserves in the USA. Shale gas and gas from coal bed share already 57% of gas production in the USA. At present there are 24 fields of shale gas on the territory of North America, its reserves are evaluated at about 20–25 trillion cubic meters, what is compared to the Gazprom reserves, evaluated in the volume of 33 trillion cubic meters. It is the adoption of new technologies of shale gas exploration and production what will let gas with its reserves “distribution” overtake coal; b. Offshore exploration; c. Geological assessment of Arctic area reserves. 3. At the same time there is an exhaustion of conventional gas resources in old fields. In the 2000s the peaks of production were passed in number of major producing countries – the USA, Azerbaijan, Algeria, Nigeria, etc. Other major exporters (Russia, Iran, China, Saudi Arabia and others) can still increase the volume of production. 4. The sophistication of the energy resource base has led to the increase of diversity and expansion of the players on the gas markets, rise in cost of field exploration, demand for a whole complex of new technological solutions. 250 300 350 200 150 100 50 0 Norway Poland Denmark Italy Germany Netherlands United Kingdom billioncubicmetersperannum actual forecast 1970 1972 1974 1976 1978 1982 1980 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Source: The Oil Drum
  13. 13. 13 Gas proved reserves changes, 2000–2010 Russia– South Korea Proved gas reserves trillion cubic meters, 2010 Brazil Venezuela Peru Argentina United States Canada Algeria Libya Egypt Saudi Arabia Iraq Qatar Kazakhstan Russia China South Africa India Pakistan Bangladesh Australia Ukraine Norway United Kingdom Nigeria 4.6 6.8 47.6 47.04 29.2 8.4 3.4 5.13.9 4.9 4.4 4.4 1.24 3.08 25.1 1.71.7 0.70.3 2.2 1.7 2.3 1.8 Turkmenistan 2.8 7.4 1.11.0 5.7 7.3 1.60.91.51.3 1.3 2.9 1.00.6 2.9 2.0 1.1 Bolivia Myanmar Thailand 22.7 Iran Reserves in 2010, trillion cubic meters Reserves in 2000, trillion cubic meters Gas reserves growth zones Gas reserves decline zones Major gas pipelines projects, 2010 NameRegion Destination Capacity, billion cubic meters Status Operational Altai China 30 projected 2015 South Korea 10 projected 2015–2017 Nord Stream Northwestern Europe 27.5 underway 2011 Nord Stream-2 Northwestern Europe 27.5 projected 2012 South Stream Southeastern Europe 63 projected 2015 Nabucco Southeastern Europe 26–31 projected 2017 ITGI Southeastern Europe 12 projected 2017 TAP Italy 10+10 projected 2017 Igat 9 Europe 37 projected 2020+ CAGP China 30 underway 2012 CAGP expansion China 20 projected 2012+ TAPI Pakistan 30 projected 2015 IPI India 8 projected 2015 Arab Gas Pipeline Middle East/Turkey 10 partially built н/д Myanmar – China China 12 underway 2013 Galsi Europe 8 projected 2015 Russia Caspian region/ Middle East Caspian region Middle East/Turkey Asia Pacific Africa < 5 5–15 15–30 > 30 LNG plants under construction Plant Capacity, billion cubic meters Operational Algeria Skikda 6.1 2013 Gassi Touil 6.4 2013 Angola Ангола 7.1 2012 Australia Pluto 6.5 2011 Gorgon 20.4 2014 Gladstone LNG 10.6 2014 Queensland Curtis 11.6 2015 Indonesia Donggi Senoro 2.7 2014 Papua New Guinea PNG LNG 9 2014 Peak gas by country Canada Azerbaijan Uzbekistan Turkmenistan Kazakhstan United States United Kingdom Russia Romania Netherlands Italy 2007 2008 2009 2008 2009 2007 2000 2006 1976 2008 2001 1950 1960 1970 1980 1990 2000 2010 Indonesia Netherlands 1.4 Source: Center for Strategic Research “North-West”, based on EIA DOE, Forbes, IEA World Energy Outlook 2010, Russian Energy Ministry, Gazprom Resource balance
  14. 14. Center for Strategic Research “North-West” Foundation14 Factors underlying the forecasts of the gas resource base transformation 1. The evaluation of “effective” reserves will vary depending on the market price for gas. Thus, in recent years the shale gas has been considered more and more profitable for production, and this gas was formerly among expensive (inefficient) resources. 2. Technological progress will likely allow to change the assessments of volumes of effective and produced reserves. 3. Reserves of nonconventional gas should be after- estimated in countries, which are approaching the peak of nonconventional gas production, in particular Russia. It will likely allow to postpone the production peaks, which are postponed to the period after 2030 in our country. 4. New regions with a huge gas reserves can appear on the map. Thus, the UK, Israel, Poland and Germany joined this group recently. 5. Rise in price and enlargement of investment projects can be predicted. 6. Key questions: the development of the infrastructure for gas transportation from new production fields; cost and laboriousness of works on new fields.
  15. 15. 15 Gas proved reserves, 2010 Alaska Gulf of Mexico India’s continental shelf Sakhalin US and Canadian Atlantic continental shelf Brazilian continental shelf West African continental shelf North Sea and Arctic continental shelf gas reserves: 6.52 trillion cubic meters gas reserves: 3.7 trillion cubic meters gas reserves: 135 trillion cubic meters gas reserves: 0.39 trillion cubic meters gas reserves: 0.5 trillion cubic meters gas reserves: 3.7 trillion cubic meters gas reserves: 169.8 trillion cubic meters gas reserves: 1.9 trillion cubic meters gas reserves: 0.8 trillion cubic meters Venezuela Peru Nigeria Australia Indonesia China Libya Brazil Algeria Kazakhstan Russia South Africa India Australia’s continental shelf Source: Center for Strategic Research “North-West”, based on EIA DOE, Forbes, Russian Energy Ministry, Gazprom Gas proved reserves, trillion cubic meters, 2010 < 5 5–10 15–30 > 30 Continental shelf oil and gas Gas production costs, US$ per 1,000 cubic meters min max 0 50 100 150 200 250 300 350 Conventional natural gas Shale gas Offshore gas Countries with the largest gas reserves, trillion cubic meters, 2010 Norway Kazakhstan Malaysia Indonesia Australia Iraq Algeria Venezuela Nigeria United Arab Emirates United States Saudi Arabia Turkmenistan Qatar Iran Russia 2.3 2.3 3.0 3.1 3.1 4.5 4.9 6.0 6.9 7.4 7.4 25.2 29.3 47.0 5.2 2.4 Resource balance
  16. 16. Center for Strategic Research “North-West” Foundation16 Shale gas recoverable resources, its production and exploration areas, 2010 Source: Center for Strategic Research “North-West”, based on EIA, Oil and Gas Journal, USGS, Wood Mackenzie, "TEK: Strategies of Development" Journal, Ukrainian Ministry of Energy and Coal Industry Technically recoverable shale gas resources as stated in official assessments n.a. < 5 billion cubic meters 5–10 billion cubic meters > 10 billion cubic meters Producing areas Areas for which estimates and exploration are carried out Areas with shale gas potential (preliminary geological assessments)
  17. 17. 17 Arctic gas potential, 2010 Source: Center for Strategic Research “North-West”, USGS, Assessment of Undiscovered Oil and Gas in the Arctic, Gautier et al., Science, May 2009 Greenland Canada Russia 1 5 7 9 10 14 15 2 Thule Murmansk Тикси Pevek Barrow Prudhoe Bay 1 2 Longyearbyen WSB 1 AA 2 EBB 1 EGR 1 YK 2 AM 3 WGEC 1 LSS 1 NM 1 BP 2 EB 1 NKB 1 TPB 1 NGS 1 LM 1 SB 3 LA1 NCWF 1 VLK 1 NWLS1 LV 1 ZB1 ESS 1 HB 1 NWC 1 MZB 1 NZAA1 TUN 1 CB 1 LS 1 JMM 1 FS 1 AA 1 AM 2 AM 1 NWC 2 AM 4 SB 1 SB 2 FS 3 FS 2 WGEC 3 WGEC 2 WGEC 5 WGEC 7 NGS2 EGR 2 EGR 3 EGR 4 EGR 5 EGR 6 EGR 7 NM 2 BP 1 EBB 2 EBB 3 TPB 2 TPB 3 WSB 2 YK 1 LA2 LA3 LSS 2 LSS 3 EB 2 EB 3 EB 4 LM 2 LM 3 13 3 4 1211 6 8 1 Projects Operator Pechora Sea (Russia) Lukoil/Conoco Phillips, Sevmorneftegaz Barents Sea (Russia) Sevmorneftegaz, Gazprom, Total, Statoil Hydro Barents Sea (Norway) Eni Norge AS, Statoil Beaufort Sea (Canada) ConocoPhillips, Gulf Canada Arctic Islands (Canada) Panarctic Oils, Suncor, ConocoPhillips, Gulf Canada Beaufort Sea (Alaska) Shell, BP Exploration Alaska, Eni Petroleum, Pioneer natura Chukchi Sea (Alaska) Shell 1211 13 1514 43 21 76 109 5 8 Undiscovered gas, trillion cubic feet Major oil and gas projects Main Arctic ports > 100 6–100 1–6 < 1 area not quantitatively assessed area of low petroleum potential Province code Province Resources WSB West Siberian Basin 651,498 AA Arctic Alaska 221,397 EBB East Barents Basin 317,557 EGR East Greenland Rift Basins 86,180 YK Yenisey-Khatanga Basin 99,964 AM American Basin 56,891 WGEC West Greenland East Canada 51,818 LSS Laptev Sea Shelf 32,562 NM Norwegian Margin 32,281 BP Barents Platform 26,218 EB Eurasia Basin 19,475 NKB North Kara Basins and platforms 14,973 TPB Timan-Pechora Basin 9,062 NGS North Greenland Share Margin 10,207 LM Lomonosov - Makarov 7,156 SB Sverdrup basin 8,596 LA Lena-Anabar 2,106 NCWF North Chukchi-Wrangel Foreland Basin 6,065 VLK Vikitskii Basin 5,741 NWLS NorthWest Laptev Sea Shelf 4,488 LV Lena Vilyui Basin 1,335 ZB Zyryanka Basin 1,505 ESS East Siberian sea Basin 618 HB Hope Basin 648 NWC Northwest Canada Interior Basin 305 MZB Mezen' Basin NQA NZAA Novaya Zemlya Basins and Admiralty Arch NQA TUN Tunguska Basin NQA CB Chuckhi Borderland NQA YF Yukon Flats NQA LS Long Strait NQA JMM Jan Mayen Microcontinent NQA Franklinian Shelf NQA Resource appraisal, billion cubic feet FS Resource balance
