The Natural Gas Cartel Club: Post-2020 RUS-TEH-TUR-QAT — Seven Iskenderun Pipelines
This article describes activities ongoing to generate a possible gas cartel or dominant position with 60 to 70% of global natural gas reserves in Russia, Iran, Qatar, possibly drawing in Azerbaijan and Turkmenistan, positioning for post-2020. This could mean control of roughly 85% of global gas supplies.
GREEN IS THE NEW BLACK: MAKING A GAS CARTEL http://affiliatenetwork.navisioglobal.com/2017/07/russia-gas-cartel/
The Iraq war from 2003 was partly about future control of regional hydrocarbon reserves and a desire to ensure a degree of control in the future. The Syrian conflict, which grew in 2011 out of a local, low key affair, protesting political and human rights issues, escalated into a complex proxy war. This may have become harder due to a clear Russian intent to become involved. Such involvement is likely to include assistance in the development of future Iranian South Pars natural gas, plus combined Iranian/Iraqi oil reserves and in persuading Qatar to consider their own strategic emphasis. Iran (18%), Qatar (13%) and Iraq (4%) jointly hold 35% of proven global reserves, in addition to Russia’s 26%. It is possible that a semi-formal, high level mini-OPEC style “Gas Club” alliance with Iran, Iraq, Turkey and Qatar may be in the process of forming in the long term. The short term strategic aim may be to control, develop and maintain influence of the key coastal strip of Syrian and Turkish territory encompassing the Incirlik airbase, the Botas Dorytol and Ceyhan (BTC) oil terminals on Iskenderun Bay and the Tartus Russian naval base to the south in Syria.
A major LNG export “energy hub” around the Turkish hydrocarbon export port of Ceyhan may be the result, supplied by several planned gas pipelines, some under construction. This hydrocarbon struggle is rooted in WW2 energy and security policies, overlain by a centuries old Sunni-Shia conflict, now manifesting itself. The future status of hydrocarbon rich Kurdistan is unclear. With natural gas use predicted to increase in the future, together with renewable energy, as fossil fuels decline, this article focuses on where the extra gas required by Europe, China and SE Asia will be sourced, who will control and profit from it, how it will be transported and how serious the future geopolitical implications might be.
According to the IEA, by 2040 natural gas plus wind & solar power will overtake coal, whose demand will decrease by 60% in Europe, 40% in the US, and 15% in China. Oil domination is not over, but an EV transport revolution will lead to a rapid decline. Global proven reserves lie in just 4 Middle Eastern states, Iran (17.9%), Qatar (13.2%), Saudi Arabia (5.6%) and Iraq (3.4%), overall ~40%, with Russia holding 26%. Global consumption growth to 2035 is predicted to be “more than combined US and Russian production”.
Global movement of gas consists of either a) Pipeline Transportation or b) Liquified Natural Gas [LNG] vessels. These movements have become increasingly complex, with more integrated markets resulting. LNG trade is predicted to double to half of global production by 2040, but there are increasingly worries over European dependence on single supply sources.
To sustain 2015 consumption levels in Europe, 100 to 150 Bcm/year of additional supplies are predicted as needed by 2025. Few suppliers can provide this for a growing gap. Events in 2014 put energy security back at the top of the EU agenda, with Moscow’s closure of gas pipelines into Ukraine, two issues becoming important:
a) The extent to which new EU climate change policies will affect broader international influence;
b) Changing parameters in international energy markets and consequent foreign policy challenges.
Russia is the world’s largest producer of crude oil and was the third largest producer of petroleum and other liquids in 2015 after Saudi Arabia and the US, with average production of 11.0 Mbbl/day. Russia was also the 2nd largest producer of dry gas in 2015 (2nd to the US), producing 650 Bcm, about 20% of global annual production. It has 26% of world reserves with 47,800 Bcm as of January 2016, the majority in West Siberia.
