Global Energy, Economic Interdependence, Iraq And the Gulf
Transcript of Global Energy, Economic Interdependence, Iraq And the Gulf
The Center for Strategic and International StudiesArleigh A. Burke Chair in Strategy
1800 K Street, NW • Suite 400 • Washington, DC 20006Phone: +1-202-775-3270 • Fax: +1-202-457-8746
Web: www.csis.org/burke
Global Energy, Economic Interdependence, Iraq And the Gulf
Anthony H. CordesmanArleigh A. Burke Chair
Revised: September 2007
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Scoping the ProblemNot every "catastrophe" is a catastrophe. Short-term problems can lead to long-term gains. Turbulence, panics, price rises, interruptions = substitutions, new technologies, diversification, conservation and efficiency.
Supply shortfall models are outdated, very uncertain, and very sharply by country.
Many key security decisions are domestic: Nuclear, coal, conservation, social policy, environmental issues, efficiency, stockpiles, level of dependence on single energy sources.
Not a “zero sum game” between consuming nations or consumers and suppliers: Global interdependence means energy must be shared to sustain trade, and exports. Cheaper to cooperate and rely on market forces than compete or fight.
Energy costs as a percentage of total GDP, or in terms of economic dependence, leave considerable elasticity.
A very unpleasant present could have serious political and economic costs, but could mean a better future.
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3
The 19th Century Myth of Global Resource Competition
The world does not run out of oil and gas, it simply becomes progressively less affordable.No mechanism for global trade and globalism works better than open market prices for exports.Substitution effects work best if price driven, with limited intervention by governments.Demand-driven high prices are fair prices.The World adapts over time.
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Reality is Global InterdependenceMajor industrialized states and emerging economies dependent on global trade.US and Europe “import” oil through Asian manufactures.Global stability dependent on global economic growth and stability.Environment, Supply, Conservation, Efficiency evolve forward on global basis.Market forces most efficient and secure method of pricing and distribution for all major powers.
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0 1 000 2 000 3 000 4 000 5 000 6 000
20302004
20302004
20302004
MtoeProduction consumed within each region Traded between regions
Oil
Coal
Gas
11%
15%
48%
54%
11%
20%
trade as % of world demand
World Fossil Fuel Supply: The Globalism Factor
Source: IEA, World Energy Outlook, 2006
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The Challenge of “ElasticityElasticity in demand: Economic growth, response to price, global economic conditions.Elasticity in supply: Quantity, price, and comparative advance of petroleum, gas, coal, nuclear and otherElasticity in Conservation: Ability to reduce demand in current uses of energy and through social change. Which are gaining influence?Elasticity in Efficiency: Ability to reduce demand for energy and achieve the same output.
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Sudden change or long slope toward rising scarcity?
Sudden critical changes tend to breed more tension and conflict.Slow rises in scarcity lead to market-driven and substitution responses.E.g. running out of oil: Have been running out since before anyone here was born, but actual major shortfalls have been very different.Substitution, however, is time and cost sensitive. Can’t change housing, workplace, public transportation, or vehicle fleets quickly.
Even more true of social behavior and values.National security interests create different sensitivities.
Some Chinese literature sees future oil crisis in these terms. “Horse blinders” are also a problem. May not look in right place for alternatives or focus too narrowly on one aspect of resource.
Technology is a predictive nightmare.Always get availability, cost, effectiveness. Comparative desirability wrong.By definition, cannot predict a technological breakthrough, although they do occur.
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Crisis points or substitution effects and social and economic change?
Major global shortage of whale oil has been real. Past concerns with strategic metals, oil have not been. Neither has matteredMarginal value of resources changes radically in cost and use as resources become more scarce.Substitution effects come from scarcity but also technological change and other factors.Efficiency and conservation are key options, but are driven by economic realties and not ideology, social and political goals, or anticipation.Mid and long term elasticities are extremely difficult to predict.Many key shifts in resources involve complex social and economic shifts, not simply shifts in direct use of resource. Housing patterns and residential distance from work versus gas mileage.Drinking water vs. agricultural imports
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Driven by Geopolitics/Geoeconomics or Market Forces?
Even market-driven adaptation can be very unpleasant, particularly for the most dependent and poorest nations.
No one ever really runs out of anything, it simply becomes progressively more unaffordable.
