Access to Central Asian energy resources for Asian consumers
3d Asia Energy Security Summit 2013Fostering energy security partnership and cooperation within Asia. Anantara Riverside Resort, Bankgok, Thailand February 28- March 1st 2013
World Oil and Gas Reserves. GASMiddle East 38% CIS 36% Arica 7% OilMiddle East 48% CIS 8% Africa 8% 0% 10% 20% 30% 40% 50% 60%
Oil Consumption Projections. OECD states - oil for transport demand will be reduced by 30% between 2009-2035. Non-OECD states – demand will increase from 7.5 mbd. to 13.5 mbd. at the same period.
Gas demand growth.81% of growth will come from non- OECD states.In China only it will grow 5 times. (2009-2035)
World energy consumption by region: India and Chinaaccount for half a growth in world energy use.
C A G as res erves (trillion cubic meters )98765 K az akhs tan4 TUrkmenis tan32 Uz bekis tan10 K az akhs tan TUrkmenis tan Uz bekis tan BP s tatis tical review (2011)
Two shores of Caspian – East andWestDifferent gravitation trends.West - ( Azerbaijan and South Caucasus ) towards EUEast ( Kazakhstan, Turkmenistan– China, Asia).Quickly integrating Central Asia independently of Europe.
Caspian Sea Basin – dividing factor. 1. Unresolved legal status 2. Various historical identities on the Western and Eastern shores. 3. Conflicts, political regimes. ( Iran-Azerbaijan, Azerbaijan- Turkmenistan, international sanctions towards Iran). 4. Lack of maritime activities, including civilian, and trade transportation infra structure. 5.Competition between producers and producer/transit states. 6. Russia’s and Iran’s policies preventing trans-Caspian pipelines. 7. Militarization of the Caspian.
Oil and Gas Reserves Azerbaijan (national sources)GAS OIL Proven 2,5 tcm Proven 2bln Projected 6 tcm Projected 2bln
EU - Southern Gas Corridor 1. Nabucco 2. ITGI ( Turkey-Greece-Italy Inter connector ) Poseidon project. 3. IGI ( Inter connector Greece Italy) IBG ( Bulgaria- Greece) 4. TAP ( Trans Adriatic Pipeline) 5. AGRI ( Azerbaijan- Georgia – Romania Inter connector) 6. White Stream ( Georgia-Ukraine).
Shift in Caspian producers’ energy policies From “politicization of energy” to “commercialization of state”. Azerbaijan – from the “oil diplomacy” in 1990s to promotion of national state oil and gas company in 2000s.
Turkmenistan’ gas exports– East or West? Turkmenistan currently ranks in the top six countries for natural gas reserves and the top 20 in terms of gas production. According to OGJ, Turkmenistan has proven natural gas reserves of approximately 265 Trillion cubic feet (Tcf) in 2012, a significant increase from 94 Tcf estimated in 2009. Turkmenistan has several of the worlds largest gas fields, including 10 with over 3.5 Tcf of reserves located primarily in the Amu Darya basin in the southeast, the Murgab Basin, and the South Caspian basin in the west. Recent major discoveries at South Yolotan in the prolific eastern part of the country are expected to offset most declines in other large, mature gas fields and will likely add to the current proven
SOCAR investments abroad Georgia – up to US$ 1 bln. ( Kulevi Terminal, near 100 gas stations, gas transmission system…) Turkey – will reach US$ 17 bln by 2018. TANAP – projected cost raised from US$ 5 bln to US$10 bln., privatization of PETKIM refinery ( production volume will reach 5 bln in 2015), refinery in Izmir,, BTE branch to Nakhichevan, goal- gas distribution in Ankara Switzerland – gas stations and refinery of Exxon. Ukraine – near 15 gas stations, goal -refinery and share in Sarmatia (1,5%)- Odessa Brody Plotzk pipeline. Romania -13 gas stations ( goal -refinery) Kirgizistan – refinery ( negotiations) SOCAR Trading Company - terminal in Jumeyra, South East Asia.
EU energy Security - Competing projects South Stream and Nabucco
TANAP – Game Changer of theSouthern Gas Corridor. 1. EU independence from Russia’s gas export monopoly. 2.Replaced original Nabucco East on Turkish soil. 3. Jointly owned (80%-20%) with Turkey gas pipeline. 4.Azerbaijan relies on its own gas resources (independence from Turkmenistan) 5. Azerbaijan gets almost full control over the Shah Deniz 2 gas transportation to Europe (independence from EU). 6. Enables Azerbaijan for the first time to sell its gas to EU customers through its own pipeline.