  18. 18. Center for Strategic Research “North-West” Foundation18 Recent tendencies in gas markets 1. Key experts increasingly define the current situation in the energy sector as the beginning of “the gas era”. Gas generation claims to leadership in power generation by both – the volume of input capacities and the amount of investments. Gas wins in competition with other sources (nuclear, coal, renewables) as the most effective, affordable, and reliable resource. 2. The entry of liquefied natural gas to the world market and deployment of infrastructure to gain liquefied natural gas (hereinafter – LNG) in the USA and the EU. The volumes of gas carries construction increased significantly in 2006- 2010. There is a rise and enlargement of fleet for gas transportation. According to IHS Fairplay, ships tonnage will increase by 30% by 2020 in comparison to the 2009 and will account 25 million cubic meters. The rise will be mainly due to implementation of large ships with tonnage of more than 50 thousand cubic meters. The minor increase of gas carries fleet is expected to 2014, but after 2016 the fleet replenishment will begin, it is connected with the implementation of new gas liquefaction facilities. 3. The expanding of the number of market participants (geographical and corporate). The process of sector restructuring has begun: new resource providers and consumers are entering the markets. The deployment of infrastructure for LNG gaining in the U.S. and the EU allowed to form the global natural gas market, flexible, balanced in terms of number and diversity of suppliers and consumers5 , scaled and integrated, including American, Asian and European “centers”. 5 In 1985 there was the only country-consumer – Japan, which dominated on the global LNG market, providing more than 73% of world consumption; in 2002 Japan bought 50% of the world LNG volume, South Korea – 17% and the EU – 28%; in 2008 Japan provided only 40% of the LNG consumption, the EU – 22%, South Korea – 17%, India and the U.S. – 5% each. In the last 10 years the traditional main suppliers of LNG – Indonesia, Malaysia and Trinidad and Tobago – have been supplemented by Qatar, Nigeria, Australia, Oman, Algeria, Egypt and several other suppliers. 4. The long upward trend of rise in gas prices, which have somewhat corrected the world financial crisis during the last three years, and the increase of supply of LNG and shale gas to the market. Thus in 2009 the USA took the lead in the world natural gas production, overtaking Russia. This resulted in the redirection of LNG trade flows from the United States to Europe. In particular, the Qatar LNG suppliers, without the demand for their own production in the U.S. market, have been forced to establish a market in Europe. Thus, the shale gas entry to the markets has provided a temporary reduction in the price of this fuel. Experts predict a decline in price growth rates of the resource in the next few years. 5. Gas conflicts, particularly between Russia and Ukraine, have politicized the market. Gas has become a subject of political debates. A whole range of new investment projects and institutional initiatives has been launched in recent years in order to minimize political risks and reduce the pressure of gas suppliers and transit countries (duplicating pipeline projects, the third energy package, etc.). 6. The growth of the volumes of spot and futures gas market, the reduction of the market sector, where long-term contract prices, tied to the oil price, are in force. In the last 10 years a smooth “decoupling” of oil and gas prices has been happening.
  19. 19. 19 Gas production and consumption, 2010 7.0 92.4 20,9 9.4 9,8 17.3 5.5 6.5 10 16 54 105 32.0 72.030.3 26.97.1 44.1 8,8 0.85 1,8 2 8 Houston Hub 5.4 6.2 16 4.1 10.9 21 18.8 6.3 14.9 20.1 36.5 17.7 5.2 43.3 8.2 3.9 Brazil Venezuela Peru Argentina United States Mexico Canada Algeria Libya Egypt Saudi Arabia Iraq Iran Russia China Ukraine Индия Pakistan Bangladesh Myanmar Thailand Indonesia Australia Norway Nigeria Malaysia Japan Netherlands United Kingdom Italy Trinidad and Tobago Bolivia Colombia Henry Hub USA Golden Gate Center Waha Hub Alberta Heren NBP index German market Japanese LNG market 611.0 683.4 650 138137 80.4 29 106.4 4.1 93.8 57 43.6 70.5 84 8445.161.3 97109 62 51 40.3 82 Qatar 116.7 20.4 2057 66.535.7 55.3 68.9 94.5 76.1 7.6 UAE 60.551 50 30.4 475 159.8 93.8 8.16.5 4,5 10.9 3.7 Source: Center for Strategic Research “North-West”, based on EIA DOE, BP Statistical review 2010, Russian Energy Ministry, Gazprom, Rusenergo, Naftogaz Top gas consuming countries, billion cubic meters, 2010 Gas flows 2010 Main centers of price-setting Gas net importers in 2010 Gas net exporters in 2010 Gas pipeline, billion cubic meters LNG, billion cubic meters Gas production in 2010, billion cubic meters Gas consumption in 2010, billion cubic meters Average gas prices in main markets, 2010, US$ per million BTUs LNG average prices, 2010, US$ per million BTUs Top gas producing countries, billion cubic meters, 2010 Australia India United Arab Emirates Egypt Uzbekistan United Kingdom Mexico Algeria Netherlands Malaysia Indonesia Saudi Arabia China Norway Qatar Iran Canada USA Russia Mexico Germany USA Russia Iran China Japan Canada Italy India United Kingdom United Arab Emirates Saudi Arabia Ukraine France Uzbekistan Egypt Thailand Netherlands Argentina 43.3 43.6 45.1 45.1 45.5 46.9 57.6 61.9 60.5 68.9 76.1 81.3 83.9 93.8 93.8 94.5 109.0 136.9 475.0 683.4 50.4 50.9 51 55.3 57.1 59.1 61.3 66.5 70.5 80.4 82.0 83.9 96.8 106.4 116.7 138.5 159.8 611 650 Resource balance
  20. 20. Center for Strategic Research “North-West” Foundation20 The forecast of gas market transformation 1. Further growth of consumption. The gas can become the dominant fuel in energy in the beginning investment cycle (the period of large-scale investments in the modernization of existing and construction of new facilities) as the cheapest, low-carbon and available resource. In China, the gas demand will be the largest in the world: by some assessments it will rise up to 6 times by 2030 compared to 2005.6 It is necessary for China in coming years to reduce dependence on coal in power industry and to carry out the transition to more ecological types of generation. Gas consumption in other Asian countries and the Middle East will grow faster than on the traditional markets (4.6% and 3.9% respectively).7 In Europe the key changes are expected around 2020, when decline in conventional gas reserves will occur, and Europe will have to double the import of LNG and shale gas by 2030 2. The further globalization of the market at the cost of the further growth of LNG delivery, but the assessments of the market volume are different. According to the forecast of JSC “Gazprom” the annual production of LNG will exceed 500 million tonnes, or about 700 billion cubic meters of gas by 2020. The BP forecasts, that LNG production could reach 476 billion cubic meters by 2020. Moreover m LNG market gains a global character with the developed trade infrastructure. 