Globalism does not make life fair, it simply does a better job of rewarding the successful.Does not really matter whether multinational, state/state company, or private entity if collectively react to market driven forces.Historically, conflict occurs when perceived scarcity leads to geopolitical or geoeconomic concepts that can lead to conflict.Greed, ambition, nationalism have historically been more of a source of conflict and tension than actual scarcity.
Japanese scrap Iran and oil crises of 1941.Synfuels versus oil access in World War II.
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Elasticity in Demand
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Resource Limits or Demographic Pressure?
Global and local/regional population growth are a key factor putting pressure on resources. Growth estimates are slowing, but still of major impact.Globalization, hyperurbanization, development, and rising living standards are equal pressures. In broad terms, resource pressure increased with national and personal income.Emerging powers and regions like China, India, SE Asia create combined pressures on resources.As the past shows, existing uses of resources are virtually never viable unless they reach a stable, long-term equilibrium, which is the exception and not the rule.
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Demographic Pressure(U.S. Census Bureau Estimate of World Population in Billions)
2.63
3.7
4.5
5.3
6
6.8
7.6
8.3
8.99.3
0
1
2
3
4
5
6
7
8
9
10
In billions
In billions 2.6 3 3.7 4.5 5.3 6 6.8 7.6 8.3 8.9 9.3
1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050
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Demographic Dynamics3 billion total in 1959, 6 billion total in 1999: +100% in 40 yearsGrow to 9 billion by 2042: +43% in 50 yearsGrowth rate projected to drop from pace of 2% in 1960s to 1% by 2020, 0.5% by 2050. (Maybe!)Annual increment dropping from 88 million in 1990 to 78 million in 2020 to 47 million in 2050.80% of growth in 2007-2027 projected to be in poor countries.Nearly 50% of growth occurs in 8 countries, only one of which isdeveloped.51 countries lose population by 2025, and “age.” 25% of Western Europe will be 65 or over, vs. 4% in Sub-Saharan Africa.By 2025, urbanization will reach 60% of population -- 3.9 billion.Source: US Census Bureau, World Population estimates, and CSIS, Seven Revolutions
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Growth of Global Energy Demand Consumption of Energy in Quadrillion BTUs: 2004 vs. 2030
0
100
200
300
400
500
600
700
800
Quad BTU 447 702 240 298 207 404 83 145 101 131
World 2004
World 2030 . OECD
2004OECD 2030 .
Non-OECD 2004
Non-OECD 2030
. China 2004
China 2030 . US
2004US
2030
Adapted from DOE/EIA, IEO 2007, Table A1 Reference Case . In Quadrillions of Btus.
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Growth of China and US Energy DemandConsumption of Energy in Quadrillion BTUs: 2004 vs. 2030
0
20
40
60
80
100
120
140
160
3-D Column 2 101 131
Quad BTU 83 145
. China 2004 China 2030 . US 2004 US 2030
Adapted from DOE/EIA, IEO 2007, Table A1 Reference Case . In Quadrillions of Btus.
