By most estimates, global consumption of natural gas – a cleaner-burning alternative to coal and oil for electric power and other applications – will double by 2030. However, in North America, Europe, and South and East Asia, the projected consumption of gas is expected to far outstrip indigenous supplies. Delivering gas from the world's major reserves to the future demand centers will require a major expansion of inter-regional, cross-border gas transport infrastructures.
This book investigates the implications of this shift, utilizing historical case studies as well as advanced economic modeling to examine the interplay between economic and political factors in the development of natural gas resources. The contributors aim to shed light on the political challenges which may accompany a shift to a gas-fed world.
DAVID G. VICTOR is Director of the Program on Energy and Sustainable Development at the Freeman Spogli Institute for International Studies, Stanford University.
AMY M. JAFFE is Wallace S. Wilson Fellow for Energy Studies at the James A. Baker III Institute for Public Policy, Rice University.
MARK H. HAYES is a Research Fellow at the Program on Energy and Sustainable Development, Freeman Spogli Institute for International Studies, Stanford University.
Edited by
CAMBRIDGE UNIVERSITY PRESS
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CAMBRIDGE UNIVERSITY PRESS
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Published in the United States of America by Cambridge University Press, New York
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© Cambridge University Press 2006
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no reproduction of any part may take place without
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First published 2006
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Library of Congress Cataloguing in Publication data
Natural gas and geopolitics: from 1970 to 2040/edited by David G. Victor, Amy M. Jaffe, and Mark H. Hayes.
p. cm.
Includes bibliographical references and index.
ISBN-13: 978-0-521-86503-6 (hardback)
ISBN-10: 0-521-86503-4 (hardback)
1. Gas industry – Government policy. 2. Energy policy. 3. Geopolitics. I. Victor, David G., 1965 II. Jaffe, Amy M., 1958 III. Hayes, Mark H., 1976– IV. Title.
HD9581.A2N35 2006
382′.42285–dc22
ISBN-13 978-0-521-86503-6 hardback
ISBN-10 0-521-86503-4 hardback
Cambridge University Press has no responsibility for the persistence or accuracy of URLs for external or third-party internet websites referred to in this publication, and does not guarantee that any content on such websites is, or will remain, accurate or appropriate.
| List of figures | page vii | |
| List of tables | x | |
| List of boxes | xii | |
| List of contributors | xiii | |
| Foreword by James A. Baker, III | xv | |
| Acknowledgments | xvii | |
| List of acronyms and abbreviations | xx | |
| Part I Introduction and context | ||
| 1 | Introduction to the study JOE BARNES, MARK H. HAYES, AMY M. JAFFE, AND DAVID G. VICTOR | 3 |
| Part II Historical case studies | ||
| 2 | Introduction to the historical case studies: research questions, methods and case selection MARK H. HAYES AND DAVID G. VICTOR | 27 |
| 3 | The Transmed and Maghreb projects: gas to Europe from North Africa MARK H. HAYES | 49 |
| 4 | Liquefied natural gas from Indonesia: the Arun project FRED VON DER MEHDEN AND STEVEN W. LEWIS | 91 |
| 5 | Bypassing Ukraine: exporting Russian gas to Poland and Germany NADEJDA M. VICTOR AND DAVID G. VICTOR | 122 |
| 6 | Natural gas pipelines in the Southern Cone DAVID R. MARES | 169 |