Russia as an actor in Central Asiaand Caspian. 1. Flaws of “energy superpower” concept ( investment crisis, increasing state encroachment undermines growth). 2. Lack of technology and capital to acquire assets abroad ( some in Turkmenistan and Kazakhstan). 3. Monopoly on major gas export route to Europe and transport of oil and gas in Central Asia. (Torpedoed transportation projects such as CPC, which led to Kazakh-Azerbaijan agreement in 2006 on BTC, “explosion” crisis with Turkmenistan etc.) 4.Improved Russia-Turkish relations ( Turkey allowed Russia Blue Stream through its territorial waters). 5.Waning power of state owned Gasprom ( clashing with third EU energy package , aspiring ownership of Ukrainian gas pipeline)– Russia’s policy responses becoming rougher. 6. Caspian status: trans-Caspian gas pipeline unacceptable ( military threats) 7. Russia’s political and economic influence in CA states stagnated.
China and Central Asia. 1. In decade increased its presence in CA – dominant in onshore Kazakh oil fields, replaced Russia in Turkmen gas sector. 2. China – Kazakh crude oil pipeline in 2005, branch Kenkyak to Kumkol in 2009, 10 bcm line from Western Kazakhstan to Southern Kazakhstan. 3. Modernization of Atyrau refinery in 2009-2013. 4. Member of Shanghai Cooperation Organization 5. Refuses global security role in favor of Russia prioritizing bilateral commercial and political interests. Energy geopolitics for China is energy politics ( Denison, 2012). 6. CA states’s main advantage shifted with the globalization of the gas market from resources as geopolitical bargaining tool towards the bordering with China- main market for global energy consumption growth.
Challenges in CA markets integration. Power derives not from fixed control over natural resources within borders, but through regimes of market access that maximize control over the flows of good, capital and innovations. ( John Agnews). CA reserves are insignificant compared to those of Russia, they are landlocked and depend on transit states they border. The transport is expensive. Growing resource nationalism leads to tough negotiation behaviour and less openness. Increase in LNG decrease attractiveness of high priced gas via pipeline.
India: challenges in access to CA energy. Like the EU, and unlike Russia and China, India depends on transit states to get an access to CA resources. - is the democratic actor. - relative passivity of energy companies. - security considerations. - Russia and Iran blocks trans-Caspian pipeline. - Iran is under international sanctions. - can Turkmenistan fulfill its export commitments?
More pipelines secure greater peace. “Win – win” mentality should prevail. Geopolitical domination approach should diminish. Objective factors ( nature of a gas “era’) Subjective factors -CA and Caspian states – artificial stability, based on oil revenues – when replaced by the political process. -Big regional powers - when liberalized and reduced geopolitical ambitions.
New Geopolitics of Central Asia – from the “greatgame” to “ local politics of energy” (MichaelDennison, 2012). -New technologies lead to unconventional reserves shifting geography of production and reconfigure import dependencies. -energy mix of major consumers was subject to external shocks like Fukushima disaster in 2011 -policy on climate change and renewable energy -ownership of resources ( resource nationalism and assertiveness of National Oil companies) factor in investment decisions. -the CA leaders use the investments and export diversification of the oil and gas as the best way to political and economic sovereignty and elite enrichment. -“compression” of geography - China’s railway expansion.( Parag Khanna, 2012) happens faster than political institutions can afford.
Increasing insufficiency of the currentEnergy Security conceptual framework International Energy Agency defines energy security as ‘ an uninterrupted energy supply at a reasonable price and with environmental considerations” from abundant, reliable and diverse sources connected with economic growth and social development. As most of the producers are authoritarian or semi - authoritarian regimes political factors and domestic impact of the energy security - or ownership -is becoming more salient ( EU agenda in Azerbaijan).
Duality of integration.1. Commercialization ( internationally) of state actorsand regionalization of energy policies.2. Globalization of ideas. Increasingly affecting the issue of …. Ownership and domestic impact of energy security in states- producers.
Conclusions. Success of access to the Central Asia resources for the Asian consumers depends on variety of factors: Global market trends/economy/resources availability Geography Political factors (conflicts, resource nationalism, rising ambitions, need of revenues to support patronage etc). affecting both bilateral relations, energy policies of the CA leaders and export routes stability and security). Increasing role of small states as a game changers ( Azerbaijan and CA states ) and regionalism/commercialization trends.Most importantly, Understanding the changing nature of the “ great game” and “compressing geography” of the CA, which work in favor of the most dynamic and adjusted to these changes actors in the region. (Russia versus China).