The Tip of the Iceberg: Energy in the Arctic
Analysis
Beneath the frigid seas of the Arctic, a once isolated natural gas
field is increasingly within the grasp of Russian companies. If
they can tap this resource - and the steady retreat of the polar
ice pack suggests that they can - Russia can dominate the natural
gas markets of Europe for decades to come.
Summary
By most accounts ice in the Kara Sea, just beyond the Yamal
Peninsula, is retreating. According to satellite photos, the
average coverage of sea ice in the Arctic has shrunk by 6 percent
since 1978. Furthermore to sonar measurements taken by U.S.
submarines report that ice is thinning from 10 feet in the 1950s to
5.9 feet today.
But the peninsula, so to speak, is only the tip of the iceberg.
Until now, the giant Russian gas concern, Gazprom has been unable
to prospect, much less exploit, the Arctic Ocean. Currently,
icebreakers can navigate the Kara Sea only 10 months of the year.
But with the pack ice in retreat, the opportunity arises for
Gazprom, and other Russian petroleum firms, to drill in the
relatively shallow - and increasingly ice-free - waters. If the
Russians succeed here and in finishing a network of pipelines, they
can dominate European energy markets for decades.
The diminution of Arctic ice is being greeted in some quarters as
environmental disaster. But Russia, victim of many environmental
disasters, ironically stands to benefit. With its vast Arctic
coast, Russia stands to add new fisheries and short the time to
ship goods between Asia and Europe.
________________________________________________________________
Would you like to see full text?
stratfor.com
___________________________________________________________________
But the feature that holds the most promise is petroleum. In 1998,
The Economist reported that Russia's Arctic shelf could hold as
much as 65 trillion cubic meters of gas - more than the Russian
mainland. If the ice continues to recede, Russia will have
thousands of square miles of potentially petroleum rich seabed to
explore.
The probability of independent offshore fields is high; many of
Russia's 25 Yamal Peninsula gas fields have offshore sections. The
massive Rusanovskaya field in the Kara Sea may hold as many as 8
trillion cubic meters by itself. Already Russia is planning to
drill for gas in the adjacent Barents Sea.
Collectively, the confirmed onshore Yamal fields hold more than 10
trillion cubic meters of natural gas. That's enough to fulfill all
of Europe's and Turkey's natural gas needs, 450 billion cubic
meters a year, for 20 years - or Russia's current share of those
needs for half a century.
But how will the Russians transport this gas, thousands of miles to
market? Gazprom, Russia's natural gas monopoly, has been building a
pipeline between the Yamal and Europe for several years. The six
trunk line system, when completely finished sometime around 2010,
will have an annual capacity of 65 billion cubic meters (bcm), at a
total cost of $50 billion.
_______________________________________________________________
For more on Russia, see:
stratfor.com
__________________________________________________________________
Gazprom's problem has been cost, but even here it has made steady
progress. Using a number of joint venture agreements, Gazprom has
already built the German, Polish and Belarussian sections of the
Yamal-Europe line. Consequently, the line already functions and
links to existing Russian fields as well as Russia's vast
distribution network. Parallel sections to handle additional
capacity are already under consideration.
In order to maximize its profits, Gazprom is taking Western loans
- but not Western partnerships - to develop the Russian sections
of the line. Russia may be forced to seek foreign technical
assistance to exploit the ice-choked Kara Sea, but if the ice
continues to recede, Russia can likely handle development on its
own.
Once developed, the Yamal project will shift Europe's energy
politics decidedly in Russia's favor. Poland will be forced to drop
its opposition to a Russian export route that marginalizes Ukraine,
trading it for the Yamal line and a fat annual windfall of $900
million in transit fees. Otherwise Gazprom will simply dust off a
Baltic Sea route that bypasses Poland as well. Ukraine, for its
part, will no longer be able to exploit its position as a transit
state for Russian gas exports. The new Yamal bypasses Ukraine
altogether.
This will also weaken the long-term export prospects of Central
Asia - especially Kazakstan, Turkmenistan and Uzbekistan. While
they could still conceivably supply Turkey and Iran directly,
Russia's control of their other export routes will limit their
access to Europe - especially if Yamal gas grabs an ever increasing
share of the European market.
Closer to home, Gazprom maintains its potential to provide a large
source of tax revenues. Demand for gas use is expected to slowly
increase throughout Europe over the next 50 years as individual
states attempt to curb their carbon emissions; natural gas is more
efficient than coal or oil. The Yamal line should bring in revenues
of $5 billion annually.
_______________________________________________________________
For more on Russia & the CIS, see:
stratfor.com
__________________________________________________________________
(c) 2000 Stratfor, Inc.
_______________________________________________
SUBSCRIBE to the free, daily Global Intelligence Update. Click on
stratfor.com
UNSUBSCRIBE by clicking on
stratfor.com
_______________________________________________
Stratfor.com
504 Lavaca, Suite 1100 Austin, TX 78701
Phone: 512-583-5000 Fax: 512-583-5025
Internet: stratfor.com
Email: info@stratfor.com |
