Olcott presentation

Energy security: Risks and Advantages of Partnering with Russia: 

Energy security: Risks and Advantages of Partnering with Russia Martha Brill Olcott Senior Associate

Different Understandings of Energy Security: 

Different Understandings of Energy Security EU understanding of energy security different from individual members’ understandings of their energy security US geopolitical understanding of Russia and energy different than those working directly in energy field in USG Russia views energy as a national asset, and does not believe unrestricted use of market mechanism will lead to sufficient protection of national interests

Geopolitics of Oil and Gas: 

Geopolitics of Oil and Gas Russian policy very consistent in recent years. Not likely to change before next Russian presidential election. Russian bilateral relationships with Europe and America are somewhat strained, but generally cordial, reflecting the desire of their national businesses to continue doing business with Russia. Though since January 2006 there has been clear demonstration of underlying differences between the understanding of energy security (and how it relates to national security) in Russia, the U.S, and some of the European nations.

Russian Energy Policy in the Second Putin Administration: 

Russian Energy Policy in the Second Putin Administration Reclaiming of direction of strategic resources by the state (includes center-periphery) Increased capitalization and going international Managing geopolitical dimensions of energy Reform of tax structure and legal infrastructure as it relates to oil and gas Windfall profits (unexpected)

Russian FOREX Reserves, 2000-2006: 

Russian FOREX Reserves, 2000-2006

Sources of Controversy: 

Sources of Controversy Ukrainian and Belarusian gas crises have hardened Western attitudes. Tensions between Moscow and Estonia, Lithuania, Poland, + others Russian reluctance to ratify the Energy Charter has sparked interest in alternative transport routes. Forced sale/renegotiation of license held by Western firms. Fears of Russia’s supply chain

Crude Oil Production 1998-2006: 

Crude Oil Production 1998-2006

Oil Production Growth, 1999-2006: 

Oil Production Growth, 1999-2006

Unresolved Questions : 

Unresolved Questions Shtokman Located in the Barents Sea in depths ranging from 320 to 340 meters. 3.2 trillion cubic meters of gas and more than 31 million tons of gas condensate Nordstream Russo-German Baltic seabed pipeline project for Russian gas from Primorsk to Germany Kovykta: Siberian Gas Deposit with 2 trillion cubic meters of gas and more than 83 million tons of gas condensate Currently run by TNK-BP

The Shtokman Gas Field: 

The Shtokman Gas Field

The North European Gas Pipeline: 

The North European Gas Pipeline

Kovykta Gas Field : 

Kovykta Gas Field Controlled by RUSIA Petroleum, which is 67 percent owned by TNK-BP Rosprirodnadzor has completed a second probe into compliance with the Kovykta gas condensate license agreement Gazprom likely to get share

What to Expect in Russia: 

What to Expect in Russia Much like now, state-run portions of oil and gas sector will be managed by people seeking to balance national, institutional and personal interests. Continued reform of state-owned resource companies and their partial privatization. Increasing effort by Russian state companies to get access to foreign downstream projects. Continued discussion, and possible adoption of legislative providing better articulation of license holder rights. Renewed pressure to address energy intensiveness of the domestic Russian economy. Continued search for formula to encourage more investment in domestic oil and gas projects. Continued debate over transformation of pricing for domestic gas.

What to Expect in Russia: 

What to Expect in Russia Pressure for tax reform to increase windfall profit share of producers (particularly when linked to reinvestment. New subsoil law to protect “strategic” assets Renewed demand by Independents for transport equity. Further calls for better legal elaboration of strategic and other minority shareholder rights. Will Russia be able to strike the right balance between encouraging foreign investment and protecting long-term national needs? Will Russia be able to maintain its monopoly on the sale of Central Asian Gas?

Alternative Routes Include BTC and possible Trans-Caspian lines: 

Alternative Routes Include BTC and possible Trans-Caspian lines

Conclusion: Can Russia balance Europe and Asia?: 

Conclusion: Can Russia balance Europe and Asia? Theoretically this is possible, but would require clever management of regional approach---balancing of Russian, Kazakh, Turkmen supplies with development of possible new sources of Russian domestic production. Could also require complex triangular relations with China Will mean that Russia guesses right on balance between LNG and long-land pipe Timing is critical, both for Russia’s pacing of its own projects, Shtokman, Sakalin, Kovytka, Yamal, Timing is also critical regarding competing routes and suppliers. When will Iranian gas come on line? Will Europe dither and overestimate the likelihood of TransCaspian route and Nabucco or fail to consider Turkmenistan production problems (and lack of investment)? One must be savvy to distinguish pipelines from pipe dreams.

THE END : 

THE END