Geopoliticalmonitor.com
September 22, 2009
1. Executive Summary
This report is the first in an annual series that aims to explore the global energy supply situation. This series will track new oil and gas discoveries and what they mean for global power politics. Energy
security considerations have and will continue to serve as a catalyst for economic and military conflict. Knowing the energy supply forecast of BRIC countries, and thus the geopolitical pressures that they face, is essential for properly predicting and understanding these conflicts.
2. Brazil
Data:
Oil Export/Import (thousand barrels): -124 (35th largest importer)
Proven Oil Reserves (billion barrels): 12.182 (17th largest)
Natural Gas Export/Import (billion cubic feet): -353
Proven Gas Reserves: 12,280 [1]
Overview:
Brazil is a standout among BRIC countries in its ability to control energy demand. Two important factors have allowed Brazil to flirt with achieving energy equilibrium in the past couple of years [2]. These factors are Brazil’s modest energy reserves and the government’s strong emphasis on alternative energy, mainly in the form of sugar-cane ethanol [2]. In this comfortable position, Brazil is not dependent on energy imports and furthermore may only be a few major discoveries away from becoming a large net exporter of oil over the short term. Of course, such a situation would likely be fleeting because Brazil’s rise as an economic power carries with it a soon-to-be towering domestic energy demand [1].
Recent Discoveries:
Two years ago, Petroleo Brasileiro SA (Petrobas), a Brazilian public company, discovered a massive field off the coast of Rio de Janeiro [3]. The Tupi field is believed to contain anywhere from five to eight billion barrels, making it the largest find in the Western Hemisphere in the past 30 years [3]. The Tupi field and smaller subsequent discoveries imply a stable if not lucrative energy security outlook over the short-to-medium term [3, 4].
3. Russia
Data:
Oil Export/Import (thousand barrels): 7,054 (2nd largest exporter)
Proven Oil Reserves (billion barrels): 60 (8th largest)
Natural Gas Export/Import (billion cubic feet): 6,317
Proven Gas Reserves: 1,680,000 [1]
Overview:
With the world’s largest proven natural gas reserves, second largest coal reserves, and eighth largest oil reserves, Russia is poised to not only sustain energy independence but thrive whenever energy prices rise out of global recession [1].Indeed, Russia's status as "R" in BRIC countries is largely owing to its massive energy reserves. Moreover, Moscow’s struggle to attract foreign direct investment (FDI) to develop its energy sector now seems to be over, as FDI has started to rebound in what looks to be the start of a trend [5].
Moscow’s energy independence allows it flexibility in foreign policy. Without any acute reliance on the Middle East for energy supplies, Moscow can adopt a somewhat ambivalent attitude towards allies like Iran - generally supportive but willing to waver if the offer is right. Russia has already leveraged its position as an energy exporter in past international dealings, most notably with Ukraine [6]. European nations are particularly wary that Russia will one day use the threat of turning off the energy tap to extract foreign policy concessions.
Recent Discoveries:
Due to FDI shortfalls and economic uncertainty in the wake of the global economic crisis, there has been less exploration in Russia over the past few years. However, it should be noted that the Russian government is actively pushing a case for Russian ownership of the Arctic to the UN Commission on the Limits of the Continental Shelf in an effort to secure vast Arctic oil reserves. If their claim is successful, Moscow will then control the final frontier of energy exploration under the receding Arctic ice. It goes without saying that this would do much to further bolster Russia’s already charmed position.
4. India
Data:
Oil Export/Import (thousand barrels): -1,918 (6th largest importer)
Proven Oil Reserves (billion barrels): 5.625 (21st largest)
Natural Gas Export/Import (billion cubic feet): -353
Proven Gas Reserves: 37,000 [1]
Overview:
The combined pressures of a growing reliance on energy imports and spiking domestic demand have forced the Indian government to look to its own backyard for a solution, granting a slew of new licenses for energy exploration within India [1]. Although these efforts have so far born fruit, India is set to continue its dependency on foreign oil and consequently will seek to secure supply lines from the Middle East, Africa, and elsewhere. These efforts are likely to parallel those of China, a country with which India has an ongoing border dispute, a crushing defeat in the border war of 1962, and a naval arms race that is currently coalescing around the two regional rivals. That India and China will compete over energy supplies moving forward should be expected.
Recent Discoveries:
Cairn Energy’s discovery of the Mangala field in 2004, which contains a wealth of over 1 billion recoverable barrels, is the largest discovery in India since 1985 [8]. The Barmer Basin in which the field was found is expected to increase India’s domestic oil production by 20%, allowing for a significant reduction of Indian dependence on oil imports [8, 11]. There are several surrounding blocks in Rajasthan that have yet to be explored, so it is possible that more discoveries will be forthcoming.
