The US Energy Information Agency (EIA) expects natural gas to be the fastest growing fossil fuel between 2010-2040, thereby increasing its importance in global energy relations. In tandem with its growing role in the world, there has also been a growth in unconventional natural gas extraction (i.e. shale gas “fracking”), thereby allowing the US to unseat Russia as the largest gas producer in 2013. Although this economically and environmentally costly procedure does have some revolutionary market potential, the real future of global natural gas relations will be decided between Russia, Iran, and their allies. Moscow and Tehran are the two pillars of the global market, and they have the potential to monopolize the resource through the creation of a ‘gas OPEC’. This organization will likely be countered by the West, which will seek to create an alternative grouping centered around its geopolitical partners, therefore presenting the scenario of two competing gas cartels that would further polarize international relations.
The State of the Gas Market Today
The International Energy Agency (IEA) released a report in 2011 speculating upon a future “golden age of gas”. It believes that a confluence of factors (fracking, Chinese and Indian consumption, nuclear energy aversion, etc.) will account for a significant rise in natural gas use, eventually overtaking coal as the second-most used fossil fuel. Additionally, the US’s introduction of fracking onto the global market has made it so that previously energy-dependent states (i.e. Poland) could now have the potential to become regional production leaders, should their reserves pan out to be as large as expected. Slowly but surely, gas titan Iran has been shedding its crippling Western sanctions and may one day realize its potential as a significant global gas actor. The proliferation of liquefied natural gas (LNG) export technology is expected to have the long-term potential of reshaping the entire market, as it could bring together distant suppliers and consumers from all across the world.
Categorical Market Rankings
The following statistics gathered from the CIA World Factbook will highlight the top-ten players in each category, after which the rankings will be analyzed and geopolitical forecasting will be conducted:
(1) Russia; (2) Iran; (3) Qatar; (4) US; (5) Saudi Arabia; (6) Turkmenistan; (7) United Arab Emirates; (8) Venezuela; (9) Nigeria; and (10) Algeria.
(1) US; (2) Russia; (3) EU; (4) Iran; (5) Canada; (6) Qatar; (7) Norway; (8) China; (9) Saudi Arabia; and (10) Algeria.
(1) Russia; (2) Qatar; (3) Norway; (4) EU; (5) Canada; (6) Netherlands; (7) Algeria; (8) Turkmenistan; (9) US; and (10) Slovakia.
Analysis of Categorical Market Rankings
The data allows one to draw important conclusions about the future role of certain regional gas players.
North America: US, Canada
The US is clearly a rising gas superpower, although its rapid ascendance may come at a hefty environmental price. The full environmental extent of fracking has yet to be properly studied, so it is possible that it may impart long-term negative consequences on the region where the activity takes place. Particularly, these include the groundwater supply and the fracked area’s susceptibility to earthquakes. Canada’s production, on the other hand, is bolstered by its copious amount of oil sands. Because of the close historic (and NATO) relationship between the US and Canada, it can be inferred that both of them may coordinate their global energy policies to geopolitically influence the future gas market. LNG technology will help Washington and Ottawa bring their product to the energy-hungry Eastern Hemisphere.
Europe: EU, Norway, the Netherlands
For the ease of the report, it is simplest to approach the EU, Norway, and the Netherlands as a unified whole. Considering this, it then appears as though Europe’s energy honeymoon is soon to end. The Netherlands and Norway are expected to experience significant drops in their natural gas production, thereby affecting their export to the continent. This will altogether make Europe even more dependent on out-of-region imports, especially seeing how no European country is in the top ten of proven reserves. The only way to stop or reverse this trend would be for the EU’s ambitious energy policy, the 2020 Climate and Energy Package, to succeed, although it is doubtful that it will reach the stated goal.
