logistics bottlenecks

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Officers of the World Energy Council

Pierre GadonneixChair

Francisco Barns de CastroVice Chair, North America

Norberto Franco de MedeirosVice Chair, Latin America/Caribbean

Richard DrouinVice Chair, Montral Congress 2010

C.P. JainChair, Studies Committee

Younghoon David KimVice Chair, Asia Pacific & South Asia

Jorge FerioliChair, Programme Committee

Marie-Jos NadeauVice Chair, Communications & Outreach Committee

Abubakar SamboVice Chair, Africa

Johannes TeyssenVice Chair, Europe

Abbas Ali NaqiVice Chair, Special Responsibility for Middle East &Gulf States

Graham Ward, CBEVice Chair, Finance

Zhang GuobaoVice Chair, Asia

Christoph FreiSecretary General

Logistics BottlenecksWorld Energy Council

Copyright 2010 World Energy Council

All rights reserved. All or part of this publication may be used orreproduced as long as the following citation is included on eachcopy or transmission: Used by permission of the World EnergyCouncil, London, www.worldenergy.org

Published 2010 by:

World Energy CouncilRegency House 1-4 Warwick StreetLondon W1B 5LT United Kingdom

LogisticsBottlenecks


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Logistics Bottlenecks World Energy Council

1

Content 1

Executive Summary 2

Introduction 3

1 Energy capabilities and requirements in themid- and long-term 4

1.1 Coal 51.2 Oil 51.3 Natural gas and liquefied natural gas (LNG) 61.4 Uranium 61.5 Biomass and biogas 71.6 Electricity 7

2 Energy trade closing the gaps betweenrequirements and capabilities 9

2.1 Coal 92.2 Oil 112.3 Natural gas and liquefied natural gas (LNG) 12

3 Largest logistics bottlenecks across the

energy supply chain and energy carriers 133.1 Bottlenecks across the supply chain steps

related to energy sources 133.2 Bottlenecks across the supply chain steps

related to energy carriers 143.3 Crude oil transportation 14

3.3.1 Major bottlenecks 143.3.2 Necessary capacities 15

3.4 Gas transportation 183.4.1 Major bottlenecks 183.4.2 Necessary capacities 19

3.5 Electricity systems 213.5.1 Major bottlenecks 223.5.2 Necessary capacities 22

4 Infrastructure investments required tomanage key logistics bottlenecks 24

4.1 Necessary investments in oil transportation 244.1.1 Relevant price benchmarks 244.1.2 Evaluation of investments required in

the 20082020 time frame 254.1.3 Evaluation of investments required in

the 20202050 time frame 254.2 Necessary investments in gas transportation 26

4.2.1 Relevant price benchmarks 264.2.2 Evaluation of investments required in


the 20202050 time frame 274.3 Necessary investments in efficient electricity

systems 284.3.1 Relevant price benchmarks 284.3.2 Evaluation of investments required in


the 20202050 time frame 30

5 Necessary policies 31

5.1 Necessary policies in oil transportation 315.2 Necessary policies in gas transportation 315.3 Necessary policies in electricity transportation 32

References 34

Study Group Membership 35

Appendix 1.Conversion rates used in the study 36

Appendix 2.Matrix of logistics bottlenecks 37

Appendix 3.Oil refining 41

Contents


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Logistics Bottlenecks World Ener

2

Many of the vulnerabilities to Energy Access,Energy Security, and Environmental Sustainabilityresult from impediments to reaching a globaldemandsupply balance, as well as local balances,for various energy sources and carriers.Vulnerabilities result from multiple reasons:regional imbalances of energy production andconsumption, the bulky character of the majority of energy fuels, the virtual necessity of electricityconsumption following its production, amongothers.

To detect and prioritize respective bottlenecksacross energy carriers, they have to be measured.In this report, production, consumption, exports,and imports were measured across all major energy carriers for seven key regions of the worldfor three time frames2008, 2020, and 2050.Imbalances between production and consumptionform bottlenecks in each region.

From the logistics point of view, the most importanttypes of fuel are those biggest volumes that must

be transported over large distances. If fuels areranked on that criterion, the winners are coal, oil,and gas. Although people are slowly turning toalternative energy sourcessuch as biofuels andnuclear energyeven in 2050, those three fuels interms of total volume will dominate withoutquestion.

Another challenge is electricity transportation.Electricity must be consumed at its source or sentalong a transmission-and-distribution network rightafter its production, as storage is inefficient. To

make things more complicated, transmission itself is inefficient over long distances, necessitatingproduction facilities close to end-users.

To better identify and assess possible logisticsbottlenecks, a Logistics Bottlenecks Matrix wasconstructed, showing major bottlenecks across theenergy value chain on one axis (from themanufacturing of equipment through mining andextraction to transportation and consumption) andtypes of fuels/electricity on the other axis.

Having prioritized energy sources and their imbalances, as well as having outlined major sources of possible imbalances, three crucial

bottlenecks were identifiedoil movement, naturalgas and liquefied natural gas (LNG) movement,and electricity movement. Should they not bemanaged in 2020 and 2050 (i.e., if required energysources and carriers are not delivered fromproducers to consumers), enormous damage willbe done to the global economy, the full extent of which is currently immeasurable.

To manage expected key bottlenecks, significantinfrastructure investments need to be made. Todevelop the required oil pipeline and tanker

networks, gas pipelines and LNG carriers systems,as well as smart grids boosting the efficiency of electricity distribution, a total amount of about USD900 billion will have to be spent in the 20082050time frame, signifying average annual outlays of USD 21.4 billion.

Moreover, required policies and concrete actionsfor world leaders are described. These actions willallow for timely investments in the respectiveinfrastructures and build bridges between theprivate and public sectors in various regions, so

that the money which needs to be spent is spenteffectively, generating desired results for companies, governments, and society.

Executive Summary


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3

The Deciding the Future: Energy Policy Scenariosto 2050 study (EPS), published by the WorldEnergy Council in 2007, indicated a number of impediments and threats to achieving access,security, and environmental sustainability of energyaround the globe. Many of those threats, or vulnerabilities, which need to be overcome by the

joint efforts of policymakers, companies, andsocieties, involve the movement of energy.

Logistics vulnerabilities are inherent to the world of

energy and result for multiple reasons:

Regional imbalances of energy productionand consumption (e.g., Europe consumesmuch more oil than it produces);

Low-energy density of the majority of fuels(GJ per kilogram), stressing modes of transportation (pipelines, mega-tankers, LNGcarriers, etc.);

The virtual necessity of immediate electricityconsumption due to inefficient and costlytechnologies for storing electricity;

Electricity transmission is inefficient over longdistances.

Worth examining are the numerous points of contact between logistics bottlenecks andmanufacturing bottlenecks. In fact, the energysupply chain along starts with the manufacturing of energy equipment and energy-related facilities,such as power plants

Introduction


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estimated at 6.5% (U.S. Energy InformationAdministration). Hence, electricity usage has manyrestrictions and imbalances around the globe.

Currently, electricity production and consumption

are concentrated in the most developed regions of the world. Europe, with just over 9% of the globalpopulation, consumes 24% of the worldselectricity. North America, with 5%, consumes28%. On the other extreme, Africas 14% of theworlds inhabitants must do with just 3% of theelectricity (1 TWh of electricity equals 3,600 TJ;see Appendix 1 for the conversion table).

Not surprisingly, the demand for electricity willincrease for all regions in both the 20082020 and20202050 time frames (Figure 5). Growth will bedriven especially by emerging markets. The AsiaPacific region is projected to increase electricityconsumption between 2008 and 2020 by 60%,Africa by 86%, and Latin America by 87% (EPS2050 model).

