GAS ABUNDANCE

Just ten years ago, most of experts were making disappointing forecasts in respect of energy resources, pointing out a possible shortage of oil and natural gas to meet the growing demand of the global economy.

However, the global financial crisis of 2008-2009 showed for the first time that the prices of hydrocarbon resources were too high and that the demand for oil and gas would not grow as fast as was predicted in previous years.

Many see the reason for the drop in energy prices in the shale revolution, which has allowed the United States to significantly reduce the volume of oil imports within a short time and even begin to think about the possibility of exports.

The rapid development of alternative and renewable energy sources plays an important role in reducing the consumption of hydrocarbon resources. Suffice it to recall the European Union's intention to bring the share of alternative energy sources to 30 per cent by 2030 and to 50 per cent by 2050.

Europe will be the first to experience a surplus of natural gas

The EU's statements on the need for energy supplies from alternative sources give the impression that Europe is experiencing a real "hydrocarbon hunger". However, recent actions against the main supplier of gas to the region - Russia - show that the EU does not need Russia's natural gas that much. Rather, it is the official Kremlin that is seeking to retain a lucrative market despite ever tougher regulations on natural gas supply under the rules of the Third Energy Package.

Data from OJSC Gazprom shows that in 2014, deliveries of Russian gas to Europe amounted to only 159.4bn cu m, compared to 174.3bn cu m in 2013. Incidentally, in 2014, the average price for Russian gas fell by 8.17 per cent, to 349.4 dollars per thousand cubic metres.

Russia, which has the largest natural gas reserves estimated at 31.2 trillion cu m, according to figures from Britain's BP, is trying to redirect its exports to China. So far, we are speaking about 30bn cu m per year delivered through the Sila Sibiri [Power of Siberia] gas pipeline that is currently under construction. However, it is planned to increase this amount to 100bn cu m per year. It should be noted that the parties are not in a hurry to disclose the price at which Russian gas will be supplied to China, and the pace of implementation of this project is not very high, either.

The EU is in no haste to get cheaper gas from Turkmenistan

The EU is clearly unenthusiastic about shelling out on new sources of natural gas, as is the case with Turkmenistan.

Of late, there has been a lot of talk about possible deliveries of gas from Turkmenistan to Europe in an amount of 30bn cu m. This year, the leadership of that country will complete the construction of the East-West pipeline, which will bring Turkmen gas to the Caspian Sea coast.

It should be noted that there "never was a story of more woe" than the fate of the Trans-Caspian Gas Pipeline (TCGP), the construction of which has been discussed for over 20 years. In the late 1990s, TCGP was considered a competitor to Russia's Blue Stream project.

In September 2011, the EU authorized the European Commission (EC) to enter into negotiations with Turkmenistan and Azerbaijan for the laying of TCGP. It was expected that an agreement on the launch of construction could be signed before the end of the year, and Turkmen gas would be delivered to the European Nabucco pipeline by 2017.

Currently, the third round of negotiations is underway on deliveries of Turkmen gas via TCGP in an amount of 30bn cu m per year, which provides for the possibility of gas delivery, first, to Turkey using the Trans-Anatolian Gas Pipeline (TANAP), and then to European countries by 2019.

Turkmen President Gurbanguly Berdimuhamedov has once again urged the EC countries to buy Turkmen gas at the border of Turkmenistan, which is an additional problem for the EU. Speaking at a business forum held by the Caspian European Club, Energy Minister Natiq Aliyev said that the questions who would buy gas on the border of Turkmenistan and who would build the Trans-Caspian Gas Pipeline still remained opened for debate.

The minister noted that EC Vice-President Maros Sefcovic proposed the creation of a Caspian consortium involving large European companies, which could buy Turkmen gas and solve the issues of financing and construction of the Trans-Caspian Gas Pipeline. However, this requires a detailed study.

Meanwhile, the story of the supply of Turkmen gas can be regarded as a shining example of the lack of "hydrocarbon hunger" in the world. According to BP, Turkmenistan ranks fourth in the world as regards natural gas reserves, which amount to 17.5 trillion cu m.

Notably, while ten years ago, Gazprom was the main buyer of Turkmen gas importing up to 50-60bn cu m a year, in 2014, as little as 11bn cu m was delivered to Russia, whereas the plan for 2015 provides for 4bn cu m of gas.

At the same time, in 2014, natural gas production amounted to more than 76bn cu m in Turkmenistan, and the target for 2015 stands at 80bn cu m.

The bulk of the country's exports goes to China. Moreover, the government of Turkmenistan intends to increase exports to China, bringing them up to 65bn cu m of gas per year by the end of 2021 and then raising it to 160-170bn cu m per year. But the question remains, how is Turkmenistan going to annually dispose of extra 100bn cu m in the coming years? Many point to China, India and other South Asian countries. But let us not forget that the developing countries of Asia - such as Pakistan, India, and least of all Afghanistan - are unlikely to be too generous in paying for natural gas supplies. Thus, Turkmenistan, Russia and Iran will have to sell natural gas to them at a significant discount, compared to the prosperous countries of the European Union.

Expensive Iranian gas

Now there is a lot of talk about the possibility that the European project Nabucco can get a second wind after the lifting of sanctions from official Tehran by the United States and the European Union following the signing of an agreement on Iran's nuclear programme. After all, the Nabucco project was originally designed for the resource base of Iran, whose natural gas reserves are ranked second in the world at an estimated 33.78 trillion cu m, according to the British company BP.

Iran has stated its readiness to double natural gas production from last year's 210bn cu m to 400bn cu m per year. Meanwhile, Iranian natural gas is the most expensive on the Turkish market today, compared to Russian and Azerbaijani gas. It is no wonder that during his recent visit to Iran, Recep Tayyip Erdogan declined the country's offer to double its gas supply to Turkey. Consequently, it is unlikely that EU countries will express their interest in the construction of the Nabucco pipeline for the purchase of Iranian gas which is currently one of the most expensive energy resources in the market.

LNG deliveries

In the meantime, EU countries are now showing considerable interest in energy supply - not by means of pipeline infrastructure, but by tanker transportation of liquefied natural gas (LNG). One of the leading LNG suppliers is Qatar, which has the world's third largest natural gas reserves estimated at 24.678 trillion cu m, according to BP. Incidentally, Saudi Arabia and the United Arab Emirates also have great potential for the supply of liquefied gas, possessing 8.234 trillion cu m and 6.091 trillion cu m of natural gas, respectively.

However, the European Union is now in anticipation of the continuation of a "miracle" in the shale gas revolution in the US and Canada to address the issue of obtaining cheap energy resources. It should be noted that the price of gas production in these countries ranged between 100 dollars and 130 dollars per thousand cubic metres in 2012-2013.

The United States and Canada are expected to start LNG interventions in the EU by 2018. Gas reserves are estimated at 9.345 trillion cu m in the US and 2 trillion cu m in Canada. But the high cost of transportation ultimately substantially equalizes prices for liquefied gas and natural gas received by consumers via pipeline infrastructure.

In the meantime, energy consumers have a wide range of hydrocarbon resources offered by producing countries. The revolution in obtaining energy resources from renewable sources snaps at the heels of gas producing countries and virtually threatens with the inability to consume all hydrocarbon resources that are going to be available in the coming decades. Therefore, oil and gas producing countries can go even so far as resort to price dumping in order to quickly sell their wealth. By the way, we are witnessing practically the same situation in the field of oil production: despite the excess of supply over demand, the main producing countries are not seeking to limit their production.