| 7 | International gas trade in Central Asia: Turkmenistan, Iran, Russia, and Afghanistan MARTHA BRILL OLCOTT | 202 |
| 8 | Liquefied natural gas from Qatar: the Qatargas project KOHEI HASHIMOTO, JAREER ELASS, and STACY L. ELLER | 234 |
| 9 | Liquefied natural gas from Trinidad & Tobago: the Atlantic LNG project ROB SHEPHERD AND JAMES BALL | 268 |
| 10 | Politics, markets, and the shift to gas: insights from the seven historical case studies MARK H. HAYES AND DAVID G. VICTOR | 319 |
| Part III International gas trade economics | ||
| 11 | The Baker Institute World Gas Trade Model PETER HARTLEY AND KENNETH B. MEDLOCK, III | 357 |
| 12 | Political and economic influences on the future world market for natural gas PETER HARTLEY AND KENNETH B. MEDLOCK, III | 407 |
| 13 | Market structure in the new gas economy: is cartelization possible? AMY M. JAFFE AND RONALD SOLIGO | 439 |
| Part IV Implications | ||
| 14 | Conclusions AMY M. JAFFE, MARK H. HAYES, AND DAVID G. VICTOR | 467 |
| Appendix: Technical notes NADEJDA M. VICTOR | 484 | |
| Index | 488 | |
| 1.1 | Global primary energy consumption, by fuel | page 8 |
| 1.2 | Worldwide consumption of natural gas, 1965, 1985, 2003 | 9 |
| 1.3 | World trade in natural gas, 1970–2004 | 11 |
| 1.4 | The international gas trade projects examined in this book | 19 |
| 2.1 | Case selection: ensuring variation in outcomes | 40 |
| 3.1 | Gas pipelines and LNG facilities: Algeria, Italy, and Spain | 50 |
| 3.2 | Algeria: primary energy supply, by fuel, 1965–2004 | 52 |
| 3.3 | Algeria: natural gas production, consumption, and exports, 1970–2004 | 53 |
| 3.4 | Italy: primary energy supply, by fuel, 1965–200455 | |
| 3.5 | Italy: gas consumption, by sector, 1960–1995 | 55 |
| 3.6 | Italy: sources of natural gas, 1965–2002 | 57 |
| 3.7 | International oil prices, 1965–2004 | 62 |
| 3.8 | Algeria: export revenues, by source, 1965–2000 | 72 |
| 3.9 | Spain: primary energy supply, by fuel, 1965–2004 | 76 |
| 4.1 | Natural gas infrastructure: Indonesia, Malaysia, and Brunei | 93 |
| 4.2 | Japanese imports of LNG, by country, 1969–2001 | 96 |
| 4.3 | Japan: primary energy supply, by fuel, 1965–2003 | 97 |
| 4.4 | Indonesia: primary energy supply, by fuel, 1965–2003 | 115 |
| 4.5 | Singapore: primary energy supply, by fuel, 1965–2003 | 117 |
| 5.1 | Primary energy production on Soviet territory, 1913–2002 | 127 |
| 5.2 | The shifting geography of Soviet and Russian gas production, 1960–1998 | 128 |
| 5.3 | Production, consumption, and international trade of gas on Soviet territory, 1965–2001 | 129 |
| 5.4 | Composition of Soviet gas exports to Europe, 1970–2001 | 130 |
| 5.5 | Soviet and Russian earnings from gas export, 1975–2003 | 133 |
| 5.6 | Major Soviet and Russian gas export routes, 2003 | 136 |
| 5.7 | Germany: primary energy consumption, by fuel, 1965–2003 | 150 |
| 5.8 | Poland: primary energy consumption, by fuel, 1965–2003 | 153 |
| 6.1 | South America: international gas pipelines | 170 |
| 6.2 | Evolution of YABOG gas prices, 1978–1992 | 175 |
| 6.3 | Chile: primary energy mix, 1975–2000 | 177 |
| 6.4 | Brazil: primary energy supply, 1975–2000 | 185 |
| 7.1 | Existing and proposed Turkmen gas export pipeline routes | 204 |
| 7.2 | Turkmenistan: natural gas balance, 1990–2003 | 206 |
| 7.3 | Turkmenistan: key economic indicators, 1992–2003 | 206 |
| 8.1 | Greater Persian Gulf region | 235 |
| 8.2 | Qatar: gas infrastructure | 236 |
| 8.3 | Qatar: oil production and revenues, 1971–2002 | 239 |
| 8.4 | Qatar: natural gas output, 1980–2001 | 245 |
| 9.1 | Trinidad & Tobago: gas infrastructure | 271 |
| 9.2 | US gas supply and demand, 1980–2004 | 273 |
