Geopolitics and Natural Gas

At the forefront of growing eminence of natural gas is the key issue of global energy security as producing and consuming countries compete for control of resources and markets.

Competition for, control of, and access to natural gas resources and markets will set the political agenda and strategic manoeuvring that will pit major powers, IOCs, NOCs, and consuming countries against each other in the pursuit of energy security.

Task Force 3 has been formed to examine the interplay between economic and political factors in the development of Natural Gas resources and analyse the main political challenges, mega-trends, issues and consequences that may shape and drive the future natural gas-intensive world.

Chair: Mel Ydreos Canada	Vice Chair: Geert Greving Netherlands	Secretary: Jeff Okrucky Canada
MYdreos@uniongas.com	geert.greving@gasterra.nl	jokrucky@uniongas.com
Tel: +1 519 436 4597	Tel: +31 50 3648 688	Tel: +1 519 436 4681

TASK FORCE 3 OVERVIEW

INTRODUCTION

Demand for primary energy is expected to grow in the coming decades in line with the world’s expanding economy, rising population, as well as growing prosperity. Of all the sources of primary energy, by far, Natural Gas has emerged as the most attractive fossil fuel owing to the premium it commands, particularly in terms of environment-friendly features (as compared to oil or coal), vast resources, as well as technology and innovation that allow natural gas to reach consumers in a safe, reliable and efficient manner. In this context, Natural Gas is widely regarded as the fuel of choice on the way to a future of sustainable energy.

At the forefront of growing eminence of natural gas is the key issue on global energy security as producing and consuming countries compete for control of resources and markets. In this light, the United States is becoming increasingly dependent on natural gas, which supplies more than one quarter of its total energy requirement. The US relies heavily on the North American supplies for most of its gas, but with the rapid pace of depletion of those reserves and few untapped fields available for exploitation.  The recent significant shale gas findings and development hold significant promise but the need for gas from other regions such as Qatar, Nigeria and Russia may become more acute.

Development of unconventional gas and the impact of new energy policies under the new presidency will determine the exact call on international gas markets. Similarly in Europe, the share of gas imports in the energy equation is also projected to rise. The European Union has expressed concern about the growing dependence on imports, notably from Russia, while Russia has expressed concern about security of demand regarding the evolving EU energy market. Developing nations like China, India and Korea are turning to gas due to environmental pressures, but are highly dependent on external sources of supply. A key factor in the geopolitics of gas is the heavy concentration of reserves in a relatively small number of producing countries that will further heighten the security of supply imbalance.

The top 5 producers (Russia, Iran, Qatar, Saudi Arabia and UAE) hold nearly 67% of the world’s proven reserves. NOCs control more than 80% of the oil and gas resources, and there appears to be a trend towards ‘Resource Nationalism’. The various market structures along the gas value chain are a reflection of the socio-economic and political preferences of producing and consuming countries.

Competition for, control of, and access to natural gas resources and markets will set the political agenda and strategic manoeuvring that will pit major powers, IOCs, NOCs, and consuming countries against each other in the pursuit of energy security.

Concerns about import dependence and tensions between producing and exporting countries should be dealt with if the world economies are to take the full benefit of natural gas in their energy and environmental policies. Natural gas will be at the centre stage.

Objectives

1. To understand and examine the interplay between economic and political factors in the development of Natural Gas resources and analyse the main political challenges, mega-trends, issues and consequences that may shape and drive the future natural gas-intensive world.

2. To engage the international community of stakeholders (particularly on the interface between politics and industry) in a dialogue, aimed at:

a) creating greater awareness of the potential hurdles to a growing international gas market, and

b) fostering co-operation between the industry and policy makers in producer and consuming countries

3. To distill potential recommendations for further advancement of the co-operation between the relevant actors (e.g. policymakers, institutions, fora and the gas industry), to be put before the WGC 2012 Round Table

Scope

1. Describe the landscape of the governments, institutions and fora involved in gas policy making and their interfaces.

2. Verify common ground between the views held by the industry and regional energy policies of the value and potential of natural gas as the bridging fuel towards sustainability of the 21st Century.

3. Examine the key drivers affecting the development of Natural Gas resources, focusing in particular on the interplay between economics and politics in the context of global energy security. The analysis should take into account the following:

• Regional geopolitics and unique features of different regions

• Future gas business models and their implications

• Development perspectives, including major regional markets of gas distribution and LNG

• Challenges for the future and potential pitfalls

• Interdependency and transparency – Resource nationalism and market nationalism

• International gas trade- Challenges and opportunities

• Historical Case Studies and lessons learned for the future

• Future threats, including terrorism

Note: The reports to be produced are not meant to be exhaustive representations of the current standing of natural gas as seen from every possible angle. Instead, they should be short, synthesising the main factors that could stand in the way of realisation of an aspired and/or potential role of gas in future energy systems. The work of this taskforce differs from the work done by the IGU committees in the sense that it focuses on the views (and perhaps prejudices) held by the “outside world”, and uses its reports as a basis for dialogue.

Deliverables

1. During the next Triennium

• Regional Forums

2. Shortly before the WGC 2012:

• Overall Report - Development, Trends, Issues and Challenges

• Separate Regional Reports – 3-4 Regions (Specific Issues and Alternative Scenarios)

3. At the WGC 2012

• Strategic Round-table

Contacts