Eurasia: Russia, Turkmenistan
Russia dominates the gas market through its staggering reserves (with possibly 2.5 times as much available via fracking) and enormous production and export volume. Turkmenistan, on the other hand, is an up-and-coming gas player, as it has the 6th largest reserves and the 8th largest export volume. If it can increase its production from the 16th spot to somewhere in the top ten, then its exports would inevitably increase as well. It is also necessary to note that the US has had far-reaching plans for Turkmenistan’s gas potential since before the turn of the millennium. It wanted to connect the country’s gas reserves to India as a way of diverting resources away from Russia’s energy nexus. The fact that American geostrategic planners had their sights set on Turkmenistan testifies to the country’s future energy significance. All of this will be important to keep in mind when discussing the potential for a Gas OPEC later on.
The Middle East: Iran, Qatar, Saudi Arabia, the United Arab Emirates (UAE)
The combined gas reserves of all four Mideast parties is 1.5 times as much as Russia’s total amount, thereby demonstrating the crucial importance of this region to the gas industry’s future. So important are the three Gulf Kingdom’s gas reserves to strategic market planning that it is suspected that the Syrian Crisis was initiated because of Damascus’ refusal to allow those countries to build a gas pipeline through its territory to Turkey and the EU (Syria instead chose to go with Iran’s proposed pipeline through Iraq).
Saudi Arabia and the UAE have not begun tapping most of their reserves yet, as highlighted by the Saudi’s 9th place ranking on the production list (the UAE is 18th) and the fact that neither of them is yet a top-ten exporter (they are 174th and 36th, respectively). The Saudis are also the 7th largest consumers of natural gas, so it is inferred that they produce mostly for domestic consumption. In the future, these two Kingdoms can increase their market space and become stronger players.
There are two splits evident in the Mideast gas game and one recent wild card: Iran is a rival to Saudi Arabia and the UAE, while Qatar has recently had a falling out with both Gulf Kingdoms (although it has yet to ‘flip’ to Iran’s side). This means that Russia and Iran could potentially ‘poach’ Qatar from the Gulf Kingdoms’ grasp and integrate it into the proposed Gas OPEC. Such a possibility and its implications will be discussed further on.
China is listed as the 8th largest gas producer in the world, yet it is not in the top ten for reserves or export. This signifies that the country largely consumes what it produces and imports to make up the difference. As a result of rising consumption, China is expected to import even more gas, making it a prime potential partner for Iran, Turkmenistan, and Russia (the proposed founders of the future Gas OPEC).
Africa: Algeria, Nigeria
Africa holds immense promise in the future gas industry, seeing as how Algeria is already an active player and Nigeria has the potential to service the growing (anti-Russian) demand in Europe. Algeria consistently ranks in the lower level of the top ten for reserves, production, and export, lessening the possibility that it will ever ‘shock’ the system. Its reserves, however, are in decline. Nonetheless, it is the fourth largest supplier of gas to the EU, having two pipelines to Italy and one to Spain. It also sells gas via the LNG method. Nigeria has huge reserves but they haven’t been fully explored yet. Should this come to pass, there is a strong possibility of a Trans-Saharan Pipeline being built to Algeria, where it will then connect to Europe to assist with anti-Russian energy diversification. Where things get interesting is that Algeria is a Soviet-era ally of Russia’s (they still interact heavily in the arms trade and then-President Medvedev visited in 2010) but Nigeria is firmly entrenched in the Western camp. Algeria’s domestic instabilities and proximity to the EU make it a prime candidate for Western blackmail if it ‘missteps’, thus meaning that it has to closely toe the line between advancing its national interests and being coerced into Western cooperation.
Latin America: Venezuela
Venezuela stands alone from the rest of Latin America for its 8th largest reserves of gas worldwide (and the 2nd largest in the Western hemisphere). The regional state behind it is Mexico, which trails far behind at 32nd place (Canada is 19th). Although rhetorically being against American hegemony, the country still heavily engages in the natural resources trade (primarily oil) with the US in order to build up its budget. This means that both countries are experiencing a complex economic interdependence, but unlike oil, it is doubtful that the US will need Venezuela for its domestic gas needs. What it would need it for, however, would be to support it as a counter-Gas OPEC member. Washington has been trying to overthrow the Venezuelan government for some time now, and if it manages to succeed, it could easily return Caracas into the orbit it escaped from nearly 15 years ago and influence its natural resource policy in the same manner as it wants to do Canada’s.
