An Atlantic Basin Energy System? Paul Isbell Calouste Gulbenkian Fellow Center for Transatlantic Relations Johns Hopkins University School for Advanced International Studies (SAIS) September 12, 2012

Formation of an Atlantic Basin Energy System (ABES) Why Energy and the Atlantic? Pre-conditions for the formation of ABES Remaining Barriers Policy Implications

The Importance of Atlantic Energy From the end of the Cold War to the rise of China and the BRICS: the “forgotten” Atlantic Shifting pattern of US oil import dependence – Traditional: Middle East, Persian Gulf, Saudi Arabia – New rivals to Saudi Arabia and the Arab World (7 of top 10 national suppliers from the Atlantic Basin) – Proliferation of suppliers large enough to negatively impact security of US oil supply Increasing specific mass of the Atlantic Basin in the broad global energy system – geopolitical implications: the return of a new Atlantic?

Geography of Top 10 Oil Sources Atlantic Basin – Canada (1) – Mexico (2) – Nigeria (4) – Venezuela (5) – Colombia (8) – Angola (9) – Brazil (10) Broader Middle East Saudi Arabia (3) Iraq (6) Algeria (7) Atlantic sources will grow in the future, while others could slide. Ecuador is 11 th, Congo (Bzza) 14 th, Cameroon 15th

Pre-conditions for an ABES Dynamic basin energy demand Dynamic basin energy supply Sufficient basin autonomy Intra-basin complementarity

Dynamic Atlantic Basin Demand Approximately 40% of world demand Northern Atlantic demand flat to 2050 Southern Atlantic demand in line with the rest of the world Southern Atlantic’s share of global energy demand set to double to around 20% by Atlantic demand will be outstripped by the rest of the world, but Atlantic supply is set to boom

Atlantic vs World Demand to 2050 Source: Global Energy Assessment, IIASA

Northern vs Southern Atlantic Demand to 2050 Source: Global Energy Assessment, IIASA

Dynamic Atlantic Basin Supply Boom in Atlantic energy supply – Oil (over 1/3 of global production, over 40% of global reserves) New players: Brazil, Guyana Basin, Atlantic Africa Traditional players with enlarged reserves: Canada, Venezuela – Gas (over 1/3 of global gas and LNG production; 12% of conventional reserves, but over 60% of shale reserves – four of the five largest shale reserves in the Atlantic Basin) – Renewables (over four-fifths of global installed capacity and biofuels production)

Sufficient Basin Autonomy Over a quarter of world oil trade Only 15% extra-basin oil dependence 30% of global LNG trade Only 6% extra-basin gas dependence (concentrated in EU dependence on Russia) Over 80% of global biofuels trade

Center for Transatlantic Relations Source: BP Statistical Review of World Energy Elaborated by the Center for Transatlantic Relations, Johns Hopkins SAIS Intra-Atlantic Basin Oil Trade

Center for Transatlantic Relations

Intra-Basin Complementarity Traditional complementarity between North and South (northern investment in southern supply for importation) Emerging complementarity in the southern Atlantic Southern Cone shale gas with South African gas- to-liquids Brazilian biofuels collaborations with West Africa Others: LNG trade, petroleum products markets, northern investment in southern renewables

Barriers and Other External Factors Financial instability in the Northern Atlantic Price environment (fossil fuel subsidies, global oil prices, the price of carbon) providing a partial, but insufficient driver of low-carbon energy Insufficient policy and regulatory environments around the basin (energy nationalism) Lack of diplomatic structure in the Basin

Pre-conditions and Barriers Pre-conditionsMet/unmet Strong/medium/weak fulfillment or remaining barrier Dynamic energy demandMetMedium Dynamic energy supplyMetStrong Sufficient energy autonomyMetMedium-Strong Intra-basin complementarityMetStrong Financial and economic stability in the Northern Atlantic UnmetWeak-Medium Appropriate pricing environmentUnmetMedium-Strong Stable and rigorous policy and regulatory environments UnmetMedium-Strong Diplomatic/governance structureUnmetMedium-Strong Pre-conditions for the Emergence of an Atlantic Basin Energy System Source: own elaboration.

Policy Implications Energy Security – Middle East and Central Asia – China and East Asia Broader Atlantic Integration: Sustainable Development and Climate Change Atlantic Basin Consciousness and Atlantic Institutions Reconfiguration of the Atlantic – renewal of the West

Supporting Graphs

Atlantic Basin Petroleum Production in the World, Source: EIA and own elaboration.

Atlantic Basin Petroleum Consumption in the World, Source: EIA and own elaboration.

Atlantic Basin Petroleum Reserves (without Venezuela’s super-heavy oil) Source: EIA and own elaboration.

Atlantic Basin Natural Gas Reserves (pre-shale revolution) in the World (trillion cubic feet) Source: EIA and own elaboration.

Atlantic Basin Gas Consumption in the World (trillion cubic feet annually) Source: EIA and own elaboration.

Assessed Global Shale Gas Resources, 2011 Source: EIA

Global Shale Gas Resources, “technically recoverable” reserves by country (tcf), 2011