IEA Caspian Energy Outlook

Selim Kuneralp 08.12.2010

I should first like to thank the EPC for this opportunity to take part in a discussion on Transcaspian Energy and its future role for Europe. The subject matter is fascinating and I am delighted that the EPC has taken the initiative of organising today’s gathering.

We have as a basis for our discussions the International Energy Agency’s 2010 “World Energy Outlook” which devotes more than one hundred pages to an analysis of the energy demand and supply situation in the region and each of its constituent countries. As usual, the “Outlook” is a mine of information and it would be very difficult to try to summarise all the relevant information in the seven minutes that Amanda has allocated to me. I shall therefore refrain from doing that and will instead highlight the elements that I have found particularly interesting, concentrating on implications for Europe.

The first such point relates to the fact that while the region has an enormous reserve of oil and natural gas resources, all but one of the countries in it have relatively small populations which means that there is an important potential for exports. All the countries in the region have inherited their basic infrastructure from Soviet times and are engaged in a process of modernizing and upgrading it. The economic turbulences that followed the collapse of the Soviet Union led to a sharp fall in demand for energy in all of them, but this fall has started to reverse itself in the course of the present decade. More attention is given to reducing wastage though the performance is uneven across the region. Despite expected growth in demand which will be the outcome of the industrialization of the region, the surplus available for export is also expected to increase.

If the right policies are pursued in the region with respect to both demand and supply, the export capacity of the whole region is expected to rise substantially, although oil production is expected to peak around 2025. Production of oil is expected to increase from 2.9 mb/d in 2009, to 5.4 mb/d in 2025 and fall back to 5.2 mb/d by 2035. The volume of exports is expected to increase from 2.3 mb/d in 2009 to 4.6mb/d in 2025, before falling back to 4.3 mb/d in 2035. Aggregate gas production is expected to rise from 188 bcm in 2008 to 260 bcm in 2020 and 315 bcm in 2035. Total net exports are expected to rise from 63 bcm in 2008 to 100 bcm in 2020 and 130 bcm in 2035. Despite some logistical difficulties, the cost of getting Caspian resources out of the ground “compares favourably with those in most other regions”.

The region plays host to companies from all over the world but China’s role has increased in recent years, though by not as much as could have been expected. In fact, China’s share in oil and gas production in the Caspian is expected to fall in the period up to 2035