Section5 pirani eng

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Section5 pirani eng

  1. 1. OXFORD INSTITUTE FOR ENERGY STUDIES Natural gas for Ukraine, Natural Gas Research Programme Russia and Europe: where next? Simon Pirani Senior Research Fellow Oxford Institute for Energy Studies International Security Forum, Lviv, 16 April 2010 1
  2. 2. MAIN POINTS OXFORD INSTITUTE FOR ENERGY STUDIES  The impact of economic crisis on the Natural Gas Research Programme European gas market  The effect of crisis, and recovery, on Russia and other CIS producers  Ukraine’s gas trade after the 2009 ‘gas war’  Prospects for international cooperation 2
  3. 3. Observed gas demand, OECD Europe (bcm) It may return to pre-crisis levels only in 2013-14 OXFORD INSTITUTE FOR ENERGY STUDIES Natural Gas Research Programme 560 555 550 545 540 535 530 525 520 515 510 505 2004 2005 2006 2007 2008 2009 Source: IEA
  4. 4. Changes in the European market OXFORD INSTITUTE FOR ENERGY STUDIES Oil-linked prices may not be with us forever Natural Gas Research Programme Source: Howard Rogers (OIES), Atlantic Basin LNG / Argus, Gas Matters 4
  5. 5. Natural gas imports to OECD Europe OXFORD INSTITUTE FOR ENERGY STUDIES first nine months of the year, Bcm 400 Natural Gas Research Programme 350 300 250 200 150 100 50 0 2008 2009 Russia Norway Algeria Others Russia lost market share 5
  6. 6. A very different outlook for OXFORD INSTITUTE FOR ENERGY STUDIES Russia and Gazprom Natural Gas Research Programme Worries about a ‘supply squeeze’ have gone. Now there are questions about long-term demand. Gazprom’s big projects are being delayed ... Gazprom will face competition in Europe from LNG... Russia’s dominance in central Asia has been undermined by the Turkmenistan-China pipeline ... In Russia, Gazprom is under pressure from the oil companies and Novatek ... 6
  7. 7. Main sources of supply to Russia’s gas balance, 2008-2009 (bcm) OXFORD INSTITUTE FOR ENERGY STUDIES 800 Natural Gas Research Programme 61 700 35 600 113 500 113 400 300 551 462 200 100 0 2008 2009 Gazprom Russia, non-Gazprom Central Asia purchases 7
  8. 8. Turkmen gas exports, 2008-2011 (bcm) 50 OXFORD INSTITUTE FOR ENERGY STUDIES 45 7 Natural Gas Research Programme 40 35 13 30 25 42.3 10 20 15 15 7 6 10 5 11.8 11 11 0 2008 2009 2010, est. 2011, proj. Russia China Iran 8
  9. 9. Ukraine after the January 2009 OXFORD INSTITUTE FOR ENERGY STUDIES ‘gas war’ Natural Gas Research Programme • Nord Stream will be built and Ukraine’s bargaining power will be reduced • Ukraine will pay European-linked prices for imports • Gas consumption must be cut – by energy-saving, not industrial slump • Production could be increased 9
  10. 10. Russian gas export capacity to Europe up to OXFORD INSTITUTE FOR ENERGY STUDIES 2015: transit via Ukraine could be reduced Natural Gas Research Programme 10
  11. 11. Ukraine’s demand collapse, 2009 monthly consumption, as % of same month in 2008 OXFORD INSTITUTE FOR ENERGY STUDIES 20 10 Natural Gas Research Programme 0 -10 -20 -30 -40 -50 -60 -70 -80 -90 1.09 2.09 3.09 4.09 5.09 6.09 7.09 8.09 9.09 10.09 11.09 12.09 Total Industry (excluding power) Residential & public sector Demand destruction concentrated in industry, but slowly recovering since the spring 11
  12. 12. Ukraine’s 2009 gas imports problem OXFORD INSTITUTE FOR ENERGY STUDIES was converted into a cash problem Natural Gas Research Programme Volume of Price Import bill imports $231.12 2009 (est) 28.51 Bcm $6.59 billion (average) $290-300 $9.42-9.75 2010 (proj’n)** 32.5 Bcm (average) billion * Source: energy ministry, Naftogaz. ** Assuming oil at $70/bbl ... the IMF counted $3bn Naftogaz operating deficit as part of Ukraine’s fiscal shortfall But what will happen in 2010?
  13. 13. Europe, Ukraine and Russia: areas of possible cooperation OXFORD INSTITUTE FOR ENERGY STUDIES Natural Gas Research Programme TRANSIT AND STORAGE:  How could a consortium work to the benefit of all?  Could Ukraine become a storage provider? REDUCING CONSUMPTION:  In industry, it will depend on sourcing investment  Municipal services reform is hard (in Russia too)  What about price reform, and Naftogaz structure? INCREASING GAS PRODUCTION IN UKRAINE:  What type of investment environment? The more transparency, the better 13

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