European Security of Supply and Geopolitics

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European Security of Supply and Geopolitics

• George H.B. Verberg
• President International Gas Union
• European Forum Gas 2006,
• Berlin, 3-4 April

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INTERNATIONAL GAS UNION www.igu.org
International non-profit organization founded in
1931 Objective To promote the technical
economic progress of the gas
industry Members Associations of the gas
industries in 67 countries
23 associate member companies
www.wgc2006.nl 23rd World Gas Conference 6-9 June
2006, Amsterdam
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Themes for Today

• The World Needs Energy,
• LNG Changes the Global Gas Scene,
• Europes Position and Security of Supply.

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Our Planet At Night Shows Where Energy Is Used
5
Energy Consumption in Perspective
1/3 of world population
IEA data year 2003
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Global Energy Demand Forecast IEA
Growth relative to consumption in 2002 Gas has
growing Power segment
159
TOTAL PRIMARY ENERGY
139
118
100
Gas for Power
54
187
157
123
41
Gas for other market segments
7
Total Energy Demand by Region 2002 and 2030
Data IEA, WEO 2004
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Changing Weights in the Global Landscape
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What to expect.....?
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Proven world oil reserves 1.188.000 million
barrelsR/P ratio 40 years
1000 mln bbl
40
72
16
Kazakhstan
61
Europe
FSR
North America
734
41
112
101
Asia Pacific Region
Africa
South and Central America
Middle East
Data BP Statistical Review 2005
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Your New T-Shirt?
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Oil Prices How High is High?

• Oil prices in US of 2004
• 1864 92 /b, but at that time no
• oil dependent economy
• 1980 81 /b, economic difficulties
• 2004 55 /b
• 05/6 60 /b
• Expected restraints in refinery capacity lifted
  by 2008

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The Way Forward...??
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Wind Energy ...
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Well.....
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Transition to Bio-Gas? DEMO....
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But Lets Talk Natural Gas Bus in Zigong
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How to Serve the Customer without Infrastructure
Gas Distribution in China
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Replacement of Reserves

• the industry has replaced only half the
  reserves it has produced and needs to spend
  40 bn a year, rather than the current 14 bn,
  to ensure it found a new barrel of oil for every
  barrel consumed.
• (Wood Mackenzie in Financial Times, 4 Oct 2005)

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If Enough Viable Projects would have been
Available...??

• The 70 bln US Buy Back Cash Pile (only 5 yrs,
  from ExxonMobil,Shell,BP,Total and Chevron) , and
  using a Debt/Equity Ratio of 25/75, could have
  financed a Production Capacity of
• 4.7 mln bbl/d oil (prod.cap.Saoudie-Arabia ca
  11.5 mln bbl/d)
• or 160 bln m3/y gas
• (or some refinery capacity??)

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Who Owns the Gas (and Oil) Reserves?
OIL 50/50
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Corruption and bribery versus oil and gas
reserves
of proven oil/gas reserves

• Corruption index (by Transparency International)
  ranks countries degree of corruption among
  public officials and politicians.
• 0 highly corrupt
• 10 clean

C-index
TI data 2005 reserves data BP june 2005
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Themes for Today

• The World Needs Energy,
• LNG Changes the Global Gas Scene,
• Europes Position and Security of Supply.

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World Gas Reserves Proven 180 Trillion m3R/P
ratio 66 years
48
1000 bcm
73
5
7
Europe
Russia
North America
14
Middle East
14
Asia Pacific Region
7
Africa
South and Central America
Data BP Statistical Review 2005
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Major Natural Gas Trade Movements at the Start of
the 21st Century No Single Global Gas Market but
Regional Gas Markets
Source BP Statistical Review 2004
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Middle East LNGSetting a New Global Cost
Benchmark ( per MMBtu)
Source Cambridge Energy Research
Associates. 31001-10
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International LNG Trade Connecting Markets
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World gas prices have become more aligned
Source M. Speltz, Chevron, sept 2005
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Themes for Today

• The World Needs Energy,
• LNG Changes the Global Gas Scene,
• Europes Position and Security of Supply.

