Energy Security and Economic Performance of the Caspian Region: How Vulnerable is the Region to Falling Oil Price? Presented by

Energy Security and Economic Performance of the Caspian Region: How Vulnerable is the Region to Falling Oil Price? Presented by Nathaniel Babajide PhD Scholar Centre for Energy, Petroleum and Mineral Law and Policy (CEPMLP) University of Dundee, United Kingdom 1st IAEE Eurasian Conference Presentation August 28-31, 2016, Baku, Azerbaijan. a.babajide@dundee.ac.uk www.cepmlp.org

Presentation Outline Introduction Overview of Caspian Region Research Methodology Findings and Discussion Conclusion and Recommendation

Caspian Region Overview Basin countries: Azerbaijan, Iran, Kazakhstan, Russia, Turkmenistan World s Location: Surface Area: 41 40 N, 50 40 E 22,142,990 sq. km Water volume: Population: 78,200 km3 (18,800 cu mi) 254.1 million (1.1%AGR) GDP (current US$): $2.63 trillion (2014) GDP Growth (Av.): 4.3% in (2014) Energy Reserves: Crude oil: Natural gas: Coal : 298.6 billion barrels 86.8 trillion m3 190.6 billion toe Nathaniel Babajide a.babajide@dundee.ac.uk www.cepmlp.org

Caspian s Energy Reserves and R/P Ratio Russia (82%) and Kazakhstan (18%) own the entire Caspian coal reserves Source: BP, 2015 Caspian holds about 17.6%, 46.4% and 21.4% of global proven reserves of oil, natural gas and coal respectively Iran (53%) and Russia (35%) hold the region s highest oil reserves Iran and Russia collectively accounts for 77% of Caspian gas reserves

Caspian s Key Indicators Surface Area (Million sq. km) Population (Million) GDP (in Billion constant 2005 US$) GDP per capita constant 2005 US$) Energy use per capita (Kg of oil equivalent) Azerbaijan 0.09 9.53 31.24 3275.71 1472.90 Iran 1.75 78.14 276.74 3541.43 2883.40 Kazakhstan 2.72 17.29 96.50 5580.89 4457.80 Russia 17.10 143.82 999.83 6843.93 5283.41 Turkmenistan 0.49 5.31 20.56 3873.77 4943.05 Region Total/Average * Source: World Bank (2016) 22.14 254.09 1424.86 4623.15* 3808.11* Russia covers about 77% of Caspian s total surface area Russia and Iran are the two most populous and biggest economies in the region In terms of GDP and energy use per capita, Russia and Azerbaijan respectively have the highest and lowest values

Caspian s TPEC by Fuel, 2014 Caspian s Energy Outlook Caspian's TPEC stood at 1032.7 million toe (~8% of world s TPEC ) in 2014 Energy mix is dominated by fossil fuels (>90%), with natural gas as dominant fuel Source: BP, 2015 In 2014, Caspian produces and consumes 17.2 and 5.7 million b/d of crude oil respectively Caspian economies export 40-80% of their total oil production Source: Worldbank, 2015 Source: BP, 2015 Russia supplies >60% of the region s export total followed by

Economic Outlook of Caspian Region Source: Worldbank, 2015 Caspian's intermittent economic growth averaged 7.3% from 2000-2014 and 4.3% in 2014 From 2010-2014, Turkmenistan recorded the highest average GDP growth rate 11.1%, followed by Kazakhstan (6.0%), Azerbaijan (3%) and Russia 2.8%

Caspian s high CO2 emissions makes the region highly susceptible to global climate change threat Source: BP, 2015 In 2014, Caspian states emitted 2607.7 Mt of CO2 (7.4% of global emission) Although with declining trend, Russia is the biggest emitter, followed by Iran

Source: APEC, 2007 Methodology

Result and Discussion Vulnerability Index Caspian economy is much more vulnerable to oil price changes as the oil export share of GDP moves in the direction of variation in global oil market Vulnerability impact is more pronounced in Azerbaijan and Kazakhstan owning to their largest contribution of oil export revenue to their GDP.

Result and Discussion - DPES DPES > 50 in Russia, Iran and Kazakhstan signifies moderately diversified supply portfolios and thus less prone to energy supply security risk. Conversely, DPES < 50 in Azerbaijan and Turkmenistan suggests high dependence on few sources of energy, thus highly prone to supply risk Nevertheless, the constancy of growth suggests absence of serious attention.

Result and Discussion - CFEP Caspian s CFEP is very low, less than 4% throughout the considered period. Russia s CFEP share was 3.0%, this improve to 3.7% (the highest) in 1995 and thereafter declined over the years reaching a low figure of 2.9% in 2014 CFEP discloses the region s high vulnerability to possible environmental degradation

Conclusion Caspian states heavily depend on oil and gas inflows which accounts for 40-80% of their total GDP Vulnerability Indicator reveals the region s high susceptibility to global oil price fluctuation, thus inimical to economic growth Although experienced meaningful economic growth under high oil prices, but the recent downward trend places crucial burden on economic growth Also, the region s reliance on few energy sources predisposes it to supply disruptions Historical trend shows fluctuating but high CO2 emission owing to increasing fossil fuel consumption in the region

Recommendations Diversification of energy supply and foreign earning sources Adoption of effective demand side management cum energy efficiency measures Huge investment in renewable energy technologies Promoting research and development (R&D) initiatives Regional cooperation among member states

Thanks For Listening Centre for Energy, Petroleum and Mineral Law and Policy 1st IAEE Eurasian Conference Presentation August 28-31, 2016, Baku, Azerbaijan. a.babajide@dundee.ac.uk www.cepmlp.org