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Urban Growth Patterns will be another key: 2006-2020
By 2020, population of world’s 100 Largest Cities will grow by 191 million90% of that Growth in Developing World
Source: Frank Verrastro, CSIS
0.0
20.0
40.0
60.0
80.0
100.0
Africa
Asia-P
acific
Europe
US/Can
ada
MENASou
th Asia
Latin
Ameri
ca
2006
-202
0 Po
pula
tion
Gro
wth
, M
illio
ns
0
5
10
15
20
25
Num
ber o
f Citi
es in
Top
100
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Money Means Major Shifts in Resource Use - Car Ownership in 2004
Potential of increased ownership in China and India, is huge
Source: OECD/IEA (2006)
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Average Annual GDP and Population Growthfor Selected Regions, 2004-2030
-0.5
0.5
1.5
2.5
3.5
4.5
5.5
6.5
7.5
UnitedStates
OECDEurope
Japan SouthKorea
China India Africa MiddleEast
Russia Brazil
Per
cent
per
Yea
r
GDPPopulation
Source: EIA, IEO2007
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Non-OECD Asia Dominates the Growth in Demand
Source: DOE/EIA IEO 2007
20
0
10
20
30
40
50
60
70
1990 1995 2000 2005 2010 2015 2020 2025 2030
Reference Low Price
High Price
ProjectionsHistory
Low Growth
High Growth
Net Import Share of U.S. Liquid Fuels Consumption, 1990-2030percent
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Elasticity in Supply
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Global Demand and Risk Involves Far More Than Oil: IEA Estimate
Oil
Coal
Gas
BiomassNuclear
Other renewables
0
2 000
4 000
6 000
8 000
10 000
12 000
14 000
16 000
18 000
1970 1980 1990 2000 2010 2020 2030
Mto
eGlobal demand rises 50%+ in 25 years, most in coal
Source: IEA, World Energy Outlook, 2006
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World Marketed Energy Use by Fuel Type: 1980-2030The EIA Estimate
0
50
100
150
200
250
300
1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030
Qua
drill
ion
Btu
Liquids
Natural Gas
Coal
Renewables
Nuclear
History Projections
34%
8%
28%
6%
Share of WorldTotal
24%38%
26%
23%
7%
6%
Source: EIA, IEO2007
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World Nuclear Generating Capacity by Region, 2004 and 2030
8
65
72
92
114
131
5
42
15
61
134
112
0 50 100 150
Other Non-OECD
Non-OECDEurope
Non-OECD Asia
OECD Asia
OECD Europe
OECD NorthAmerica
Gigawatts
20042030
Source: EIA, IEO2007
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Comparative Fossil Fuel Demand Consumption of Energy in Quadrillion BTUs: 2004 vs. 2030
0
50
100
150
200
250
300
Coal 114.5 199.1 46.6 59.3 67.9 139.8 53.6 119.3
Natural Gas 103.4 170.4 53.1 72.3 50.3 98.1 8.9 29.3
Liquids 168.2 238.9 98.9 114.4 69.3 124.4 30.6 61.5
World 2004
World 2030 .
OECD 2004
OECD 2030 .
Non-OECD 2004
Non-OECD 2030 .
Non-OECD Asia 2004
Non-OECD Asia 2030
Adapted from DOE/EIA, IEO 2007, Table A2.Reference Case. In Quadrillions of Btus.
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World Coal Consumption, 2004-2030
0
50
100
150
200
250
2004 2010 2015 2020 2025 2030
Qua
drill
ion
Btu
IndiaChinaUnited StatesRest of World
Source: EIA, IEO2007
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World Natural Gas Production by Region, 2004-2030
0
20
40
60
80
100
120
140
160
180
2004 2010 2015 2020 2025 2030
Trilli
on C
ubic
Fee
t
OECD RussiaMiddle East Other Non-OECD
Source: EIA, IEO2007
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Elasticity in Efficiency and Conservation
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Energy Intensity by Region: 1980-2030
Source: DOE/EIA IEO 2007.
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Non-OECD Energy Intensity : 1980-2030
Source: DOE/EIA IEO 2007.
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The “Wild Card:” Global Warming and Carbon Dioxide Emissions
(Relative to 1980)
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OECD Carbon Dioxide Emissions(Average Annual Growth in Percent Per Year from 2004-2030)
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Non-OECD Carbon Dioxide Emissions: (Average Annual Growth in Percent Per Year from 2004-2030)
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Global Oil Dynamics
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Oil Reserve UncertaintiesTrue nature of reservesCanadian tar-sandsVenezuelan bitumen depositsImpact of technological gainAbility to substitute for current super-giant and giant fieldsRate of decline in fieldsRate and size of new developments and discoveriesInaccuracy of 3-D seismic modeling
Introduction
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Running Out of Oil? Trend in Reserves: 1980-2030
Source: DOE/EIA IEO 2007.
