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The Role of Azerbaijan and Russia in the European Energy Security Strategy

Konstantin SimonovKonstantin SimonovParisParis

April 13April 1320120122

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Expectations and Reality Expectations and Reality

•It is out of question that Azeri gas It is out of question that Azeri gas will come to European market will come to European market

•But it will be not a driver of But it will be not a driver of serious changes in EU serious changes in EU

•Extremely high expectations: Extremely high expectations: Europeans consider that South Europeans consider that South Corridor is the solution to all Corridor is the solution to all problems of EU on gas marketproblems of EU on gas market

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Small AmountSmall Amount

16 bcm – 6 bcm for Turkey = just 10 bcm16 bcm – 6 bcm for Turkey = just 10 bcmAccording to IEA consumption in OECD-Europe in 2020 can According to IEA consumption in OECD-Europe in 2020 can

be be more than 600 bcm more than 600 bcm

Share of Azeri Gas in European consumption (OECD-Europe, 2020)

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Difficult co compete Difficult co compete with Russiawith Russia

Gazprom Supplies to Europe, Turkey, Billion Cubic Metres

150,5

158,8

140,6138,6

150

125

130

135

140

145

150

155

160

165

2007y 2008 y 2009 y 2010y 2011y

Source: Gazprom

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Difficult co compete Difficult co compete with Russiawith Russia

Consumption of Russian gas in France (bcm)

9,8 10,4 10,1 9,8 9,5

0

2

4

6

8

10

12

2007y 2008y 2009y 2010y 2011y

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Shakh Deniz CupShakh Deniz Cup

TAPTAP

ITGIITGI

NabuccoNabucco

SEEPSEEP

TAPTAP

10 bcm!!!10 bcm!!!

Serious battle for very small Serious battle for very small amount of gas amount of gas

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It is profitable to have It is profitable to have Gasprom an a neighbourGasprom an a neighbour

Estimate Price for European Consumers

380 397 415373

050

100150200250300350400450

Price for Europeanconsumers for Azeri

gas transportingthrough Nabucco

Price for Europeanconsumers for Azeri

gas transportingthrough ITGI

Price for Europeanconsumers for Azeri

gas transportingthrough TAP

Average price forRussian gas (nine

months endedSeptember 30, 2011)

Source: RWE, Gazprom, NESF

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South Corridor vs. South Corridor vs. South Corridor South Corridor

Source: Gazprom

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The Question of PriceThe Question of Price

• Assets in Europe – the Assets in Europe – the future of DEPA and DESFA future of DEPA and DESFA ((Socar Socar is one of is one of pretenders) pretenders) • Solution of political Solution of political problems problems

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Сonsequences Сonsequences of Possible of Possible War in IranWar in Iran

Source: The University of Texas

Ethnic structure of Iran Population (million people)

4512

5

13

Persians

Azerbaijanians

Kurds

Others

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Сonsequences Сonsequences of Possible of Possible War in IranWar in Iran

Shares in Shakh Deniz Field

25,5%

25,5%10,0%

10,0%

10,0%

10,0%

9,0%

BP (operator)

Statoil

Total

NICO

Lukoil

SOCAR

TPAO

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AzerbaijanAzerbaijan as a as a Transit Country? Transit Country?

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Looking for Reliable Looking for Reliable RouteRoute

Azerbaijan + Azerbaijan + Georgia +Georgia +TurkeyTurkey

Russia + Russia + UkraineUkraine

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Memo to the Supporters Memo to the Supporters of Fof Free ree CCompetitionompetition

• IIn the chain of gas supplies to GDF Suez of France n the chain of gas supplies to GDF Suez of France Gazprom got rid of the intermediary Fragaz as far back Gazprom got rid of the intermediary Fragaz as far back as several years ago. In 2006, however, as it renewed as several years ago. In 2006, however, as it renewed the gas supply contract with Gaz de France (12 billion the gas supply contract with Gaz de France (12 billion cubic metres a year) and signed a new contract to cubic metres a year) and signed a new contract to supply gas by the new gas pipeline, Nord Stream (2.5 supply gas by the new gas pipeline, Nord Stream (2.5 billion cubic metres), the Russian corporation reached billion cubic metres), the Russian corporation reached agreement to move the gas delivery point to the agreement to move the gas delivery point to the border of France and got the right to sell 1.5 billion border of France and got the right to sell 1.5 billion cubic metres of gas annually in the French market on cubic metres of gas annually in the French market on its own. A company called Gazprom Marketing & its own. A company called Gazprom Marketing & Trading France was established for that purposeTrading France was established for that purpose

• It should be noted that only an insignificant portion of It should be noted that only an insignificant portion of the 140-150 billion cubic metres of Gazprom’s annual the 140-150 billion cubic metres of Gazprom’s annual export to European countries and Turkey is sold by the export to European countries and Turkey is sold by the group to end-usersgroup to end-users

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Thank you! Thank you!

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