Lecture V: On the Border: Russias Energy Relations within the CIS

1
Lecture V On the Border Russias Energy
Relations within the CIS

• David Dusseault
• Eurasia Energy Group
• Aleksanteri Institute

2
Introductory Thoughts

• The CIS (Central Asia, Caucasus, Ukraine,
  Moldova, and Belarus) is not a unified energy
  space
• Each country possesses a different energy
  profile and
• These profiles influence relationships that
  extend beyond the borders of Post-Soviet Space.

3
A Note on Sources

• Unless cited to the contrary, the material in
  this lecture has been taken from EIA website
• http//www.eia.doe.gov/emeu/cabs/Ukraine/Backgrou
  nd.html
• http//www.eia.doe.gov/emeu/cabs/Centasia/Backgro
  und.html

4
Variation Haves Have-nots?
5
Differentiating the CIS

• The CIS countries can be divided into four
  groups Suppliers, transit states, consumers and
  hybrids
• Suppliers Turkmenistan Uzbekistan
• Transit Ukraine, Belarus, Moldova
• Consumers Georgia, Armenia, Tajikistan,
  Kirgizstan and
• Hybrids Kazakhstan Azerbaijan.

6
Defining the Terms

• Suppliers are resource rich, but highly dependent
  on Russia for transit
• Transits are resource dependent on Russia but
  form the corridor to the EU
• Consumers are highly dependent on Russia for
  supplies, but are not strategic transit points
  and
• Hybrids produce and transit to a degree
  independent of Russia.

7
Cases
8
Turkmenistan
9
Structuration of Turkmenistans Energy Sector
10
Oil Production
11
Oil Industry

• Reserves 546M 1.7B barrels
• Reserves located in the S. Caspian
• 1992 2004 production has doubled 110,000
  260,000 bbl/d
• FDI through PSA or joint ventures investment
  target 500M USD (2005) and
• Transit swaps w Iran, Russia, Azerbaijan,
  possibilities through Afghanistan.

12
The Political Climate Whos Investing?

• Politics and business are interrelated
• Political system is opaque (cult of personality)
• Still FDI is successful UAE, UK, Malaysia,
  Denmark, Canada, Russia and
• Investment has improved production in aging
  fields, provides opportunities for green field
  development.

13
Gas Production
14
Turkmen Natural Gas All dressed up, nowhere to
go

• Reserves stand at 71Tcf
• Turkmen gas competed with Gazprom through the mid
  1990s
• Turkmenistan was squeezed out of the market due
  to Russias transit monopoly
• Output dropped 2.02Tcf 466Bcf (1992-1998) and
• Production agreement 1999 2.0Tcf 2004.

15
The Transit Issue

• 90 exports transit through Uzbekistan to Russia
  and Ukraine
• Disputes (2004) have focused on price and
  quantity
• 2005 212Bcf 2.8Tcf 2008 beyond
• Talk of Afghan option inter-regional options,
  too and
• Infrastructure investment needed to increase
  existing capacity.

16
Structuration Ukraine
17
Basic Conditions

• Largest energy consumer in Europe
• Natural gas 75 from Russia
• Impact of increased costs depends upon sectoral
  reform and
• Political uncertainty adds to investment jitters.

18
Ukraines Oil Industry

• Proven reserves of 395 bbl 2007
• Consumption decline 813,000 343,000 bbl/d
  1992-2006
• High level of dependence on Russia Kazakhstan
  and
• Total imports 267,000 bbl/d 78 consumption.

19
Oil Transit

• Main pipeline Druzhba
• 900,000 bbl/d 2006 1.6M bbl/d
• 22 Russias 4.1M bbl/d transit Ukraine and
• Consumed domestically or sent on to EU.

20
Natural Gas

• 40Tcf reserves
• 2006 produced 0.68Tcf consumed 3.1Tcf
• 6th largest consumer
• NG 10 increase in energy mix (1990s) and
• 1.1Tcf gas storage.

21
2006 Gas Crisis

• Result of price and payment schemes
• Residuals of asset swaps (1990s)
• Agreed price 230USD Tcf w/ Gazprom
• Gas from Kazakhstan Turkmenistan will supply
  Ukraine.

22
A Final Thought

• Highest level of energy intensity
• 0.5 toe per 1000USD GDP
• EU 15 0.15 per 1000USD
• Gas 50 of energy mix and
• High dependence on coal nuclear in power
  generation.