The next geopolitical surprise might not be related to Islamic militants but to a significant energy dispute between Russia and China. And the implications of such a dispute are difficult to assess, yet could play a critical role in the world and the financial markets.
Russia has leveraged its energy resources into reclaiming a significant position in the geopolitical arena. Yet, despite its successes, signs point to dwindling resources and bad policy as a significant trouble spot for the future.
According to Stratfor.com: "Gazprom's Yuzhno-Russkoye oil and natural gas field will come on line Dec. 18. However, even this 805 billion cubic meter field will not stem the overall decline in Gazprom's natural gas production, highlighting the seriousness of the supply crunch in the near future."
The intelligence service concludes that this latest Russian project, although "considerable," as it contains "proven reserves of 805 billion cubic meters (bcm) of natural gas and 5.7 million tons (42 million barrels) of oil," it is "incapable of stemming the slow decline of Gazprom's natural gas supply."
In other words, Stratfor is predicting a serious "the supply crunch in the near future."
To be sure, Stratfor is quite alone in this viewpoint, seeins as natural gas prices are hovering near their 52 week lows, as they have been for months, due to the plentiful supply, especially in the U.S. where the Barnett Shale find continues to flood the marketplace, and the lack of sustained frigid weather is dampening demand.
Yet, Stratfor has some interesting thoughts that are worth exloring.
First, Stratfor suggests that the easy natural gas, "the low hanging fruit" has already been found by Gazprom, while no new sizeable projects have been brought on line, except for Yuzhno-Russkoye and the Zapolyarnoye "superfield" since 1991.
Second, "The other three major fields in Western Siberia -- Urengoy, Yamburg and Medvezhye -- with reserves of 16 trillion cubic meters of natural gas among them, already account for 70 percent of Gazprom's natural gas production. The fields already online are also past peak output."
Third, and most important is this. According to Stratfor, Gazprom has both foreign and domestic commitments. The foreign commitments are more profitable, since Gazprom has to sell gas at a huge discount to its domestic markets.
Adding to Gazprom's problems are some regional complexities as "The dwindling natural gas supply might not be able to support all of Gazprom's commitments. Gazprom currently is relying on the Central Asian states, particularly Turkmenistan and Kazakhstan, to pick up the slack in production. However, those countries' ability to increase production in part depends on Gazprom's commitment to investing in transportation infrastructure linking Russia to Central Asia -- not exactly a high priority for the Russian natural gas giant."
Making matters worse for the gas giant is the fact that both Turkmenistan and Kazakhstan are looking for alternative export routes, that do not include Russia.
Among these alternatives is a 2000 line pipeline project that would connect "China to Kazakhstan's sector of the Caspian Sea. Once the line is completed, China will be able to tap multiple oil-producing regions throughout Kazakhstan, and ultimately ship 1.0 million barrels per day into western China."
Yet another Chinese project "would link Turkmenistan to China via a natural gas line. This project has been under discussion for some time, but the Chinese have always been coy in public about the deal's prospects. Now their interest is public and firm. Beijing also has explicitly said it wants the line to transit Uzbekistan, which would link Tashkent's energy and political desires into China's policy."
In other words "China's plans do not foresee exploiting many fresh sources of natural gas in the region, but simply diverting output from routes Russian to routes Chinese. This development, which could be in place as soon as 2009, would greatly interfere with Russia's strategic policies in a very real, sudden and broad sense."
Conclusion
If Stratfor is correct, Russia's natural gas monopoly, Gazprom, is headed for some trouble, due to both internal and external issues. The former being its status as a monopoly, and the feeling of security engendered by the circumstance. The latter deals with the constant risk of competition from China.
China, due to its extraordinary and ongoing growth is constantly scavenging the planet for natural resources. Its lack of a major navy, and its prospects of not having such a navy for decades forces the Chinese to look for land bound resources whenever possible. Thus, ties to Central Asia are more sensible, despite the potential for a significant set of difficulties with Russia.
As Stratfor puts it: "Given Gazprom's technical limitations, without Central Asian natural gas, Gazprom can meet its export requirements for Europe or it can meet domestic demand -- not both. And considering that cheap energy acts as a panacea for social disruption at home and is a critical arm of strategic policy abroad, the Chinese decision to grab the ring will muck with Russian geostrategy in Europe, Central Asia and even at home. "
What it means is that the combination of Russia and Gazprom's plodding ways, and China's constant search for resources will likely be a major geopolitical development over the next few years, with the potential for armed or at least very tense political clashes between the two countries. |
