THE GEOPOLITICS OF SHALE GAS

THE GEOPOLITICS OF SHALE GAS
THE IMPLICATIONS OF THE US’ SHALE GAS REVOLUTION
ON INTRASTATE STABILITY WITHIN TRADITIONAL OIL– AND NATURAL GAS-EXPORTING COUNTRIES IN THE EU NEIGHBORHOOD

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The US’ shale gas revolution could in the long term destabilize traditional oil- and gas exporters in the European Union (EU) neighborhood: A combination of substitution effects and greater energy efficiency, could put pressure on the price of oil, leading to fiscal difficulties in traditional hydrocarbon exporting countries.

The Hague Centre for Strategic Studies (HCSS) conducted a study on the geopolitical consequences of shale gas in the context of the ‘Strategy & Change program‚. HCSS calls upon the EU to seek alternate interdependencies with the oil and gas exporters in its immediate neighborhood, leading to a further development of these nations.

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CONTENTS

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FOREWORD

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CONTENTS

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LIST OF FIGURES

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LIST OF ABBREVIATIONS

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EXECUTIVE SUMMARY

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1 INTRODUCTION

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2 TODAY’S MARKET IN SHALE GAS

• 2.1 Definitions and Terminology
• 2.2 Global Resources and Production of Shale Gas
• 2.3 Direct Effects of Shale Gas Extraction

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3 ENERGY MARKETS AND GEOPOLITICS

• 3.1 Geopolitics and the International Oil Market
• 3.2 Geopolitics and the Market for Natural Gas
• 3.3 Indirect Effects of Shale Gas: Shale Gas as a Geopolitical Domino?

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4 METHODOLOGY

• 4.1 System Dynamics and Scenario Discovery
• 4.2 General Modeling Assumptions
• 4.3 Energy Price Scenarios Model
• 4.4 Country Stability Model

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5 TYPICAL FUTURE PRICE SCENARIOS

• 5.1 Paradigm Shifts in Natural Gas Markets
• 5.2 Price Developments in Energy Markets in Selected Regions

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6 INTRASTATE STABILITY IN EUROPE’S NEIGHBORHOOD

• 6.1 Comparability of Countries
• 6.2 Impact on State Stability

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7 CONCLUSIONS AND RECOMMENDATIONS

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BIBLIOGRAPHY

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ANNEX 1: HORIZONTAL DRILLING
ANNEX 2: COUNTRY SPECIFIC INFORMATION
ANNEX 3: SHALE GAS SCENARIOS

• Scenario 1
• Scenario 2
• Scenario 3
• Scenario 4
• Scenario 5
• Scenario 6
• Scenario 7
• Scenario 8
• Scenario 9

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Price Volatility Scenarios

• Scenario 10
• Scenario 11
• Scenario 12
• Scenario 13
• Scenario 14

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ANNEX 4: IMPACT ON TRADITIONAL HYDROCARBON-EXPORTING COUNTRIES
Initial Conditions
Scenario Dynamics

