Geopolitics of natural gas

June 16, 2008 | 00:00

Geopolitics of natural gas

Based on the premises that natural gas is to become an even more important element in the world's fuel mix, this study presents an analysis of the development of the world market for natural gas. By utilizing historical case studies as well as advanced economic models the interplay between economic and political factors in the development of natural gas resources is examined.

The study includes seven historical case studies on the special challenges of investing in large-scale, long-distance gas production and transportation infrastructures. Furthermore a dynamic spatial general equilibrium economic model is presented, known as  the Baker Institute World Gas Trade Model (BIWGTM), to simulate the development of global gas markets between 2005 and 2040. The key findings of the report are as follows:

1) An integrated global gas market will emerge in which events in any individual region or countrywill affect all regions.

2) The role of governments in natural gas market development will change dramatically in the coming decades.

3) The rising geopolitical importance of natural gas implies growing attention to supply security.

4) The rapid shift to a global gas market is not a certainty. It depends enormously on creating the context in which investors will have the confidence to deploy vast sums of financial and intellectual capital; it requires finding solutions to the adverse social and political consequences of developing natural resources in countries where governance is weak; and it assumes a continued pull from the growing world electricity sector.

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