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World Oil Proven Reserves
1984 1994 20060
200
400
600
800
1,000
1,200
1,400
Middle East 430.8 661.7 742.7Europe & Eurasia 96.70 80.30 144.40S& C America 36.30 81.50 103.50Africa 57.80 65.00 117.20N. America 101.90 89.80 59.90Asia Pacific 38.10 39.20 40.50
1984 1994 2006
12%
61%
10% 3% 5%9%
Oil Proven Reserves Trends (In Billion Barrels)
Oil Proven Reserves 2006 (In % of Total)
Note: If Canadian tar-sands are included, the North American total rises to 236 billion (18%)
Source: BP Statistical Review2007
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Oil Reserves-to-Production Ratios
Source: BP Amoco Statistical Review of Energy 2007
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Oil Production Uncertainties“Sustainable” spare capacityElasticity in importer conservation, efficiency, and alternative supply and time/uncertainty lagsFeasibility of production at given pricesTechnological gains in the upstream industry“Sustainable” inflow of foreign investment
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World Oil Production Trends
1983 1994 20060
10
20
30
40
50
60
70
80
90
Middle East 11.841 20.118 25.599Europe & Eurasia 16.343 13.657 17.563S& C America 3.539 5.347 6.881Africa 4.865 7.004 9.991N. America 14.838 13.807 13.699Asia Pacific 5.171 7.184 7.941
1983 1994 2006
Source: BP Statistical Review2007
17%
8%
22%
31%
12%
10%
Source: BP Statistical Review
Oil Production 2006 (In Percent)
Oil Production Trends (In MMBD)
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Shift in Global Oil DependenceGeostrategic uncertaintiesLack of good estimatesDecay and natural decline vs. technology growthAlternative energy supply, efficiency, and conservation?The need for investment.
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World Liquids Consumption by Region, 2004 vs. 2030
0 5 10 15 20 25 30 35
Africa
Non-OECD Europe/Eurasia
Middle East
Central and South America
OECD Asia
OECD Europe
Non-OECD Asia
North America
Million Barrels per Day
20042030
Source: EIA, IEO2007
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Asian Liquids Consumption in theEIA Reference Case, 1990-2030
0
5
10
15
20
25
30
35
40
45
Milli
on B
arre
ls O
il E
quiv
alen
t per
Day
Aus/NZ 0.8 1 1 1.1 1.1 1.2 1.2 1.3South Korea 1 2.2 2.1 2.2 2.5 2.6 2.7 2.8Japan 5.2 5.5 5.4 5.2 5.2 5.2 5.2 5.2India 1.2 2.3 2.5 2.7 3.2 3.6 4 4.4Other 3.1 5.7 6 6.7 7.6 8.3 9 9.8China 2.3 5.6 6.4 9.4 10.5 11.9 13.6 15.7Total Asia *13.7 *22.3 *23.3 *27.3 *30.1 *32.7 *35.7 *39.1World *66.5 *79.8 *82.5 *90.7 *97.3 *103.7 *110.4 *117.6% Total *21% - *28.2 - - - - *33%
1990 2003 2004 2010 2015 2020 2025 2030
History Projections
Source: EIA, IEO2007, Appendix A, p. 88
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0
10
20
30
40
50
60
70
1990 1995 2000 2005 2010 2015 2020 2025 2030
Reference Low Price
High Price
ProjectionsHistory
Low Growth
High Growth
Net Import Share of U.S. Liquid Fuels Consumption, 1990-2030percent
45
0
20
40
60
80
100
1990 1995 2000 2005 2010 2015 2020 2025 2030
Reference
High Price
Low Price
ProjectionsHistory
2005 dollars per barrel
World Oil Prices in Three Cases, 1990-2030
Average world oil prices in 2030 are $36, $59, and $100 per barrel in 2030
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Oil Price Sharply Affects Global Demand for All Liquids
(Millions of Barrels Per Day - Source: EIA, International Energy Outlook, 2007,
0
20
40
60
80
100
120
140
160
HistoryLow PriceReferenceHigh Price
History 66.3 84.3Low Price 93 112.9 133.7Reference 90.7 103.8 117.7High Price 87.7 91.6 103.4
1990 2005 2010 2020 2030
Average world oil prices in 2030 are $36, $59, and $100 per barrel in 2030
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How Oil Price Could Affect Energy Demand by Type in 2030
Source: EIA, IEO 2007pg. 13.
Average world oil prices in 2030 are $36, $59, and $100 per barrel in 2030
48
World Unconventional Liquids Production as Percent of Total: 2005-2030
Source: DOE/EIA AEO 2007.
