Caspian Crossroads v3 - Camden Conference · Caspian Crossroads: ... New pipelines to Iran, ......

Strategic Advisors in Global EnergyStrategic Advisors in Global EnergyStrategic Advisors in Global Energy

Caspian Crossroads: Accessing, Transporting and Consuming the Caspian's Oil and Gas

Prepared for Camden Conference Energy Symposiumby Hans [email protected]

30 January 2010

PetroChina Tops 2009 PFC Energy 50http://www.pfcenergy.com/pfc50

Caspian Crossroads | PFC Energy |

National Oil Companies (NOCs) outperformed International Oil Companies (IOCs) in 2009, rebounding more quickly from 2008 lowsNational Oil Companies (NOCs) outperformed International Oil Companies (IOCs) in 2009, rebounding more quickly from 2008 lows

Caspian at Crossroads of Europe, Asia and the Middle East

Caspian Crossroads | PFC Energy | Image credits: Xinhua, Getty, EnergyTechStocks, public domain

Primary Energy Balance, 2008 (Oil + Gas, Mtoe)

+547

+67

+42Caspian

-187+95

+42Caspian region has energy…

-100Asia needs energy B t it’ t


energy… But it’s not as easy as connecting the dots…

GDP Surging in China

Annual GDP Growth 2004 to 2008

World

China GDP experienced 9.6% growth in 2008

Europe

Latin America

North America

World

India too, pacing non-OECD Asia

Middle East

Asia

FSUOECD Asia

OECD Asia saw limited

India

China

AfricaOECD Asia saw limited growth Key Markets

0% 2% 4% 6% 8% 10% 12%

US

India

Meanwhile, North America and Europe lagging


Source: IMF & World Bank

Note: GDP growth rates are real and based on exchange rates

Global Vehicle Fleet – Poised for Growth

Limited vehicle ownership in Asian markets experiencing strong economic growthLimited vehicle ownership in Asian markets experiencing strong economic growth


Limited vehicle ownership in Asian markets experiencing strong economic growth creates the potential for significant motor fuels demand growth

Limited vehicle ownership in Asian markets experiencing strong economic growth creates the potential for significant motor fuels demand growth

Oil Demand Growth Driven by Emerging Markets

North America

Europe-0.3%

FSU1.9%

America0.3%

Middle East 3.7%

Non-OECD Asia 4.6%

Latin America 2 6%

Africa 3.5%

OECD Asia -0.9%

2.6%

Global products demand has grown by 1.4% annually on average from 2004-2008


– OECD markets have experienced either flat or declining demand– Growth lies in non-OECD markets which now contribute over 40% of global oil product demand

Natural Gas Use On the Rise

Global Natural Gas Demand56

tcf

50

52

54

OECD

44

46

48

Non OECD38

40

42

Non-OECD

34

36

38

1992 1994 1996 1998 2000 2002 2004 2006 2008


1992 1994 1996 1998 2000 2002 2004 2006 2008

China and India to Lead Asian Gas Imports

20bcf/d

China and India: Future Demandfor Natural Gas Imports

12

16

4

8

0China India

2010 2020 2030

China to begin switching from coal to natural gas in 10+ years

India is 3rd largest non OECD consumer of oil for power


India is 3rd largest non-OECD consumer of oil for power generation, but will soon start switching to gas

Gas Use is Exploding in Many Producing Countries

5-year avg. domestic demand growth Pipe & LNG Pipeline LNG

Gas needed domestically for power, industrialization, desalination

Qatar

UAE10%

12% Bubble size represents domestic market

e.g. Egypt 1.1 tcf

Egypt

OmanIran

Trinidad

8%

g gypIran 4.0 tcf

Indonesia

Turkmenistan Nigeria

Trinidad

4%

6%

Algeria

Malaysia

Libya

2%

Russia 7 tcf exports17 tcf domestic demand4% domestic growth


0%0.0 0.5 1.0 1.5 2.0 2.5

Exports (2008) in tcf

4% domestic growth

The Big Picture


Tehran Steps Up Energy Diplomacy

Ambitious diplomatic outreach to Azerbaijan, Turkey, Turkmenistan, Russia, India and China