Figure 5Projected electricity consumption across regions in 2008, 2020, and 2050.Source: EPS 2050 model

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importer with global shares of 41% and 43%,respectively (according to the EPS 2050 WECmodel).

2.2 OilFor many years, global supplydemand in the oilmarket has been anything but balanced. Fewcountries hold the majority of reserves, while mostof oil heavy users are vulnerable and dependenton supplier countries, often from other regions. In2008, out of around 3.9 billion tonnes of oilproduced, as much as 2.2 billion were exported toother regions, accounting for 56% of totalproduction (Figures 8 and 9).

Toward 2020, most of the heavy oil importers willstruggle to curb their dependence, or at leastreplace long-distance suppliers with closer ones tosome extent. One reason is that large reserves of oil are located in geopolitically turbulent areas,which places higher risks on them as importsources. Another reason, thanks to successfulresearch and development, is that previouslyunavailable oil fields in net-importing countries arenow feasible alternatives to imports (heavy oil inVenezuela and oil sands in Canada).

In the 20202050 time frame, global demand for oilwill remain difficult to curband so will be its

transportation needs. It is projected that 58.8% of oil refined in 2050 will be exported to other regionsof the worlda higher share than either in 2008 or 2020.

2.3 Natural gas and liquefiednatural gas (LNG)

The transportation of natural gas, vital for todayseconomy, is a challenge much more difficult toovercome than arguably any other fuel. It needs tobe compressed and pumped in large quantities tocreate sufficient pressure in gas pipelines. If transported by sea, it must be liquefied and thenre-gasified at the destination.

As a result, only 11.5% of natural gas extracted in2008 was exported to other regions of the globe(Figure 10). Most of those relatively scarce tradeflows occurred via gas pipelines linking gas fields informer Soviet countries and Europe (44% of globalexports). Other significant flow was directed fromNorth Africa to southern Europe86 bcmrepresented around one-fourth of global exports(Figure 11).

By 2020, the world will be demanding much higher accessibility and portability of natural gas. Not onlywill gas exports grow by 86%, according to our projections, but also their share in global

Figure 9The worlds largest oil net-exporters and importers in 2008 and their net-trade volumes in milliontonnes.Source: EPS 2050, 2009 BP Statistical Review of World Energy 2009, IEA

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Assessing major expected trade flows acrossregions and energy carriers is vital to show whichcarriers will really matter when it comes totransportation over the long distances to meetenergy demand in the future. Equally important ismapping and evaluating potential bottlenecks in asustainable energy supply. A structure basedprimarily on an energy supply chain is used here,from extraction of the respective fuel types throughtheir transportation and storage to consumption(Figure 12). These steps need to be adjusted for electricity bottlenecks. Transmission grids (high-voltage) and distribution grids (mid- and low-voltage) as well as storage are most important.

Bottlenecks can be assigned to respective energysources or to the carriers themselves, as describedpreviously. For segmentation purposes, energysources can be divided into three basic typessolid (coal, uranium, and solid biomass), liquid (oiland biofuels), and gas (natural gas and biogas).

Placing successive steps of a logistics supply chainon one axis and energy sources and carriers on theother one leads to a matrix of logistics bottlenecks.This matrix, in turn, can be populated withrespective logistics risks that may disturb theenergy supplydemand balance.

A detailed discussion of all identified logisticsbottlenecks would take extensive space; besides, itis difficult to prioritize them to show major challenges to the demandsupply equilibrium over the long term. Therefore, Appendix 2 shows details

according to the segmentation described aboveand is only summarized below, followed with anoverview of critical gaps where the biggestbottlenecks appear.

3.1 Bottlenecks across thesupply chain steps related toenergy sources

A variety of logistics bottlenecks is related toenergy sources. Some are universal for all their types (e.g., capacity shortage for manufacturing of energy-related equipment), but more are source-specific. For some solid fuels, for examplebiomass, compromising agricultural areas is anissue, as growing populations require increasinglyhigher food production

Liquid fuels, i.e., oil and biofuels, have their problems. In the case of biofuels, many challengesresult from a rather complex supply chainbothbiodiesel (from oil crops) and bioethanol (fromsugar and starch crops) require growing crops first,then processing them to obtain the final product,which in case of bioethanol, has to be additionallyblended in refineries or depots with gasoline.

Moreover, due to pressure on agricultural areas,EU countries are already debating decreasingminimum obligatory shares of bioethanol in car fuel. Oil logistics bottlenecks will be discussed indetail in the study.

Most of transportation bottlenecks related to gasenergy carriers are related to their inherentcharacteristicsvolatility and flammability.Vulnerabilities related to natural gas and LNG willbe discussed in the study. As for biogas, animportant logistics issue that can restrict its growthis low average production capacity of biogasfacilities. Fuelled with organic waste, rarely dobiogas-fired power plants (or combined heat and

3. Largest logisticsbottlenecks across theenergy supply chain andenergy carriers


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power plants) have access to high amounts of fuel.Therefore, their potential output will be limited dueto lack of economies of scale.

3.2 Bottlenecks across the

supply chain steps related toenergy carriers

When discussing energy accessibility, peoplerelate primarily to electricity, which arguably hasbiggest impact on their lives. After being producedin power plants, electricity is transported via high-,mid-, and low-voltage grids to end consumershouseholds, industry, institutions, and so forth. Itmay also be stored for later use. Transportationbottlenecks are detailed in later chapters of thestudy. Critical gaps are identified where the biggestvulnerabilities appear (based on the VulnerabilitiesMatrix).

Although all logistics bottlenecks deserve attentionand concrete actions from investors andpolicymakers to ensure a stable supply of respective energy carriers and electricity, they stillcan be prioritised to show critical gaps, which theworld must manage; otherwise, exporting countrieswill not realize potential sales and the economicgrowth of importers will be hampered without

energy to fuel it.

Three bottlenecks oil transportation, gastransportation, and efficient-electricity systemsrequire the most effort to ensure a supplydemandbalance in the 2050 time frame. They will bedetailed and measured, and a management planwill be proposed.

3.3 Crude oil transportation

Since its first commercial use in the 1850s, thevariety of applications for crude oil has steadilyexpanded. Crude oil is reasonably portable and itsreserves around the globe are uneven. The MiddleEast countries and Russia hold between them alittle less than two-thirds of global reserves as of 2008. Both mid- and long-distance transportationare required to satisfy the growing hunger for oil. In

2008, 56% of extracted oil was already beingtransported to other regions. Such an amount hasand will result in an array of logistics challenges tohandle.

3.3.1 Major bottlenecks

Between 2008 and 2050, global oil exports areprojected to increase by 17%. This growth may notseem extraordinarily high, but nonethelessinvestors and politicians will struggle to ensure asustainable supply. That will happen due to three

reasons:

Figure 12Potential bottlenecks across the steps of an energy supply chain with conversion to electricity.

Electricity storage

Grid distribution

Electricity

Construction of power

plantsStorage

Pipeline transpor

tation

Road, rail &water

transpor tation

Extraction

Grid transmission

Raw materials and fuels


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1. Oil exports higher by 17% from 2008 to 2050is still a large growth, equalling 368 milliontonnesclose to the oil consumption of France, Germany, Italy, and Spain together in2008.

2. Along with shifting demandsupply patterns,oil trade routes will change. For example,European crude imports are projected toshrink from 681 million tonnes in 2008 to amere 430 million tonnes in 2050, signifying

that some exporters (like Russia andsurrounding countries) will have to find newmarkets for their products. This means higher investment needs than those resulting from avolume increase of pure exports.