3. Since the early 2020s rapid growth of gas production is expected in the Middle East, North America and countries of the former Soviet Union. A key region in the LNG trade in the next 10 years will be the Middle East, which will have 40% of all LNG facilities by 2020. Indonesia, on the contrary, may become a net importer of gas. 4. New gas transport routes. In 2011 it is planned to begin the construction of trunk gas pipeline Nabucco, which will transport gas from Turkmenistan and Azerbaijan, bypassing Russia; later the following projects will be activated – Persian Pipeline (pipeline from Syria, Iraq, Iran) gas pipeline Nigeria - Algeria - Spain and others. Another aim of such projects is the reduction of transit risks of Russian gas delivery (primarily, Nord Stream and South Stream - 2). The value of suppliers, focusing on the marine transportation of gas, will increase on the natural gas market; thus, Australia is claiming to the role of the leading player in the supply of LNG. 6 The Outlook for Energy. A View to 2030. ExxonMobil. 7 Energy Outlook 2030. British Petroleum. 5. In the next 3-5 years the high competition among gas sellers on the major markets at relatively low gas prices will remain the same. In 2015 (according to some estimates, in 2020) gas prices rise will restore due to increased demand pressures. 6. In the context of the global gas market establishment the unconventional gas in the United States may play a role similar to that played by the oil reserves in the North Sea and the pipeline Texas - New York to form the modern structure of the world oil market, where such sorts as Brent and WTI, and the London and New York raw materials exchanges are the basic elements of the pricing system. It should be taken into consideration that the North American market is the most competitive. Its rules can be used to form the institutional base of the world market. 7. The increase in the amplitude of prices fluctuations, liability to speculation. The emergence of new gas crisis is possible. 8. The gradual markets integration, with the important role of regulators (the third energy package of the EU). 9. Consumer strategy is aimed at further liberalization and expansion of the number of gas suppliers. The liberalization and strategy of the number of gas suppliers expansion in the EU8 has become the most notable process of the last years; it means the development of a highly competitive gas market. Gas transport systems of the EU countries are transformed into a single network; there is a tougher regulation, designed to ensure an equal access to the “tube” and underground storage facilities; gas transport system is already reversible and has on its western and southern borders the chain of LNG regasification terminals. 10. The emergence of players who make a bet on the increase of the sectors with gas use, especially in transportation. How reasonable is the increasing number of vehicles, working with LNG? 8 Since 2004 the EU has been introducing a rule of free choice of gas suppliers for all industrial enterprises (since 2007 - for all consumers). The opening of national gas markets creates new conditions for direct access for gas producers to consumers, bypassing the vendors. Then a number of documents aimed at forming a common EU energy market, reduction of the influence of monopolies.
  21. 21. 21 Gas market lifecycle EU’s 1st, 2nd and 3rd energy packages Rules and standards on renewable energyOil-linked gas prices National markets - utilization of associated gas from oil fields and coal mines - first uses in everyday life - absent transport infrastructure Local resource 1880–1920 1930–1960 - expansion of transport network - interregional trade - stable/regulated prices - expansion of the energy resource base - production growth - stable or decreasing prices - production growth - low prices (?) - expansion of the energy resource base - market integration Liberalization Globalization 1980–1990 2000–2010 Coalcrises Emergenceofcheapoil Oil turned into main fuel resource Asia’sindustrialization Commoditysupercycle Construction start of LNG infrastructure (Qatar, 1997) Decisions on prices deregulation adopted (1979) Gas industry recognized as natural monopoly in the United States (1938) Establishment of OPEC nationalization of oil industries in some countries First gas stoves Depletion of West Texas oil fields, oil peaks passed in the United States 1973and1979oilcrises politizationofoilsupply Golden age Decoupling of oil and gas markets RiseinM&Adeals; industry consolidation; reinforcement of state-owned companies Emergence of shale gas markets Widespread adoption of spot market contracts Emergence of new players Discovery of oil fields in the Netherlands (1959) Disputes between Russia and gas transit countries (Belarus, Ukraine) First concepts of transport fuel switching to natural gas LNG drop in prices. First LNG sea terminals in the US and UK Manufactured coal gas for street lighting US gas industry subsidies Gas Exporting Countries Forum Debate on OPEC-like organization Resource balance
  22. 22. Center for Strategic Research “North-West” Foundation22 Gas production and consumption, 2030 Gas consuming countries, 2030 Others 29% USA 16% Middle East 13% Russia 12% China 6% India 3% Japan 3% Canada 3% Brazil 1% Australia 1% South Korea 1% Source: Center for Strategic Research “North-West”, based EIA DOE, BP Statistical review 2011, Gazprom, Novatek, Ukrainian Ministry of Energy and Coal Industry Gas producing countries, 2030 Gas net importers in 2030 Gas net exporters in 2030 Gas pipeline, billion cubic meters LNG, billion cubic meters Gas production in 2030, billion cubic meters Gas consumption in 2030, billion cubic meters Gas flows 2030 Russia 20% USA 15% Middle East 15% Africa 9% Latin America 6% Canada 4% Australia 4% China 3% Mexico 2% India 2% Brazil 1% Others 20% Latin America 5% Mexico 3% Africa 4% 7.0 92.4 20,9 9.4 9,8 17.3 5.5 6.5 10 16 54 105 32.0 72.030.3 26.97.1 44.1 8,8 0.85 1,8 2 8 Houston Hub 5.4 6.2 16 4.1 10.9 21 18.8 6.3 14.9 20.1 36.5 17.7 5.2 43.3 8.2 3.9 Brazil Venezuela Peru Argentina United States Mexico Canada Algeria Libya Egypt Saudi Arabia Iraq Iran Russia China Ukraine Индия Pakistan Bangladesh Myanmar Thailand Indonesia Australia Norway Nigeria Malaysia Japan Netherlands United Kingdom Italy Trinidad and Tobago Bolivia Colombia Henry Hub USA Golden Gate Center Waha Hub Alberta Heren NBP index German market Japanese LNG market 611.0 683.4 650 138137 80.4 29 106.4 4.1 93.8 57 43.6 70.5 84 8445.161.3 97109 62 51 40.3 82 Qatar 116.7 20.4 2057 66.535.7 55.3 68.9 94.5 76.1 7.6 UAE 60.551 50 30.4 475 159.8 93.8 8.16.5 4,5 10.9 3.7
  23. 23. 23 The issues to be resolved 1. How reasonable is the “gas optimism”? Perhaps in the coming years politicians and regulators will rise question about the optimal share of gas generation in order to ensure the “stability” of the energy balance. 2. How long the gas resources will be enough to ensure the rapid growth of consumption? There are no accurate predictions for these processes in the expert community now. Will the new “gas crisis” occur? When will the world Hubbert peaks9 on gas be passed? 3. Whether macroregional markets will close up together and what rules they will obey? As an “ideal model” of the gas market formation experts often take an example of the USA, which has now a developed market infrastructure, trading and rules of gas pricing. 4. What would be the prevalent form of agreements on natural gas contracts: spot prices, stock trading or long-term contracts? For example, the prices on the USA gas market, becoming the world key market due to the consumption growth, are traditionally defined exactly on the spot and futures markets. Simultaneously there is a reduction of market sector with long-term contract prices, tied to the oil prices, around the world. 5. Will the number of market players grow due to LNG, shale gas? 9 The Hubbert peaks on resource (oil, gas, etc.) – is the world production, which was or will be achieved. The oil peak was first theoretically predicted by american geophysicist King Hubbert, who created the model of known reserves. In 1956 Hubbert correctly predicted that production of oil from conventional sources would peak in the continental  United States around 1965-1970, and the world production would reach its peak at 2000. 6. Whether there will be the nationalization or, on the contrary, privatization (liberalization) of gas resources, taking into account the high cost and scale of the projects? Whether the concentration will increase or, on the contrary, the restructure of the sector will begin? 7. Whether the gas is an independent resource or it exists as part of the “ideal mix” with the renewable energy sources, and gas generation plays only the role of peak suppliers? In particular, the assessment of many states-consumers is that the gas is a fuel, dominating only in the period of transition to “renewable” energy balance, as due to technological point of view, it is a perfect balancer for alternative energy sources. 8. What kind of impact these processes have on Russia? Russia, as a key gas supplier, will likely be under pressure from a range of new solutions (institutional, technological, design), that will be initiated and implemented primarily by consumers. 9. What competences will be required by technologically different? Are the labor markets of traditional gas market players ready for technological sophistication of the sector? 10. Whether the rise of gas production in the Arctic will occur? At the moment it strongly depends on the world prices on raw materials and on the level of technologies development? 11. Whether the “ideal mix” will be created in power industry basing on gas and the RES? Resource balance