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LIST OF FIGURES

• Figure 1 The research design of the study
• Figure 2 The research design of the study
• Figure 3 Worldwide technically recoverable shale gas resources (trillion cubic feet, Tcf)
• Figure 4 Global shale gas production and current projects
• Figure 5 Dependency on natural gas imports in the EU, 2000-2011
• Figure 6 US gas imports vs. shale gas production, 2006-2011
• Figure 7 Origin of EU gas imports, 2010
• Figure 8 Spot crude oil (Western Texas Intermediate) prices (in nominal US$ per barrel) and important (geopolitical) events 1970-2012
• Figure 9 Recovery time of oil-exporting countries after a disruption in crude oil supply
• Figure 10 Natural gas prices (in nominal US$) per Million British Thermal Units (mmBTU)
• Figure 11 Balancing supply and demand
• Figure 12 Sector diagram of the energy prices model
• Figure 13 View of the demand sub-model
• Figure 14 View of the (extraction) capacity sub-model
• Figure 15 View of the costs sub-model
• Figure 16 View of the prices sub-model
• Figure 17 View of the trade sub-model
• Figure 18 The impact of resource prices on instability
• Figure 19 Sector diagram of the instability model
• Figure 20 View of the economic sub-model
• Figure 21 View of the resources sub-model
• Figure 22 View of the population sub-model
• Figure 23 View of the instability sub-model
• Figure 24 View of the institutions sub-model
• Figure 25 Stack graph of energy input shares
• Figure 26 Prices of natural gas
• Figure 27 Gas price scenarios ‘high share of individual fuel type’
• Figure 28 Oil price scenarios ‘high share of individual fuel type’
• Figure 29 Gas price scenarios of high volatility
• Figure 30 Oil price scenarios of high volatility
• Figure 31 Scenario effects for Russia
• Figure 32 Scenario effects for Qatar
• Figure 33 Schematic geology of natural gas resources
• Figure 34 Stack graph of energy input shares
• Figure 35 Prices of natural gas
• Figure 36 Energy demand of the regions
• Figure 37 Energy demand shares of the regions
• Figure 38 Oil and average energy prices
• Figure 39 Stack graph of energy input shares
• Figure 40 Prices of natural gas
• Figure 41 Energy demand of the regions
• Figure 42 Energy demand shares of the regions
• Figure 43 Oil and average energy prices
• Figure 44 Stack graph of energy input shares
• Figure 45 Prices of natural gas
• Figure 46 Energy demand of the regions
• Figure 47 Energy demand shares of the regions
• Figure 48 Oil and average energy prices
• Figure 49 Stack graph of energy input shares
• Figure 50 Prices of natural gas
• Figure 51 Energy demand of the regions
• Figure 52 Energy demand shares of the regions
• Figure 53 Oil and average energy prices
• Figure 54 Stack graph of energy input shares
• Figure 55 Prices of natural gas
• Figure 56 Energy demand of the regions
• Figure 57 Energy demand shares of the regions
• Figure 58 Oil and average energy prices
• Figure 59 Stack graph of energy input shares
• Figure 60 Prices of natural gas
• Figure 61 Energy demand of the regions
• Figure 62 Energy demand shares of the regions
• Figure 63 Oil and average energy prices
• Figure 64 Stack graph of energy input shares
• Figure 65 Prices of natural gas
• Figure 66 Energy demand of the regions
• Figure 67 Energy demand shares of the regions
• Figure 68 Oil and average energy prices
• Figure 69 Stack graph of energy input shares
• Figure 70 Prices of natural gas
• Figure 71 Energy demand of the regions
• Figure 72 Energy demand shares of the regions
• Figure 73 Oil and average energy prices
• Figure 74 Stack graph of energy input shares
• Figure 75 Prices of natural gas
• Figure 76 Energy demand of the regions
• Figure 77 Energy demand shares of the regions
• Figure 78 Oil and average energy prices
• Figure 79 Stack graph of energy input shares
• Figure 80 Prices of natural gas
• Figure 81 Energy demand of the regions
• Figure 82 Energy demand shares of the regions
• Figure 83 Oil and average energy prices
• Figure 84 Stack graph of energy input shares
• Figure 85 Prices of natural gas
• Figure 86 Energy demand of the regions
• Figure 87 Energy demand shares of the regions
• Figure 88 Oil and average energy prices
• Figure 89 Stack graph of energy input shares
• Figure 90 Prices of natural gas
• Figure 91 Energy demand of the regions
• Figure 92 Energy demand shares of the regions
• Figure 93 Oil and average energy prices
• Figure 94 Stack graph of energy input shares
• Figure 95 Prices of natural gas
• Figure 96 Energy demand of the regions
• Figure 97 Energy demand shares of the regions
• Figure 98 Oil and average energy prices
• Figure 99 Stack graph of energy input shares
• Figure 100 Prices of natural gas
• Figure 101 Energy demand of the regions
• Figure 102 Energy demand shares of the regions
• Figure 103 Oil and average energy prices
• Figure 104 Scenario effects for Russia
• Figure 105 Scenario effects for Qatar
• Figure 106 Scenario effects for Azerbaijan
• Figure 107 Scenario effects for Saudi Arabia
• Figure 108 Scenario effects for Algeria
• Figure 109 Scenario effects for Northwestern Europe
• Figure 110 Scenario effects for Egypt
• Figure 111 Scenario effects for Kazakhstan

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Quelle und Report
by
THE HAGUE CENTRE FOR STRATEGIC STUDIES (HCSS) & THE NETHERLANDS ORGANISATION FOR APPLIED SCIENTIFIC RESEARCH (TNO)