3. Apart from the economic issues likely tohappen, social, political, and environmentaltensions that may create more logisticsbottlenecks for oil are also very important.

Having those three sources of potential supplybottlenecks in mind, a list of them may be putforward:

Postponing investment decisions (for examplenew rigs) due to price volatility of crude.

An insufficient number of ships.

Terrorist attacks on ships.

Hijacking ships (e.g., pirates near Somalia).

Terrorist attacks on pipelines.

Pipelines used as a tool in political blackmail.

Congestion management (especially inagglomerations).

Sinking oil platforms (often cheaper thantowing it and disposing of it on land).

3.3.2. Necessary capacities

Equally important to identifying oil transportationbottlenecks is actually sizing them, i.e., defining theinvestment gap that will cover necessary amountsof crude to regions which will need them in the

2020 and 2050 time frames.

Logistics infrastructure in 2008

In 2008, global extra-regional exports of crudeamounted to 2,197 million tonnes, the vast majorityof which was transported via oil pipelines and oiltankers. Table 1 lists crucial cross-regional pipelinelogistics routes along with their capacities and 2008transportation volumes.

As for land transportation, there are additionallysignificant extra-regional volumes of crudetransported via rail from CIS to APAC (specifically,from Russia to China)amounting to around 9million tonnes annually (179 tsd barrels per day).All in all, oil pipelines used for transportationbetween regions accounted for a mere 6.4% of global exports (140 million tonnes) in 2008. Therest was transported via tankers, although it mustbe noted that loading in most ports would beimpossible without pipelines connected to oil fields.

Oil tankers transported the remainder of cross-regional crude flows, 2,061 million tonnes. Crudeoil together with petroleum products are major

Table 1The worlds major oil pipelines and their 2008 through-put.

Direction Pipeline(s)Capacity

(1,000 bbl/day)Through-put

(million tonnes) *

CIS EuropeFriendship

(RussiaCEE and WesternEurope)

1,300 58.5

CIS APAC KazakhstanChina 120 5.4

Middle East APAC KirkukCeyhan (IraqTurkey) 1,500 67.5

*Assumed 20,000 bbl in 1 million tonnes crude and 90% average utilization of pipelines.


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maritime transport commodities, accounting for 34% of total transports via the sea in 2008. At theend of the year, the tonnage of tanker fleet reached414 million dead-weight tonnes. 1 Utilization of global tankers reached 96.5% and has been rising

over last 20 years, with exception of last financialcrisis temporarily curbing oil demand across allregions (Figure 13).

Apart from investments in enhancing the totalcapacity of oil tankers, maintaining such a largefleet in operational condition required scrapingsome ships and replacing them with new ones. In2008, 202 vessels were demolished, totalling 5.5million DWT (1.3% of total capacity).

Capacity requirements between 20082050

Between 2008 and 2050, significant investments inoil movement infrastructure will be required tomaintain the supplydemand balance. They willresult from increasing demand in most regions andfrom changing demandsupply patterns around theglobe (e.g., regions shifting from net-exporters tonet-importers).

1 Dead-weight tonnage (DWT) determines howmuch weight a particular ship can safely carry.DWT contains weights of cargo, fuel, ballast water,fresh water, provisions, crew, and passengers; 1DWT equals 1 tonne of payload.

Existing oil pipelines will continue to operate in theforeseeable futurefirst, because there will bedemand from Europe for Russian crude (Friendshippipeline) and from APAC for Middle East oil(Dorytol pipeline). However, increasing demand,

especially from emerging Asian economies, suchas China and India, will urge neighbouring net-exporters to lay additional pipelines, which are atthe moment the cheapest means of crudetransportation. Table 2 lists planned pipelinesinvestments for the 20082020 time frame.

Between 2008 and 2020, all major currentlyplanned investments in increasing crude pipelinecapacity will be realized among the CIS, Europe,APAC, and the Middle East. It comes as nosurprisethey are relatively close and urgentlyrequire new transport routes to reach clients for their crude (CIS and Middle East) or to ensuresupply for domestic markets (Europe and APAC).

Altogether, four significant projects are planned,with a combined length of around 9,000 kilometresand an annual through-put of 175 million tonnes of crude. From this amount, 50 million tonnes fromthe NekaJask pipeline should be subtracted; it will

Figure 13Capacity development of the global tanker fleet and capacity surplus in the 19902008 period.Source: Review of the maritime transport 2009, United Nations Conference on trade and development, Geneva

0

50

100

150

200

250

300

350

400

450

200620042002200019981996199419921990 2008

Million DWT

World tanker fleet (M DWT)Tanker fleet surplus (M DWT)


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17

Figure 14Projected required capacities for oil pipelines and tankers for extra-regional crude exports in the20082050 time frame.

0

500

1000

1500

2000

2500

2008 2020 2050

E x

t r a - r e g

i o n a l o

i l e x p o r t s ,

M t o

n n e s

Year

Crude volu me exportedextra-regionally viapipelines

Crude volu me exportedextra-regionally via tankers

be more of a transit route from the Caspian Sea tothe Persian Gulf. Summing up the remaining 125million tonnes of annual capacity with 131 milliontonnes from existing pipelines (assuming Russiawill give up current rail transportation once the EastSiberiaPacific pipeline is ready), that leaves 256million tonnes of crude, which may be transportedvia pipelines in 2020 on an extra-regional scale.

Because few companies or governments areannouncing oil-pipeline development plans further out than 2020, sizing additional pipeline capacitiesfrom 2020 to 2050 requires further assumptions.

Looking at the projected global oil trade from ademandsupply perspective, in the 20082020time frame, out of 141 additional million tonnes of crude to be exported by countries worldwide, 125million tonnes will likely be exported to customersin other regions via pipelines. Thus, 89% of incremental global exports in that period can beassigned to oil pipelines. Assuming that this shareremains unchanged through 2050, then out of 226.9 million tonnes of projected incremental extra-regional oil exports, 201.3 million tonnes willrequire additional pipeline capacity and 25.6 milliontonnes of additional tanker capacity (Figure 14).

Table 2Major planned oil pipelines 20082020.

Direction Pipeline(s) Length(km)

Capacity(1,000

bbl/day)

Target annualthrough-put

(million tonnes)

CIS Europe/APAC

Trans-Caspian Oiltransportation system

(KazakhstanTurkey/Mediterranean

700+ shuttletankers 1,200 60

CIS APAC

KazakhstanChinaextension

East SiberiaPacific(RussiaChina)

960

5,857

n/a

1,000

15 *

50

CIS Middle East NekaJask pipeline(KazakhstanIran) 1,550 1,000 50

*Only surplus through-put.


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3.4. Gas transportation

The transportation of natural gas is arguably even

more challenging than oil. Gas is highly flammableand ethereal. The smallest leak in a pipeline maylead to losing large amounts of this valuableresource, not to mention creating an extraordinaryrisk for fire or explosions. Long-distance gastransportation is equally, if not more, problematic. Ithas to be cooled down to less than -162 degreesCelsius to liquefy it and its volume compressedmore than 600-fold. So its trade value must justifyits transportation cost.

3.4.1. Major bottlenecks

Long-distance natural gas transportation isprojected to rise rapidly via pipelines and LNG

carriers. In 2008, global extra-regional exports of gas amounted to 353.5 bcm11.5% of the worldsproduction. In 2020, this volume is projected to

increase to 657.3 bcm (16.7% of globalproduction), and to as much as 1,892.7 bcm(34.8% of global production) in 2050!

