1. The University for business and the professions

2. The University for business and the professions The Russian Gas Deficit Geopolitical Implications for Bulgaria and for Europe Professor Alan Riley. Sofia Friday 16 th November

3. The University for business and the professions A Russian Gas Deficit? 47 Trillion Cubic Metres in the ground Surely they cannot be running short of gas?

4. The University for business and the professions Gas Deficit: A Serious Supply Issue Declining Production in ‘legacy’ Gas Fields Lack of Investment in New Fields Low Domestic Prices Diverted Investment Capital Costs

5. The University for business and the professions Source: Gazprom, Institute of Energy Policy Matured fields: over 20% decline in 6 years! Gas sector: on the forefront of supply crisis

6. The University for business and the professions Gas production on Gazprom’s mature gas fields would continue to rapidly decline Source: Jonathan Stern, Oxford Institute for Energy Studies, ‘The future of Russian gas and Gazprom’, 2005 Urengoy and Yamburg will decline by 30% by 2010 as compared to 2004!

7. The University for business and the professions Where Gazprom had been investing in the previous years? Source: Institute of Energy Policy, Gazprom data. * - Gazprom estimate Cumulative capital investment by Gazprom in 2000-2006, USD bn (money of the day)

8. The University for business and the professions IEA Concerns I We are afraid that Gazprom will not have enough gas to supply even their existing customers and existing contracts. This is our data,” Claude Mandil, IEA executive director.

9. The University for business and the professions IEA Concerns II Inefficiency & Lack of Competition Increasing Gasification Ability of Central Asia to Deliver Incentives for Gas Independents

10. The University for business and the professions Stern: Future of Russian Gas? OUP Book, The Future of Russian Gas & Gazprom Extent of Depletion of NPT Fields Lack of Investment in New Fields Domestic Price Increases Vital Raises Issue of Accelerated Depletion

11. The University for business and the professions Gazprom in Crisis UK Defence Academy Paper, Michael Fredholm Gas Supply Shortage investment-depletion problem Details of 05/06 Deficit Looks at Potential Deficit Solutions

12. The University for business and the professions Russia Short of Gas? Milov former energy minister www.energypolicy.ru www.energypolicy.ru Series of Papers and Speeches on Subject Believes Potential Problem as early as 2010

13. The University for business and the professions President Putin Chaired a Meeting on the Deficit in the Kremlin Looking for Solutions Reportedly Unhappy with Gazprom Influence on Price Increase Announcement in November 2006

14. The University for business and the professions How Big and When? Milov: 126bcm by 2010. Central Asia and Domestic Gasification could make it worse 155bcm current EU Imports Accelerated Depletion…2008?

15. The University for business and the professions Deficit Solutions I Kremlin Meeting September 2006 Short Term Supply Problems Nuclear, Hydro-Timing Coal-Near Term Possibilities-But Rail Capacity Energy Efficiency-Difficult to Put in Place Incentives

16. The University for business and the professions Deficit Solutions II Higher Domestic Prices? -Time Delay -Political Trouble -Economic Trouble Energy Saving in Industry? -Kremlin Needs Effective Tax Regime

17. The University for business and the professions Russian Deficit Analysis Unclear how great Significant Very Little to be a lot worse-eg accelerated depletion or increase in domestic demand

18. The University for business and the professions Deficit Consequences Much More Serious than a Cut Off Pressure to Switch to Alternatives Pipeline Questions Impact on Energy Liberalisation Bulgarian Gas Market Development Geopolitical Consequences

19. The University for business and the professions Much More Serious than a Cut Off Cut off-a day or two. Fundamental Financial Incentive to sell to EU No Pipelines to China Chinese cannot pay EU rates with EU scale Deficit-’we want to but we cannot’ Much More Serious Supply Security Issue.

20. The University for business and the professions Switch to Alternatives LNG Gasification Plants LNG Hubs? Alternative Pipelines- Nabucco Switch to Domestic Coal Issue of Speed Delay Closure of Nuclear Power Stations

21. The University for business and the professions Pipeline Questions If Gas Deficit how valuable Russian Pipeline plans? Southstream a pipeline- but what about the gas? Reliance on Nabucco and LNG Instead?

22. The University for business and the professions Impact on Energy Market Liberalisation Liberalisation: A EU Solution to Gas Supply Shortages Physical Interconnection and Legal Right to Trade Bring Enhances Gas Security Advantage of Increased LNG Facilities Across EU can be maximised Liberalisation will bring more investment into energy market.

23. The University for business and the professions Impact on German Liberalisation Debate Leaves Ms Merkel Worried Germany Heavily Dependent on Russian Gas Particularly Vulnerable largest Western Customer

24. The University for business and the professions Impact Bulgarian Energy Development Importance of Nabucco for Bulgarian Gas Market Vital Importance of interconnection other gas markets Role of Coal Role of Nuclear

25. The University for business and the professions Geopolitical Consequences Weaken Russian ‘Energy Power’ Energy Superpower ‘out of gas’ Encourage alternatives which will stimulate competition to Russian Gas Encourage liberalisation across EU Increase incentive for Bulgaria and rest of SEE to build themselves into EU energy markets Make Central Asia & LNG Sources Vital.

26. The University for business and the professions Market Lessons for EU & Russia EU Big Energy Players E.ON & GDF Favour-Vertical Closed Energy Market with- LTSC Seen to Fail to Deliver Failure of Gazprom- Force Re-assessment Time to Liberalise the Russian Gas Market?

27. The University for business and the professions You Cannot Buck the Market!