Several key goals of this diplomacy:

Ensure uninterrupted stream of– Ensure uninterrupted stream of revenues from crude exports

– Maintain flow of imported refined products and natural gas to addressproducts and natural gas to address domestic imbalances

– Gain access to foreign investment and technology to boost oil and gas gy gproduction, expand refining capacity and develop LNG export capabilities

Increasingly pivotal player in the


g y p p yemerging East-West, North-South energy flows Source: Fars / RFE/RL

Iran Must Import Energy to Meet Needs

Northeast relatively stranded

Natural gas imports from Turkmenistan

Crude swap deals at Neka

US attempting to limit gasoline

Neka

US attempting to limit gasoline imports via sanctions

Map source: CIA

Chinese investments in Iranian


Chinese investments in Iranian upstream, downstream and gas sectors continue (~US$ 20 bn)…

Major Gas Export Pipeline Projects in Doubt

Tajikistan China

KyrgyzstanUzbekistan

IPITAPI

Opposition from Iranian Oil Ministry stemming from security concerns– Would face interference from Jundallah (“Army of God”), based in Baluchistan along the


Would face interference from Jundallah ( Army of God ), based in Baluchistan along the Iran/Pakistan border

US opposition to IPI, tepid support for TAPI

Turkmenistan Diversifies Its Gas Exports

0

60bcm

Turkmen Gas Exports, 2005-2011China Iran Russia

Iran as largest

30

40

50 export destination

10

20

2009 t t R i hit b i li l i

02005 2006 2007 2008 2009E 2010F 2011F

2009 exports to Russia hit by pipeline explosion

Revenues still high thanks to Russia’s new pricing formula

New pipelines to Iran China open up additional export


New pipelines to Iran, China open up additional export opportunities

Will the BTC Model Work for Nabucco?

Baku-Tbilisi-Ceyhan began pumping oil from Azerbaijan in 2006, allowing Caspian crude to bypass Russia

Multi-year lobbying effort to push through– US government– Oil companiesOil companies– Local political will

Can it translate forCan it translate for a gas pipeline?

– Geopolitics?– Supply?Supply?– Company support?

– Limitations of gassupplies via


pipeline

Georgia Conflict Exposed Transport Risk

Russian invasion halted East-Westhalted East West flow of goods

Baku-Supsa closed as precautionas precaution

Railway bridge bombed

Reports of bombing along pipeline route

BTC already shutBTC already shut down due to explosion in Turkey


Role of Russia?

Russia does not want Caspian gas to reach Europe

South Stream as opposing project to Nabuccop j

Sister pipeline, Nord Stream, would also bypass pesky Ukraine

Source: Pismestrovic, Kleine Zeitung / CartoonArts International

Russia has gas, but needs much of it for domestic consumption– Major export-oriented projects (Yamal peninsula, Kovykta, Shtokman) to

require tens of billions of dollars


require tens of billions of dollars– Gas exports to China by 2013? 2015? 2020?

Sino-Russian Relations Help Drive ESPO Pipeline

US$ 15 bn to RosneftRosneft

US$ 10 bn to Transneft

20-year oil supply deal for China

Kozmino deliveries started in DecemberDecember

Refinery cooperation?


Takeaways

Pipeline projects are hard wherever you are, and especially so around the CaspianChina is the most viable alternative export route for Caspian oil and

i th f bl f tgas in the foreseeable future– China has succeeded in reaching deals with a variety of Caspian players,

including Russia, Kazakhstan, Turkmenistan and Iran– Pakistan and India are largely still struggling to reach this level of cooperation,

mainly due to physical geography and regional geopolitics

Iran risks overextending itself, particularly in gas, and must balance a larger security context as wellI di f d i t li i ( d LNG) i i ll f thIndia forced into supplies via sea (crude, LNG), principally from the Middle East


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Caspian Crossroads v3 - Camden Conference · Caspian Crossroads: ... New pipelines to Iran, ......

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