To ensure this growth, numerous logisticsbottlenecks concerning natural gas must beaddressed:

Sub-optimal investments in pipeline systems,partly due to geopolitical pressures (NordStream, South Stream, and Nabucco).

Adjustments of local laws and regulations toavoid obstruction of network investments(e.g., right of way).

Table 3The worlds major gas pipelines and their 2008 through-put.

Direction Pipeline(s) Length (km)Through-put

(bcm)

CIS Europe YamalEurope

Druzhba

4,196

2,750

33

30

CIS APAC

Central AsiaChina(Turkmenistan/

KazakhstanChina)

South Caucasus Pipeline(AzerbaijanTurkey)

1,833

692

40

8.8

CIS Middle East KorpejeKordkuy(TurkmenistanIran) 200 8

APAC Europe TurkeyGreece 210 7

Middle East CIS IranArmenia 140 2.3

Middle East APAC IranTurkey 2,577 11

Africa Europe

MaghrebEurope(AlgeriaSpain)

Greenstream (LibyaItaly)

Medgaz (AlgeriaSpain)

Trans-Mediterranean (AlgeriaItaly)

1,620

540

757

2,560

12

11

8

30.2

Africa Middle East Arab gas pipeline(EgyptLebanon) 992 10.3


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Threat of terrorist attacks on pipelines andLNG tankers.

Other LNG transportation challenges(distance from production unit to end-consumers, costs incurred, and infrastructurerequired to compress/decompress naturalgas).


To assess necessary capacities, as in case of oil,the gas exports in 2008 may be split into twostreams: gas pipelines and LNG carriers.Analogically to crude, the current infrastructure andneeds for its further development to satisfy globaldemand are described.

Logistics infrastructure in 2008

In 2008, extra-regional exports of gas amounted to353.5 bcm, transported by both gas pipelines, andLNG tankers. Gas pipelines moved around 60% of this volume, 211.6 bcm, between regions. Table 3shows the division of that volume amongrespective pipelines. Altogether, 13 trans-regionalgas pipelines have a total estimated through-put of 211.6 bcm.

As for infrastructure associated with LNG, at theend of 2008, there were 309 LNG carriersworldwide, with total capacity of 43.2 bcm of gas.They transported 141.9 bcm of LNG followingroutes shown in Table 4. Altogether, 353.5 bcm of

natural gas exported in 2008 between regions weretransported via LNG carriers (roughly 40%) and60% via pipelines.

Capacity requirements between 2008 and 2050

The demand for natural gas, being a much cleaner fuel than oil and thus more widely accepted, willgrow significantly over the coming years. Theresulting extra-regional exports are projected togrow almost exponentiallyby 86% from 2008 to2020 and by another 188% in the 20202050 timeframe! Beyond any doubt, that will requiretremendous investment to make sure exportingmarkets have a platform to reach their customers.

To accommodate such growth, exporters arealready building their capacities of existing

pipelines and laying new ones. Table 5 listsplanned gas pipelines, their length, diameter, andannual targeted through-put.

Should all started and announced projects becompleted, 398.5 bcm of pipeline capacity wouldbe added between 2008 and 2020. That is notlikely to happen, however, for one simple reasonEurope will not need that much gas. At the end of 2008, 63 bcm of gas were imported by Europe fromCIS via the Druzhba and YamalEurope pipelines,plus 68 bcm from Africa and Turkey. In 20082020,incremental European gas imports are projected at33.2 bcm. Even assuming that all of that will beimported via gas pipelines, there is still a huge gap

Table 4Global extra-regional routes of LNG transportation in 2008 (in bcm). Orange boxes indicateintra-regional flows and are presented for information only.Source: BP Statistical Review of World Energy, 2009

OriginNorth

America LAC EuropeMiddle

East Africa APAC

D e s

t i n a

t i o n

North America - 8.75 0.56 0.18 4.06

LAC 1.61 0.08

Europe 5.03 1.21 8.06 40.99

Asia Pacific 0.97 1.97 0.42 53.78 17.05 85.69


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20Table 5The worlds major planned gas pipelines.

Direction Pipeline(s) Length (km) Diameter(inches)

Target annualthrough-put(bcm/year)

CIS APAC

Central AsiaChinaenhancement

(TurkmenistanChina)

Altai Gas Pipeline(RussiaChina)

South CaucasusPipeline (Azerbaijan

Turkey)

Trans-AfghanistanPipeline

(TurkmenistanIndia)

Blue Stream(RussiaTurkey)

1,833

2,800

692

1,680

1,213

42

56

42

56

2455

15 *

30

11.2 *

33

16

CIS Middle East

AzerbaijanIran

Arab gas pipeline,Phase 2 (Turkey

Syria)

AzerbaijanSyria

200

6236

90

6.57

1

CIS Europe

Nabucco

Nord Stream

White Stream(GeorgiaEU pipeline)

South Stream(RussiaEU)

3,300

1,222

2,100

900

36

48

42

31

55

32

63

Middle East APAC

QatarTurkey pipeline

OmanIndia pipeline

IranPakistan pipeline

Pars pipeline(IranTurkey

2,500

1,100(subsea)

900

1,740

28

42

42

-

20

26.5

7.8

37

Africa Europe GALSI(AlgeriaItaly) 865 2248 8

APAC Europe TurkeyGreece 210 36 5 *

Africa MiddleEast

Arab gas pipeline(EgyptJordan) 1,200 36 0.5

*Only surplus through-put.


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21Figure 15Projected required capacities for gas pipelines and LNG carriers in extra-regional gas exports inthe 20082050 time frame.

0

200

400

600

800

1000

1200

2008 2020 2050

E x t r a - r e g

i o n a l g a s e x p o r t s ,

b c m

Year

Gas volume exported extra-regionally via pipelines

Gas volume exportedextra-regionally via LNGcarriers

of 161.2 bcm between announced new pipelines toEurope (in total, 194 bcm) and the abovementionedprojected import increase. Such a discrepancystems from political reasonssome projectedpipelines will substitute for current ones (e.g., theNord Stream is an alternative to the Druzhba or Yamal pipes). The others will substitute each other

(like the South Stream supported by Russia versusNabucco or White Stream supported by politiciansand investors willing to decrease the currentEuropean dependence on Russian gas).

Of the announced incremental investments in gaspipelines to Europe, potentially capable of transferring 194 bcm of gas, only 33.2 bcm of additional gas inflows are about to materialize. Thatleaves 237.8 bcm of global incremental gas exportsvia pipelines. (Other planned pipeline investmentsare all assumed to be realized.) From theremaining list, some of the projects are competingfor the same gasfor example, the SouthCaucasus Pipeline (AzerbaijanTurkey) and BlueStream (RussiaTurkey). Taking that into account,a 30% correction factor representing shares of projects not likely to be completed because other options were substituted can be assumed. Thisleaves 166.4 bcm as likely incremental gas pipelinethroughput between 2008 and 2020.

The remainder of necessary exports will have to be

transported by LNG tankers, if at all. It wouldamount to 137.3 bcm (difference between

additional exports of 303.8 bcm in 20082020 and166.4 bcm assumed to be transported via newpipelines).

Between 2020 and 2050, as in case of oil, thereare no available projections for the development of transportation infrastructure for natural gas.