  24. 24. Center for Strategic Research “North-West” Foundation24 Oil: 2010–2030 The trends of energy resource base change 1. The peaks of oil production are already passed in some countries, which play an important role in the provision of world consumers. World production peak, according to some estimates, has already been passed (2007), according to the others – it will happen in 2050. Assessments dispersion is very wide. In the USA, the largest oil consumer, the peak production was passed in 1970. In Russia, the independent from OPEC oil exporter, the peak was probably in 2010. The largest OPEC exporters – Saudi Arabia, Iran, Venezuela, Libya, Oman – have also already passed the peak of raw materials production. In combination with the growth of absolute consumption that gives a long-term trend in growth of prices for this raw material. 2. The shift of oil production projects in deep geological structuresandfarouttothesea.Thereplenishmentofglobal raw materials base is varied out due to the development of non-conventional oil and offshore areas in countries, that didn’t belong to the most important players in the market, in particular Canada, Brazil. Deep-water fields are about a half of the discovered oilfields since 2006. Since 2000, the world deep-water oil production increased three times and reached 5 million barrels per day, and by 2015 it will rise to 10 million barrels per day. The richest regions in terms of deep-wateroil arethe Gulf ofMexico, coastof Braziland the western coast of Africa. Growth of offshore developments in recent years has led to increased demand for offshore vessels. Thus, according to IHS Fairplay forecasts, in 2020 the number of offshore vessels will be about 9.3 thousand units compared to 7.4 thousand units in 2010. The rate of the vessels number growth will remain approximately the same in all segments. By total deadweight the most significant increase will be in the number of the fleet in the segment of offshore platforms and vessels for their service and in segment of drilling vessels. 3. Geographical distance of the deposits from customers, the technical complexity of the projects lead to increased prime costs, as well as to the growth of “nominal” of investment projects. The volume of investment into new types of projects is so high that they can only be carried out by the international consortiums of mining companies, and the question about the deposits is a crucial factor of mining companies’ capitalization. 4. The non-conventional oil sources and relevant technological solutions are invested mainly by the developed countries.  Geography of non-conventional oil production growth: 83% of production in 2030 will belong to the United States and Canada.  Developing countries (excluding China) are practically do not execute non- conventional oil production and do not invest in exploration of such deposits. Russia exploits the resources of the Soviet developments. Mexico does not update its energy resource base, etc. 5. Risks associated with the global shortage of hydrocarbon resource base are still quite high. Experts point out that the long-term trend of oil prices rise is connected with the depletion of reserves. 6. The oil prices rise changes the conditions of competition in motor fuel markets. Thus, the prices rise provides more attractiveness of such segments as: a. Liquefied gas for cars; b. Biofuel; c. Electric vehicles. There are the researches, which show that the volumes of investments in electric transport technologies correlate with the oil prices; d. Synthetic fuel from coal and shale; e. The increase of effectiveness of internal combustion engines with the ensuring of motor fuel consumption reduction.
  25. 25. 25 Oil proved reserves changes, 2000–2010 Source: Center for Strategic Research “North-West”, based on EIA DOE, Bundesanstalt fuеr Geowissenschaften und Rohstoffe, UKERC, The Global Oil Depletion Report, 2009, Sсhlumberger – Worldwide heavy oil by country Oil proved reserves, billion barrels, 2010 <10 10–50 50–100 >100 Oil reserves growth areas, 2000–2010 Estimated heavy oil reserves in 2010, billion barrels Oil reserves decline areas, 2000–2010 Reserves in 2000, billion barrels Reserves in 2010, billion barrels date Peak oil by country, Yemen 2001 Syria 1996 Australia 2000 Colombia 1999 Argentina 1999 Egypt 1993 Oman 2001 Indonesia 1997 United Kingdom 1999 Libya 1970 Norway 2001 Venezuela 1970 Mexico 2003 Iran 1974 United States 1970 Russia 1987 Billion barrels per year 2000 2005 Shell Total UppsalaCampbel Energyflies Miller Meling LBST OPEC US EIA BGR IEA 2010 2015 2020 2025 2030 2035 2040 2045 2050 Forecasts for peak oil and post-peak production decline rates 8% 7% 6% 5% 4% 3% 2% 1% 0% Forecastsforpost-peak productiondeclinerate Peak oil date Peak Oil Consulting 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 Canada Iran Russia Brazil Mexico Ecuador Argentina United States Algeria Libya Egypt Saudi Arabia Iraq Kuwait Kazakhstan China India Nigeria Indonesia Australia Norway United Kingdom Venezuela 72.6 48.5 7.3 30 253 5.4 12.29.2 37 454 22 104 190 96 24 5.64.8 3.0 5.1 3.32.8 2.7 262 190 263 44.2 29.5 28.4 21.7 6.610.7 175.2 2,550 4,9 112 137.6 89.7 76 0,00 500 1000 1500 2000 2500 3000 3500 4000 4500 2000 2005 Shell Total UppsalaCampbel Energyflies Miller Meling Peak Oll Consulting LBST OPEC US EIA BGR IEA 2010 2015 2020 2025 2030 2035 2040 2045 2050 19.1 125 10.4 137 296 2,200 12.8 16 2.5 115 447 60 264 20 402 Resource balance
  26. 26. Center for Strategic Research “North-West” Foundation26 Brazil Peru Argentina United States Canada Algeria Libya Iran Kazakhstan China India Nigeria Indonesia Australia Norway Venezuela Russia Saudi Arabia Iraq 262,4 175,2 137,6 115,0 104,0 296 97,8 60,0 44,3 37,2 30,0 25,4 20,4 19,1 12,8 12,2 73%10% 3% 3% 2% 9% СШАРоссия Конго Бразилия Италия Остальные страны 272 113,8 66,8 0 50 100 150 200 250 300 Канада Россия Казахстан 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 20 40 60 80 100 Неконвенционная нефть Природный газоконденсат Неразведанные месторождения нефти Неразработанные месторождения нефти Имеющиеся месторождения нефти Gulf of Mexico Oil reserves: 45 billion barrels US and Canadian Atlantic continental shelf Oil reserves: 3.82 billion barrels Alaska Oil reserves: 26.6 billion barrels North Sea and Arctic continental shelf Oil reserves: 74.8 billion barrels West African continental shelf Mediterranean Sea Oil reserves: 33.8 billion barrels Oil reserves: 11.8 billion barrels Sakhalin Oil reserves: 450 million tonnes Brazilian continental shelf Oil reserves: 12 billion barrels New oil producing areas, 2010 Oil proved reserves, 2010, billion barrels <10 10–50 50–100 >100 Shale oil reserves Continental shelf oil and gas Oil sands and heavy oil reserves Source: Center for Strategic Research “North-West”, based on EIA DOE, Bundesanstalt fuеr Geowissenschaften und Rohstoffe U.S. Offshore Oil and Gas Resources, Oil and Gas Journal, IEA World Energy Outlook 2010 Oil production costs, US$ per barrel Middle East and North Africa oil Conventional oil Deep oil Heavy oil Arctic oil Shale oil min max Production by type of crude oil, billion barrels per day 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 20 40 60 80 100 Unconventional oil Natural gas liquids Crude oil: fields yet to be found Crude oil: fields yet to be developed Crude oil: currently producing fields Countries with the largest oil reserves, billion barrels, 2010 Algeria Brazil USA China Qatar Kazakhstan Nigeria Libya Russia UAE Kuwait Iraq Iran Canada Saudi Arabia Venezuela 12.2 12.8 19.1 20.4 25.4 30.4 37.2 44.3 60.0 97.8 104.0 105.0 137.6 175.2 296 262.4
