Caspian Report - Issue: 08 - Fall 2014

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FATIH MACIT, HOLLY REHM 10 in the 1950s. However, it was not until the 1980s that large-scale fracking and shale development began in the Barnett Shale in Texas. Horizontal drilling and fracking began to be used in tandem in the early 1990s and attracted the attention of the oil and gas sector in the U.S. From there, technological innovations and adaptations through work on the Barnett and Bakken plays have greatly improved the feasibility and effectiveness of shale gas drilling. 9 While fracking has been used in the U.S. for decades, plans for widespread fracking with the shale revolution have stirred controversy. Groups have raised concerns over environmental issues, including contamination of water resources, pollution caused by mishandled and potentially hazardous hydraulic fracturing fluid, methane leakages, and seismic effects, as fracking has been shown to cause to minor earthquakes. Proponents argue that with robust regulations and monitoring, fracking can be done safely and shale gas can effectively replace more harmful fossil fuels. Natural gas emits significantly less carbon dioxide and sulphur dioxide than the combustion of either coal or oil. 10 Many also argue that natural gas is a cleaner “transition fuel” as countries convert from fossil fuels to renewable energy sources. MADE IN AMERICA: DOMESTIC CONDITIONS FOR THE DEVELOPMENT OF SHALE GAS Despite other potentially large shale formations around the world, the U.S. remains the only country to have initiated the widespread development of these resources. Several arguments have been put forward to explain the success of the shale gas revolution in the U.S. Robert Blackwill and Meghan O’Sullivan sum up these arguments succinctly in their article on the shale revolution: “The fracking revolution required more than just favourable geology; it also took financiers with a tolerance for risk, a property-rights regime that let landowners claim underground resources, a network of service providers and delivery infrastructure, and an industry structure characterized by thousands of entrepreneurs rather than a single national oil company.” 11 In addition, publicprivate partnerships in research and development of shale technologies, favourable policies and regulations, established supply chains, and familiarity with oil and gas drilling have all contributed to the U.S. shale revolution and enabled the effective development of national shale resources. The unique property rights regime in America is also credited with helping spur the shale revolution. In contrast to many other countries, in the U.S. a homeowner owns their home, the land it sits on as well as the ground below and any resources contained therein. In other countries, this land would be controlled or heavily regulated by the state. Bypassing state involvement, any company able to procure an agreement with a homeowner can begin drilling on their land. This provides financial incentives for landowners to permit drilling on their land. 12 Additionally, analysts note that oil and gas drilling has taken place around the U.S. for decades, acquainting the population to drilling rigs, tankers, etc. In other areas of the world, such as Europe, the population is not familiar with these activities as most production of 9. U.S. Department of Energy, “Modern Shale Gas Development” 13. 10. EIA, “What is shale gas and why is it important” 11. Robert D. Blackwill and Meghan L. O’Sullivan, “America’s Energy Edge: The Geopolitical Consequences of the Shale Revolution.” http://www.foreignaffairs.com/articles/140750/ robert-d-blackwill-and-meghan-l-osullivan/americas-energy-edge. Accessed June 13, 2014. 12. Paul Stevens (2012) “The ‘Shale Gas Revolution’: Developments and Changes,” London, England, 9.
their large energy companies occurs abroad rather than at home. 13 This has also been a determinant in the shale gas revolution. The make-up of the oil and gas sector itself has also been a factor. Since peak U.S. oil production in the 1970s, large American oil companies have focused attention on overseas and offshore oil and gas assets. The small and independent energy companies left behind were forced to innovate in order to survive. Thus, they worked to capitalize on the domestic natural resources. When companies began experimenting with horizontal drilling in sequence with hydraulic fracturing on shale plays in the 1990s, the industry began to take notice and invest in improving extraction techniques. It was this innovation and entrepreneurship - forced by necessity and competition - that catalysed the shale gas revolution. Without independent companies fighting for survival or with a single dominant energy company, the shale boom would never have taken off. 14 Further, favourable domestic policies and regulations have enabled the U.S. shale boom. These include the 1980s Energy Act which provides tax credits amounting to 50 cents per million British thermal unit (Btu) of gas produced, the 2005 Energy Act which specifically excludes fracking from the Environmental Protection Agency’s Clean Water Act, and the Intangible Drilling Cost Expensing Rule, which can cover more than 70 percent of well start-up costs. Many other countries have stricter regulations or lack financial incentives for domestic energy companies. 15 Additionally, government involvement with the research and development of shale extraction technologies has been key. The government’s Gas Technology Institute (GTI) began research and development on what would become shale technologies in the early 1980s. GTI began a publicprivate partnership with universities, national laboratories, service providers, and federal agencies, as well as companies from the oil and gas sector with the aim of developing and GOVERNMENT INVOLVEMENT WITH THE RESEARCH AND DEVELOPMENT OF SHALE EXTRACTION TECHNOLOGIES HAS BEEN KEY. testing technologies. With its heavy industry presence, which proved to be vital to the success of the project, this partnership was different than others. Additionally, GTI widely disseminated its findings to the industry, thus directly providing the technological know-how to the domestic companies working in the field. 16 ENERGY ECONOMY: INVESTMENT IN U.S. SHALE GAS AND ITS CONTRIBUTION TO ECONOMIC RECOVERY Large investments have been made in the shale revolution; at the same time the resource boom is credited with helping the American economy recover after the 2008 financial crisis. Investment in shale plays totalled $133.7 billion in the U.S. between 2008 and 2012. Joint ventures with foreign companies comprised 20 percent of these investments, includ- 11 CASPIAN REPORT, FALL 2014 13. Paul Stevens (2012) “The ‘Shale Gas Revolution’: Hype and Reality,” London, England, 13. 14. Robert A. Hefner III “The United States Gas: Why the Shale Revolution Could Have Happened Only in America,” http://www.foreignaffairs.com/articles/141203/robert-a-hefner-iii/theunited-states-of-gas. Accessed June 13, 2014. 15. Stevens, “The ‘Shale Gas Revolution’: Developments and Changes,” 9. 16. Pipeline and Gas Journal (2013) “Unlocking the Potential of Unconventional Gas,” Houston, Texas, 26-28.