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the chairman of the Senate foreign relations
committee (Dick Lugar) said on Monday (March 13
2006).

• No one who is honestly assessing the decline of
  American leverage around the world due to energy
  dependence can fail to see that energy is the
  albatross of US national security.
• Lugar said a priority was formal co-ordination
  with China and India as they developed strategic
  petroleum reserves. He also called for new
  regional partnerships in the west.
• he suggested that there be a 35 a barrel price
  floor for oil, to provide security for companies
  seeking to invest in alternative fuels.

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Some Facts of the EU Gas Market and of the US Gas
Market

• Russian Federation (NOC) 107 BCM
  22
• Norway (partly NOC) 75
  16
• Algeria LNGpipelines (NOC) 55
  12
• Nigeria LNG 15
  3
• LNG several sources 6
  1
• EU imports 258
  55
• Gas Consumption EU 467 BCM
  (2004)
• US top-5 gas cies 33,4 of total market
• Leading producers are now involved in all
  processes of the energy value chain in order to
  better manage the risks inherent in energy
  markets

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Olie- en gas voorzien in 2/3 energiebehoefte EU,
importafhankelijkheid stijgt snel!
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SoS Key Energy Region (1) Risk Melting
Permafrost
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SoS Key Energy Region (2) Risk Political
Situation?
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SoS(3)Oil and LNG exports from the Middle East
travels through three narrow sea straits
Source IEA
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Russias Diversificationof Gas Export Away From
Europe
gas development
Transport by pipeline or LNG
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Europes Diversification..?
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Mr Barosso, do you see the way forward to an
(external) European Energy Policy....?
Wanderer above the sea of fog, Caspar David
Friedrich
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EU - Greenpaper A European Strategy for
Sustainable, Competitive and Secure Energy

• Europe has not yet fully developed competitive
  internal energy markets. A level playing field,
  the importance of unbundling Only when such
  markets exists will EU citizens and businesses
  enjoy all the benefits of security of supply and
  lower prices
• New legislative proposal concerning gas stocks
  (taking account of the different potential for
  storage in different parts of the EU)
• It would combine the freedom of Member States to
  choose between different energy sources and the
  need for the EU as a whole to have an energy mix
  that, overall, meets its core energy objectives.

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EU - Greenpaper A European Strategy for
Sustainable, Competitive and Secure Energy(2)

• Solidarity between member states
• It would combine the freedom of Member States to
  choose between different energy sources and the
  need for the EU as a whole to have an energy mix
  that, overall, meets its core energy objectives.

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EU - Greenpaper A European Strategy for
Sustainable, Competitive and Secure Energy(3)

• Towards a coherent external energy policy
• Pipelines from Caspian Region, North Africa and
  Middle East, new LNG terminals)
• A new initiative is particularly opportune with
  regard to Russia....A true partnership would
  offer security and predictability for both sides,
  paving the way for the necessary investments in
  new capacity. It would also mean fair and
  reciprocal access to markets and infrastructure
  including in particular third party access to
  pipelines

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The GreenbookSome Comments

• The EU-Commission has No real powers for an
  external EU energy policy
• Views among member states differ substantially
  (countries like Poland, Germany,France would like
  to do it their way)
• The EU tries to export its liberalization to
  Russia, why would it be happy with that??
• EUs liberalization based upon the old paradigm
  of abundant supplies for EU

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The Greenbook some comments(2)

• Russia/Gazprom is reaching out to the CASPIAN
  region and to ...
• Russia has a huge investment challenge in order
  to serve its domestic and export objectives
• China is knocking on Russias back door
• Two Russia-China/Japan pipelines are announced
  (one from West-Siberia!).

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Vladimir Sure Neelie, youre Liberalised YOUR
WAY, but wouldnt it be Cold in Winter?
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Thank you for your attention

• See you in Amsterdam!
• 23rd World Gas Conference and Exhibition
• June 5 9 2006