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Geopolitics of Gas in the New World of Energy –

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Mel Ydreos

The geopolitics of energy – competition for, control of, and securing reliable access to those supplies – has been a driving factor in global prosperity and security. The term geopolitics reflects the interplay between power and interests, strategic decision-making, and geographic space. While for much of the 20th century it was oil that took centre stage in the high-stakes game of geopolitical power play, the growing prominence of natural gas has seen this commodity rapidly gaining in geopolitical importance.

“Natural gas is clean, affordable, reliable, efficient and secure and is a foundational fuel in the global energy mix, ” says Chairman of the International Gas Union (IGU) Task Force on Geopolitics and Natural Gas, Mel Ydreos.

“However, geopolitical developments, politics and policies affect the gas industry in ways that stretch beyond the visible time horizon. These forces can affect the timing, direction and size of gas flows, whether by pipeline or liquefied natural gas (LNG), and the role of gas in energy systems. We want to provide an independent view of Geopolitics and Natural Gas, ” says Ydreos.

In the past three years, this IGU Task Force has engaged with the industry, academia, political and key global organizations to solicit input on the key regional geopolitical issues in the areas of Asia-Pacific, Middle East & North Africa (MENA), South America and Europe-CIS.

With this, the IGU commissioned a study to examine the highly complex interplay between economic and political factors in the development of natural gas resources, and to analyse the main political challenges and trends that may shape the future in a natural gas-intensive world. “This should enable us to grasp how political challenges impede or stimulate the expansion of the international gas sector, ” says Ydreos.

Recommendations from this study will be presented at the 25th World Gas Conference in Kuala Lumpur, 4 to 8 June 2012. It will be aimed at improved co-operation between the relevant policy makers, institutions, and the gas industry, and towards mitigation of geopolitical risks in the context of global energy security in each region.

Hotspots: Past, Present and Future

Ydreos says the issue of geopolitics and natural gas was heightened during both rounds of the Ukraine-Russia dispute and drove home the risks around geopolitical influences. Geopolitics has also made its presence felt in regional and global markets. For example, from the 1980’s, the acquisition by European market players of a substantial volume of additional gas from Russia provoked a political reaction from the US. Meanwhile, in South America, Ydreos opines that geopolitical factors have influenced and impeded the development of a more liquid and robust market.

“The other and most obvious geopolitical play is Iran. Iran holds large reserves of natural gas, however, the imposed international sanctions have negatively affected the Iranian energy sector, ” he says. However, while there is a great possibility that Iran may become a net exporter of gas, the problems plaguing the Iranian gas sector are likely to continue into the near future.

Security of Supply with shale gas

Ydreos says the commercial development of shale gas in North America has been a total game changer for the industry. “Price has dropped to historic low levels and the vast development of shale gas has positioned North America to be long on supply. This has also led to price stability, which is just as important as the decline in price. With this, North America is no longer reliant on LNG imports, ” he says.

In ensuring energy security, the onus is on the respective industry players to develop robust and dynamic risk management and growth strategies that will mitigate the sudden impact of geopolitics. “Players must be able to anticipate emerging trends, ” he says.

Apart from uncertainties arising from low-carbon economy policies, evolving market regulations, and low economic growth, changes in rent distribution in international supplies could also have geopolitical implications. These could arise from subsidies on other energy sources and taxes on fossil fuels, and also from de-linking natural gas prices from those of oil.

Ydreos believes that supply security should also be addressed in a broader perspective. Industry pundits agree that any action plan to address this significant global issue must be on a multilateral platform and take into account input from various stakeholders that include producers, consumers, governments, regulators, as well as technology and service providers.

For further information or to register, please visit www.wgc2012.com. Closing date is April 30, 2012. To join WGC2012 on LinkedIn, please visit http://ow.ly/73nMx.

About WGC2012

Since 1931, the International Gas Union has been organising the World Gas Conference once every three years; the triennial World Gas Conference and Exhibition is the biggest and most important global gas industry event, attracting 5, 000 industry professionals from all over the world and showcasing the latest developments, with information on policies, strategies technologies, challenges and opportunities. The 25th World Gas Conference will take place in Kuala Lumpur, Malaysia, 4-8 June 2012 with the theme “Gas: Sustaining Future Global Growth.”

About IGU

The International Gas Union (IGU), founded in 1931, is a worldwide non-profit organisation promoting the political, technical and economic progress of the gas industry with the mission to advocate for gas as an integral part of a sustainable global energy system. IGU has more than 110 members worldwide and represents more than 95% of the world’s gas market. The members are national associations and corporations of the gas industry. The working organization of IGU covers the complete value chain of the gas industry from upstream to downstream. For more information please visit www.igu.org.

WGC2012 Conference Secretariat Level 20, Tower 1, Etiqa Twins 11, Jalan Pinang 50450 Kuala Lumpur, Malaysia Tel: +60 3 2171 3477 / +60 3 2171 3575 Fax: +60 3 2171 3535 Email: media@wgc2012.com


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