The Dark Horses
There are two possible dark horses that can upset the energy equilibrium to varying extents, besides the overall uncertainty of actual shale gas reserves and the serious environmental concerns over their extraction. The first one is if the fracking revolution turns Poland and Canada into major gas producers. Having Poland as a strong supplier for the EU would lessen the bloc’s import needs and quickly rehabilitate it from its Russian gas ‘addiction’. Concerning Canada, if it happens to have some large undiscovered reserves accessible via fracking (and it actually fracks them), then it could continue to combine its gas potential with the US to make North America a prime energy superpower to rival Russia. The second dark horse relates to the last comment, and it deals with reserves under the Arctic. Although still not delineated and very expensive to extract, in the future this situation could be resolved and Canada and the US may dramatically increase their reserves and challenge the Gas OPEC.
The Asian Appetite
Asia is expected to increase its consumption of all energy resources, with its appetite growing so fast in the coming years that it may even outpace supply. This means that many suppliers will be competing for this burgeoning market. Principally, China, India, and Japan will be the main engines of energy consumption on the continent, although South Korea will also experience an increase in demand. With their strong economies, these customers may also be able to pay higher prices for gas, making them an even more attractive partner than Europe, for example. Therefore, Asia is forecasted to emerge as the main market which the Gas OPEC will compete for against its rivals.
The Gas OPEC (The Energy Eurasian Union)
Now that the foundations of the gas trade and its market description have been expostulated upon, it is now appropriate to segue into the topic of the Gas OPEC. Such an organization would inevitably be oriented around geopolitical interests and feature a ‘West versus the Rest’ approach, with ‘the Rest’ representing the core of the Gas OPEC.
Russia, Iran, and Turkmenistan are envisioned as the founders of this organization. Turkmenistan’s inclusion is justified by its intimate gas relationship with China, which imports over half of its gas from the country. India, another vociferous consumer of gas, is planning to build either an underwater or overland gas pipeline to Iran. By tying China and India into the Gas OPEC web via Turkmenistan and Iran, its geopolitical potential power could possibly have kinetic results. Adding in Russia’s plans to build a gas pipeline to China, the Gas OPEC would result in a form of energy interdependence emerging between the Eurasian BRICS members. This would make it a type of ‘Energy Eurasian Union’.
The Counter-Gas OPEC (The Energy NATO)
The fact that the US and Canada, already huge (or in the case of Canada, potentially huge) players on the international gas market, have large gas reserves and the political will to export them to advance their global NATO goals, brings about the idea of a counter-gas OPEC to Russia and Iran’s Gas OPEC. The face-off between the two would resemble an Energy NATO (ENATO) versus an Energy Eurasian Union (EEU). North America (the US and Canada) and its allies (Saudi Arabia & the UAE, potentially a fracking Poland and a ‘flipped’ Algeria and Venezuela) could have a monopoly of supply to the Western world while competing with the EEU for the Eastern one through LNG exports. In the Cold War of the 21st century, each bloc may not have competing ideologues, but rather competing gas organizations.
Qatar Calls the Shots
For the most part, the geopolitical fault lines between the EEU and the ENATO have been drawn. Qatar, however, remains the most important outlier, as it has recently experienced a severe disruption of ties with its Gulf allies. This raises the prospect that it may drift closer to Iran, and by extension, the future EEU. After all, with Qatar and Saudi Arabia politically, militarily, and ideologically competing in the Mideast, it is only natural for this competition to elevate to the economic level. Accordingly, gas geopolitics may give Qatar the long-term edge over its Saudi rival, bequeathing it the added advantage it needs to triumph in this new Mideast ‘Cold War’. The EEU would overwhelmingly dominate the world’s gas market in this case.
