An Atlantic Basin Energy System?

Paul IsbellCalouste Gulbenkian Fellow

Center for Transatlantic RelationsJohns Hopkins University

School for Advanced International Studies (SAIS)

September 12, 2012

Formation of an Atlantic Basin Energy System (ABES)

• Why Energy and the Atlantic?

• Pre-conditions for the formation of ABES

• Remaining Barriers

• Policy Implications

The Importance of Atlantic Energy

• From the end of the Cold War to the rise of China and the BRICS: the “forgotten” Atlantic

• Shifting pattern of US oil import dependence– Traditional: Middle East, Persian Gulf, Saudi Arabia– New rivals to Saudi Arabia and the Arab World (7 of top 10

national suppliers from the Atlantic Basin)– Proliferation of suppliers large enough to negatively impact

security of US oil supply• Increasing specific mass of the Atlantic Basin in the

broad global energy system – geopolitical implications: the return of a new Atlantic?

Geography of Top 10 Oil Sources

• Atlantic Basin– Canada (1)– Mexico (2)– Nigeria (4)– Venezuela (5)– Colombia (8)– Angola (9)– Brazil (10)

• Broader Middle East• Saudi Arabia (3) • Iraq (6)• Algeria (7)

Atlantic sources will grow in the future, while others could slide. Ecuador is 11th, Congo (Bzza) 14th, Cameroon 15th

Pre-conditions for an ABES

• Dynamic basin energy demand• Dynamic basin energy supply• Sufficient basin autonomy• Intra-basin complementarity

Dynamic Atlantic Basin Demand• Approximately 40% of world demand• Northern Atlantic demand flat to 2050• Southern Atlantic demand in line with the rest

of the world• Southern Atlantic’s share of global energy

demand set to double to around 20% by 2050.• Atlantic demand will be outstripped by the

rest of the world, but Atlantic supply is set to boom

Atlantic vs World Demand to 2050

2010 2020 2030 2040 20500.000

200.000

400.000

600.000

800.000

1000.000

1200.000

1400.000

Rest of the WorldSouthern AtlanticNorthern AtlanticEJ

/yr

Source: Global Energy Assessment, IIASA

Northern vs Southern Atlantic Demand to 2050

2010 2020 2030 2040 20500.000

50.000

100.000

150.000

200.000

250.000

300.000

350.000

400.000

450.000

500.000

LACAfricaEuropeNorth America

EJ/y

r

Source: Global Energy Assessment, IIASA

Dynamic Atlantic Basin Supply

• Boom in Atlantic energy supply– Oil (over 1/3 of global production, over 40% of global

reserves) • New players: Brazil, Guyana Basin, Atlantic Africa• Traditional players with enlarged reserves: Canada, Venezuela

– Gas (over 1/3 of global gas and LNG production; 12% of conventional reserves, but over 60% of shale reserves – four of the five largest shale reserves in the Atlantic Basin)

– Renewables (over four-fifths of global installed capacity and biofuels production)

Sufficient Basin Autonomy

• Over a quarter of world oil trade• Only 15% extra-basin oil dependence• 30% of global LNG trade• Only 6% extra-basin gas dependence

(concentrated in EU dependence on Russia)• Over 80% of global biofuels trade

Center for Transatlantic RelationsSource: BP Statistical Review of World Energy 2011 . Elaborated by the Center for Transatlantic Relations, Johns Hopkins SAIS

Intra-Atlantic Basin Oil Trade

Center for Transatlantic Relations

Intra-Basin Complementarity

• Traditional complementarity between North and South (northern investment in southern supply for importation)

• Emerging complementarity in the southern Atlantic• Southern Cone shale gas with South African gas-to-

liquids• Brazilian biofuels collaborations with West Africa• Others: LNG trade, petroleum products markets,

northern investment in southern renewables

Barriers and Other External Factors

• Financial instability in the Northern Atlantic• Price environment (fossil fuel subsidies, global

oil prices, the price of carbon) providing a partial, but insufficient driver of low-carbon energy

• Insufficient policy and regulatory environments around the basin (energy nationalism)

• Lack of diplomatic structure in the Basin

Pre-conditions and Barriers

Pre-conditions Met/unmet Strong/medium/weakfulfillment or remaining barrier

Dynamic energy demand Met Medium

Dynamic energy supply Met Strong

Sufficient energy autonomy Met Medium-Strong

Intra-basin complementarity Met Strong

Financial and economic stability in the Northern Atlantic

Unmet Weak-Medium

Appropriate pricing environment Unmet Medium-Strong

Stable and rigorous policy and regulatory environments

Unmet Medium-Strong

Diplomatic/governance structure Unmet Medium-Strong

Pre-conditions for the Emergence of an Atlantic Basin Energy System

Source: own elaboration.

Policy Implications• Energy Security

– Middle East and Central Asia– China and East Asia

• Broader Atlantic Integration: Sustainable Development and Climate Change

• Atlantic Basin Consciousness and Atlantic Institutions

• Reconfiguration of the Atlantic – renewal of the West

Supporting Graphs

Atlantic Basin Petroleum Production in the World, 1980-2009

1980

1981

1982

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0

10000

20000

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50000

60000

70000

80000

90000

Rest of World

Atlantic Basin Broad

Atlantic Basin Narrow

Thou

sand

bar

rels

per d

ay

Source: EIA and own elaboration.

Atlantic Basin Petroleum Consumption in the World, 1980-2009

1980

1981

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Rest of World

Atlantic Basin Broad

Atlantic Basin Narrowest

Thou

sand

bar

rels

per d

ay

Source: EIA and own elaboration.

Atlantic Basin Petroleum Reserves (without Venezuela’s super-heavy oil) 1980-2010

Petroleum Reserves in the Atlantic Basin

0

200

400

600

800

1000

1200

1400

1600

Billion Barrels

Rest of World

Atlantic Basin Broad

Atlantic Basin Narrow

Source: EIA and own elaboration.

Atlantic Basin Natural Gas Reserves (pre-shale revolution) in the World (trillion cubic feet)

19801981

19821983

19841985

19861987

19881989

19901991

19921993

19941995

19961997

19981999

20002001

20022003

20042005

20062007

20082009

20100

1000

2000

3000

4000

5000

6000

7000

World

Atlantic Basin Broad

Atlantic Basin Narrow

Trill

ion

cubi

c fee

t

Source: EIA and own elaboration.

Atlantic Basin Gas Consumption in the World (trillion cubic feet annually) 1980-2009

1980

1981

1982

1983

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0

20000

40000

60000

80000

100000

120000

Rest of World

Atlantic Basin Broad

Atlantic Basin Narrowest

Billi

on cu

bic f

eet

Source: EIA and own elaboration.

Assessed Global Shale Gas Resources, 2011

Source: EIA

Global Shale Gas Resources, “technically recoverable” reserves by country (tcf), 2011