Average world oil prices in 2030 are $36, $59, and $100 per barrel in 2030
49
World Unconventional Liquids Production in theReference Case, 1980-2030
0
2
4
6
8
10
12
Mill
ion
Bar
rels
Oil
Equ
ival
ent p
er D
ay
Other Gas-To-LiquidsCoal-To-LiquidsBiofuelsUltra Heavy CrudesCanadian Oil Sands
Other -0.03 -0.03 0.19 0.18 0.01 0.01 0.01 0.03 0.04Gas-To-Liquids 0 0.03 0.33 0.29 0.23 0.51 0.81 0.95 1.17Coal-To-Liquids 0.01 0.09 0.13 0.08 0.26 0.59 1.1 1.78 2.38Biofuels 0.05 0.15 0.21 0.35 1.25 1.43 1.5 1.62 1.66Ultra Heavy Crudes 0 0 0.2 0.57 0.86 0.98 1.15 1.43 1.65Canadian Oil Sands 0.15 0.38 0.67 1.09 1.9 2.3 2.7 3.2 3.6
1980 1990 2000 2004 2010 2015 2020 2025 2030
History Projections
Note: “Other” includes shale oils and other unidentified sources of unconventional liquid fuels. Source: EIA, IEO2007
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Oil Production Risks
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Market is Only Part of the Story: Impact of Oil Disruptions
51
The following outlines key oil supply disruption incidents:
1956: the Suez War caused 1.0 MMBD supply shortages for 4 months.1967: The ’67 Arab-Israeli War caused 2.0 MMBD supply shortages for 2 months.1974: The October War caused an oil embargo that cut the supply by 2.6 MMBD for 6 months. During that disruption, the world oil price tripled, from about $4 a barrel to about $12 a barrel. 1979: the Iranian Revolution caused 3.5 MMBD supply shortages for 6 months.1980: the Iran-Iraq War caused 3.3 MMBD supply shortages for 3 months.1990: the Iraqi invasion of Kuwait caused the loss of 4.3 MMBD or 13% of the world export market. This led to a doubling in the world oil price from July to October 1990, from about $16.50 to about $33 a barrel. 2002: strikes and unrest in Venezuela caused 2.1 MMBD supply shortages for 3 months.2003: unrest in Nigeria caused 0.3 MMBD supply shortages for 6 months2003-Present: Iraq War caused on average 1.0 MMBD supply shortages. Iraq’s oil production is still lower than pre-war levels2006: unrest in Nigeria caused 0.4 MMBD supply shortages.
52
0
5
10
15
20
25
30
35
40
19701971
19721973
19741975
19761977
19781979
19801981
19821983
19841985
19861987
19881989
19901991
19921993
19941995
19961997
19981999
20002001
20022003
20042005
Cur
rent
US
Dol
lars
Oil Embargo
Iranian Revolution
Iran-Iraq War: Starts
Iran-Iraq War: End
Gulf-War Starts
Gulf-War: Ends
Oil Crash Starts
Iraq-War: Starts
Nigerian Unrest
The 911 Attacks
Desert Fox
al-Qaeda attacks in Saudi start
KatrinaVenzuelan Strikes and Unrest
Oil Crash Ends
Source: EIA, “Crude Prices by Selected Type 1970-2005,” available at: http://www.eia.doe.gov/emeu/aer/txt/ptb1107.html. Note: These prices are averages of several types: Saudi Light, Iranian Light, Libyan Es Sider, Nigerian Bonny Light, Indonesian Minas, Venezuelan Tia Juana light Mexico Maya, and UK Brent blend
52History of Oil Shocks: 1970-2005Overtimes: more incidents, more frequent volatility, higher risk of asymmetric attacks, and more geopolitical uncertainties.
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Current DOE/EIA Oil and Gas “Hotspots”
Thousands of BB/D
Country/Region in 2004 in 2010
Algeria (Gas and Oil) 1,900 2,000
Bolivia (24 Tcf) 40 45
Caspian Sea (Gas & Oil) 1,800 2,400-5,000
Caucasus Region (Gas & Oil) ( pipeline transit)
Columbia 351 450
Ecuador 535 850
Indonesia (Oil shifting to Gas) 900 1,500
Iran (Gas and Oil) 4,100 4,000
Iraq 2,025 3,700
Libya Gas and Oil) 1,600 2,000
54
Current DOE/EIA Oil and Gas “Hotspots” II
Thousands of BB/D
Country/Region in 2004 in 2010
Nigeria 2,500 2,600
Russia (Gas & Oil) 9,300 11,100
Saudi Arabia (gas & Oil) 10,400 13,200
Sudan 344 530
Venezuela 2,900 3,700
Total “at Risk” 38,895 45.475
Adapted from DOE/EIA, “World Energy Hostpots,”
http://www.eia.doe.gov/emeu/cabs/World_Energy_Hotspots/Overview.html
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Global Chokepoints 1Bab el-Mandab Closure could keep tankers from Gulf from reaching the Suez Canal/Sumed pipeline complex, diverting them around the southern tip of Africa
• Oil Flows: 3 million bbl/d• Destination of Oil Exports: Europe, United States, Asia
Bosporus Export routes for production from the Caspian Sea region pass westwards through the Black Sea and the Turkish Straits en route to the Mediterranean Sea and world markets.
