Energy issues have always been important in international relations, but in recent years may have become even more important than in the past due to the widespread awareness of existing limits to energy sources and negative climate impacts. The course discusses global trends in energy consumption and production, various available scenarios for potential developments in the coming decades, the availability of oil reserves and the evolution of the oil industry. It then discusses natural gas and highlights the differences between oil and gas. It will also discuss renewable energy sources, nuclear energy and EU energy policy. The course aims at providing students whose main interest is in international relations a background on energy resources, technology and economic realities to allow them to correctly interpret the political impact of current developments. It also aims at providing students, who already have a technical background in energy science or engineering, with the broad global view of energy issues that will allow them to better understand the social, economic and political impact of their technical knowledge. ABOUT THE INSTRUCTOR : Giacomo Luciani Scientific Advisor for the Master in International Energy at the Paris School of International Affairs (PSIA) Sciences Po, Giacomo Luciani is also Adjunct Professor at the Graduate Institute of International and Development Studies, Geneva and Director of the Executive Master in International Oil and Gas Leadership. For the period 2010-13 he was appointed Princeton University Global Scholar, attached to the Woodrow Wilson School and the Department of Near Eastern Studies. His research focuses on the political economy of the Middle East and North Africa and on global energy issues. RECOMMENDED BACKGROUND : The course requires no special scientific, mathematical or economic background; all key concepts are clearly and elementarily explained. It is expected that it will be of interest to undergraduate and graduate students in schools where an equivalent course is not offered (this being the case for the vast majority of schools). USPC Sorbonne Paris Cité Supported by Université Sorbonne Paris Cité IDEX Investissements d'Avenir Funded by Investissements d'Avenir - 'ANR. Info : Course content : Licence Creative Commons BY NC SA
Interview with Professor Thierry Bros - part 2
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Del curso dictado por Sciences Po
Politics and Economics of International Energy
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Week #5 : The geopolitics of natural gas
This module presents the Introduction to geopolitics of gas, Geopolitics in the Far and Near Est
Conoce a los instructores
Giacomo LucianiProfessor and Scientific Advisor for the Master in International Energy
Paris School of International Affairs
-What about the new potential producers?
Mozambique and the other countries
that have made large discoveries of gas
and are hoping to get into this business?
-Let us look at the LNG world, because you mentioned Mozambique,
you could also mention Tanzania... -Yes, this is all LNG.
-Israel and even Cyprus.
The problem is that the window of opportunity to sell gas around 2020
is now closing down for this LGN.
So all the projects will be for after 2020.
What we have seen in Europe, it was one of the call we had
earlier this year, the question of prices in Europe
does matter for LNG projects coming after 2020.
If you have extremely high prices, those projects
could enter the European market. If you have lower prices,
the 9 and 8 dollars per million BTU is this kind of element.
Then, back to what you are saying, we will not build a new LNG plant
if prices in Europe are about 8.
Therefore, courtesy of Gazprom that has managed to get the right price
in Europe since the last 12 months, those projects have been delayed
and we have not seen any FID on them. We have even seen a reverse
in terms of news flow.
We have seen Woodside leaving Israel, meaning no Israeli LNG,
Shell selling their stakes in Woodside which means that they think that
the LNG is not so much a priority business for them,
or at least in Australia.
We have seen some companies willing to sell their assets in Canada in LNG.
That is a first part of the LNG story.
If you think that you may face a price war in 2020 in Europe,
you may not be very willing to initiate an LNG plant.
Perhaps to finish on this, in Mozambique,
Eni is perhaps making more money by selling their stakes to the Chinese
and barking in the CAPEX that could lead to LNG later on.
But you are making
a short-term gain right now instead of having to invest
and monetizing the resources in the long term.
-Down the road. -That is also perhaps
what shareholders are hoping to get again in the near future.
Let us look now at the pipe gas, there is one pipe gas project,
its Shah Deniz 2.
Shah Deniz 2 did get an FID late last year.
It did get and FID at a time when European prices were high.
This gas was supposed to be sold at market prices.
Today, at lower prices, it may be more difficult for this gas...
-It's marginal.
-For this gas to come into Europe and make a profit.
Interestingly enough, perhaps the FID
of Shah Deniz 2 did allow the European players
to benefit of the European consumers.
Benefit from lower gas prices. But, what you are saying
on the joint-venture owning Shah Deniz is that Total and Statoil
have exited and sold their stakes.
-Yes. When you look together the fact that Russia has a lot of flexibility
and that all their projects are vulnerable to low prices,
does this mean that Russia could deliberately flood the market
and prevent these other projects from ever come into life?
-Yes, and I think for example
this is the risk the market did not understand in Poland for shale gas.
People were thinking "we could be able to produce shale gas in Poland
whatever the price is because we have expensive Russian gas".
