What Will it Take to Unlock the Caspian Region’s Energy Riches?
THE CASPIAN REGION has the potential to make a significant contribution to ensuring energy security in the rest of the world by reducing the need to develop more expensive sources of hydrocarbons and increasing the diversity of global oil and gas supplies. The Caspian region contains substantial resources of both oil and natural gas, which could underpin a sizeable increase in production and exports over the next two decades. But potential barriers to the development of these resources, notably the complexities of financing and constructing pipelines through several countries, are expected to constrain this expansion to some degree. In its New Policies Scenario, the IEA sees Caspian oil
production growing strongly — especially over the first 15 years of the projection period. It jumps from 2.9 mb/d in 2009 to a peak of around 5.4 mb/d between 2025 and 2030, before falling back to 5.2 mb/d by 2035. Kazakhstan contributes all of this increase. After Saudi Arabia, Iraq and Brazil, it ranks fourth in the world for output growth in volume terms to 2035. Most of the incremental oil output goes to exports, which double to a peak of 4.6 mb/d soon after 2025. Investment decisions on new export infrastructure, in particular from Kazakhstan, will be needed soon to pave the way for this expansion.
trade as the region expands its access to new markets in Europe and China, which emerges as a major new customer. Further development of a southern corridor from Azerbaijan to Turkey and other European markets enables larger volumes of Azerbaijan gas to move westwards. The commissioning of the Turkmenistan-China pipeline has shifted the centre of gravity of Central Asia’s gas sector eastwards. Chinese imports from the Caspian region reach about 60 bcm by 2035 in the New Policies Scenario, although concerns about over-reliance on this supply route may limit the rate of import growth. Northward export to Russia will be constrained by development of Russia’s own resources, its more efficient gas use and the evolution of demand for Russia’s exports in Europe and the Far East. In all three scenarios, the share of the Caspian
in world inter-regional trade of both oil and gas increases between now and 2035: from 6% to 9% for oil and from 4% to 11% for gas in the New Policies Scenario. Creating a diverse and flexible system of export routes will enable the Caspian region to gain access to international market prices for its resources and contribute fully to global oil and gas security. Domestic energy policies and market trends,
Caspian Energy Riches Could Enhance Global Energy Security Incremental oil production by selected countries in the New Policy Scenario, to 2035
Saudi Arabia
Kazakhstan Brazil Iraq
Venezuela Canada
Kuwait UAE
Algeria Libya Nigeria Qatar Iran
0 1 2 3 4 5
Source: WEO 2010, IEA Kazakhstan drives an increase in Caspian oil production to 5.2 mb/d by 2035, while
Turkmenistan & Azerbaijan push up gas production to over 310 bcm. Caspian gas production is also projected to
expand substantially in that scenario, from an estimated 159 billion cubic metres (bcm) in 2009 to nearly 260 bcm by 2020 and over 310 bcm in 2035. Turkmenistan and, to a lesser extent, Azerbaijan and Kazakhstan drive this expansion. As with oil, gas exports are projected to grow rapidly, rising from less than 30 bcm in 2009 to nearly 100 bcm in 2020 and 130 bcm in 2035. While Russia will remain a purchaser of Caspian gas, there will be greater diversity in Caspian gas
34 December 2010
beyond being critical to the Caspian’s social and economic development, will affect the volumes of oil and gas available for export. Despite some improvement in recent years, the region remains highly energy intensive, reflecting continuing gross inefficiencies in the way energy is used (a legacy of the Soviet era), as well as climatic and structural economic factors. If the region were to use energy as efficiently as OECD countries, consumption of primary energy in the Caspian as a whole would be cut by half. How quickly this energy efficiency
mb/d 6
potential might be exploited hinges largely on government policies, especially on energy pricing (all the main Caspian countries subsidise at least one form of fossil energy), market reform and financing. In the New Policies Scenario, total Caspian primary energy demand
expands progressively through the Outlook period, at an average rate of 1.4% per year, with gas remaining the predominant fuel. By 2035, demand is about 50% higher than in 2008. Kazakhstan and Turkmenistan see the fastest rates
of growth in energy use, mainly reflecting more rapid economic growth. •
World Energy Outlook – Factsheet International Energy Agency
www.iea.org
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