What Shale Gas Revolution Means for International Energy Geopolitics and New World Order? | Tuncay Babali

The future of energy sources and it’s geopolitics can be discussed from many angles; exciting innovation and technology based advances, renewable energy and environmentally friendly applications, climate change’s impact, arctic and Eurasian promises are to name a few. However, in reality shale gas revolution is the only one that has the real potential and promise that emerges above the rest.

However, that promise very much depends on North America (namely US and Canada foremost) becoming a single, transparent and well regulated energy market for all, as the new supply hub of the world. 1/3 of all the oil that the US imports is supplied by Canada. One in seven cars in the US is fuelled by Canadian resources. Canada and US hold an estimated 1,238 TCF + 59 billion barrels of recoverable shale resources. And only the US and Canada (because of their unique market environment and tech abilities) have currently added significant volumes to their national production from shale reservoirs. These statistics alone should give an idea about the energy integration potential between these two countries. With strategic planning this could turn into a bigger hope and source of inspiration not just for North America but to the whole world.

For instance Canada’s gigantic Duvernay shale gas deposit (4Bbbl) already attracts huge investments from China, Japan and latest from Malaysia with the declaration of $36 billion investment in shale gas production and LNG sector. The US production increase is immense. Yet faltering and not coming fast enough regulation is hindering the potential and emerging markets and the rest of the world cannot yet see the price drop over oil. This keeps some countries to be able to play around the classical hydrocarbon dependency of the world on geopolitical grounds.

This new energy powerhouse and supply hub can only be realized if the actors (companies, leaders of NAFTA and stakeholders) could believe in it and act accordingly in a visionary way. This might very well strengthen the freer and more democratic unipolarity of the new world order as it has never been before. Like the US once was the prime supplier of the world’s oil until the 1960s now through valuable cooperation and strategic vision to be created among the US and Canada primarily has the potential to create the world’s biggest and most reliable supply chain on hydro-carbon resources.

However, this will depend on how much cooperation and strategic vision will be put forward and how fast the projects like Keystone XL to create extra connectivity between East-West and North-South in North America through new pipelines are able to be created. Another aspect that would be vital is how the new market is structured and rules of “the new game (shale gas)” to be clear to all producers, consumers and transit countries alike. Not only that but it also requires successful address of the real environmental dangers of the shale gas production.

Despite its undoubtedly revolutionary and here to stay nature of the shale gas, it has yet to reach out to emerging markets like G20 member countries such as Turkey, South Korea. This is extremely important also from the perspective of reaching out to sustainable robust growth patterns after the world economic and Euro crisis as well as reaching out to UN millennium sustainable development goals. Reviews for both are going to be underway during this year’s G20 Summit at Brisbane, Australia and next year in Turkey.*

Key factor for emerging economies is that the regulatory regime must fulfill certain criteria in the new market such as:

– Tariff regime: Principles of the tariff-regime must be global & shared by all.

– Transparency: All criteria and procedures should be made public.

– Stability: Concerned parties should face the least possible regulatory uncertainty.

– Simplicity: In both methodology and tariffs, in so far as possible

– Non-discrimination: Non-discrimination among equal parties secured through Third Party Access (TPA).

– Cost-reflectiveness: Costs not directly related to market operations should not included. Cross-subsidies should not be allowed.

Signs of failure of the promises with wrong early practices in countries like Poland and Ukraine (beyond recent crisis with Russia) have the potential to lead more geopolitical and geoeconomical rivalries and shift of alliances in classical hydrocarbon energy geopolitics. World must be vigilant about such developments which might have direct bearings on the shape and direction of the new world order.

In the final analysis what will be the choice of energy for the future and why questions will continue to dominate the energy geopolitics debate beyond its traditional scope. Course and outcome of this debate will have an immense impact on the new world order.

Some useful articles/links and news entries used for this article:

*Turkey’s economy has transformed very fast over the past few decades. 50 years ago according to the World Bank and IMF figures, the country’s GDP per capita was just over $250 – roughly the level of the least developed countries of today. Now the average per capita GDP in real terms is over $11000, and the country, by many standards, a developed nation has three times higher annual energy demand than the world average (around 4,5%).

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