| 9.3 | Henry Hub historic prices, 1990–2005 | 274 |
| 9.4 | US LNG imports, 1985–2004 | 276 |
| 9.5 | New England: gas demand, 1988–1999 | 277 |
| 9.6 | New England: natural gas infrastructure | 278 |
| 9.7 | Unit cost for a 3mtpa LNG plant, 1965–1990 | 284 |
| 9.8 | Integrated project with f.o.b. sales | 291 |
| 9.9 | Transfer pricing arrangement | 292 |
| 9.10 | Tolling arrangement | 292 |
| 9.11 | Atlantic LNG Train 1 structure | 298 |
| 9.12 | Atlantic LNG Trains 2 and 3 structures | 307 |
| 11.1 | Historical demand for natural gas, selected countries, 1980–2004 | 362 |
| 11.2 | Long-run gas demand curve for different per capita GDP levels | 365 |
| 11.3 | The hypothetical supply of a gas substitute, 2020–2100 | 369 |
| 11.4 | Proved natural gas reserves, by region, 2003 | 371 |
| 11.5 | Undiscovered natural gas, by region, 2000 estimates | 371 |
| 11.6 | Estimated long-run cost of supply curves, selected regions | 372 |
| 11.7 | LNG transportation network | 375 |
| 11.8 | LNG liquefaction, capital costs | 377 |
| 11.9 | Technological progress in LNG capital costs, 1995–2040 | 379 |
| 11.10 | Gas supply projections: major countries or regions, 2002–2040 | 381 |
| 11.11 | Gas demand, net of transport fuel and backstop supply, 2002–2040 | 383 |
| 11.12 | Major natural gas trades between regions, 2002–2040 | 384 |
| 11.13 | LNG importers, 2002–2040 | 384 |
| 11.14 | LNG exporters, 2002–2040 | 385 |
| 11.15 | Selected regional price projections, 2002–2040 | 388 |
| 12.1 | Reference case results, 2002–2040 | 414 |
| 12.2 | Reference case, selected prices, 2002–2040 | 416 |
| 12.3 | No pipelines from Russia to northeast Asia: results, 2002–2040 | 420 |
| 12.4 | Decadal average price changes from the reference case, 2002–2040 | 424 |
| 12.5 | Higher Chinese demand growth results, 2002–2040 | 426 |
| 12.6 | Changes in backstop demand, alternative technology case, 2020–2040 | 431 |
| 12.7 | Alternative technology case results, 2002–2040 | 432 |
| 13.1 | Dominant-firm equilibrium | 451 |
| 1.1 | Seven historical case studies, with brief descriptions | page 17 |
| 2.1 | Projected major inter-regional trade and representative country routes | 32 |
| 2.2 | Range of relevant values for major projected international gas trade routes | 36 |
| 2.3 | Proposed case study pairs/clusters: built projects selected from the larger “universe of cases” | 39 |
| 2.A | A Universe of built projects that involve difficult investment environments | 44 |
| 3.1 | Transmed: technical details | 62 |
| 3.2 | Transmed: contracted volumes, 1977 | 64 |
| 3.3 | Transmed: financial details | 67 |
| 3.4 | Transmed: revised contract volumes, 1983 | 76 |
| 3.5 | Factors common to both projects | 85 |
| 3.6 | Factors varying across the two projects | 86 |
| 5.1 | Russia's major international gas export lines, 2003 | 143 |
| 5.2 | Gas balances for key countries along the BC, 2001 | 148 |
| 5.A | A Russian earnings from oil and gas export, 1994–2004 | 166 |
| 6.1 | GasAndes: ownership structure | 183 |
| 6.2 | Brazil: gas market assessment, circa 1993 | 186 |
| 6.3 | GasBol: ownership structure | 193 |
| 6.4 | GasBol: sources of funding | 194 |
| 7.1 | Turkmenistan: trade balance, 1997–2001 | 207 |
| 7.2 | CentGas: ownership structure | 219 |
| 7.A | A Foreign firms involved in the Turkmen oil and gas sectors | 228 |
| 7.B | B Turkmenistan: major natural gas deposits | 229 |
| 8.1 | Qatargas: ownership structure | 251 |
| 8.2 | Qatargas: sales contracts, 1994 | 252 |
| 8.3 | LNG shipping costs to Japan (Sodegaura), early 1990s | 253 |
| 8.A | A Timeline of important events | 265 |