Incremental gas exports from 2020 to 2050 havebeen estimated at 1,235.5 bcm. To see how theymight be split between gas pipelines and the LNGfleet, the world map with additional gas demandand supply divided among the regions, isillustrative. In case of Europe, imports are projectedto stay at a constant level between 2020 and 2050.In APAC, however, gas imports are likely toincrease by 719 bcm. Assuming 80% of thatamount to be transported via pipelines calculates to575.2 bcm. Remaining incremental capacity (660.3bcm) will be transported via LNG carriers (Figure15).

3.5 Electricity systems

The process of the generation and distribution of electricity has always been a struggle to increaseefficiency, i.e., the ratio of output (power suppliedto end-customers) to input (energy value of thefuels used to generate electricity). According to theMcKinsey Global Institute, in 2003, only 37% of energy used in power generation process reachedcustomers, the rest being lost in transmission.


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Looking ahead to 2020 and 2050, the energysector must achieve much higher efficiency to beable to satisfy increasing demand, especially fromemerging economies, while consuming scarceenergy resources.

3.5.1 Major bottlenecks

Major bottlenecks to increasing the efficiency of electricity systems can be divided into two groups:

those related to power generation and thoserelated to power distribution. The former results inmanufacturing bottlenecks (for example, replacingstandard, coal-fuelled power turbines with modernones based on Integrated Gasification CombinedCycle, IGCC). The latter results in logisticsbottlenecks. For example:

Inability to accurately assess the requiredamount of electricity in the network, resultingin the distribution of excessive quantities of power.

One-way communication in the network, fromelectricity providers to customers, losing

information potentially helpful in productionplanning (switch-off plans in factories,holidays of private users).

Problems with the distribution of electricitygenerated from renewable sources (wind andsolar) and the production planning of suchintermittent resources restrains their contribution to the total volume of such energyin the network.

Few trans-national grid connections, enablingpotential price reductions (arbitrage)

Increasing overall network security (localblackouts), and increasing the stability of localnetworks near borders.

Limited capabilities in assessing sources of power loss along the grid, resulting fromtechnical issues or energy theft.


All inefficiencies embedded in todays electricitytransmission and distribution processes may bedecreasedand some of them eliminatedthanks

Table 6Status of implementation of smart grids in selected countries.Source: From Policy To Implementation: The Status of Europes Smart Metering Market, Cap Gemini2009 and Smart Meters Gaining U.S. Foothold, www.sustainablebusiness.com

Country Status

Denmark Smart meters being introduced on a large scale; around 30% of meters are being replaced with smart meters

Finland All major utilities are implementing smart meters on a large scale; 20%of the population already have a smart meter installed

Ireland Implementing a two-way communication system with the customers of an innovative electricity pre-payment service

Italy

Arguably the best developed smart meter network in the world27

million meters have been replaced with AMR devices by 2006; plans toreach 95% of consumers by the end of 2011

Sweden

Some smart grid functions implemented nationwide with a project toinstall meters that collect payments monthly was finished in 2009;around 1 million advanced meter readers now being implemented byVattenfall and E.ON

U.S.

Smart meters now represent 4.7% of installed meters in U.S.;President Obamas administration made large-scale implementation of smart meters a top priority in the energy sector, introducing a large-scale stimulus plan worth in total USD 4.5 billion for this purpose inJanuary 2009


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to smart grid systems. Smart grid is acolloquialism for a set of tools, both software andhardware, enabling power companies to increasethe efficiency of electricity distribution by improvinginformation capture throughout the network.Hardware elements of smart grids contain, first of all, automated meter readers (AMRs) that measurein real-time the consumption of electricity byvarious points in the network (at end-users and atcrucial network points, such as transformers).Telecommunications and data-storageinfrastructure is required to handle, analyse, andstore enormous amounts of data gathered viaAMRs (from SIM cards to servers). The softwareelements of smart grids comprise programs usedby operators to monitor network utilization, as wellas programs for end-users (web-based CRMsoftware) to monitor energy consumption inhouseholds.

Necessary capacities with respect to electricitydistribution should indicate when respective

regions of the globe could develop their own smartgrid systems. Table 6 reflects the current status of smart-grid implementation in countries mostadvanced in this area.

From the current status of smart-meter implementation around the world, it can be arguedthat Europe and North America are two regionswith the highest potential for the widespread use of smart meters by 2020. This argument is supportedby ABI Research, which argues that the EU andNorth America will have the highest numbers of AMRs by 2014the former being projected to haveinstalled 115 million smart meters, and the latter 45million units.

Other regions of the world, it can be assumed, aremore likely to finish their deployment by 2050,although some are already actively pursuing smartpower networks. An exception may be Middle East,which has not yet started large-scaleimplementation of AMRs, but due to acomparatively low number of citizens and largefinancial reserves, they could complete the wholeprocess in a few years.


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Table 7Cost evaluation of selected, planned oil pipeline projects .

Pipeline(s)

Annualthrough-put

target (milliontonnes)

Projectedcost of the

pipelinePipeline(s)

Trans-Caspian oil transportation system

(KazakhstanTurkey/Mediterranean60 4,000 66.7

East SiberiaPacific (RussiaChina) 50 600 30

NekaJask pipeline (KazakhstanIran) 50 2,000 40

In this section, a top-down cost assessment of required investments in the global development of smart grids is proposed.

4.1 Necessary investments inoil transportation

Having assessed the required capacities for the oilinfrastructure in the 2020 and 2050 time frames,the projected actual investments needed, can be

calculated should those capacities be addressed.To do this, it is necessary to assess relevant pricebenchmarks for each means of transportation.

4.1.1 Relevant price benchmarks

As for oil pipelines, required investments indeveloping the transportation infrastructure may beprojected primarily based on an average cost of constructing a pipeline capable of delivering 1million tonnes of crude from producer markets toconsumer markets. To quantify this benchmark, acloser look on cost evaluation of selected pipelineprojects was taken.

An average cost per 1 million tonnes of crude oilthrough-put as the average for the current andplanned pipelines is calculated in Table 7 and thisyields an estimated cost of USD 45.6 million per million tonnes.

In case of oil tankers, it will be easier to projectinvestments in developing the fleet with respect torequired capacity measured in DWT. A benchmarkcost of 1-million DWT of tanker capacity can bederived. Although generally the price of tankers

depend on their capacity, it is not linearthanks toeconomies of scale, great ships cost much less per 1-million DWT than small vessels. Table 8summarizes the estimated cost per 1 million DWTdepending on type (class) of tanker.

Measured as the average from Table 8s calculatedprices per 1-million DWT capacity of various tanker types depending on size, an average price per 1-million DWT of capacity at USD 666.3 million isestimated.

4. Infrastructure investmentsrequired to manage keylogistics bottlenecks


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4.1.2 Evaluation of investments required inthe 20082020 time frame

Multiplying additional through-put resulting fromplanned investments in oil pipelines with the pricebenchmark of cost per 1 million tonne of targetcrude through-put yields the projected investmentoutlay necessary to close the demand gap for crude oil transported via oil pipelines.

USD 5.7 billioninvestments in pipelines 20082020

=125 million tonnes

through-put of planned pipelinesx

USD 45.6 million/million tonnes price benchmarkaverage cost of a pipeline

per 1 million tonnes

In the case of oil tankers, required investmentsshould include both outlays for developing the fleetto cover additional demand as well as replacingobsolete vessels. As outlined previously, in 2008,the global tanker fleet transported 2,061 milliontonnes of oil using ships with 414 million DWT. Thissignifies 1 million DWT of the global tanker fleetscapacity were used to transport 5 million tonnes of crude. If, as calculated previously, extra-regional oilexports using tankers will increase by 15.9 milliontonnes in the 20082020 period, that will require anadditional 3.2 M DWT tanker capacity. Multiplyingthis by the price benchmark of USD 666.3 million

per 1 million DWT (average tanker constructioncost), demands USD 2.1 billion to fill this demand.