But this is an expensive Russian gas on the price level,
Not on the cost level.
Therefore, Russia had the ability to reduce the price in Poland
to make those projects,
that happened to be more difficult and more costly than what they thought.
They had to delay those projects,
and so far, we have not seen any major breakthrough in shale gas in Poland.
-If we look into the future, can Europe ever become independent
from Russian gas?
Is there an accommodation possible of the current tensions?
-What we have seen in the recent past, after the Crimea annexation,
is that the tension has escalated between EU and Russia.
We have now an endless list of problems
which are running from: How can Gazprom use or not the OPAL
that is the pipe just at the exit of Nord Stream?
With Russia having done some claims
at the WTO organization against the EU "Third Energy Package".
Plus the anticompetitive cases the EU has against Gazprom.
So we have a lot of problems.
My believe is that those problems are so big,
and you can also add the sanctions and the South Stream,
that it can not be solved on a technical one-to-one level.
I think that the problems will have to be viewed on a global level.
And this has to be solved on a political level.
The decision from president Putin to stop South Stream
is perhaps ignoring that he wants this global problems
to be solved at a political level. Therefore with him.
-So you think that the entire question of which pipelines will be built,
how this is going to be managed, which rules will be imposed,
is, as we speak, up in the air
and it certainly will not be resolved any time soon.
It is a very complex file, very complex negotiations are required.
It has been going on for so long that there is, I feel,
such a lot of animosity and mistrust built up.
-Yes, length in negotiation, no step forward, we could say.
And again, this is why at one stage you have either to divorce,
if you can, but it can cost a lot,
or you have to say "we will repair the bits and pieces".
But it has to be done by the two people that have the power to decide.
I also have to point out that the decision of President Putin
was taken on the 1st of December
which is also the day the new head of the EU Consul took his position,
the former prime minister from Poland, Donald Tusk.
-There is no great sympathy...
-I think it is a question of political will, more than sympathy.
The question is
what do we want to do? Where do we want to go?
And remember that in the gas industry, as in the energy industry,
the lead-time is 10 years and the minimum amount is 10 billion
of dollars or euros.
When we are talking about those things, we need to understand
where we want to be in the future.
the main question at the EU level is that
we decided to go for the energy union, so in the coming quarters
we will have to decide what it means and how to enact this.
-You said, at some point, you were talking about Europe excluding Turkey.
This is interesting, what can be said about Turkey?
Because it is a very rapidly growing gas market, right ?
-Absolutely. I said I was excluding Turkey
because if I look at the EU gas demand
it has gone down, it has peaked in 2005,
and as you said, the gas demand in Turkey is growing
by something like 10% per annum in the last 10 years.
Turkey is a great market in terms of gas.
This is why, I think, when analysts are putting Turkey in Europe,
you end up with a blur picture, because you are averaging
something that goes up and down. Therefore you do not have the trend.
Secondly, I remember that there is, so far,
no major pipeline between Turkey and Europe. This is all going to be built.
And thirdly, Turkey is outside the EU,
therefore it is not a transport but a transit issue.
If you level, is Turkey going to operate as a transit?
Is Turkey willing to be a hub? Those questions are still on the table.
-But, this raises several questions.
Could Turkey become more important for the European Union
because of its potential to become a transit hub?
Is it wise of the European Union to keep Turkey outside of Europe
at least from this point of view?
-Yes. Turkey will be absolutely important for Europe
if they wear the hub.
But it seems that the Turkish authorities
are not interested in having their country as a hub. They prefer having
it as a transit.
Being a hub means a lot of things. You need a lot of investment
in terms of CAPEX, of infrastructure, pipes, regas, trading desks, etc.
And full transparency of the system.
I am not so sure that the Turkish government is in favor of this.
It is easier for a government to say: "I am a transit, I will ship gas
from A to B and I will take a fee for this".
If you do this, you are less important for Europe,
and Europe has to bear in mind that I am going to swap
an Ukrainian transit risk for a Turkish transit risk.
-Yes, if it is purely a transit, I do not think it is
as important or as interesting.
In the end, a few years back we were all very optimistic
about the future of gas. And even recently,
it has been just a few years since the International Energy Agency
published a book on the golden age of gas.
But it seems now that the picture is not as brilliant, is it?
-Yes, Giacomo, I do not want to be too pessimistic,
but I have been one of the few that had said that we are entering
a no demand growth in terms of gas demand in Europe.
As you said, I was the most bearish on the energy scene,
and I have been consistently wrong being too optimistic
at the end of the day.
Now, we are entering a terminal decline.
So I really think, back to the golden age of gas,
that it has been on a book but not on numbers at the EU level.
If anything, the trend has always been the opposite for the last 10 years.
-Thank you very much. I think on this sobering note, we can conclude
our discussion today. Thank you. -Thank you Giacomo.
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