• Oil Flows: 3.1 million bbl/d• Destination of Oil Exports: Western and Southern Europe
Strait of Hormuz The Strait of Hormuz is by far the world’s most important chokepoint: Oman/Iran; connects Persian Gulf with the Gulf of Oman and the Arabian Sea
• Oil Flows: 17.0 million bbl/d• Destination of Oil Exports:Japan, United States, Western Europe
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Global Chokepoints: 2Malacca: Connects the Indian Ocean with the South China Sea and the Pacific Ocean.
• Oil Flows: 11.7 million bbl/d• Destination of Oil Exports:Japan, South Korea, China, other Pacific Rim countries
Panama Canal: United States is not heavily reliant on the Panama Canal for its petroleum imports.
• Location: Panama; connects the Pacific Ocean with the Caribbean Sea and Atlantic Ocean• Oil Flows): 0.5 million bbl/d; Trans-Panama pipeline 0.1 million bbl/d
Suez/Sumed: Closure of the Suez Canal and/or Sumed Pipeline would divert tankers around the southern tip of Africa , adding greatly to transit time.
• Oil Flow): 3.8 million bbl/d northbound, and 0.4 million bbl/d southbound. • Destination of Sumed Oil Exports: Predominantly Europe; also United States.
http://www.eia.doe.gov/cabs/World_Oil_Transit_Chokepoints/Full.html
57
Gulf Oil Dynamics
58
Gulf Energy as Percent of World
0
50
100
Crude Oil Reserves 55Natural Gas Reserves 40Oil Production Capacity 32Oil Piduction 28Excess Oil ProductionCapacity
83
Source: IEO 2007
59
Gulf Proven Natural Gas Reserves
0
200
400
600
800
1000
1200
TCF 993 895 249 214 112 63 17 3% of World 15.5 14 3.9 3.3 1.7 1 0.3 NA
Iran Qatar Saudi UAE Iraq Kuwait Yemen Bahrain
(In Trillions of Cubic Feet)
Source: BP Statistical Review, 2007
60
Gulf Proven & Undiscovered Conventional Oil Reserves
0
50
100
150
200
250
300
350
400
% of World Proven 22.10% 11.10% 9.70% 8.30% 8.20% 1.30% 0.50% 0.10% 0.05%% of World Undiscovered11.90% 7.30% 6.20% 0.50% 1.10% 0.50% 0.50% 0.00% 0.10%Undiscovered 87.09 53.11 45.10 3.84 7.70 3.62 3.45 0.00 0.90Proven 264.30 137.50 115.00 101.50 97.80 15.20 5.60 2.50 ?
