Abstract energy geopolitics

Petroleum Production Engineering • PROF. M. J. ECONOMIDES

Energy Geopoliticsand Eastern

Mediterranean

Michael J. Economides

Energy Geopoliticsand Eastern

Mediterranean


©2011

NATURAL GAS • PROF. M. J. ECONOMIDES

The Continuous Energy Crisis The Continuous Energy Crisis of the 21st Centuryof the 21st Century

Oil almost $150, then fell to below $40…headlines rule … “crisis”

OPEC has little excess capacity “behind the valve”, Venezuela, Nigeria, IraqChina still grows in economy and ener

Oil went over $100 (predicted for late 2010 - early 2011 in March 2010.) Middle East is the exclamation mark! Will be back over $100 soon.

Energy Geopolitics • PROF. M. J. ECONOMIDES

0.0

0.5

1.0

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3.0

80 90 00 10 20 300

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20

30

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50

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80 90 00 10 20 300

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80 90 00 10 20 30

1.71.7

1.41.4

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1.51.5

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0.80.8

2.12.1 9.59.5

1.51.5

2.72.7

2.22.2

1.01.0

1.51.5

5.95.9

2.22.2

Total Energy Other Energy Wind & Solar

HydroHydro

NuclearNuclear

Biomass,MSW

Biomass,MSW

Wind & Solar

OilOil

GasGas

CoalCoal

OtherOther

Growth Rate2003-2030, %

SolarSolar

Wind

MBDOE MBDOE MBDOE

Growth Rate1980-2003, %

1.6 1.7

11.111.1

Oil & Gas Remain as Primary Energy Sources

There are no alternativesto hydrocarbon energy

sources in the foreseeable future

LNG Tanker Underway

Photo Courtesy of BP

Globalization of Natural Gas Trade

Source: International Energy Agency and our own work

20-YR LNG EXPORT CONTRACT WITH BG AND MORE TO COME

$5.25 BILLION PROJECT WILL ALLOW TRANSIT OF LONGER AND WIDER SHIPS


Energy GeopoliticsThe Axis of Energy Militants

•Iran•Venezuela•Russia under Putin

•The quagmire that is Iraq

•China


Russia under Putin

•Bright spot in oil is gone•Re-Sovietization•Corruption•Total control of press•Investment climate has cooled down•Production is bound to decline


CanCan

Keep the Lights On?Keep the Lights On?


Energy: China’s Choke Point


China will probably lead

A Plan for Cyprus and Eastern Mediterranean Oil and Gas


March 2012

Overriding Philosophy

• Investment not welfare giveaways

• Control money influx to keep prices down

• Common Cypriots benefit from:– Direct investment through the IPO

– Through local companies participating in exploration and production

– Jobs through re‐investments

Levant Basin Prospect Area

Bulk Estimates

• Israel, total recoverable: 50 Tcf

• Eastern Mediterranean: 200 Tcf – USGS estimate

• My own analog for Cyprus: 50‐75 Tcf

What is a Tcf?

• Trillion cubic feet

• One billion thousand cubic feet (million Btu)

• 50 Tcf, means that ultimate recovery 50 Billion MBtu, at $8 translates to $400 billion from just the gas

• Cyprus needs about 100 million scf per day for electricity. 1 Tcf will provide 27 years of electricity.

Levantine Basin

Sequence of NOC events

• Cyprus NOC is launched immediately– Search for CEO (difficult to find at the required level) – likely a foreigner – politically problematic – if Cypriot, will be inexperienced – will need advising

– Need to staff NOC. Thematic coverage in E&P

• Legal framework of NOC– Cyprus oil and gas law

– Types of agreements

Use Norway Model with Petrobras Modification

• 70 percent of NOC owned by Cyprus Sovereign Fund – Council of Ministers, Board of Directors

• 30 percent into an IPO on the basis of just the Aphrodite results. London, New York and Cypriot Stock Exchanges. Should raise $10 billion, minimum– Use the funds to finance infrastructure and participate actively in oil and gas development

Sequence of Development Events• Facilitate the immediate construction of 8 in. gas pipeline from Israel’s Tamar (under fast development) to transport 100 MMScf/d, enough for 600 MW of electricity production. (About $500 million) Delek is interested

• Cyprus targets its zones for commercial development, not for gas for own use

Sequence of Developments (Cont.)

• Unitize with Israel, facilitate aggressively their LNG development from Leviathan , three trains, about 20 MTPA (about 3 Bcf/d) , two 36 in. pipelines– Estimated costs $15‐ $20 billion from development banks (China Development Bank?)

– Significant security implications for decades

– Neutralizes Turkey

Abstract energy geopolitics

Economy & Finance

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