If it sides with the ENATO, Qatar would be the member with the greatest potential and would allow that bloc to closely trail the EEU’s total gas reserves. Referencing the CIA World Factbook, Qatar has 2.5 times as many proven reserves as the US, and more than the US, Saudi Arabia, and the UAE (the three largest proposed ENATO members) combined. The EIA also states that it has been the world’s largest LNG exporter since 2006, which would in effect give the ENATO a strategic technological advantage over the EEU. Without Qatar’s incorporation, the ENATO is doomed to fail. In turn, this makes Qatar a make-or-break partner that calls the shots over whether the ENATO lives or dies.
Algeria and Venezuela as the First Targets of EEU-ENATO Proxy Warfare
Both of these countries would be a welcome inclusion into the EEU, but their long-term commitment is uncertain. Due to political manipulations (Algeria’s proximity to NATO, America’s antagonism to Venezuela), either or may experience a Color Revolution and be ‘flipped’ to the ENATO. Even if this does not occur overtly, they may, through various mechanisms, eventually become de-facto seats of ENATO’s interests in the EEU, halting and/or sabotaging its progress. This threat must always be kept in mind, as both states are relatively weaker than Russia and Iran and may not be able to effectively resist such post-modern Western covert offensives.
Thus, although it would mark a positive geopolitical extension of the EEU into Africa and Latin America, Algeria and Venezuela’s inclusion is not necessary for the EEU to function. On the other hand, given its significantly smaller gas reserves (with the exception of possible member Qatar), the ENATO would definitely need these players in its organization in order to increase its collective strength. Both of them combined would be equal to one United States (the largest member of ENATO if Qatar does not participate), a hefty addition to the ENATO’s gas capabilities. Geopolitically, Algeria and Venezuela would entrench the ENATO into Latin America and Africa and provide it with extra reserves for export to Asia.
Algeria and Venezuela are thus not important to the EEU from a reserve standpoint, but instead as a method of preventing the ENATO from actualizing its full potential and becoming a competitor. Since the ENATO would desperately need Algerian and Venezuelan participation in its project, it would be compelled to do whatever it could to bring them onto its side. This sets the EEU and ENATO up for their first proxy contest, making those two current Resistant and Defiant (R&D) states pressing targets of Western regime change efforts the moment the EEU and ENATO projects are launched.
The Two Possible ENATO Configurations and their Competitive Consequences
This section will briefly describe the possible ENATO configurations that would allow the organization to come into existence. This means that it will not address scenarios such as Qatar in the EEU or Saudi Arabia and the UAE’s lack of participation in ENATO, both of which would certainly prevent the creation of the counter-Gas OPEC.
This would occur if ENATO integrates Qatar, the US, Saudi Arabia, the UAE, Venezuela, Nigeria (a de-facto shoe-in), and Algeria, but the configuration would not surpass the EEU’s total reserves. Rather, it would be nearly 75% of the total. This is still a sizeable amount and would allow the ENATO to compete with the EE all across the world.
Under this scenario, Algeria and Venezuela enter into the EEU. Regardless of whether or not Nigeria develops its LNG and is able to export it under ENATO or if it falls under the EEU’s influence via the Trans-Saharan Pipeline, the EEU will have nearly double the amount of reserves than the ENATO. This would relegate ENATO largely to supplying the Western world, although some partners (like Qatar) may have some success in the Asian market.
A comparison of the above two scenarios demonstrates the importance of ENATO integrating Algeria and Venezuela. This supports the claim that ENATO will desperately seek to ‘flip’ these R&D states in order to give it the competitive lifeblood needed to counter the EEU. Algeria and Venezuela are also located further away from the EEU than other members, therefore meaning that they are more exposed and harder for the alliance to defend. As they are the ‘weakest links’, they will likely be attacked first, and the ENATO offensive has strong odds of success.
The Technical Aspects of the EEU’s Energy Distribution
The EEU is anticipated to have very specific technical aspects dictating its distribution network. Russia would continue to supply gas to Europe, although this amount is expected to decrease as the Europeans move away from Russian supplies and towards source diversification. Therefore, Russia will also have to diversify itself away from its old partners and towards newer ones, in this case, in Asia. Russia, as a result of its expertise in pipeline construction, will likely approach a more conventional method of distribution, building connections to China, Japan, and South Korea. In the case of Japan, it must first reach a negotiated settlement over the Kuril Islands, otherwise the US will have preferential access to that market out of geopolitical reasons. Any pipeline to South Korea could either pass through North Korea or go under the Sea of Japan. Since South Korea is a more pragmatic (and politically independent, as a result of its strong trade connections with China) country, Russia may build pipelines there before it enters the Japanese market.
