Delivering Energy Security to Europe and Beyond


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Konstantin Simonov's speech presentation at the Athens Summit 2009 “The Road to Copenhagen: Managing Climate Change & Energy Security in Southeast Europe and Beyond”.
Athens, Greece, May 12, 2009.

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Delivering Energy Security to Europe and Beyond

  1. 1. DELIVERING ENERGY SECURITY TO EUROPE AND BEYOND Konstantin Simonov Athens May , 2009
  2. 2. Economic Crisis : Short Term Respite <ul><li>Economic Crisis will reduce the consumption of fossil fuel – but only in 2009-2010 </li></ul><ul><li>Three main reasons of future “energy starvation” </li></ul><ul><li>Population growth </li></ul><ul><li>Reducing of investment to upstream in turning-point - when there is a special need in its increasing </li></ul><ul><li>Toughening of environmental challenges </li></ul>
  3. 3. W ho will L augh L ast ? <ul><li>2008 – happy suppliers </li></ul><ul><li>2009 – happy consumers </li></ul><ul><li>2015 - ??? </li></ul>Gas export from Russia during January-April was decreased by 53,3%
  4. 4. Impacts of Crisis on Energy Production <ul><li>Reducing of investment to greenfields: they are profitable at $ 75 per barrel ( shelf or bituminous sand in Canada ) + d epletion of main world fields </li></ul><ul><li>Alternative energy generation is in trouble </li></ul><ul><li>(e.g. bankruptcy of some ethanol producers in Brazil) </li></ul><ul><li>Possible radical change of the situation on oil and gas market: from market of consumers to market of suppliers. Growing consumption – declining production </li></ul>
  5. 5. Cheap Oil = Lack of Investment 2010? 2011? Demand for oil and gas will recurs. At the same time we will face the depletion of old fields while new ones are undeveloped
  6. 6. Two Energy Poles
  7. 7. Two Energy Poles
  8. 8. “ Crusade” for Recourses <ul><li>Europe, China and India: the worst situation </li></ul><ul><li>The most dramatic situation is with gas. Gas vs. oil : better environmental internals, less serious producers </li></ul><ul><li>Struggle for the same territories: Central Asia, Russia, Iran, Africa </li></ul><ul><li>Europe: main threat is the decline of domestic production </li></ul><ul><li>China and India: main threat is the increasing of domestic consumption </li></ul>
  9. 9. Central Asia as a Battle Field Gas pipeline from Turkmenistan to China ( Central Asian Gas Pipeline) : capacity was raised from 30 billion to 40 billion cubic metres. Operation at full capacity will be ensured by the end of 2013. 17 billion cubic metres Ashgabat guaranteed to China from the Malay field - today’s resource base of gas export to Europe through Russia
  10. 10. Gas Suppliers to Europe
  11. 11. “ Gas Starvation” <ul><li>Europe : 20-20-20 program is initially unrealizable . Gas production in Norway dropped by over 10 bcm . In 2015 Norway will reach plateau production. Northern Africa can increase supply by 30- 40 bcm by 2015 maximum . Iran – big political risks. Central Asia – competition with China </li></ul>
  12. 12. Nabucco will not Save Europe <ul><li>Nabucco is just 30 bcm by 2 013 at best </li></ul><ul><li>Europe suggests that reciprocal influence should be replaced with competition thinking that the latter is more important . But competition can only increase the price </li></ul><ul><li>Competition is real on the oil market but not on the gas market . The situation with gas will be more complicated </li></ul>
  13. 13. Problems of the Liberalisation of the EU Gas Market <ul><li>The European Commission and the European Parliament are working on is exactly the liberalisation of the EU gas market ( Third Legislative Package) </li></ul><ul><li>EC is thinking that the main task is liberalization of access to gas transport infrastructure </li></ul><ul><li>If your commodity is competitive the liberalisation is not something to be afraid of </li></ul><ul><li>In connection with the crisis, Europe has got a respite: gas consumption can fall by 7-10% this year. Strategically, however, the problem of gas supplies remains </li></ul>
  14. 14. Responsibility of Suppliers <ul><li>Best guarantees from the suppliers – high level of production </li></ul><ul><li>Diversification of markets as an answer to diversification of supply </li></ul><ul><li>Russia between Europe and China </li></ul>
  15. 15. Europe or China? <ul><li>Russia can export oil to China only by railroad now </li></ul><ul><li>But Russia signed 20 year contract on supplies of 300 m tons of oil through a new oil pipeline </li></ul><ul><li>2008: decline in oil production by 0.57% decline in oil export by 6.5% </li></ul><ul><li>Energy minister Sergey Shmatko believes an 8% decline in oil production is a possible scenario </li></ul><ul><li>Diversification of markets = </li></ul><ul><li>Gradual escaping form European market </li></ul>
  16. 16. <ul><li>Thank you! </li></ul><ul><li> </li></ul>