Restricted number of suppliers

The distribution of fossil fuel reserves throughout the world, expressed in billions of toe, is represented on the map in Figure 1.3.

World reserves of hydrocarbons, oil and natural gas, which provide more than half of the primary energy supply, are unequally distributed, mostly located in regions far from the main consumption areas.

Consequently, more and more of these hydrocarbons must be imported by the consumer countries. The fact that some of the oil and gas reserves are located in unstable regions of the world creates geopolitical risks.

In addition, the problem of security of supplies is aggravated by the limited number of players controlling a major proportion of the reserves (Saudi Arabia for oil, and Russia, Qatar and Iran for natural gas).

The ambition of the producing countries to control the market, which resulted in particular in the creation of OPEC2, has only been partially achieved. Nonetheless, the current situation is not especially favourable for the consumer countries.

2 Organisation of Petroleum Exporting Countries.

Figure 1.3 Distribution of fossil fuel reserves (Gtoe) (Source: BP Statistical Review 2008)

IM Coal reserves □□ Oil reserves CZI Natural gas reserves

Figure 1.3 Distribution of fossil fuel reserves (Gtoe) (Source: BP Statistical Review 2008)

In the sector of hydrocarbons, the producing states are currently generally reluctant to open their oil and gas fields to the big international companies. This is the case for most of the OPEC members: Saudi Arabia and Kuwait are completely closed. Outside of OPEC, this is also true of a country like Mexico. Recent times have been marked, in several producing countries, for example Russia, Venezuela, Iran and Qatar, by a greater desire for national control, resulting in particular in renegotiation of contracts signed with the international companies.

The political situation of some of the countries in the Middle East, which contains 57% of world oil reserves and 40% of world natural gas reserves, is particularly unstable. Oil production in Iraq has dropped to about 2 million barrels a day, due to the current conflict, a figure much below its actual production capacity. In Iran, the conflict with the international community over the nuclear issue is delaying investments and new developments in the hydrocarbon sector. Saudi Arabia itself seems to be in a delicate situation, having to cope with a declining economy and the threat of terrorism [4]. Oil is often a source of conflict and oil revenue can often be diverted to finance wars.

Reserves of natural gas are less concentrated; Russia holds a leading position with one-third of the global reserves, and is one of the main exporting countries alongside Canada, Norway, Algeria, the Netherlands and Indonesia.

However, long distance transport of natural gas through gas pipelines or as liquefied natural gas (LNG)3 relies on large-scale infrastructures and therefore major investments. The mutual dependency between supplier and consumer, induced by the existence of gas transport infrastructures, represents a safety factor. The recent tensions between Russia and the European Union, due in particular to its conflict with Ukraine, have nevertheless demonstrated the risks inherent in excessive dependency on a dominant supplier.

The distribution of coal reserves is more favourable to the large consumer countries. Due to their abundance, coal has not suffered the tensions and price rises inflicted on oil and natural gas. This explains the strong come-back of coal observed over recent years.

This come-back nevertheless involves major environmental risks, especially regarding CO2 emissions4, as discussed in Chapter 7.

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