Welcome to Politics and Economics of International Energy our fifth session. In this session, we'll discuss the geopolitics of gas. You may ask to begin with, why are we discussing the geopolitics of gas while I have not discussed the geopolitics of oil. There is a reason for that, and that is that the oil market is effectively global. It's easy to transport oil from one part of the world and therefore, it is effectively impossible to segment the market, meaning apply different prices to different customers or prevent the oil from flowing to a specific customer or from a specific producer. Many times, countries have attempted to utilize sanctions against one importing country or against one exporting countries. But it is normally possible for each importing or exporting country to obtain the oil nevertheless, and that is because it's easy to transport and easy to procure. Gas is different. Gas is difficult to transport and as we said in the previous session, it requires a network to be delivered. It requires import facility, either an import pipeline or a regasification plant and therefore, it is inherently geopolitical. It is something that relies on a system of logistics, of transportation, which is fixed and much less flexible than for oil. Therefore, it is possible for a specific producer to segment the market. That is, sell at a price to customer A and a different price customer B, for a variety of reason. Maybe I have some other advantages, some other concession that is given to me, or sometimes maybe even for political reasons because that customer is taking a position which I don't appreciate, therefore I am not serving, I'm not sending gas any longer, or I'm trying to apply a higher price. So the gas market can be segmented and as such, it allows the possibility of punishing or rewarding specific interlocutors, either suppliers or customers. Therefore, it is potentially a tool for power. In this sense, we need to discuss the logistic of gas and look at the major trade movements. We already looked at this in the past session. We have said, there are three separate markets in the world, major gas markets in the world. There is North-American gas market, there is East Asian gas market, and there is the European gas market. We said already last time that the North-American gas market is essentially self confined, the United States until now have received almost no gas from the rest of the world and for the time being, they are not exporting gas to the rest of the world except movements to and from Canada. Eastern Asia is based on LNG. As such, the market is much more flexible because LNG carriers can be diverted, can be sent to various destinations, not necessarily always the same destination, not necessarily the same destination that they were originally destined for. The European gas market is more complicated. It is mostly based on pipelines that are rigid structures, and it is mostly based on exports from Russia, from North Africa, notably Algeria and to some extent Libya, and from Northern Europe where you have essentially Norway, and the Netherlands, and the UK. These are gas-producing countries that also export to the rest of Europe. We can see in this map that Europe is surrounded by abundant gas reserves. We have significant gas reserves at relatively small distance from the European gas market. It's notable that the main supplier of Europe which is today Russia, has gas resources that are relatively distant from Europe. As we saw in the previous session, distance is very important because the cost of gas is essentially the cost of transportation, and the cost of transportation increases rapidly with distance. So in theory, Russian gas should not be the most competitive on the European market. But because of investment done at the time of the Soviet Union, as we shall see in detail in this session, it is in fact the most competitive and it is the main supplier of Europe. So when we look at this map, we can say that gas exports towards Europe have been developed from various directions. So we can speak of a Northern quadrant, there is a set of suppliers that are in the north of Europe, and they can send gas to Europe through a system of pipelines that is well-developed. There is a Northeastern quadrant or section and that is essentially Russia. In there as well, there is a system of pipelines that has been developed over time beginning with the Soviet Union which is capable to bring gas towards the European market. There is Southern slice or quadrant. There as well, we have well-developed pipelines or LNG chains that bring gas towards Europe. What remains to be done is finding enough transportation capacity from the South Eastern quadrant. Our problem, Europe's problem is opening the door to the South East because until now, gas from the Southeast does not easily flow towards Europe. The only exception is gas from Qatar that comes on LNG ships. But most of the gas from Qatar actually goes to the far East to East Asia not to Europe. When we look at this map of pipelines in detail, we see that there are pipelines that originate in North Africa and come into Europe, and these have always worked very smoothly. There has never been a problem with transit countries. The gas originates in Algeria, and it is piped towards Italy on one hand and Spain on the other hand. In both cases, it traverses other country. The gas that comes into Italy traverses Tunisia and the gas that goes into Spain passes through Morocco. Relations between Algeria and Tunisia or Algeria and Morocco have not always been smooth. Politically, there have been difficulties, tensions. But nevertheless, this gas has continued to flow in, there has never been a problem, and this is essentially because negotiations were conducted carefully and contracts were put in place that are very clear, and none of the sides that participate in this deal has an interest in rocking the boat in precipitating a crisis.