Emerging Countries: the New Players on the Energy Scene

Overview

The energy sector is undergoing fundamental changes. Indeed, since the 1960s the energy landscape seemed to undergo little change, however the past 10 years have seen major transformation of energy sources and supply. How far will these changes carry us ?

Emerging countries: the new players on the energy scene

The new millenium, characterized by strong economic growth, will also see significant growth of energy demand and specifically from the emerging economies starting with the BRICS – Brazil, Russia, China, India and South Africa – but also Indonesia, South East Asia and Latin America, as well as several Mid-eastern and North African countries.

Price escalation and supply tensions

Energy prices have increased tenfold in ten years (from 10 dollars in 1998 to more than 100 dollars in 2008). Oil and gas demand will not be able to keep up with the future energy demand curve and so demand will have to turn to coal. Coal which is available in vast quantities, will thus see its production and consumption grow in spite of its environmental drawbacks.

Changes in the supply equation

The potential for oil and gas production will face dramatic changes with the development non-conventional oil and gas, thanks to the combination of two well established techniques, horizontal drilling and fracking, thus enabling economic production of hydrocarbons from particular geological themes.

Non-conventional gas production has been growing very fast over recent years, representing in 2012 nearly 50% of natural gas production in the United-States. After the rapid development of tight gas production, shale gas is now taking over.

In recent years, we have also seen the development of shale oil production, a light crude found in mother formations[1]. Once again it’s in the Bakken, in North Dakota, that this type of production is growing fastest.

We are also witnessing an increase of Natural Gas Liquids and Condensates production, of offshore and deep offshore oil production in the Gulf of Mexico, and the development , in Canada, of synthetic crude production from the tar sands of the Athabasca river region.

Could North America become the next Middle East?

United-States hydrocarbon liquids production added to imports from Canada could reach 20 million barrels per day by 2020, with demand leveling off at 17 million barrels per day.

Demand for various oil products is decreasing simultaneously in the US due to the combined effect of increasing fuel prices, more stringent vehicle fuel efficiency specifications and ethanol consumption of which the US has become the leading producer worldwide.

This will enable the United States to considerably reduce imports from the Persian Gulf countries. Although the US Navy ensures the bulk of maritime security for Oil supply routes today, we should not expect a massive military retreat by the United States from the Persian Gulf region. But US involvement could diminish.

Strategic Consequences for Europe

Europe is becoming more and more dependent on oil and gas imports. In this evolving geopolitical context, Europe will need to increase its involvement in the security of its hydrocarbons supplies. But with increasing budgetary constraints, will this be possible ?

Methods

Analysis of recent documents. Synthesis

Results

The development of liquids production in the United States will limit imports from the Middle East to North America. So the US government could reduce military expenses to protect US imports

Conclusions

Europe should be more active in the definition and operation of a security policy to protect oil and gas imports

References

Leonardo Maugeri : Oil, the next Revolution

Sadad Al Husseini : Comment : Dr LeonardoMugeri : Oil, the next revolution

Ed Morse : Energy 2020 : USA, the new Middle East ?

Jean-Pierre Favennec : The Geopolitics of Energy

[1]Shale oil, a relatively light quality liquid oil, should not be confused with oil shale, a solid variety of solid bitumen trapped in the rock, and known for years.