  27. 27. 27 Arctic oil potential, 2010 Greenland Canada Russia 1 5 6 7 9 10 14 15 2 8 Thule Murmansk Тикси Pevek Barrow Prudhoe Bay Longyearbyen WSB 1 AA 2 EBB 1 EGR 1 YK 2 AM 3 WGEC 1 LSS 1 NM 1 BP 2 EB 1 NKB 1 TPB 1 NGS 1 LM 1 SB 3 LA1 NCWF 1 VLK 1 NWLS1 LV 1 ZB1 ESS 1 HB 1 NWC 1 MZB 1 NZAA1 TUN 1 CB 1 LS 1 JMM 1 FS 1 AA 1 AM 2 AM 1 NWC 2 AM 4 SB 1 SB 2 FS 3 FS 2 WGEC 3 WGEC 2 WGEC 5 WGEC 7 NGS2 EGR 2 EGR 3 EGR 4 EGR 5 EGR 6 EGR 7 NM 2 BP 1 EBB 2 EBB 3 TPB 2 TPB 3 WSB 2 YK 1 LA2 LA3 LSS 2 LSS 3 EB 2 EB 3 EB 4 LM 2 LM 3 13 3 4 12 11 2 1 Undiscovered oil, billion barrels Major oil and gas projects Main Arctic ports > 10 1–10 0,1–1 < 0,1 area not quantitatively assessed area of low petroleum potential Projects Operator Pechora Sea (Russia) Lukoil/Conoco Phillips, Sevmorneftegaz Barents Sea (Russia) Sevmorneftegaz, Gazprom, Total, Statoil Hydro Barents Sea (Norway) Eni Norge AS, Statoil Beaufort Sea (Canada) ConocoPhillips, Gulf Canada Arctic Islands (Canada) Panarctic Oils, Suncor, ConocoPhillips, Gulf Canada Beaufort Sea (Alaska) Shell, BP Exploration Alaska, Eni Petrolеum, Pioneer natura Chukchi Sea (Alaska) Shell 1211 13 1514 43 21 76 109 5 8 Province code Province Resources WSB West Siberian Basin AA Arctic Alaska EBB East Barents Basin EGR East Greenland Rift Basins YK Yenisey-Khatanga Basin AM American Basin WGEC West Greenland East Canada LSS Laptev Sea Shelf NM Norwegian Margin BP Barents Platform EB Eurasia Basin NKB North Kara Basins and platforms TPB Timan-Pechora Basin NGS North Greenland Share Margin LM Lomonosov-Makarov SB Sverdrup basin LA Lena-Anabar NCWF North Chukchi-Wrangel Foreland Basin VLK Vikitskii Basin NWLS NorthWest Laptev Sea Shelf LV Lena Vilyui Basin ZB Zyryanka Basin ESS East Siberian sea Basin HB Hope Basin NWC Northwest Canada Interior Basin MZB Mezen' Basin NZAA Novaya Zemlya Basins and Admiralty Arch TUN Tunguska Basin CB Chuckhi Borderland YF Yukon Flats LS Long Strait JMM Jan Mayen Microcontinent FS Franklinian Shelf Resource appraisal, million barrels of oil equivalent 3,659 29,960 7,406 8,902 5,583 9,723 7,274 3,115 1,437 2,055 1,342 1,807 1,667 1,349 1,106 851 1,912 85 98 172 376 47 19 2 23 NQA NQA NQA NQA NQA NQA NQA NQA Source: Center for Strategic Research “North-West”, based on USGS, “Assessment of Undiscovered Oil and Gas in the Arctic”, Gautier et al., Science, May 2009 Resource balance
  28. 28. Center for Strategic Research “North-West” Foundation28 Canada Russia Venezuela Brazil Mexico United States Algeria EU Libya Egypt Middle East Kazakhstan China India Africa Japan Indonesia Australia 360 876 1,314 2,299 839 2,183 1,533 1,533 438 3,577 4,000 1,500 1,300 4,000 5,584 1,715 3,467 11,424 7,847 3,978 985 547 1,569 401 599 308 1,680.8 975 1,028 553.6 1,043.1 400 438 433 200 1,128 1,533 1,168 1,614 1,314 20 438 192.6 1,171.7 765 Саудовская Аравия 13% Россия 11% США 10% Бразилия 6% Канада 6%Ирак 5% Китай 5% Каспийский регион 4% Иран 3% Кувейт 3% ОАЭ 3% Алжир 3% Нигерия 3% Катар 2% Венесуэла 2% Ангола 2% Мексика 1% Ливия 1% Индия 1% Остальной мир 13% США 21% Китай 15% Индия 4% Япония 4% Южная Корея 3% Россия 2% М ексика 3% Канада 2% Австралия 1% Ближний Восток 9% Латинская Америка 7% Африка 4% Остальной мир 25% Oil production and consumption, 2030 Source: Center for Strategic Research “North-West”, based on EIA DOE, UKERC, The Global Oil Depletion Report 2009, BP Statistical Review 2011 Oil producing countries, 2030 Oil consuming countries, 2030 Oil net importers in 2030 Oil net exporters in 2030 Oil flows, million barrels, 2030 Oil consumption, 2030, million barrels Oil production, 2030, million barrels Saudi Arabia 13% USA 21% China 15% India 4% Japan 4% Russia 2% Canada 2% South Korea 3% Mexico 3% Australia 1% Middle East 9% Latin America 7% Africa 4% Others 25% Russia 11% USA 10% Brazil 6% Canada 6%Iraq 5% China 5% Caspian region 4% Iran 3% Kuwait 3% Algeria 3% Nigeria 3% Qatar 2% Venezuela 2% Angola 2% Mexico 1% Libya 1% India 1% Others 13% UAE 3%
  29. 29. 29 Coal: 2010–2030 The trends of energy resource base change 1. Volumes of proved reserves haven’t increased recently. 2. There are polar assessments of achievement of world production peaksofeffectivelyproducedreserves:duetothemostpessimistic forecasts - in 2014, due to more optimistic forecasts – in 2045. 3. If the existing production rates are kept, reserves will be enough for more than 200 years for some countries (including large consumers – the USA and Russia). 4. Localcoaldeficitsarealreadyvisible(e.g.,Chinawithitstransport restrictions). 5. Enlargement of coal delivery requires the deployment of new transport infrastructure. The main long-term trends in coal markets 1. Total coal consumption will continue to grow in absolute terms.  The main factor of the consumption growth will be the development of economies of South-East Asia, especially Chinese one. However the prospect share of coal in the energy balance is open to question now.  The coal demand depends on the growth rate of other basic energy resources prices: oil and gas, as well as on the level of technological development, investmentattractivenessandresourceavailabilityinotherenergy sectors (first of all RES and nuclear power. If a number of expert organizations. reported in the early 2000s about the occurrence of“coalrenaissance”,basingontheperformancesoftheindustrial growthinAsiaandgrowingattentionfromtheWesttocoalasthe most reliable (compared to oil), safe (compared to the nuclear generation), available (compared to gas) resources, in the last few years most long-term forecasts of the global transformation of the resource balance show a decline of the coal share. Thus, the share of coal in primary energy production in the world can reduce to 30%, the absolute volume of coal consumption in the world will increase by 10%. 2. The consumption growth will occur up to 2030 in the countries outsidetheOECD(2%ofgrowthperyear).Itispredictedthatthe coaldemandindevelopingcountrieswillincreaseby60%,while in developed, on the contrary, will fall by 30-50% in comparison with 2005. Most of all the coal consumption will rise in China (60%) and India (95%) At the same time India will consume about 10% of the world coal, and its level of consumption will meetEuropeandNorthAmericatakentogether.Theeffortsofthe largest consumers – China and India – are increasingly focused on reduction of dependence of national energy on coal. China seeks to get away from coal dependence to other resources, and in the decade 2020-2030 the growth of coal consumption in China should be not more than 0.3% per year. According to the BPafter2020thegrowthofcoalconsumptioninIndiaandChina could slow down or even stop, and the drivers of the further growth will be the poorest countries. 3. The reduction of consumption in the developed and some developing countries is expected to be gradual. This will depend on the introduction of ecological legislation and on the dynamics of the prices of basic energy resources and the availability of technological base.  In OECD countries coal consumption will decline (-1.2% in 2010-2030). There are recent data on the removal of coal from the energy balance, even in states where the electricity is largely built on coal (in particular, the USA and Australia).InEuropeancountriesthedeclineincoalconsumption has a long trend and is partly explained by the depletion of reserves. Theregionbegantodependonimportedrawmaterials before other major consumers, and it is now gradually moving away from high-priced resource (the UK – from 1920).  For example, in 2009 the export of American energy coal decreased in almost all European countries10 . Furthermore, it was the EU countries who first prepared restrictions on emissions of carbon dioxide, actually “discriminating” coal generation. 