Saudi Iran Iraq Kuwait UAE Qatar Oman Neutral Zone Bahrain
(In Billion Barrel of Oil)
Middle East
Source: BP 2005, USGS 2000, EIA 2005
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Gulf Oil Production: 2005-2030(In MMBD in EIA/DOE Reference Case in IE0 2007)
0
5
10
15
20
25
30
35
40
45
UAESaudi ArabiaQatarOmanKuwaitIraqIran
UAE 2.8 3.3 3.8 4.5 4.7 4.9Saudi Arabia 10.7 8.9 9.4 10.4 12.9 16.4Qatar 1.1 1.6 2 2.4 2.6 2.9Oman 0.6 0.6 0.5 0.5 0.5 0.5Kuwait 2.7 2.8 3.2 3.9 4 4.1Iraq 1.9 2.5 3.3 4.2 4.8 5.3Iran 4.2 4.2 4.3 4.5 4.8 5
2005 2010 2015 2020 2025 2030
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Average world oil prices in 2030 are $36, $59, and $100 per barrel in 2030
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Gulf Share of Global Oil Production: 2005-2030
(In Percent in EIA/DOE reference case in IE0 2007)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Persian Gulf
OPEC
Global Total(MMBD)
Persian Gulf 28% 26% 27% 29% 31% 39%OPEC 42% 42% 43% 45% 46% 48%Global Total (MMBD) *84.3 *90.7 *97.4 *103.8 *110.4 *117.7
2005 2010 2015 2020 2025 2030
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Average world oil prices in 2030 are $36, $59, and $100 per barrel in 2030
63
Gulf Oil Production: 2005-2030(In MMBD in EIA/DOE high price case in IE0 2007)
0
5
10
15
20
25
30
35
UAESaudi ArabiaQatarOmanKuwaitIraqIran
UAE 2.8 3.1 3.1 3.4 3.6 3.7Saudi Arabia 10.7 7.6 8.3 8.4 10.1 11.6Qatar 1.1 1.5 1.8 2.2 2.3 2.8Oman 0.6 0.6 0.5 0.5 0.5 0.5Kuwait 2.7 2.7 2.6 2.9 3 3.1Iraq 1.9 2.4 2.7 3.2 3.6 4Iran 4.2 4 3.5 3.4 3.6 3.8
2005 2010 2015 2020 2025 2030
63
Average world oil prices in 2030 are $36, $59, and $100 per barrel in 2030
64
Gulf Share of Global Oil Production: 2005-2030
(In Percent in EIA/DOE high price case in IE0 2007)
0%
10%
20%
30%
40%50%
60%
70%
80%
90%
100%
Persian Gulf
OPEC
Global Total(MMBD)
Persian Gulf 28% 24% 25% 26% 27% 28%OPEC 42% 40% 40% 40% 41% 42%Global Total(MMBD)
*84.3 *87.7 *88.4 *91.6 *97.6 *103.4
2005 2010 2015 2020 2025 2030
64
Average world oil prices in 2030 are $36, $59, and $100 per barrel in 2030
65
MENA Oil Infrastructure
66
Gulf Chokepoints 1Strait of Hormuz: Entrance to Gulf from Indian Ocean: The Strait of Hormuz is byfar the world’s most important chokepoint: Oman/Iran; connects Persian Gulf with the Gulf of Oman and the Arabian Sea
• Oil Flows: 17.0 million bbl/dBab el-Mandab: Entrance to Red Sea From Indian Ocean: Closure could keep tankers from Gulf from reaching the Suez Canal/Sumed pipeline complex, diverting them around the southern tip of Africa
• Oil Flows: 3 million bbl/dEast-West Pipeline: Abqaiq to Yanbu on Red Sea:
. Oil Flows: 5 million bbl/d.Abqaiq-Yanbu NGL: Abqaiq to Yanbu on Red Sea:
. Oil Flows: 0.55 million bbl/d.Trans-Arabian: Saudi Arabia to Jordan:
. Oil Flows: 0.05 million bbl/d.
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Gulf Chokepoints 2IPSA: Iraq to Saudi Arabia: Link from Southern Iraq closed. Saudi Arabia used it to carry gas to Yanbu.
• Oil Flows: Conversion possible to 1.65 million bbl/dIraqi Strategic Pipeline: North-South Pipeline in Iraq. Two parallel lines from Rumalia to Kirkuk to Turkey. Only one complete.
• Oil Flows: Not functioning. 700,000 bbl/d with growth to 1.5 million bbl/d.Iraq-Turkey Pipeline: Kirkuk in Iraq to Ceyan in Turkey on the Mediterranean. Sporadic use.
. Oil Flows: Two parallel lines with 1.5 million bb/ld design capacity and 300,000 near term with repairs.
Iraq-Syria-Lebanon Pipeline: Connects Kirkuk oil area to Banias in Syria. Use halted after 2003 invasion. Two pipelines with combined capacity of 700,000 bbl/d. Once carried 450,000-600,000 bbl/d/
. Oil Flows: 200,000 bbl/d before 2003Gulf Strategic Pipeline: Plan to build lines to ports in Oman on Red Sea.• Oil Flows: 1.5 million bbl/d plus.