Page 1: CASPIAN PUBLISHED BY CASPIAN STRATE
Page 4 and 5: Dear Readers, CASPIAN REPORT 2 It i
Page 6 and 7: CASPIAN CASPIAN REPORT 4 06 FATIH M
Page 8 and 9: FATIH MACIT, HOLLY REHM 6 THE U.S.
Page 10 and 11: FATIH MACIT, HOLLY REHM 8 shale rev
Page 14 and 15: FATIH MACIT, HOLLY REHM 12 SINCE TH
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Page 18 and 19: FATIH MACIT, HOLLY REHM 16 LNG’s
Page 20 and 21: FATIH MACIT, HOLLY REHM 18 kets, pa
Page 22 and 23: MANFRED HAFNER 20 THE SOUTHERN GAS
Page 24 and 25: MANFRED HAFNER 22 THE DOCUMENT RECO
Page 26 and 27: MANFRED HAFNER 24 Notwithstanding t
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Page 30 and 31: MANFRED HAFNER 28 by the Shah Deniz
Page 32 and 33: MANFRED HAFNER 30 Snam Rete Gas has
Page 34 and 35: MANFRED HAFNER 32 THE ESTABLISHMENT
Page 36 and 37: MATTEO VERDA 34 LNG MARKET: TRENDS
Page 38 and 39: MATTEO VERDA 36 traditionally accou
Page 40 and 41: MATTEO VERDA 38 bcm), Brunei (9 bcm
Page 42 and 43: MATTEO VERDA 40 for transport vesse
Page 44 and 45: MATTEO VERDA 42 of the global LNG m
Page 46 and 47: MUBARIZ HASANOV 44 AN OVERVIEW OF E
Page 48 and 49: MUBARIZ HASANOV 46 Figure 1. Primar
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Page 52 and 53: Figure 7. Price of transport fuels
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Page 56 and 57: Figure 13. Breakdown of electricity
Page 58 and 59: THE SOUTHERN GAS CORRIDOR - WINDOW
Page 60 and 61: NINO KALANDADZE 58 become comprise
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NINO KALANDADZE 60 This picture mak
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NINO KALANDADZE 62 Security policy.
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NINO KALANDADZE 64 There are benefi
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NINO KALANDADZE 66 tion of Crimea b
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RADU DUDAU 68 THE UKRAINE CRISIS: L
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RADU DUDAU 70 RUSSIA HAS FREQUENTLY
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RADU DUDAU 72 Russia, which depends
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RADU DUDAU 74 WHAT INTERNATIONAL LA
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RADU DUDAU 76 THE NEAR FUTURE WILL
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RADU DUDAU 78 THE UKRAINIAN GOVERNM
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RADU DUDAU 80 parliament decided to
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Black Sea Serpents’ Island. RADU
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RADU DUDAU 84 (where Russia holds v
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RADU DUDAU 86 IN TERMS OF ENERGY, A
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WHY RUSSIA SIGNED A MAJOR GAS CONTR
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MESUT HAKKI CASIN 90 I will focus o
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Russian President Vladimir Putin sh
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Figure II: Russian energy infrastru
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Kazakhstan President Nursultan Naza
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MESUT HAKKI CASIN 98 economic devel
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Figure IV: China’s gas import sou
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THANOS DOKOS, THEODORE TSAKIRIS 102
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ARZU YORKAN 114 TURKEY’S RENEWABL
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ARZU YORKAN 116 is 12 th in the wor
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Figure 4: Solar Energy Potential At
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ARZU YORKAN 120 Figure 8: The share
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ARZU YORKAN 122 THE STRATEGY PAPER
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ARZU YORKAN 124 TURKEY HAS NOT YET
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CASPIAN
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THE EU AGREEMENT ON THE 2030 FRAMEW
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EU Commission President Jean Claude
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ROMAN RUKOMEDA 132 THE PHANTOM OF R
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Russia’s gas giant Gazprom CEO, A
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CASPIAN CALL FOR PAPERS 136 Caspian
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Caspian Report - Issue: 08 - Fall 2014

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