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Transcript of Gas markets and supplies from the former Soviet … Caspian & Central Asia: Azerbaijan: second and...
© OECD/IEA 2012
Gas markets and supplies from the former Soviet Union area I
IEA 2013 Energy Training Week
Marc-Antoine Eyl-Mazzega
Russia Programme Manager
© OECD/IEA 2012
Outline
1. Russia: energy sector transformation
Gas market snapshot
Gas exports overview and outlook
2. Ukraine: challenges and opportunities
Domestic challenges
Gas transit corridor
3. The Caspian & Central Asia:
Azerbaijan: second and third gas export streams to Europe
Gas supplies to China
4. European gas markets and imports
© OECD/IEA 2012
1. Russia: energy sector transformation
Gas market snapshot
Gas exports overview and outlook
© OECD/IEA 2012
Russia’s gas balance: Gazprom’s position into question
Source: Gazprom; Ministry of Energy; Novatek
Snapshot of Russia’s gas balance, 2007-2012
© OECD/IEA 2012
Major energy sector reshuffling
Tax breaks, holidays and exemptions
Export access
Companies
Gas transportation routes to Europe
Oil exports to the Asia-Pacific
New frontier resources
New greenfields + ‘liquids rich’ gas
Privatisations
© OECD/IEA 2012
Economic challenge: High oil prices do not deliver strong growth anymore
USD
112/
barrel
USD
109.3/
barrel
IMF: International Monetary Fund
WB: World Bank
USD 78/
barrel
USD 69/
barrel
Source: IMF, WB, OECD, Rosstat
Evolution of GDP growth, 2005-2013 (projection)
© OECD/IEA 2012
… as oil and gas represent almost the entire export value
Source: WTO Comtrade
Value of Russia’s energy exports to major markets compared to total export value, 2011
© OECD/IEA 2012
Gazprom’s commercial strategy in Europe in the spotlight
Source: Izvestia, 01/02/2013
© OECD/IEA 2012
Re-organisation of gas export routes to Europe / preparations for exports Asia
Europe: high capex, lower exports
Nord Stream
Belarus corridor
Ukrainian corridor
South Stream project
Asia: high capex, short time, no contracts yet
Upstream: Chayanda, Kovytka, Sakhalin-3
LNG projects at Sakhalin-1
Vladivostok
Pipeline projects to China, Japan, South Korea
© OECD/IEA 2012
Russia’s new upstream and mid-stream projects
Source: Gazprom / IEA
© OECD/IEA 2012
Far East Gas Programme
Source: Gazprom
© OECD/IEA 2012
Russian gas supplies to Europe: new routes and the issue of overcapacities
? ?
© OECD/IEA 2012
2. Ukraine: challenges and opportunities for reforms
Domestic challenges
Gas transit corridor
© OECD/IEA 2012
Ukraine’s gas transmission system is key for regional gas supply security
Key gas transmission system and transit position & large energy market
© OECD/IEA 2012
Market based gas import prices are incentive for energy sector reforms
© OECD/IEA 2012
Nord Stream + Yamal + lower demand in Europe bring gas transit to historical low
0
20
40
60
80
100
120
140
160
bc
m/y
ea
r
Transit to Moldova/ Turkey/Balkans /Russia
Transit to the EU-27
Total gas in transit through Ukraine
2012
© OECD/IEA 2012
Imports reduced to minimum level: savings + switching + imports from EU
2012
© OECD/IEA 2012
Reap the full benefit from an energy transformation in Ukraine
Supply side
Foreign companies getting access to licence areas + PSA
Changes to the PSA regime
Fuel switching to coal
Preparations for gas market reforms
Lower gas imports
© OECD/IEA 2012
Opportunities on the supply side
Raising conventional/non conventional gas production
Large untapped resources
Interest from major foreign oil and gas companies
Domestic experience
Energy Community Treaty: attractive regulatory framework
Gas transmission system: key asset
Diversification of supplies now possible
Developing renewables
© OECD/IEA 2012
Price reforms to market levels needed
Gas price and tariff comparison
© OECD/IEA 2012
3. The Caspian & Central Asia:
Azerbaijan: second and third gas export streams to Europe
Gas supplies to China
© OECD/IEA 2012
Corridor Phase 2: building on the Caspian’s strong export potential
Estimate of Caspian/Central Asian gas reserves, 2002-2012
The Caspian and Central Asia hold about 13-14% of the world’s gas reserves. Turkmenistan’s exceptional reserves are a fact and Azerbaijan could also soon
count more
Source: IEA
© OECD/IEA 2012
PSA termination pushed back 5 years to 2036
Negotiations with gas buyers + TAP vs Nabucco-West: selection expected in June 2013
Current new schedule: FID end 2013, first gas in H2 2018
Sengachal terminal expansion
South Caucasus Pipeline expansion (7 bcm, 691 km)
Parallel 56-inch pipeline to AZ-GE border
2 more compressor stations on 42-inch line through GE
22 bcm by 2018
TANAP
Gas: key milestones for opening up Shah Deniz 2 production and exports
© OECD/IEA 2012
Route and pipeline competition for 6 bcma to Turkey and 10 bcma to EU
Source: European Commission
© OECD/IEA 2012
Southern corridor is flexibly designed with producers playing key role
Synchronisation
Strong commitment of all stakeholders
Fair and clear pipeline selection process
Producers involved
South Caucasus Pipeline
TANAP
Nabucco-West and TAP
Scalability key as there is more gas beyond Shah Deniz 2
South Caucasus Pipeline
TANAP: IGA signed and ratified
Nabucco-West and TAP
© OECD/IEA 2012
Azerbaijan: potential for a third export stream by 2020-2025
Field/project/ structure
Reserves, proven or estimated
Companies Status Planned/ potential
production plateau
Estimate production
start
Shah Deniz 2 1.2 Tcm BP 25.5%, Statoil 25.5%, Socar 10%, Total 10%,
LukAgip 10%, OIEC 10%,, TPAO 9%.