On top of that, required outlays to keep the globalfleet operational, scrapping no-longer-viablevessels and replacing them with new ones, mustbe added. In 2008, the tonnage of scraped vesselsreached 5.5 million DWT. Assume this rate remainsstable from 2008 to 2020. That would mean acumulative replacement tonnage of 66 millionDWTequalling USD 43.9 billion of investmentcosts.

Total required investments in the 20082020 time

frame may be calculated as follows:

USD 56 billioninvestments in tankers 20082020

=USD 2.1 billion

new tankers requiredx

USD 43.9 billion fleet replacement cost

Summing up, required investments in oil pipelinesand tankers yield USD 51.7 billion necessary tocover logistics aspects of meeting extra-regionaldemand for oil in the 20082020 time frame.


Incremental crude transport volumes in the 20202050 time frame have already been derived. Usingthe same methodology and price benchmarks as in

the 20082020 time frame (investment unit costswill most probably in fact rise), the required capitalexpenditures (CAPEX) can be easily calculated.

Table 8Average price of oil tankers per 1-million DWT depending on type of vessel.

Tanker class Average size (inDWT)

Price of a newvessel

(USD million)

Price per millionDWT

(USD million)Product tanker 35,000 43 1,229

Panamax 70,000 50.5 721

Aframax 100,000 58 580

Suezmax 160,000 89 556

Very Large Crude Carrier 260,000 120 462

Ultra Large Crude Carrier 435,000 196 450


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For oil pipelines, the following equationsummarizes projected costs:


=201.3 million tonnes


USD 45.6 million/million tonnes price benchmarkaverage cost of a pipeline

per 1 million tonnes

As for oil tankers, once again investment outlays in20202050 will consist of two componentsa newfleet to cover incremental oil exports (25.6 milliontonnes equalling 5.1 million DWT) and areplacement fleet to cover for scraped vessels(166.3 million DWT calculated as follows: 417.2million DWT of operational tankers fleet in 2020 xthe 1.3% annual replacement rate times 30 yearsin the assessed period). Utilizing the pricebenchmark of USD 666.3 million per 1-million DWTadditional tanker capacity, the sum of new fleetoutlays in 20202050 can be estimated at USD 3.4billion, and replacing scrapped ships at USD 110.8billion. Altogether, required investments in oilinfrastructure will amount to USD 123.4 billion.

USD 114.2 billioninvestments in tankers 20202050

=USD 3.4 billion



4.2 Necessary investments ingas transportation

To derive the necessary investment outlays for required transportation infrastructure, a similar methodology as for oil from relevant pricebenchmarks and required capacities to money(CAPEX) spending necessary may be assumed.


In case of pipeline gas transportation, a benchmark

cost of laying a pipeline for 1 bcm is required. Thiscost can be estimated based on expert evaluationof the total cost of some pipeline projects plannedfor the coming years (Table 9).

The average weighed cost of gas pipelineconstruction per 1 bcm of through-put target fromsix evaluated projects was calculated to USD 330.8million/1 bcm.

The second benchmark is the cost of LNG-fleetconstruction per 1 bcm of LNG carried. Differentsources quote various costs, but assume a rather


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27

conservative cost by the Review of MaritimeTransportation that estimates a 150 million-cubic-meter LNG tanker costing USD 245 million in 2008.Because costs of LNG-carrier construction havedropped by 45% since the mid-80s, according tothe U.S. Energy Information Administration,efficiency increase needs to be built in. Assuminganother 40% efficiency increase as an averagebetween 2008 and 2050 yields USD 147 million for a 150 million-cubic-meter carrier, which,extrapolated to a 1-bcm capacity, gives the costbenchmark 980 M USD per 1 bcm LNG tanker capacity.


Having calculated necessary cost benchmarks andrequired capacities for gas pipelines and LNGtankers, the projected necessary investments for the 20082020 time frame can be derived.

In case of pipelines, essential CAPEX outlays willbe the product of planned cumulative through-putand the price benchmarkaverage cost of a gaspipeline per 1 bcm.


=166.4 bcm


USD 330.8 million/1 bcm price benchmarkaverage cost of a pipeline

per 1 bcm

As for LNG tankers, a part of the fleet operating in2008 will become obsolete and have to be replacedsome time between 2008 and 2020. Assuming thesame rate of scraped fleet (1.32% per year) fleetreplacement will be assumed to be the same. In 12years from 2008 to 2020, 15.8% of the global fleetis likely to be replaced at a cost of USD 6.7 billion(12 years 1.36% replacement rate 43.2 bcm of global fleet capacity USD 980 million costbenchmark per 1 bcm). In case of a new fleet,tankers with a total capacity of 41.8 bcm will berequired (if 43.2 bcm capacity was sufficient in2008 to transport 141.9 bcm LNG, then an 85-bcmcapacity should be enough in 2020 to transport279.2 bcm of LNG, indicating required incrementalcapacity of 41.8 bcm).

Total required investments in the global LNG fleetin 20082020 may be calculated as follows:


=USD 41.0 billion




For oil tankers, the same price benchmark applies

to calculate the necessary investments, multipliedby the projected 20202050 additional pipelinethrough-put.

Table 9Cost evaluation of selected planned gas pipeline projects.

Pipeline(s)Annual through-

put target(bcm)

Projected cost ofthe pipeline

(USD million)

Cost per 1 bcm ofthrough-put target

(USD million)Nabucco 31 10,600 341.9

IranPakistan gas pipeline 7.8 3,200 410.3Central AsiaChina pipeline

expansion 15 7,300 486.7

Trans-Afghanistan pipeline 33 7,600 230.3

South Stream 63 21,500 341.3

GALSI 8 2,000 250.0


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=575.2 bcm


USD 330.8 million/1 bcm price benchmarkaverage cost of a pipeline

per 1 bcm

Necessary investments in the LNG fleet will be veryhigh to compensate for planned exports growth.Expanding the fleet to cover projected incremental660.3 bcm exports will cost USD 197 million (samelogic as before). On top of that, USD 13.3 billionwill be needed to cover the part of the fleet thatbecomes obsolete during this time (30 years x1.36% replacement rate x 85 bcm of global fleetcapacity in 2020 x USD 980 million cost benchmarkper 1 bcm). All in all, necessary investments willamount to USD 210.3 billion.


=USD 197.0 billion



4.3. Necessary investments inefficient electricity systems

Investments in efficient electricity systems, in order to achieve sustainable energy systems, will requiresmart grids around the globe on a national levelutilizing interconnectivity options with neighbouringcountries (trans-national connections like todaysMarket Coupling in Benelux and Germany andNord Pool in Scandinavia). Based on the

experience from the most advanced markets insmart-grid deployment and on an assumedimplementation pace in the respective regions, aninvestment projection may be constructed.


Italy is the most advanced market in the world withrespect to smart grids. From 2001 to 2006, 80% of end-users were linked to a smart network and their meters replaced with two-way automated meter readers (AMRs). The project cost was estimated ata total of USD 3 billion. Considering the annualconsumption of electricity in Italy of 317.9 TWh(2008 consumption according to the InternationalEnergy Agency), the average cost of a smart gridper 1 TWh of consumption amounted to USD 11.8million (total cost of USD 3 billion/(80% of customers x 317.9 TWh total consumption).