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Asymmetric Warfare: Iran as a Case Study
Three “Kilo” submarines with long-range wire-guided and homing torpedoes, bottom mines (?), anti-ship missilesSmart mines, bottom mines, influence mines.Ship, land, air anti-ship missiles.Small, “stealth” missile patrol boats20,000 men in Naval Guards Branch.Small craft armed with ATGMs, recoilless rifles, RPGs.Any ship is a mine layer.Floating mines.“Single round” attacks by infiltrator, sea, or air.
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Global Gas Dynamics
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Gas Modeling and Vulnerability Still Limited
Costs of expansion of capacity very uncertain on global level as is technology gain.Expect to become major source of global exports-imports.Many pipeline and LNG project have very uncertain timing, cost and viability.Competitiveness with other energy sources and oil exports very uncertain
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Proved Natural Gas Reservesat End 2006
Source: BP Amoco Statistical Review of Energy 2007
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Key Gas Producers: 2003-2030(In TCF in EIA/DOE reference case in IE0 2006)
0
5
10
15
20
25
30
35
40
45
OECD N. AmericaOECD EuropeOECD AsiaRussiaMiddle EastOther Asia
OECD N. America 27.1 26.4 29.3 30.4OECD Europe 10.7 10.9 10.7 10.3OECD Asia 1.5 2.4 3.9 4.8Russia 21.8 26.8 33.5 41.5Middle East 9.1 14.2 19.8 26.2Other Asia 9.7 12.9 19.9 27.4
2003 2010 2020 2030
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The Russian Gas and Energy IssueCritical European Dependence
• Gas reserves of 1.680 TcF, Prod 22.4 Tcf, Exp 7.1 TcF.• Oil reserves of 60 billion proved+67 billion prob/poss.
Uncertain ability to reach projected production.• Gas rises from 21.8 TCF in 2003 to 41.5 in 2030.• Oil from 8/5 MMBD to 11.6 MMBD.
Cost of investment to reach these levels unknown.Major pipeline issues to Europe. China, and control of Caspian and Central Asia.Bypass Eastern Europe?
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European Dependence on RussiaPercentage of total natural gas consumption in order of total volume imported. EIA,
IEO 2006
0
20
40
60
80
100
120
GermanyItalyTurkeyFranceHungaryFinlandSlovakiaPolandCzechAustriaBulgariaRomaniaGreeceSwiss
Germany 44Italy 29Turkey 65France 26Hungary 72Finland 100Slovakia 100Poland 60Czech 82Austria 83B l i 94
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Asian Gas DependenceNon-OECD Asia accounts for much of the growth in natural gas demand projected for the non-OECD region. Led by demand in China and India, natural gas consumption in non-OECD Asia expands by 5.1 percent per year on average from 2003 to 2030. In both China and India, natural gas is currently a minor fuel in the overall energy mix, representing only 3 percent and 7 percent, respectively, of total primary energy consumption in 2003; Both countries are rapidly expanding infrastructure to facilitate natural gas consumption, as well as natural gas imports. In the reference case, natural gas consumption grows at an average annual rate of 6.8 percent in China and 5.9 percent in India.
Source: DOE/EIA, IEO 2006, “Natural Gas”
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76
Asian Natural Gas Consumption in theEIA Reference Case, 1990-2030
0
5
10
15
20
25
30
35
40
Trilli
on C
ubic
Fee
t
Aus/NZ 0.8 1.1 1.1 1.2 1.4 1.5 1.6 1.7South Korea 0.1 0.9 1 1.1 1.2 1.3 1.4 1.5Japan 1.9 3 3 3.6 3.9 4 4.2 4.3India 0.4 1 1.1 1.8 2.1 2.6 3.2 3.9China 0.5 1.1 1.4 2.8 3.7 4.6 5.7 7Other 2 5.6 6 7.9 10 12 14.1 16.5Total Asia *5.7 *12.7 *13.5 *18.4 *22.3 *26.1 *30.2 *34.9World *73.4 *96.0 *99.6 *115.9 *129 *141.1 *152 *163.2% Total *8% - *14% - - - - *21%
1990 2003 2004 2010 2015 2020 2025 2030
History Projections
Source: EIA, IEO2007, Appendix A, p. 89