Transcript Central Asia: Looking Ahead - UCLA International Institute

Energy security: Risks and
Advantages of Partnering
with Russia
Martha Brill Olcott
Senior Associate
Different Understandings
of Energy Security
• EU understanding of energy security different from
individual members’ understandings of their energy
security
• US geopolitical understanding of Russia and energy
different than those working directly in energy field in
USG
• Russia views energy as a national asset, and does not
believe unrestricted use of market mechanism will lead
to sufficient protection of national interests
Geopolitics of Oil and Gas
• Russian policy very consistent in recent years. Not likely to
change before next Russian presidential election.
• Russian bilateral relationships with Europe and America are
somewhat strained, but generally cordial, reflecting the desire of
their national businesses to continue doing business with Russia.
• Though since January 2006 there has been clear demonstration of
underlying differences between the understanding of energy
security (and how it relates to national security) in Russia, the U.S,
and some of the European nations.
Russian Energy Policy in the Second Putin
Administration
• Reclaiming of direction of strategic resources by
the state (includes center-periphery)
– Increased capitalization and going international
– Managing geopolitical dimensions of energy
• Reform of tax structure and legal infrastructure as
it relates to oil and gas
• Windfall profits (unexpected)
Russian FOREX Reserves, 2000-2006
300
250
$ bn
200
150
100
50
0
2000
2001
2002
2003
2004
Forex Reserves (incl. gold)
2005
2006
Sources of Controversy
• Ukrainian and Belarusian gas crises have
hardened Western attitudes.
• Tensions between Moscow and Estonia,
Lithuania, Poland, + others
• Russian reluctance to ratify the Energy Charter
has sparked interest in alternative transport
routes.
• Forced sale/renegotiation of license held by
Western firms.
• Fears of Russia’s supply chain
Russian production growth
Independent Producers
Gazprom
35
30
growth rate %
25
20
15
10
5
0
-5
-10
2000
2001
2002
2003
2004
2005
2006
Gazprom's Investment Program
26%
33%
19%
22%
Acquisitions
Gas Transport
Upstream
Other Investments
Crude Oil Production 1998-2006
12,000
Thousand Bpd
10,000
8,000
6,000
4,000
2,000
0
1998
1999
2000
2001
2002
2003
2004
Crude oil production, thousands of barrels per day
2005
2006
Oil Production Growth,
1999-2006
12
10
% Growth
8
6
4
2
0
1998
1999
2000
2001
2002
2003
2004
Crude oil production, percentage growth
2005
2006
Unresolved Questions
• Shtokman
– Located in the Barents Sea in depths ranging from 320 to 340
meters.
– 3.2 trillion cubic meters of gas and more than 31 million tons of
gas condensate
• Nordstream
– Russo-German Baltic seabed pipeline project for Russian gas
from Primorsk to Germany
• Kovykta:
– Siberian Gas Deposit with 2 trillion cubic meters of gas and more
than 83 million tons of gas condensate
– Currently run by TNK-BP
The Shtokman Gas Field
The North European Gas Pipeline
Kovykta Gas Field
• Controlled by RUSIA Petroleum, which is
67 percent owned by TNK-BP
• Rosprirodnadzor has completed a second
probe into compliance with the Kovykta
gas condensate license agreement
• Gazprom likely to get share
What to Expect in Russia
•
Much like now, state-run portions of oil and gas sector will be managed by
people seeking to balance national, institutional and personal interests.
•
Continued reform of state-owned resource companies and their partial
privatization.
•
Increasing effort by Russian state companies to get access to foreign
downstream projects.
•
Continued discussion, and possible adoption of legislative providing
better articulation of license holder rights.
•
Renewed pressure to address energy intensiveness of the domestic
Russian economy.
•
Continued search for formula to encourage more investment in domestic
oil and gas projects.
•
Continued debate over transformation of pricing for domestic gas.
What to Expect in Russia
• Pressure for tax reform to increase windfall profit share
of producers (particularly when linked to reinvestment.
• New subsoil law to protect “strategic” assets
• Renewed demand by Independents for transport equity.
• Further calls for better legal elaboration of strategic and
other minority shareholder rights.
• Will Russia be able to strike the right balance between
encouraging foreign investment and protecting long-term
national needs?
• Will Russia be able to maintain its monopoly on the sale
of Central Asian Gas?
Alternative Routes Include BTC and
possible Trans-Caspian lines
Conclusion: Can Russia balance
Europe and Asia?
•
Theoretically this is possible, but would require clever management of
regional approach---balancing of Russian, Kazakh, Turkmen supplies with
development of possible new sources of Russian domestic production.
•
Could also require complex triangular relations with China
•
Will mean that Russia guesses right on balance between LNG and longland pipe
•
Timing is critical, both for Russia’s pacing of its own projects, Shtokman,
Sakalin, Kovytka, Yamal,
•
Timing is also critical regarding competing routes and suppliers.
– When will Iranian gas come on line?
– Will Europe dither and overestimate the likelihood of TransCaspian
route and Nabucco or fail to consider Turkmenistan production
problems (and lack of investment)?
One must be savvy to distinguish pipelines from pipe dreams.
•
THE END