4. Overthepastfewyearstheglobalcoalmarkethasbeenfilledwith a number of new net importers. In addition, state – traditional coal exporters show increase of their own consumption with the rate outstripping export growth. These are the countries realizing the transition to an industrial economy and using for the industrialization the existing (the most available) resources – Colombia, Venezuela, Indonesia. 5. The expansion of sea coal trade. On the one hand it allows to respond more flexibility to the increased demand. On the other hand the development of the sea (spot) trade makes the market more influenced by speculation and external factors, and leads to a general increase in prices, as deposits are drifting away from the main centers of consumption, and the cost of the resource transportation increases.  The energy coal shipping is rising by an average of 7% annually.  The volume of international coal trade amounted 941 million tonnes in 2009 (16% of consumption). There are two key regional markets: a. The Atlantic Basin market – importing countries in Western Europe, particularly France, Germany and Spain. b. Pacific market, which consists of the Asian importers (Japan, Korea and Taiwan). Pacific market is about 57% of world energy coal shipping. 6. The pressure on coal generation continues to increase from the environmental legislation. For example, in the USA more than 100 coal generation projects are currently canceled or delayed, or canceled due to lack of sufficient funds (investors perceive these investments as more risky than the investments in the renewable energy sector), and to the uncertainty of the future of coal generation. 7. There is a growing price competition with gas and other energy resources, especially in terms of possible levy of tax on carbon dioxide emissions. The terms of widespread dropout of old generating capacities based on coal are coming in many industrializedcountries.Theirdropoutissupposedtocompensate with the gas generation, increasing the share of nuclear and renewable energy. But at present there is no guarantee that it will be coal plants that will be reinvested. In the period from 2004 to 2008 there was no growth of this resource consumption under the absolute total growth of energy consumption in most of developed countries with a large share of coal in energy generation. Most of the countries, which energy is based on the use of coal (the USA, China, Canada, Australia, Germany, Japan, South Korea), have announced their strategies to move to a new technological platform of energy and a gradual decline of the share of generation by coal. Russia is one of the exceptions here. In particular, the General scheme of electric power facilities placing stipulates the increase of coal generation to 2030. 8. Clean coal power is open to question. It requires large investments and subsidies from the government. “Clean coal” is already available technologically, but economic effectiveness of technologies will be estimated only after 2020. “Clean coal” projects are subsidized by countries with large resource reserves or share of coal generation. 10 In Great Britain it reduced by 36% (1.24 million tonnes) — to 2.24 million tonnes, in Spain – by 85% (0.84 million tonnes) — to 0.15 million tonnes, in the Netherlands – by 18% (0.6 million tonnes) — to 2.68 million tonnes, in Germany – by 42% (0.53 million tonnes) — to 0.73 million tonnes. The USA increased twice the export of energy coal only in Portugal — from 0.25 to 0.39 million tonnes. Resource balance
  30. 30. Center for Strategic Research “North-West” Foundation30 Coal reserves changes, 2003–2010 China 109 129 3.5 3.1 3.5 3.1 7 3.1 28.1 49.1 107.9 36.8 39.4 52.3 62.2 54 4.6 49.1 107.9 115 134 82.3 2 42.5 39.5 52.3 62.2 3 31.3 11.9 49 30 6.6 238 249 6.6 34.331.2 157157 114.5114.5 58.6 84.3 76.2 82.9 United States Canada Colombia Venezuela Algeria Nigeria Egypt Iran Pakistan India Thailand Australia Mozambique Argentina Chile Brazil Tanzania Congo South Africa Japan Mongolia Kazakhstan Indonesia United Kingdom Germany Norway Poland Ukraine Russia Turkey 0 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2 000 4 000 6 000 12 000 10 000 8 000 14 000 Uppsala high case Uppsala high case Source: Center for Strategic Research “North-West”, based on BP Statistical Review of World Energy, EIA DOE, Energy Watch Group, IEA, Russian Ministry of Energy Coal proved reserves, billion tonnes, 2009 < 1 1–10 10–50 > 50 Hard coal reserves, 2009 Lignite reserves, 2009 Hard coal reserves, 2003 Lignite reserves, 2003 Coal reserves decline areas over the last five years Areas where coal reserves estimates have not been revised since 2005 Peak coal by country, million tonnes United Kingdom Germany Japan United Kingdom (trend line) Germany (trend line) Japan (trend line) 0 1815 1825 1835 1845 1855 1865 1875 1885 1895 1905 1915 1925 1935 1945 1955 1965 1975 1985 1995 2005 100 150 100 300 250 200 350 Production,milliontonnesperyear Forecasts for peak coal World coal production forecast, million tonnes per year Coalproduction,milliontonnesperyear University of Texas Uppsala standard case 14,000 14,000 Europe and Eurasia Major exporters South Africa Australia India China Russia USA 12,000 12,000 10,000 10,000 8,000 8,000 6,000 6,000 4,0004,000 2,0002,000
  31. 31. 31 Coal market lifecycle Stagnation production growth stable prices key energy resource Golden age 1850–1920 1940–1960 fluctuation in production stable or decreasing prices production growth price instability coal's closing role in the energy mix competition with hydro and nuclear production volatility price volatility competition with gas and renewable environmental regulatory pressure transition to clean coal? Coal renaissance 1980–1990 New round of globalization 2000–2010 Coalcrises,lockoutsand strikesintheUKandUS Oil cheaper than coal Open-pit mining: generation cost-efficiency growth CCGT widespread adoption 1973and1979oilcrises Asia'sindustrialization. Commoditysupercycle Coal removed from energy use in transportation Intergovernmental Panel on Climate Change. Ratification of the Kyoto Protocol. Environmental pressure on coal Nationalization of the UK mining industry Mine privatization programs adopted in the UK. Electricity market liberalization Industry consolidation in the United States Depletion of traditional basins in Germany, the UK and several US states Coal removed from energy use in real estate Resource balance
  32. 32. Center for Strategic Research “North-West” Foundation32 Coal production and consumption, 2010 Source: Center for Strategic Research “North-West”, based on EIA DOE, BP Statistical review 2010, Indres and Pinchin-Lloyd, Rosinformugol, Russian Federal Statistics Service Major coal net importers in 2010 Major coal net exporters in 2010 Coal flows, million short tons (1 short ton = 0.907 metric tonne) Largest coal exporting ports Largest coal importing ports China USA India Australia South Korea South Africa Japan Germany Poland Kazakhstan Turkey 500 1,000 1,500 2,000 2,500 3,000 3,500 Russia Top coal consuming countries in 2010, million tonnes 3,152.3 907.6 622 226.5 208 108.6 164.7 135.8 128 102.8 93 79.2 China USA India Australia Indonesia South Africa Germany Poland Kazakhstan Turkey Ukraine 500 1,000 1,500 2,000 2,500 3,000 3,500 Russia Top coal producing countries in 2010, million tonnes 3,050 973.2 557.6 409.2 323 252.5 250 183.7 135.1 101.5 84.3 73.7 10 3 050,0 973,2 557,6 409,2 323 252,5 250,0 183,7 135,1 101,5 84,3 73,7 3 152,3 907,6 622,0 226,5 208 108,6 164,7 135,8 128,0 102,8 93,0 79,2 Brazil Venezuela Chile Argentina United States Canada Algeria Egypt Iran Kazakhstan Russia China India Thailand Indonesia Australia Poland Germany Ukraine Romania Norway United Kingdom Colombia Albania Spain Serbia South Africa Japan Mongolia 37.5 47.5 51.5 7.2 23.2 62.0 22.4 5.3 275.6 28.5 12.3 42.7 12.1 218.8 9.1 29.7 8.4 4.5 2.2 41.4 2.1 Mexico 10 24.3 Newcastle Richards Bay Banjarmasin Riga Vostochny Port RizhaoJacksonville Yokohama Ulsan Mundra Acapulco Mobile European coal market Asian coal market North American coal market