The Chinese present something of an obstacle to the EEU, despite the Russian-Chinese strategic partnership. China wants to ensure that it receives gas at the lowest possible price, and it will likely try to exploit Europe’s recent rift with Russia to achieve this. The thought of a gas monopoly scares China, since it does not want to be dependent on a large price-controlling bloc for its imports. The inclusion of Qatar in the organization would mean that over 66% of its gas imports would be controlled by the EEU (Turkmenistan by itself already supplies over 50%), a situation which Beijing would likely find unacceptable but unable to tangible change. Thus, it will be forced to deal with the new reality it finds itself in, although it may attempt unexpected methods to stop or slow down the EEU’s formation.
Should the EEU be created, Iran and Turkmenistan will certainly increase their gas cooperation. Turkmenistan could build a gas pipeline through Iran to the Persian Gulf in order to sell its LNG on the global market. Iran would thus need to acquire LNG technology, ships, and terminals in order to sell both it and Turkmenistan’s reserves to East and Southeast Asian clients. If Qatar enters into the EEU, it could provide Iran with much-needed support in this field, but barring Qatar’s participation, then Russian or East Asian investment and expertise could possibly fulfill this urgent need. Selling Iranian and Turkmen gas via LNG is the only way for the EEU’s Middle Eastern members to penetrate the Asian market, which is a prerequisite for the organization to have a global impact.
There also is the possibility that Iran could sell those resources to Europe, but this is largely dependent on a successful (pro-government) resolution of the Syrian Crisis. If the Iran-Iraq-Syria gas pipeline comes into being, then Syria would be the LNG export terminal for Iranian and Turkmen gas to the West. Although part of the same gas trading organization as Russia, the EU may buy Iranian and Turkmen supplies simply because they are ‘not from Russia’. This would on paper accomplish the EU’s political goal of diversifying away from Russian resources while still satisfying its ever growing demand. At the same time, the ENATO may pressure Europe to not purchase the gas, but if the market conditions are right (i.e. the price is lower than ENATO’s or Qatar joints the EEU), it may be helpless to prevent this. These calculations underscore the importance for Russia and Iran in assisting their Syrian ally against the Western-led terrorist onslaught it as facing. It was already mentioned earlier that Damascus’ destabilization may have been brought about as punishment for its refusal to kowtow to NATO’s pipeline policies. Therefore, Syria’s successful resistance would strike at the energy vulnerability which so scared the West that it was willing to support a three-year terrorist insurgency to prevent it.
Finally, Iran can complete its plans to build a pipeline to India either undersea or through Pakistan, which is already an Iranian client. This would solidify the EEU’s ability to influence the Asian members of BRICS and achieve a deeper level of (energy) infrastructural integration among them. All of this may serve as a step closer towards multipolarity, which is the long-term grand strategic goal of Russia, China, and Iran.
The world is on the brink of fundamental changes in the gas market. As the West continues to polarize the Rest, gas leaders Russia and Iran are embracing each other like never before. The EU’s robust rhetoric about turning its back on Russian energy resources has fortified Moscow’s political will to diversify its partnerships and move further East. Iran is breaking free from its Western sanctions and isolation, and Assad’s successful repelling of the Western-managed terrorist brigades (with Russian and Iranian support) can provide Tehran with an energy window to Europe. The time is coming for Russia and Iran’s energy interests to intersect, and if Qatar, which recently has found itself on the West and Saudi Arabia’s “bad boys’ list”, can be enticed to join, then the EEU’s global gas dominance is guaranteed. Even without Qatar, the successful implementation of the EEU would be an historical landmark for multipolarity, although the gas bipolarity that would then develop between the EEU and ENATO may harken back to the days of the Cold War.