State-run Gazprom dominates with ~70% of output, that dominant position reinforced by a legal monopoly on pipeline exports. The vast West Siberian Yamlo-Nenets field produces 50.9 Bcf/day or 525 Bcm/year, a figure likely to increase. This may be compared to the 2014 peak of 110 Bcm/year for all Norwegian output from offshore assets, declining to 2025.
Russia, Iran and Turkey recently completed negotiations in Kazakhstan aimed at ending six years of Syrian civil war, an agreement which may be related to energy and geopolitics. This did not involve consultation with the EU or US, with little to no UN involvement. All three regimes are repressive and autocratic. North America and Europe must hold strongly together in the face of this geopolitical change.
Following the cutting of ties between Qatar and Saudi Arabia, joint Russian-Iranian strategic intentions may be driven by future gas supply to European markets, including the 31 Bcm (2026) Southern Gas Corridor (SCP, TANAP, TAP) and the 37 Bcm (2026) Iranian IGAT-9 trunkline, into Turkey. It is suggested that this joint strategy includes the following:
1. Maintaining and Increasing Russian influence in the Middle East in the context of existing and new pipeline natural gas supplies to Europe, to become assured to at least 2040.
2. Development of an EU and particularly German political landscape more open to Russian/Turkish interests, through political influence.
3. Solidification of economic and political co-operation between Russia and Iran, particularly in the areas of energy technology, defence and economic development.
4. Conflict stabilisation in Syria and northern Iraq, followed by maintenance of and support for the Assad or similar Alawite regime in Syria. Focus on Incirlik-Ceyhan-Tartus coastal strip.
5. Closer relations between Russia, Iran and Turkey following the recent attempted coup in Turkey and consolidation of power by President Erdogan.
6. Reduction, limitation and control of further efforts and moves towards Kurdish independence, whilst providing sufficient encouragement for transport of KRG gas westwards to Ceyhan.
7. Limiting US influence in Iraq, whilst permitting some US and western oil companies to be involved in assisting Iran and Kurdistan technologically, in controlled partnerships in Basra and Kurdish areas.
8. Encouragement of divisions between Qatar and Saudi Arabia to isolate the latter and further reduce US regional influence, facilitated through commercial Russian gas “deals” involving Rosneft and Qatar.
9. “Neutralisation”, reduction in influence and steady shift eastwards of ISIS presence.
10. Facilitation of Exxon-Russia assisted construction of the IGAT-9 pipeline tied into the existing SCP Azeri gas export pipeline corridor into and through Turkish territory.
11. Encouragement of Rosneft-Exxon deals for Arctic gas exploitation, once US and EU sanctions are sufficiently relaxed or dropped altogether as gas prices start to rise beyond say, 2020.
Russian and Iranian Pipelines to Turkey and Qatari LNG
Russian gas to Europe would continue via existing Jamal and TAG onshore corridors, plus the 16 Bcm Blue Stream 1 [Black Sea] pipeline, completed in 2011 and the 55 Bcm (possibly rising to 110 Bcm in 2019) Nord Stream (Baltic Sea) subsea pipelines. Qatari North Field gas could be exported in larger quantities via expanded LNG facilities to India, China, Japan and Korea. In addition, it is suggested that five additional Turkish pipeline corridors could serve a considerably expanded Ceyhan LNG “Energy Hub”.
1. Extension Leg Pipeline from SCP Southwards to Ceyhan;
The SCP and subsequent TANAP and TAP pipelines (31 Bcm by 2026) collectively known as the Southern Gas Corridor, will connect the giant Shah Deniz Azeri gas field to Europe, strengthening the role of Turkey as a regional energy hub. Construction of TANAP began in March 2015 and should be complete by end 2018. The SCP will be extended with a 56 inch parallel pipeline by the end of 2017, increasing capacity from 7 to 23 Bcm/year by 2023 and 31 Bcm by 2026.