  33. 33. 33 Coal production and consumption, 2030 Производители угля, 2030 год Потребление Угля, 2030 год Производство и потребление угля, 2030 год Brazil Venezuela Chile Argentina United States Canada Kazakhstan Russia China India Thailand Indonesia Australia Poland Germany Ukraine Romania United Kingdom Colombia Albania Spain Serbia South Africa Mozambique Japan Mongolia 34.8 14.6 46.5 70.5 3.7 22.6 87.1 399.4 2.8 60.8 13.5 42.7 12.1 217.2 17.2 18.3 11.3 7.0 9.5 63 Mexico 62.6 24.0 6.0 0.8 15 24.3 Newcastle Richards Bay Banjarmasin Riga Vostochny Port RizhaoJacksonville Mundra Acapulco Mobile 46.5 34.8 Yokohama Ulsan European coal market Asian coal market North American coal market Source: Center for Strategic Research “North-West”, based on EIA DOE, BP Statistical review 2010, Rosinformugol, Russian Ministry of Energy, Russian Federal Statistics Service, Platz Coal producing countries, 2030 Coal consuming countries, 2030 Major coal net importers in 2030 Major coal net exporters in 2030 Coal flows, million short tons (1 short ton = 0.907 metric tonne) China 48% China 51% USA 14% USA 13% India 6% India 8% Australia 6% Australia 2% Japan 2% South Korea 1% Canada 1% Africa 3% Latin America 1% Others 15% Russia 4% Russia 3% Africa 4% Latin America 2% Canada 1% Others 15% Largest coal exporting ports Largest coal importing ports Resource balance
  34. 34. Center for Strategic Research “North-West” Foundation34 Nuclear power: 2010–2030 The main long-term trends of nuclear power generation development 1. Since the early 2000s a surge of interest in nuclear power was observed in the world, it was called “nuclear renaissance”. Currently 61 reactors are under construction, about 500 reactors are designed or planned in the next two decades. 49 countries intend to implement the nuclear program in the next two decades.  According to some forecasts, the development of nuclear power could increase up to 70% to 2030. 2. However in March 2011 an event occurred that can significantly affect both on the economics of the project and the long-term forecasts of nuclear power growth. It was an accident at the “Fukushima-1” plant; a full assessment of consequences of which have not still been carried out. Also there sre no principle decisions on cancellation of already announced projects. However several states stated that they refused implementation of new nuclear reactors (in particular, Germany, Switzerland, Italy, Venezuela). Some time ago such decision was made by Japan, which declared the gradual withdrawal of nuclear energy from the energy balance. The prolongation of implementation and increase of cost of new nuclear facilities should be expected as an another significant consequence of the accident at the plant. The requirements to the objects’ safety will be reviewed to toughening that may require to correct the projects of stations’ construction. A number of countries are implementing additional nuclear technology audit for security objects. Requirements to strengthen security measures are likely to lead to an increase in the cost of nuclear generation and the projects of stations’ construction. 3. The accident at the Japanese nuclear power plant has again demonstrated that nuclear technologies are extremely dangerous. Destruction of such magnitude as a rule go beyond the scope of a “national” case, and in any case they cannot be handled by the companies, operating the plant. The questions about the creating of a single global security system, the transformation of the nuclear fuel market into the centralized and about strengthening of supranational governance arrangements of the sector management are increasingly raised. In this case one of the international organizations - the IAEA or WANO, set up after the Chernobyl disaster, can claim to the role of key player. Cooperative research and industrial projects will become widespread. But while the international regime for the sector has not received the institutional design. 4. The “nuclear renaissance” will continue at least in Asia. China will continue to be the core of the growth. In 2010 the country built facilities of nuclear generation in capacity of 10 GW, but it was claimed to rise the total nuclear capacity up to 70-80 GW by 2020, it requires the construction of six reactors per year during a decade. Currently, the country is building nuclear reactors with a total capacity of 33 GW, it should be completed by 2015. Between 2015 and 2020 it is planned to reduce the construction of new nuclear reactors from six to four years. It is supposed that the accumulated power plant in China in 2030 will reach 200 GW, and by 2050 - 400 GW. 5. Thedecisionmarketinthenuclearsectorbecomesstationary, mature. It is a widespread process of competencies distribution. The threshold of the “newcomers” entry to the markets has greatly decreased in recent years. Thus by 2016 China will be able to put the construction AP 1000 “on stream” (country has already made this decision.) Most of the new technological projects, competing with each other (AP 1000, EPR 1600, ATMEA-1, APR 1400, ESBWR), belong to the III / III+ generation, with the similar parameters of safety and reliability. Customers of such projects focuse on the characteristics of cost and terms, and the quality / flexibility of training project. The question about the new nuclear power plant proposal economy, and not about the unique technical skills, remains a key in a medium term. The main reserve of economy is the optimization of business processes: the cost and timing of construction (including logistics), modern building materials, etc. 6. Taking into account the high degree of uncertainty of capital costs for the construction of nuclear power plants today, a variety of risks of implementing nuclear projects and its funding requires a broaden participation of the state. State support of the nuclear power plants construction can be in the form of direct government funding, loan guarantees and guaranteed return on investment through the state- regulated electric power markets. In China the construction of nuclear power plants is carried out by state companies on the centrally approved five-year plans of national development. In France nuclear energy market is dominated by two large state-owned companies – AREVA and EDF. In Russia the development of nuclear energy is managed by the State Corporation “Rosatom” integrating the construction, operation of nuclear facilities and fuel cycle. The country has a Federal target program for the development of the nuclear industry. In Japan the Government provides loan guarantees for foreign sales of the reactor. In India the National Government funds the construction of nuclear power plants. In 2005 the USA Congress adopted the basic package of incentives, including loans and guarantees for the construction of nuclear facilities. Technological trends in the nuclear sector 1. Nuclear power is a mature sector, the most important technological component of which became the design of the reactor and the station, rather than new scientific developments. It is expressed, for example, by the fact that the innovations are adopted most actively out of the industry – in the area of ​​new construction materials, projecting, innovation in business processes, etc. Traditional players increasingly take the management of the supply chain upon themselves (technological chains), leaving themselves the development of standards and requirements for thousands of suppliers and configuration of design partnerships. Such strategies are implemented by AREVA, GE-Hitachi, Westinghouse. 2. There is recently a reconstruction of technological chain of nuclear power, that is partly also connected with the optimization of stations building technology. The main directions of changes: a. Modular assembly or assembly of the reactor on the site. So Westinghouse AP 1000 uses a modular design of construction, which involves the remote production of building modules with the subsequent delivery to site and installation, while AREVA EPR builts on the site. b. The alignment of more flexible supply chain. Machinery and equipment for nuclear power plant include high pressure reactor and support equipment. Most of the support equipment is similar to that required for non-nuclear (e.g., fossil fuel power stations and chemical plants).