- Front End Engineering and Design studies
- FID expected end 2013
16-20 bcm Q3 2018
Absheron 150-350 bcm Socar (40%), Total (40%), GDFSuez (20%)
- 27/02/2009: PSA
- Exploration well drillings
- 2012 Notice of Discovery and Commerciability
- Field assessment ongoing
6-15 bcm 2020-2022
Umid 200 bcm; 40 Mt con-
densate
Socar; Possibly Nobel oil
-Discovery 2010
- Two exploration wells drilled since 2009
- Technical production started Sept. 2012 from one well - Five more wells to be drilled, third in Q1 2013
- PSA likely in 2013
1Mcm/gas/day; 2-10 bcm/year
2014
Babek 400 bcm; 80 Mt con-
densate
Socar; foreign partners - Seismic surveys 6-15 bcm 2020-2025
Zafar-Mashal Socar Exploration works during the 2000 could be newly undertaken
2025
ACG deep gas 300 bcm Socar; foreign partner is very likely
PSA or specific contract to be signed in 2013 6-15 bcm 2020
Nakhichevan 300 bcm; 40 Mt
condensate
Socar, RWE - MoU signed in 2010
- PSA expected in 2013
6-15 bcm 2020-2025
Shafag-Asiman 200-500 bcm; 65 million
tonnes of condensate
Socar, BP - 2009 MoU with BP
- 2010 PSA with BP
- 2011-2015 seismic surveys, data processing and assessment - 2016-2017 exploration well drilling
2-10 bcm 2020-2025
© OECD/IEA 2012
Other possible future gas sources
Black Sea offshore
Romania: advanced exploration Petrom (OMV)-ExxonMobil: Neptun Block; Midia block 15
Lukoil-Vanco: East Rapsodia and Trident
Bulgaria: licences awarded Khan Asparuh block: Total and partners
Iraq
Shale gas in Bulgaria & Romania
And also:
Turkmenistan
Eastern Mediterranean
© OECD/IEA 2012
China will more than double consumption over the next five years, increasing reliance on imports by pipeline and LNG; India’s gas demand will also grow, leading
to higher LNG imports and also leaving room for supplies from Central Asia
Natural gas demand in China
0
100
200
300
400
500
600
700 bcm
Domestic Production
Imports
2009 2015 2020 2025 2030 2035
China
Source: IEA
India: Evolution of Capacity by Fuel (New Policies Scenario)
Central Asian gas supplies to China & India are in the European interest
Source: IEA
© OECD/IEA 2012
Challenges
Central Asia: exports limited by domestic demand ?
Power + residential demand
Chemical and transportation sectors
Inefficiency + subsidies
Availability of drilling rigs in the Caspian
Turkmenistan:
No further onshore PSAs?
Sales strictly at the border
What is the top export priority ?
Investment & technical challenge
How about the offshore?
© OECD/IEA 2012
4. European gas markets and imports
© OECD/IEA 2012
Gas demand at lowest level, production is stable, import gap lower yet growing
© OECD/IEA 2012
Innovative commercial conditions needed
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10
20
30
40
50
60
70
Electricity forward Germany (€/MWh)
Gas cost + EUA (€/MWh)
Coal cost + EUA (€/MWh)
Gas plants recover fuel costs only
Gas plants lose money just on fuel
Germany: comparison of gas, coal and electricity prices, 2009-2012
© OECD/IEA 2012
Central European gas markets more integrated
Security of supplies
Nord Stream prolongation: supplies to Czech Republic and Slovakia, Austria possible
North-South gas route being developed
Świnoujście LNG terminal
Physical dual flows Austria-Slovakia + Czech Republic-Austria+ Poland-Czech Republic
Interconnector Austria-Hungary
Interconnector Hungary-Romania
Interconnector Hungary-Croatia
© OECD/IEA 2012
North-South gas corridor + wider Southern gas corridor
New or future
likely gas flows
Bi-directional
interconnection
that is planned
and must be built
Bi-direction
interconnection
built
Bi-directional
interconnection
already built but
that requires
upgrade
Potential for
shale gas
resources and
production
Gas
connection
planned/ to
be built
Connection
built
© OECD/IEA 2012
Fostering liquidity and competition in markets
Diversification of supplies: Southern gas corridor/Black Sea/Polskie LNG
Market integration + gas hub
Regulation: common network and market rules + efficient & independent supervision and regulation
Access to storage capacities
Shale gas
Biogas
Energy Community Treaty