5. China
Data:
Oil Export/Import (thousand barrels): -3,877 (3rd largest importer)
Proven Oil Reserves (billion barrels): 16 (13th largest)
Natural Gas Export/Import (billion cubic feet): -43
Proven Gas Reserves: 80,000 [1]
Overview:
Of all the BRIC countries, China’s domestic energy demand is growing the fastest, making the need to secure energy supplies a high priority for Beijing [1]. In response to China’s growing dependency on oil imports, Beijing has dispatched state-owned energy corporations to scour the globe and buy up natural resources.
On the defense end, Beijing is particularly concerned about China’s over-reliance on shipping lanes through the Straits of Malacca for energy imports from the Middle East. This is one of the factors underpinning the CCP’s desire to expand Chinese military power, particularly naval power in the South China Sea. In the event of a conflict with the United States, Beijing fears being cut off from its energy lifeline by a U.S. naval blockade of the Straits. It is with these fears in mind that the Chinese government has been working to diversify and expand energy imports.
It should also be noted that the Chinese emphasis on state sovereignty and not meddling in internal affairs -a policy that some argue to be an excuse for ignoring human rights- allows China to secure energy deals with states that some Western governments are hesitant to deal with. For example: Sudan, Iran, and Venezuela.
Recent Discoveries:
China continues to use sovereign wealth funds and SOEs to secure energy assets. In mid September, China and Venezuela agreed to a $16 billion dollar deal that seeks to develop the Orinoco Basin [9].
A subsidiary of China National Petroleum Corp. recently made a $1.9 billion investment in Canada’s Athabasca Oil Sands Corp [10]. This investment came as part of a $30 billion loan granted by the Chinese Development Bank to help the overseas expansion of Chinese SOEs.
Xinjiang, site of the Tarim Basin, continues to be a critical component of China’s domestic energy supply. The province is home to 14 percent of China’s oil output and over 40 percent of its coal reserves [12]. With various exploration and development projects ongoing, Xinjiang should be able to expand production over the coming years; that is, if ethnic strife does not de-rail economic progress.
6. End Notes
[1] Energy Information Agency (EIA). International Energy Data. 2009. United States Government http://tonto.eia.doe.gov/country/index.cfm
[2] Reel, Monte. Brazil’s Road to Energy Independence. Aug 19, 2006. Washington Post. http://www.washingtonpost.com/wp-dyn/content/article/2006/08/19/AR2006081900842.html. August 20
[3]Brooks, Bradley. Alternative Energy Powerhouse Brazil Finds Big Oil. Aug 23, 2009. Associated Press. http://www.google.com/hostednews/ap/article/ALeqM5hxQdx6DomM1By5mqzTtFFibxZ2eAD9A8QVDO0
[4] Herald News Services. Discovery Made off Brazil. September 16, 2009. Calgary Herald. http://www.calgaryherald.com/technology/Discovery+made+Brazil/1998948/story.html
[5] RIA Novosti. Foreign Investment in Russia $17 Billion in First Half of 2009 – Putin. Aug 9, 2009. http://en.rian.ru/russia/20090918/156176157.html
[6] Mason, Rowena. Ukraine and Russia Spar Over Gas Transit. Sep 8, 2009. The Telegraph. http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/6157971/Ukraine-and-Russia-spar-over-gas-transit.html
[7] Macrae, Penny. India Hungry for Foreign Oil Despite Home Finds. Aug 30, 2009. AFP. http://www.google.com/hostednews/afp/article/ALeqM5g6NUcPUnndlfzxAZ4Ignt0YH8fPQ
[8] Gerson Lehman Group. Rajasthan Oil Production – A Significant Positive for India. Sep 6, 2009. http://www.glgroup.com/News/Rajasthan-oil-production--A-significant-positive-for-India-43048.html
[9]Press TV. Venezuela Signs $16 Billion Oil Deal w/ China. Sep 16, 2009. http://www.presstv.ir/detail.aspx?id=106393§ionid=351020704
[10] Lam, Eric. World Watching Canada Reaction to Athabasca Investment. Sep 14, 2009. Financial Post. http://www.financialpost.com/news-sectors/energy/story.html?id=1997185
[11] Mukul, Jyoti. Barmer’s Billion Barrel Find a Great Spur. Sep 1, 2009. Business Standard. http://www.business-standard.com/india/storypage.php?autono=368738
[12]Radio Free Asia. Xinjiang Energy Risk Rises. July 13, 2009. http://www.rfa.org/english/energy_watch/energy-risk-07132009103219.html