Session A:Politics and Economics of Gas Export Projects

Russian Gas:Across Belarus to Poland & Germany

David G. Victor and Nadejda M. VictorStanford University

(http://pesd.stanford.edu/gas)

Project ConferenceHouston

26 May 2004

The Belarus Connector

Kiev

MinskWarsawPrague

Berlin

Istanbul

Moscow

A

F

Yamal

Urengoy

Yamburg

Orenburg

C

B

Turkey

Uzbekistan

Turkmenistan

Kazakhstan

Russia

DE

Caspian Sea

Black Sea

MediterraneanSea

Dauletabad

G

H

20°E10°E0°E10°W

30°E

30°E

40°E

40°E

50°E

50°E

60°E

60°E

70°E

70°E 80°E

80°E

90°E

30°N

40°N

40°N

50°N

50°N

60°N

70°N

0°E

10°W

90°E

30°N

]0 1,000 2,000500 KilometersGas Fields

The Key Players and Their Interests

• Russia and Gazprom– Boost export volumes– Direct access to German Market

• Bypass Ruhrgas; gain higher margins– Internal turmoil in early 1990s

• Belarus• Poland• Germany

– No “German” interest– Wintershall (BASF): break the German gas monopoly

How well did they do?

Soviet and Russian Gas ExportsFSU: Natural Gas Production, Export, Import and Consumption

-200

-100

0

100

200

300

400

500

600

700

800

1955 1960 1965 1970 1975 1980 1985 1991 2001

Bill

ion

Cub

ic M

eter

s

Import

Export

Productionfor internaluse

187

129.3

10.4

544

666

553

Gas Consumption

371

270

47

FSU: Natural Gas Export

0

20

40

60

80

100

120

140

1960 1980 2000

Bill

ion

Cub

ic M

eter

s

Gazprom and the German Market

• Minimal Impact on margins• Volumes higher, but along baseline• Accelerated gas-on-gas competition and

opening of German gas market• All told, a disaster for Gazprom?• Story still unfolding

– Gazprom’s downstream holdings

German Market and Wintershall

• Eroded Ruhrgas margins• Wintershall has ~15% share today, up

from ~zero in 1990• German (large) consumer a winner

Transit countries

• Poland– The problem of demand

• Belarus and Ukraine– Reversal of roles

0

50

100

150

200

250

300

350

1965 1970 1975 1980 1985 1990 1995 2000

Bcm

Gas

Equ

iv

Coal

Oil

Gas

Hydro

Share of Final Consumption

0%

20%

40%

60%

80%

100%

1965 1975 1985 1995

Coal

OilGas Hydro

Poland: Gas Struggles for Share

Contrast: Soviet State Orders GasFSU: Primary Energy Production, 1913-2002

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

1913

1917

1921

1925

1929

1933

1937

1941

1945

1949

1953

1957

1961

1965

1969

1973

1977

1981

1985

1989

1993

1997

2001

Mto

e

0%

20%

40%

60%

80%

100%19

22

1932

1942

1952

1962

1972

1982

1992

2002

Gas

Oil

Coal

Biomass

Hydro

Nuclear

biomass

coal oil

gas

Direct Exports and Bypass

Kiev

MinskWarsawPrague

Berlin

Istanbul

Moscow

A

F

Yamal

Urengoy

Yamburg

Orenburg

C

B

Turkey

Uzbekistan

Turkmenistan

Kazakhstan

Russia

DE

Caspian Sea

Black Sea

MediterraneanSea

Dauletabad

G

H

20°E10°E0°E10°W

30°E

30°E

40°E

40°E

50°E

50°E

60°E

60°E

70°E

70°E 80°E

80°E

90°E

30°N

40°N

40°N

50°N

50°N

60°N

70°N

0°E

10°W

90°E

30°N

]0 1,000 2,000500 KilometersGas Fields

Implications for Geopolitics

• Primary of Geoeconomics– Estimation of deman

• Poland; Turkey

• Transit Country Problem– Ephemeral and overstated?– Contestability of routes and markets

• Security of Supply: Russia the reliable supplier?

Backup Slides follow

1970, 3.4 Billion Cubic Meters

1975, 19.3 Billion Cubic Meters

1980, 57.6 Billion Cubic Meters

1991, 105.2 Billion Cubic Meters

2001, 131.06 Billion Cubic Meters

Czech Republic

Austria

Bulgaria

Croatia

Finland

France

Germany

Greece

Hungary

Iran

Italy

Netherlands

Others

Poland

Romania

Slovakia

Czechoslovakia

Poland

Austria

Germany

Poland

Italy

Germany

Poland

Czechoslovakia

Italy

Germany

Poland

Czechoslovakia Italy

France

Germany

Poland

Italy

France

Austria

Turkey

Turkey