2. Kurdish Gas Via New Erbil-Ceyhan Pipeline;
Iraq has the 7th largest global gas reserves, which are severely underdeveloped Hydrocarbons are mainly oil, with 153 Bbbl, the OPEC list №2. Kurdistan is oil rich, with the Iraqi-Kurds holding almost a third of Iraqi reserves. If the KRG autonomous region were a nation-state, it would rank 10th, just after Libya. The EIA, “Probable Iraqi reserves have been estimated at 7.8–8.5 Tcm”, which would be one of the largest globally. Kurdistan may become a game-changing asset in the future. A gas pipeline to Turkey is under consideration, parallel to an existing oil export line, probably with a capacity of about 10 Bcm.
3. South Pars Iranian “Friendship” Route via IGAT-9 Keying in to SCP
The jointly owned Iranian South Pars and Qatari North Dome field is the largest non-associated gas field in the world, holding 58.5 Tcm of in-situ natural gas and ~50 Bbbl of natural gas condensates. Reserves are greater than every other gas field on Earth combined. Tensions exist, with Iran unable to extract rapidly due to sanctions. Iran has long considered gas pipelines to Oman and Pakistan. IGAT-9 would be 5600 km long of capacity 37 Bcm. SCP is planned as 31 Bcm by 2026.
The Iranian section is 1,863 km long, running from the southern city of Asalouyeh in Bushehr Province through Ahvaz, Dehgolan and eventually the Bazargan district and border crossing point in West Azerbaijan Province in the northwest, close to the Armenian and Turkish borders. It is envisaged to carry 110 Mcm/day from South Pars via 17 compressor stations, with 50–60 Mcm/day reserved for local consumption. It has been reported that the project will be funded 23% by Iran and 77% by Turkey. The stretch from Assaluyeh to Bid Boland was completed in June 2008.
In January 2017 Iran invited Russian participation in the construction of IGAT-9. Hamid Reza Araghi, managing director of NIGC, spoke of a potential Russian-Iranian joint venture. Iran’s Mehr news agency quoted Araghi as saying that if the required licences are obtained, the project’s pipelaying segment of the project could be implemented as an EPCF contract worth USD 2.5 billion.
4. Future Eastern Mediterranean Offshore Gas.
The Eastern Mediterranean offshore region has substantial gas reserves. The USGS estimated in 2010 that the Levant Basin may contain ¬3455 Bcm of gas and 1.7 Bbbl of recoverable oil, mostly in Israeli and Cypriot waters. These could change the regional energy outlook considerably and are comparable to Iraqi reserves. The eventual subsea pipeline capacity is unknown.
5. Turkstream Subsea Pipeline.
The TurkStream pipeline will run offshore from Anapa to the Turkish coast, with an onshore string for gas transit laid to the Turkish border. The first string is intended for Turkish consumers, while the second string will deliver gas to southern and SE Europe, each having a capacity of 15.75 Bcm. Turkey is expected to consume about 15.75 Bcm per annum, with the rest of the gas is planned for transportation to the Greek–Turkish border, then exported to Europe.
If the listed pipelines were built to the capacities envisaged, then the predicted European shortfall of 100 to 150 Bcm in 2025 could be replaced by a combination of Russian and Iranian pipeline gas and Qatari LNG.
Sunni Vs Shia Persian Gulf Gas Pipelines
It has long been recognised that the most likely location where conflict could flare up over hydrocarbons would be The Persian Gulf and/or neighbouring regions. Gas pipelines from the Gulf have been discussed for many years running north to Syria, both a “Sunni” version from the Qatari side through Saudi Arabia and Jordan and a Russian backed “Shia” line from the Iranian side along the western edge of Iran or Shi’ite Iraq.
Russia would gain considerably by having an option to export gas from Ceyhan, a newly “upgraded” licensed marine base at Tartus and a “de-westernised” Incirlik airbase. A Syrian/Turkish coastal “hub” would be a logical transit point for the long discussed serious additional monetisation of Iranian South Pars/North Dome gas.
