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AB 2000 studies

Alain Boublil Blog

 

Natural gas, the new strategic commodity

During a century, the access to oil has constituted a major strategic stake and has been at the center of geopolitical tensions leading even sometimes to wars. At the end of the Ottoman Empire, England and the United States, to which France lately joined, have redrafted the Middle East map according to the localization of the oilfields. The Pearl Harbor attack has been initiated by Japan threat to be deprived of its oil supply by the U.S. If the German army went to Stalingrad to fight, it was with the purpose to have access to Caspian Sea and its important oilfields. At last, the embargo decided in 1973 by the producing nations had as an objective to put the pressure on Western States to stop their support to Israel during its war against Egypt and Syria. To guarantee its security and, which is less frequently mentioned, to keep prices at a high level, the U.S. have forbidden until recently oil exports except and under conditions toward its neighbors, Canada and Mexico. So oil has been during all these periods a major source of crisis and even of wars.

Tensions currently observed related to the putting into operation of the Nord Stream 2 pipeline between Poland, Ukraine and Russia do not obviously carry the same violence but they are revealing of the new strategic importance granted to natural gas. And it is not an isolated case because if China is so preoccupied about the safety of the maritime transportation in its sea zones which go until Singapore and the Indian Ocean, it is because are going through them essential products to its economic activity and especially oil and natural gas. So, this fossil fuel could, in the coming years, occupy the role oil has taken during the whole Twentieth century in the international relationship.

The reasons are multiple and the first one lays in the way natural gas is carried. What have made oil success were its transportation easiness and its many uses, to the difference of coal. Natural gas doesn’t show the same qualities. It needs, like oil with the pipelines, the construction of costly equipments which go through countries which it is not always addressed to. But two major innovations occurred. The shale gas revolution has allowed to increasing available resources. The building of liquefaction plants and methane tankers has extended the transportation possibilities. The countries which were isolated like archipelagos or too far from the fields for the pipelines construction was profitable, have been able to have access to that energy source when they had seaboard territories. So they built the necessary plants.   

The second reason lays in the climate stakes. Natural gas, yet, is a fossil fuel but its use emits much less CO2 than coal. Networks leaks, their operators are now committed to reduce can generate methane emissions, more harmful than CO2 but these ones are not accumulating themselves in the atmosphere during a long enough period to contribute at the same level to climate warming. So among the solutions allowing to rapidly reducing greenhouse gas is in a good place the substitution of natural gas to coal to produce power. The natural gas demand which will result from this transformation is all the more important that the power demand at the world level will increase with the reduction of thermal engines share, the digitalization of the activities and especially the pursuit of the economic catching up of the emerging countries like China and India. The energy saving policies will only feebly be able to slow these trends.

Renewable, due to their intermittent character, will not offer before a long time the power supply safety and the recourse to nuclear power, limited to the countries which master this technology or at least the nuclear power plants management will not alone be able to cope with this demand increase. So the natural gas need will strongly rise during the coming years but the geographical disequilibrium between supply and demand will carry a quite new character and will generate geopolitical tensions.

In the past most of the oil production surplus was concentrated in the OPEC countries, mainly in the Middle East, which, even if they were not always agreeing between themselves have favored a mercantilist approach; They protected their revenues through the level of produced quantities. The situation of the natural gas world market is quite different. Along with the Gulf Emirates which are exporting almost their entire production, the two main exporters are Russia and since recently with the shale gas, the U.S. Facing with them, it exist two main importers, the European Union and China. So natural gas supply and transport are going to become growing tensions issues between these great powers.

Europe, due to the progressive depletion of the North Sea fields, imports more than 30% of its consumption from Russia. The construction of a new infrastructure, Nord Stream 2, generates worries. It would increase the continent dependence from Moscow and would deprive Ukraine of the resources it gets from the fees paid by the pipelines operators which go through the country from Russia. But the two countries are in a conflict since the Crimea annexation. The U.S. see also in this project a threat to its LNG exports and has put a pressure through the issuance of sanctions against the companies which are participating to it. So Europe is divided, Germany supporting the project and Poland, which supports Ukraine against Moscow, militates against its put into operation. Another source of difficulties for the continent, the degradation of the relationship between Morocco and Algeria, has lead to the blockage of the pipeline which was carrying one third of the country needs.

Russia has another very promising client, China and is considering the construction of a new giant pipeline, with a 50 bnm3 capacity, Power of Siberia N°2, which would supply it, as Nord Stream 2, from the Yamal giant gas field. So Moscow, which is accused of making natural gas prices higher through the limitation of its exports toward Europe, would again strengthen its position thanks to this enormous market. Chinese consumption went in ten years from 100 to 300 bnm3 and its imports reached 100 bnm3. Half of them come from Russia and Turkmenistan. The remaining imports are GNL, coming from the Gulf and Australia whose fields have been put into operation and liquefaction plants built thanks to the contracts concluded with Chinese importers. But the rebound of tensions in the area with the more and more assumed presence of the U.S. as is testifying of it the constitution of AUKUS alliance could incite Beijing to become less dependent of its Australians suppliers, which would affect the situation of the country.

The natural gas market has become a privileged competition if not a fight ground between the great powers at a time when that commodity is more and more searched by the countries which want to reduce their greenhouse gas emissions. We must hope and act in order that this legitimate demand doesn’t threat the peace of the planet and so its survival.    

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