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Critical decisions for the pipelines

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Konstantin Simonov’s speech presentation at Forth Energy Summit «Sustainable, competitive and secure energy in Europe». …

Konstantin Simonov’s speech presentation at Forth Energy Summit «Sustainable, competitive and secure energy in Europe».

Nicosia, Cyprus, November 14, 2011.

Published in: News & Politics, Business

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  • 1. National Energy Security FundNational Energy Security Fund Critical Decisions for the Pipelines Konstantin SimonovKonstantin Simonov NicosiaNicosia November, 14November, 14
  • 2. National Energy Security Fund Gas ReservesGas Reserves Proved Gas Reserves in Caspain Area and Central Asia 42,3 26,0 2,6 3,1 1,7 1,8 1,2 44,8 29,6 8,0 3,2 1,6 1,8 1,3 0,0 5,0 10,0 15,0 20,0 25,0 30,0 35,0 40,0 45,0 50,0 Russia Iran Turkmenistan Iraq Uzbekistan Kazakhstan Azerbaijan 2000y 2010y Source: BP World Energy OutlookSource: BP World Energy Outlook 20112011
  • 3. National Energy Security Fund Gas ReservesGas Reserves • It is impossible to evaluate the structure andIt is impossible to evaluate the structure and quality of gas resources in the Caspianquality of gas resources in the Caspian region due to insufficient dataregion due to insufficient data • Lifting cost on South Yolotan will be higherLifting cost on South Yolotan will be higher then on Dauletabadthen on Dauletabad • It requires deep and expensive processing toIt requires deep and expensive processing to prepare Caspian gas for transportation.prepare Caspian gas for transportation. Capacities for waste utilization are needed.Capacities for waste utilization are needed. Moreover, substantial part of reserves is hardMoreover, substantial part of reserves is hard to recover and thus economically unprofitableto recover and thus economically unprofitable
  • 4. National Energy Security Fund Shakh Deniz CaseShakh Deniz Case • The project of developing the Shakh Deniz deposit was launchedThe project of developing the Shakh Deniz deposit was launched in 1996 when the Azerbaijan parliament ratified a product sharingin 1996 when the Azerbaijan parliament ratified a product sharing agreement with a consortium of foreign investors led by BPagreement with a consortium of foreign investors led by BP • After three-year long geological prospecting the sides proceededAfter three-year long geological prospecting the sides proceeded to the first phase of the deposit development with anticipated peakto the first phase of the deposit development with anticipated peak production of some 8.6bn to 9bn cu m per year. The deposit wasproduction of some 8.6bn to 9bn cu m per year. The deposit was launched with a two year delaylaunched with a two year delay .. Gas deliveries started in 2007.Gas deliveries started in 2007. Production has not reached the designed capacity yet. Last yearProduction has not reached the designed capacity yet. Last year some 6.9bn cu m of gas was producedsome 6.9bn cu m of gas was produced • The sides originally planned to launch the second phase of ShakhThe sides originally planned to launch the second phase of Shakh Deniz in 2012 but postponed it until 2017 with the designed outputDeniz in 2012 but postponed it until 2017 with the designed output level of 16bn cu m and capital expenses above $20bn. However,level of 16bn cu m and capital expenses above $20bn. However, neither a technical model of development nor commercialneither a technical model of development nor commercial conditions of future supplies has been approvedconditions of future supplies has been approved • The second phase is technically more complicated as it envisagesThe second phase is technically more complicated as it envisages a greater sea depth at the place of production and much furthera greater sea depth at the place of production and much further gas horizon compared to the first phase, which makes the secondgas horizon compared to the first phase, which makes the second phase more expensivephase more expensive
  • 5. National Energy Security Fund Problematic SolutionsProblematic Solutions • Iran – problem of sanctionsIran – problem of sanctions • Iraq – problem of reconstruction ofIraq – problem of reconstruction of economyeconomy • Turkmenistan – problem of Trans-Turkmenistan – problem of Trans- Caspian pipelineCaspian pipeline • Kazakhstan – gas is mainly producingKazakhstan – gas is mainly producing at oil deposits and pumped back intoat oil deposits and pumped back into reservoirs to maintain pressurereservoirs to maintain pressure • Turkey and Azerbaijan will be theTurkey and Azerbaijan will be the winning partywinning party
  • 6. National Energy Security Fund More PoliticsMore Politics then Economicsthen Economics • Everyone wants to buy AzeriEveryone wants to buy Azeri gasgas • You can not avoid TurkeyYou can not avoid Turkey • Political demands: membershipPolitical demands: membership in EU; solving of Karabakhin EU; solving of Karabakh ProblemProblem
  • 7. National Energy Security Fund RussianRussian Benchmark PriceBenchmark Price for Azeri Gasfor Azeri Gas Expenses on transporting Azeri gas from the Shakh Deniz deposit (€/ 1,000 cu m) 77 90 104 0 20 40 60 80 100 120 Nabucco ITGI TAP Cheap Gas? 345 360 0 50 100 150 200 250 300 350 400 Gaprom's gas average price in Europe ($/1,000 cu m), six months ended June 30, 2011 Estimated price of gas from the Shakh Deniz transporting to Europe through Nabucco ($/1,000 cu m) Source: Gazprom, RWE,Source: Gazprom, RWE, NESF calculationNESF calculation Source: RWESource: RWE
  • 8. National Energy Security Fund SummarySummary • Gas from Caspian greenfields willGas from Caspian greenfields will not be cheapnot be cheap • Growing of political ambitious ofGrowing of political ambitious of Turkey and AzerbaijanTurkey and Azerbaijan • Growing influence of China in theGrowing influence of China in the regionregion • Rejection of Russia as gasRejection of Russia as gas suppliersupplier
  • 9. National Energy Security Fund Thank you!Thank you! www.energystate.ruwww.energystate.ru
  • 10. National Energy Security Fund Thank you!Thank you! www.energystate.ruwww.energystate.ru

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