Target benchmark cost of installing smart-gridsolutions per 1 TWh of electricity consumptionshould incorporate expected diminishing hardware

costs (AMRs should be less and less costly toproduce) and scale effects. For the purposes of thisstudy, it has been assumed that the average costof smart-grid components will be average 50%


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29Table 10Projected progress and estimated costs in smart-grid implementation from2008 to 2020.

Percentage of end-userswith AMRs

Energy consumption(TWh)

Estimated cost of smart-grid deployment

(USD million)

2008 2020 2008 2020 20082020

Europe 10% 80% 3,633.3 4,110.4 16,970.5

NorthAmerica 3% 80% 5,283.4 6,180.6 28,069.3

SouthAmerica 0% 10% 1,075.0 2,014.3 1,188.1

APAC 0% 10% 6,734.6 10,749.6 6,340.2

Africa 0% 10% 643.7 1,194.2 704.3

USSR 0% 10% 946.8 1,048.5 618.4

Middle East 0% 50% 742.3 1,266.7 3,735.6

TOTAL 19,059.0 26,564.3 57,626.4

Table 11Projected progress and estimated costs in smart-grid implementation from 2020 to 2050 .

Percentage of end-userswith AMRs

Energy consumption(TWh)

Estimated cost of smart-grid deployment

(USD million)

2020 2050 2020 2020 2020-2050

Europe 80% 95% 4,110.4 5,766.5 5,101.7

NorthAmerica 80% 95% 6,180.6 9,535.4 8,436.1

SouthAmerica 10% 80% 2,014.3 5,312.3 21,932.7

APAC 10% 80% 10,749.6 22,482.9 92,824.3

Africa 10% 80% 1,194.2 4,170.9 17,220.2

USSR 10% 80% 1,048.5 1,463.5 6,042.2

Middle East 50% 95% 1,266.7 3,758.8 9,976.4

TOTAL 26,564.3 52,490.4 161,533.7


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lower in 20082050 period than it was in case of Italy. Hence, the value of benchmark cost of installing smart-grid solutions per 1 TWh of electricity consumption has been finally calculatedat USD 5.90 million.


As discussed previously, Europe and NorthAmerica are most likely to introduce smart grids on

a wide scale before 2020 (Table 10). Currentprogress of implementation in Europe (which maybe measured as a share of the AMRs in the totalnumber of meters in the region) can be estimatedat around 10%, whereas in North America, it isaround 3% (highest in U.S., lowest in Mexico).Apart from several pilot projects, other regionshave yet to start full-scale implementation projects.

Both Europe and North America have the meansand determination to install AMRs at 80% crucialconsumption point by 2020. The Middle East caneasily reach 50% implementationthis region by2020 will reach consumption levels of 1,266.7TWh, just over 20% of the consumption in NorthAmerica. Other regions will most probably havestarted large-scale implementation programs bythen, allowing them to reach 10% implementation.To reach the assumed implementation status, USD57.6 billion of investments in smart grids isrequired.


The year 2050 may see nearly full emplacement of smart meters worldwide (Table 11). By then,Europe, North America, and the Middle East shouldreach 95% coverage, whereas other regions mayinstall smart meters for 80% of the population.Reaching these assumed implementation levels by2050 requires investing over USD 161.5 billion.


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Multi-million dollar investments are a necessary butnot exclusive condition to bring about theinfrastructure required to ensure a balanced energysupplydemand and manage key logisticsbottlenecks. Equally important are necessarypolicies that support the timely development of necessary infrastructure without excessive costs.

5.1 Necessary policies in oiltransportation

Apart from enhancing pipeline capacities anddeveloping a dense network of oil tankers, thefollowing steps are recommended to ensure aconstant supply of oil on a global scale:

Recommendations for policymakers

Granting legal rights-of-way for oil pipelines(mostly at the national level) to preventblockage for economic reasons (selling theground at economically-justified prices;

International cooperation to reduce piracy onoil tankers ; unless pirates are pressured onland and sea, oil tankers will have to choosesuboptimal routes, and in extreme cases beunable to serve some customers

Introducing stimulus packages for oil-tanker producers (long-term tanker leasing contracts,dockyard infrastructure adapted to producingoil tankers, incentivizing the replacement of obsolete fleet).

Recommendations for industry

Intensifying RD&D activities aimed atincreasing oil demandsupply balance, i.e.,increasing production in importing regions

Develop additional pipeline infrastructure(cheapest oil transportation mode) and pursueeconomies of scale in the market for tankers.

5.2 Necessary policies in gas

transportationAs seen over the past few years, political tensionsand power games in natural-gas transportationcould obscure the primary objective, which shouldbe providing sufficient quantities from net-exportingto net-importing countries at affordable prices.Every so often, natural gas is treated as a politicaltool to increase influence over a particular importing region or to obtain ownership over distribution assets in targeted economies.

To prevent it and allow for undisturbed access tothis natural gas, strict policies should be supportedby both policymakers and companies:


Granting legal rights-of-way for gas pipelines(also mostly at the national level

Incentivizing projects with the most positiveeconomic impact and ensuring highest energyinterconnectivity (like the Trans-EuropeanEnergy Network programme)

Providing incentive packages to increasecross-border trade of natural gas (especially

5. Necessary policies


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via pipelines), such as decreasing transit fees,and signing long-term legally-bindingcontracts.

Cutting price subsidies gradually for gaswhere they are too high to encourage energyefficiency (especially in net-exportingcountries), and enforcing much stricter controls over gas consumption and potentiallosses (tends to be laxer in countries withabundant gas).


Increasing regional partnerships through jointinfrastructure investments (sharing naturalgas storage facilities, and sharing costs of laying pipelines), which also may decreaseper-unit investment costs.

RD&D investments in liquefaction and re-gasification technologies any processefficiency increases will have a large impact inthe face of rapid projected growth in LNG

transportation

Increasing LNG transportation efficiency, e.g.through economies of scale in LNG carriers(transportation using the largest carriersresults in a cost reduction of20-30%)

5.3 Necessary policies inelectricity transmission

A set of regulations and incentives ensuring proper management of electricity transmission shouldfocus on promoting increased energy efficiencyand regional cooperation. We recommend adaptingfollowing principles by policymakers and industry:


Developing financial vehicles by utilities andgovernments (especially regulators) to ensurethe timely deployment of smart grid networks.International cooperation by governments toincentivise deployment of trans-systemnetwork connections, e.g., the EU list of supported electricity infrastructure projects aspart of the Trans European Network.

Support the introduction of third-party access(TPA). This functions well in EU countries buton much too low a scale outside the EuropeanUnion. TPA ensures de-monopolization of regional electricity markets, opens options tobuy electricity from any market player.

Supporting international projects to buildenergy bridges between countriestoensure electricity price convergence andcreate power pools to decrease the risk of blackouts; an example is the Scandinavian

Nord Pool Creating stimulus packages for operators of

power plants and distribution infrastructures.The focus should be on increasingproductivity, efficiency, and reliability of energy assets. Elements of a possibleincentive system can be found in EU climatedirectives (red certificates for combined heatand power production, CO2 allowances for modernization of production infrastructure,and planned white certificates for increasing

energy efficiency).


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International cooperation in developingcommon standards for smart-grid networks;

joint efforts could diminish required outlays for developing standards and increaseinteroperability between national power networks.

Investments in large-scale smart-grid systemseven without strong incentives from

governments, thereby decreasing energylosses and delivering extra value to customers(through more accurate information and billingand extended services package) should beencouraged.