  35. 35. 35 3. One of the key contenders for the future technology leadership in the sector is China. The country quickly reaches the technology copying, using the experience of others. It stakes on the use of cheaper factors of production and the optimization of business processes, and on the fact that the whole technological chain is copied and optimized, and not its separate elements. It is an integrated technological chains that compete with foreign suppliers, and not the individual suppliers. 4. Horizons of scientific research are the development of new types of reactors. The implementation of these basic researches is often based on cooperative projects. 5. The main investor in R & D is still the state. Nuclear science programs continue to have primary (compared with other energy researches and developments) access to budget finances. During the last three decades nuclear R & D have over 50% of public spending on research, development and demonstration projects in the field of energy.  The same situation is common in Japan, which does not have nuclear weapons. It should be noted, that according to the International Energy Agency the cost of nuclear researches in the field of nuclear synthesis reached its peak in around 1980, and since 1985 has been steadily declining. And the most of the costs were attributable to Japan and France. Nucleoelectrica Argentina SA 1PHWR, 1CANDU CONAUR SA Haykakan Atomayin Electrakayan VVER TVEL Electrabel PWR Areva NEK EAD VVER ТVEL Eletronuclear PWR Siemens British Energy 14AGR, 4Magnox, 1PWR British Nuclear Fuels MVM Group VVER TVEL E.ON, EnBW, RWE, Vattenfall 11PWR, 6BWR Siemens Nuclear Power Corporation of 18PHWR, 2BWR Nuclear Fuel Complex ANAV, CNAT, Iberdrola, Nuclenor 6PWR, 2BWR ENUSA, Westinghouse Ontario Power Generation, Bruce Power, Hydro-Quebec, NB Power CANDU Cameco CGNPC , CNNC 4PWR, 4CNP, 2ВВЭР, Westinghouse, Areva, CNNC, Comision Federal de Electricidad BWR General Electric EPZ PWR Siemens PAEC 2PWR, 1CANDU CNNC, PAEC Rosenergoatom 16VVER, 11RBMK,4EGP-6 TVEL Nuclearelectrica CANDU FCN Slovenske elektrarne VVER TVEL Nuklearna Elektrarna Krsko PWR Westinghouse 25 companies, largest are: Exelon, Progress Energy, FirstEnergy, Energy Future 69PWR, 35BWR Areva, Westinghouse, Babcock & Wilcox, General Electric Taiwan Power Company 4BWR, 2PWR, General Electric, Energoatom VVER TVEL TVO, Fortum 2BWR, 2VVER Westinghouse, ТВЭЛ Electricite de France PWR Areva CEZ Group VVER TVEL Swissnuclear 3PWR, 2BWR Westinghouse, General Vattenfall 7BWR, 3PWR Westinghouse Eskom PWR Westinghouse KHNP 10PWR, 7OPR, 4CANDU Korea Nuclear Fuel TEPCO, Kyushu , Chubu, Tohoku, Shikoku, KEPCO, Hokuriku, Chugoku, Hokkaido, JAPC 23BWR, 3ABWR, 24PWR Toshiba, JFNL, Mitsubishi Heavy Industries, Hitachi, Nuclear Fuel Industries Country Operators Types of reactors Fuel suppliers Argentinta Armenia Belgium Bulgaria Brazil United Kingdom Hungary Germany India Spain Canada China Mexico Netherlands Pakistan Russia Romania Slovakia Slovenia Taiwan Ukraine Finland France Czech Rep. Switzerland Sweden South Korea Japan South Africa United States Commissioning of new reactors as stated by national strategy papers in 2011 0 20 40 60 80 100 120 Existing reactors Reactors under construction Reactors to be commissioned by 2030 Reactors whose commissioning by 2030 is under research Brazil CanadaChina FranceG erm any IndiaJapan South Korea Russia U nited Kingdom U nited States Resource balance
  36. 36. Center for Strategic Research “North-West” Foundation36 ABWR Taipei АР 1000 Zhejiang (6) АР 1000 (6) Shandong АР 1000 N. Carolina АР 1000 S. Carolina АР 1000 Georgia АР 1000 (4) FloridaАР 1000 (2) Alabama Dieppe EPR Olkiluoto US-EPR (2) Virginia, Maryland EPR (6) Jaitapur EPR Jaitapur APR 1400 Shin Kori APR 1400 APR 1400 Shin Kori VVER1200 Leningrad obl. VVER 1200 Akkuyu VVER1200 Akkuyu US-ABWR (2) Texas ABWR Matsue ATMEA CANDU Alberta CANDU Sinop CIAE, INET Beijing “First Academy” Chengdu Geneva Grenoble Dubna Obninsk Mumbai Hyderabad MNRC Sacramento Nuclear Energy Institute Washington, D.C. SHERDI Shanghai NINT Xian Westinghouse Pennsylvania Toshiba, Tokyo Areva, Paris MIT, Boston Max Planck Institute, Heidelberg Seversk Dimitrovgrad Sarov EPR (2) Wales,Gloucestershire VHTR SCWR VHTR,GFR SFR, SCWR LFR, MSR VHTR,GFR SFR, SCWR LFR, MSR. VHTR, GFR, SFR, MSR VHTR, SFR VHTR, SFR, SCWR, MSR GFR, VHTR, SFR VHTR, SFR, GFR VHTR, GFR MSR, GFR, SFR, SVBR (LFR) SFR LFR SFR Japan South Korea France Belgium Switzerland United Kingdom IV generation reactors VHTR GFR SFR SCWR LFR MSR Very high temperature reactor Gas-cooled fast reactor Sodium-cooled fast reactor Supercritical water reactor Lead-cooled fast reactor Molten salt reactor * ITER (International Thermonuclear Experimental Reactor) is an international project to design and build an experimental fusion reactor to address physical and technological challenges. MNRC Sacramento Keytomapsymbols Nuclear research centers III+ generation reactors under construction and on order, by type and number of units ITER participating countries* Countries conducting research on closed fuel cycle VHTR, SFR IV generation experimental reactors, by type and country АР 1000 (4) Florida Nuclear energy companies by market segment New technological markets (water desalination, back–end, standardization etc.) Construction of reactors and NPPs Back–end, R&D in adjacent spheres 2016 Unique design Modular or standard design Back–end, adjacent technologies AREVA HITACHI AECL KHNP MITSUBISHI WESTINGHOUSE CNEIC ROSATOM New materials 2020s Atomic Energy of Canada Limited (Canada) Areva (France) General Electric – Hitachi (USA – Japan) Korea Hydro and Nuclear Power Company (South Korea) Westinghouse (USA) Rosatom State Nuclear Power Corporation (Russia) China Nuclear Energy Industry Corporation (China) Mitsubishi Nuclear Energy Systems (Japan) Logos and names of nuclear energy companies on the map Euratom ABWR (6) Matsue, Higashidori, etc. EPR VVER1200 Novovoronezh HITACHI HITACHI HITACHI HITACHI Nuclear research centers, R&D and new-generation reactors Source: Center for Strategic Research “North-West”, based on Areva, IEA, IAEA, ITER, Mitsubishi, GE-Hitachi, KHNP, NTI, NEI, Clean Energy Info Portal, Westinghouse, Generation IV International Forum, WNA, Rosatom, Bochvar VNIINM
  37. 37. 37 The back-end of the nuclear fuel cycle The back-end of the nuclear fuel cycle is a series of technological processes that take place after the production of electric power from nuclear power plant, it covers management of spent nuclear fuel, including its recycling, radioactive waste (air conditioning, disposal). The market will grow, but its economy is still not known. Spent nuclear fuel Several models of treatment with spent nuclear fuel are accepted in the world. 1. Some countries – Russia, Japan, France, the UK, India, China – chose a closed nuclear fuel cycle, that means that the discharged from the reactor fuel is recycled to extract uranium and plutonium for re-fuel production. These countries have their own production capacity of fuel. 2. Some countries do not recycle the spent nuclear fuel, equating it to the high-level waste and thus keep it on bystation or centralized storage, suggesting further bury of them in geological formations. Many countries, that pursue such policy, have previously recycled the spent fuel on their territory or abroad – the USA, Canada, Sweden, South Korea, Finland, Slovakia, the Czech Republic, Hungary, Germany, Spain, Romania, Lithuania, Taiwan 3. Some countries do not have their own capacities for fuel recycling, but it is processed at facilities of Russia, UK and France. They are the Netherlands, Italy, Bulgaria. 4. A number of countries haven’t made a final decision in favor of a closed or open cycle (“delayed decision”). For the present they keep the spent fuel at bystation or centralized storage, waiting for the moment when the advantages and disadvantages of the two types of cycle become more obvious and when the term of the possible storage of spent fuel will expire and will need to decide for recycling or disposal in geological formations. These countries are Armenia, Argentina, Mexico, Pakistan. 5. There are countries that, developing its nuclear power, expect to take the nuclear fuel on lease, and therefore they do not need to create an infrastructure for spent fuel and high-level waste (Belarus, Turkey, Jordan, Vietnam, Bangladesh, Egypt, Iran). 6. The last group of countries, while conducting a particular policy, seeks to change it in the future or find different combinations. We are talking about Belgium, Ukraine, Slovenia, South Africa, Brazil, the United Kingdom. Shut down reactors, 1960–2009 by country total 0 5 10 15 20 25 2,000 4,000 6,000 8,000 10,000 Units Netcapacity,MWe 1960–1964 1965–1969 1970–1974 1975–1979 1980–1984 1985–1989 1990–1994 1995–1999 2000–2004 2005–2009 Armenia Belgium Kazakhstan Lithuania Netherlands Spain Canada Slovak Rep. Sweden Japan 1 each 2 3 each 4 each Bulgaria Ukraine Italy Russia 5 each 11France 19Germany United Kingdom 26 United States 29 Source: Center for Strategic Research “North-West”, based on IAEA, World Nuclear Association, International Panel on Fissile Materials, Commissariat a l’Energie Atomique Resource balance

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