Following the unexpected and sudden breakdown in relations between six Arab states and Qatar on 5th June 2017, it is possible Qatar might have been persuaded to concentrate on LNG exports to Asia. Vessels would continue to pass through the Iranian Strait of Hormuz. European deliveries would be maintained with Egyptian agreement to allow Suez Canal passage. Efforts to blockade eastwards could be problematic for LNG-dependent nations such as Japan and South Korea, and are unlikely.
Turkey has no indigenous hydrocarbons and hopes to be a self-sufficient “Mahdist” power by 2025. Iran will be happy for US influence in the Middle East to be minimised or removed, to pressure Israel and export via the IGAT-9 pipeline, along the Turkish controlled SCP extension and onwards to European markets via TANAP/TAP or to the Mediterranean coast for LNG export.
Rosneft, QIA, Glencore and Exxon-Mobil
The recent deal between Rosneft and the Qatar Investment Authority [QIA]/Glencore, essentially selling 19.5% to Qatar via a convoluted route, may be part of an understanding that Qatar will be able to participate as an investor in Russian hydrocarbon exploitation in the future. Qatar were given this “present” and a seat at the Arctic Oil & Gas table in return for their agreement to stick to LNG sent to Asia, hence the phony Turkish coup, the fake wedging of Saudi-Qatar, and the Astana tripartite meeting in April 2017.This was effectively at the expense of BP whose recent involvement in Russia was terminated through an earlier forced sale of TNK-BP.
Between 2011 and 2013, Exxon-Mobil gradually became the partner of choice of Rosneft. Russia was to be the oil major’s next mega-area, a rapidly shortening list. A major coup was pulled off in Sochi in August 2011, when Vladimir Putin, Rex Tillerson and Igor Sechin signed co-operation agreements for 10 Joint Ventures, including drilling in the Russian Arctic, exploration in the Black Sea, development in the Bazhenov shale of western Siberia, a joint Arctic research centre and substantial options for Rosneft to invest in Gulf of Mexico and Texan areas. Rosneft would own 66.7% and Exxon the rest of the JV. There are thus powerful indications that Exxon-Mobil would like to work in Russia in the first half of the 21st century, with recent mentions of 2014 imposed sanctions relaxation. This would be a gain for Exxon-Mobil over old rival BP. Glencore is active in Kurdistan, with former BP CEO Tony Hayward having played a major role in Genel’s activities there.
Political Strategies and Emphasis on Clean Energy
With Europe (UK and France) close to politically and militarily hamstrung by political chaos and uncertainty and America having been effectively “blindsided” by recent political affairs, it is important for Europe, NATO and the US to draw together, define coherent Middle East policies and formulate long term energy strategies. This seems sorely lacking, with others taking advantage. With a US government open to such measures and European threats from “populism” and break-ups dissipated, the following policies might be appropriate:
· Encouragement of a US backed Kurdish state.
· Newly defined US Government Russian sanctions.
· Softening of attitudes towards Iran.
· Ongoing strong assistance to Israel.
· Pressure on Saudi Arabia to counter Salafism.
· Emphasis on closer European integration on security and energy.
· Encouragement of relaxations in Turkish repression and autocracy.
· Move to peace in Syria with Iranian-Turkish support.
· Full disclosure of any recent abnormal Russian influence on elections.
The potential for a tightening of gas supply options may be a perfect opportunity for Europe and North America to concentrate less upon Russian and MENA hydrocarbons and move strategically, whilst accelerating quickly towards the development and commercialisation of a suite Clean Renewable Energy technologies, for a balanced mix between natural gas, solar PV, offshore wind, whilst pushing hard for nuclear fusion, energy efficiency gains carbon capture & storage, offshore methane gas hydrate exploration and clean dry fracking.
