Scenarios for Russian Natural Gas Exports: The Role of Domestic Investment, the Caspian, and LNG
Hartley, Peter R.
Medlock, Kenneth B. III
Russia is the largest global natural gas supplier and has the potential to expand its production significantly. Europe depends on Russia for more than a quarter of its natural gas supply, placing Russia in a position to project its power to achieve political goals, higher prices, or both. However, pricing disputes that have led to short term supply reductions, most notably with Ukraine in the winters of 2005-06 and 2008-09, have caused European gas consumers to reconsider Russia’s role in European energy security. Specifically, many European nations have significantly expanded liquefied natural gas (LNG) import capability, and there has been substantial effort devoted to looking at the development alternative pipeline routes to Europe for natural gas from the Caspian states of the Former Soviet Union. Scenario analysis using the Baker Institute World Gas Trade Model (BIWGTM) indicates that Russia may be less able to negatively influence the Western European gas market in future years. In general, as a global market for natural gas continues to develop the diversity of alternative suppliers will increase thereby lessening the effects of instability in any single region. Specific to Europe, while increased LNG import capability certainly plays an important role, the response of European consumers to future supply disruptions also accelerates other important avenues. Specifically, natural gas supplies imported by pipeline from the Middle East, in particular Iraq, could play a key role. The importance of the Middle East to European supply diversification, however, means any collusion between Russia and the major producers in the Middle East could pose a significant threat to global energy security.