The New Geopolitics of Natural Gas

The New Geopolitics of Natural Gas. Agnia Grigas. 2017. Harvard University Press. 416 pp.

Back Cover

 

We are in the midst of an energy revolution, led by the United States, as the world’s greatest producer of liquefied natural gas (LNG). An unanticipated development with far-reaching implications for the international order. Agnia Grigas drills deep into today’s gas markets to uncover the forces and trends transforming the geopolitics of gas.

The boom in shale gas production in the United States, the growth of global LNG trade, and the buildup of gas transport infrastructure worldwide have so transformed the traditional markets that natural gas appears to be on the verge of becoming a true global commodity. Traditional suppliers like Russia, whose energy-poor neighbors were dependent upon its gas exports and pipelines, are feeling the foundations of the old order shifting beneath their feet. Grigas examines how this new reality is rewriting the conventional rules of intercontinental gas trade and realigning strategic relations among the United States, the European Union, Russia, China, and beyond.

In the near term, Moscow’s political influence will erode as the Russian gas giant Gazprom loses share in its traditional markets while its efforts to pivot eastward to meet China’s voracious energy needs will largely depend on Beijing’s terms. In this new geopolitics of gas, the United States will enjoy opportunities but also face challenges in leveraging its newfound energy clout to reshape relations with both European states and rising Asian powers.

The Author

 

Agnia Grigas is a Senior Fellow at the Atlantic Council and a frequent advisor to government and business. Born in Lithuania and emigrated to the United States at age ten, she earned her BA cum laude in Economics and Political Science from Columbia University, followed by an MPhil from St Antony's College, Oxford, and a PhD in International Relations from Brasenose College, Oxford. He has taught at Harvard, Yale, Stanford, Columbia, NYU, the University of Oxford, the London School of Economics, and the University of Pennsylvania. A proud mother of three, she lives with her husband in Los Angeles, California.

Summary + Notes

Introduction: A New Era of Gas

Initially, gas was little more than a waste product of oil production because of its lower energy density. A regional fuel rather than a fungible global commodity, often been operated by monopolies. 100 percent dependent on a single gas pipeline, a single gas-producing country, and even a single company, a fixed set of pipeline export routes and consumers. Gas is no longer a scarce, localized, difficult-to-transport resource doled out by energy monopolists (and their affiliated states). The established modus operandi between importing states and traditional suppliers is changing—strengthening the bargaining position of the former and weakening the leverage of the latter. Markets are increasingly setting the terms of trade, and gas monopolies look poised to lose some of their geopolitical clout. The new geopolitics of gas is coming. 

The Prospect of a Global Gas Market. A gas revolution is in the making. Since the mid-2010s, the so-called gas glut has emerged as a popular refrain among market watchers. Growth of LNG trade, shale boom, and the buildup of inter-connective gas infrastructure, have consequences for gas pricing, contracts, and trade.

LNG trade that started in 1997 when Qatar created the world’s largest LNG export plant and took its business global. Tankers across the globe first opened the theoretical possibility of gas prices converging across the three main gas markets of Asia, Europe, and North America.

1. A shale revolution. The top ten shale reserves in order of greatest to least are: China, Argentina, Algeria, the United States, Canada, Mexico, Australia, South Africa, Russia, and Brazil.
2. Gas transport infrastructure such as gas pipelines, pipeline interconnectors, and LNG liquefaction and regasification terminals.
3. Price differentials in different parts of the world are converging, long-term contracts are being challenged by increased trade on the spot markets, and pressure for removing destination clauses for gas flows and delinking the price of gas from the price of oil is building.

The Study of Geopolitics, Energy, and Eurasia. The geopolitics of gas consists of the immensely political actions of governments, investors, and other key actors who decide which gas trade projects will be built, how the gains will be allocated, and how the risks of dependence on international gas trading will be managed. 

The geopolitics of gas reflects how gas supply, demand, dependence, and transit can determine bilateral relations between importing and exporting states and cause power shifts in specific regions and in the international system as a whole, and at the same time, it reflects how power shifts in the international system, in regions, and in bilateral relations affect gas supply, demand, dependence, and transit.

Brzezinski argued during the Cold War, 'Whoever controls Eurasia dominates the globe.'

1. The Changing Global Gas Sector

2. The Politics and Commerce of American LNG Exports

3. The Politics of Supply: Russia and Gazprom

4. The Politics of Dependence Transformed: Europe

5. The Politics of Transit: Ukraine and Belarus

6. The Politics of Isolated Suppliers: The Caucasus and Central Asia

7. The Politics of Demand: China and Beyond

Conclusion