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1. Hayler, William B.; Keever, John M. (2003).American Merchant Seaman's Manual. CornellMaritime Pr

2. Pipelines international - March 2010

3. Vladimir Socor (2005-05-05). "Trans-Caspian Oil Pipeline Planned in Kazakhstan".Eurasia Daily Monitor (The JamestownFoundation).

4. Tom Colton "The World Fleet of LNGCarriers ", from shipbuildinghistory.com

5. Annual Report on the Progress in SmartMetering 2008, European Smart Metering Alliance

6. Shargal, M. (2009). From Policy toImplementation: The Status of Europes SmartMetering Market

7. The Climate Group (2008). SMART 2020:Enabling the low carbon economy in theinformation age.

8. McKinsey Global Institute (2008) The Caseof Investing in Energy Productivity

9. UNCTAD (2009) Review of MaritimeTransport

10. World Energy Council (2007) Deciding theFuture: Energy Policy Scenarios to 2050

11. BP (2009) Statistical Review of WorldEnergy

12. International Energy Agency (2009) EnergyStatistics of non-OECD countries

13. International Energy Agency (2009) EnergyStatistics of OECD countries

References


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Vulnerabilities Study Chair

Thulani Gcabashe (South Africa)

Study Chair:

R.V. Shahi (India)

Study Director:

Mariusz Turek (Poland)

Members:

Vctor Dez (Colombia)Jeong-Gwan Lee (Korea)Ion Nedelcu (Romania)Emilio Guerra (Spain)

Oil Refining Task Force

Chair:

Alessandro Careri / Giuseppe Ricci (Italy)

Members:

Ayman Emara (Egypt)Laila Gaber (Egypt)Ismael Mohamed (Egypt)Jarmo Nupponen (Finland)Philippe Jacob (France)Pierre Marion (France)Harald Kraft (Romania)Nenad Djajic (Serbia and Montenegro)Urban Krrmarck (Sweden)Jean-Eude Moncomble (France) - Observer

Study Group Membership


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Table 1Conversion rates used in the study

Study unit Terajoules (10 12 J)

Electricity 1 TWh 9.3

Gas 1 bcm 37.5

Oil 1 million tonnes 41.7

Uranium 1 tonne 0.44

Coal 1 million tonnes 27.79

Appendix 1.Conversion rates used in thestudy


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Appendix 2.Matrix of logistics bottlenecks


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38

T a

b l e 1

R a w m a

t e r i a

l s / f u e

l s

E l e c

t r i c i t y

E x

t r a c

t i o n

R o a

d / r a

i l / w a

t e r

t r a n s p o r t a

t i o n

P i p e

l i n e

t r a n s p o r t a

t i o n

S t o r a g e

C o n s

t r u c

t i o n

&

f i t t i n g o

f e n e r g y -

r e l a t e d f a c

i l i t i e s

G r i

d t r a n s m

i s s

i o n

G r i

d d i s t r i b u

t i o n

E l e c t r i c i

t y s

t o r a g e

R a w m a t e r i a l s / f u e l s - s o l i d

C o a

l

S e c u r i

t y c o n c e r n s

e s p .

I n

u n

d e r g r o u n

d m

i n e s

L a c k o

f p r o p e r

i n f r a s t r u c t u r e

( p o r t s

f o r

l o a

d i n g /

o f f l o a

d i n g c o a

l )

B a

l a n c i n g

n e c e s s

i t y o

f

i n c r e a s e

d

g e n e r a

t i o n

f r o m

b i o m a s s

/ c o -

g e n e r a

t i o n w

i t h

a f f o r d a

b i l i t y f o r e n

d -

c u s t o m e r

N u c

l e a r

N o w

i d e r e c y c l

i n g

o f n u c l e a r w a s t e

( h i g h c o s t s

? )

N I M B Y i s s u e

w h e n c o n s t r u c t

i n g

a p

l a n

t ( n e e

d o

f

b e

t t e r s o c i a

l

e d u c a

t i o n

)

S o l i

d

b i o m

a s s

C o m p r o m

i s i n g

a g r i c u

l t u r a

l a r e a s

f o r n e e

d s o

f e n e r g y

s e c t o r

( b i o m a s s

)

N e e

d t o b u

i l d

p o w e r p

l a n

t / C H P

c l o s e

t o b i o m a s s

s o u r c e s

R a w m a t e r i a l s / f u e l s - l i q u i d

O i l

P o s t p o n

i n g

i n v e s t m e n

t

d e c i s i o n s

( e . g .

i n

n e w r i g s )

d u e

t o

p r i c e v o

l a t i l i t y o

f

c r u

d e

I n s u

f f i c i e n t

n u m

b e r o

f s h

i p s

T e r r o r i s t a t

t a c k s

o n s h

i p s

S h i p s '

h i j a c k i n g

( e . g .

p i r a

t e s n e a r

S o m a

l i a )

T e r r o r i s t a

t t a c k s

o n p

i p e

l i n e s

P i p e

l i n e s u s e

d a s

a t o o

l i n p o

l i t i c a

l

b l a c k m a

i l s

B i o f u e

l s

C o m p r o m

i s i n g

a g r i c u

l t u r a

l a r e a s

f o r n e e

d s o

f e n e r g y

s e c t o r

( b i o f u e

l s )


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39

T a

b l e 1

R a w m a

t e r i a

l s / f u e

l s

E l e c

t r i c i t y

E x

t r a c

t i o n

R o a

d / r a

i l / w a

t e r

t r a n s p o r t a

t i o n

P i p e

l i n e

t r a n s p o r t a

t i o n

S t o r a g e

C o n s

t r u c

t i o n

&

f i t t i n g o

f e n e r g y -

r e l a t e d f a c

i l i t i e s

G r i

d t r a n s m

i s s

i o n

G r i

d d i s t r i b u

t i o n

E l e c t r i c

i t y s

t o r a g e

R a w m a t e r i a l s / f u e l s - g a s

N a t u r a

l

g a s

I n v e s t m e n

t

s h o r t a g e

i n

i n t e r n a

t i o n a

l

p i p e

l i n e

l i n k a g e s

I n v e s t m e n

t

d e c i s i o n s

d r i v e n

b y

p o

l i t i c s r a

t h e r

t h a n

e c o n o m

i c f a c t o r s

N e e

d o

f

a d j u s

t m e n

t o

f l o c a

l

l a w s

/ r e g u

l a t i o n s

t o

a v o

i d o

b s t r u c t

i o n o

f

n e

t w o r k

i n v e s

t m e n

t s ( e

. g .

L a w o

f r o a

d )

P i p e

l i n e s u s e

d a s

a t o o

l i n p o

l i t i c a

l

b l a c k m a

i l s

S t o r a g e s

e c u r i

t y

e s p .

A g a i n s t

t e r r o r i s t s a

t t a c k s

H i g h d e p e n

d e n c e

o n g a s

i n e n e r g y

p o r t

f o l i o o f

m a n y

c o u n

t r i e s ( e . g .

R o m a n

i a , I t a

l y )

L o w

l e v e

l o f

i n v e s t m e n

t s e c u r i

t y

( e . g .

i n R u s s

i a )

B i o g a s

L N G

I n s u

f f i c i e n t

n u m

b e r o

f s h i p s

T e r r o r i s t a t

t a c k s

o n s

h i p s

S h i p s '

h i j a c k i n g

( e . g .

p i r a

t e s n e a r

S o m a

l i a )

T e r r o r i s t a

t t a c k s

( e s p .

L N G

t e r m

i n a

l s / s i

l o s

i n

p o r t c i

t i e s )

H y d r o g e n


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T a b

l e 1

R a w m a t e r

i a

logistics bottlenecks

Documents