Energy analysts meeting at a Washington forum Wednesday discussed the shifting pattern of energy supply and consumption with particular reference to new pipelines likely to be built to get Central Asian oil and gas to world markets.
Former oil company executive Frank Verrastro of Washington's Center for Strategic and International Studies says energy trade patterns are in flux, as China and India emerge as major importers.
"We've got pockets of producers and pockets of consumers that are not geographically co-located. And you can name the producers on one hand: it is Russia and the Caspian, the Middle East, Africa, and the non-conventional production in North and South America, mostly Canada and Venezuela. When you look at the consumption side it is North America, Europe and Asia. And this puts increasingly pressure on the delivery system," he said.
The Caspian Sea region in Central Asia is getting particular attention because it is a new and still growing source of oil and gas. The area is so distant from world markets that experts aren't sure whether Caspian oil will increasingly be sent east or continue to flow west through Russia or Turkey.
"Central Asia has to orient in some respects its energy supplies towards China. Even Iran is orienting towards China. Russia will have to orient some towards China. This is where the big growth is going to come from," said Julia Nanay, an analyst at PFC Energy Consultants in Washington.
Nanay says China is likely to emerge as a new energy hub for Caspian oil and that more pipelines will be built to western China. China's oil imports have risen by over 30 percent annually over the last three years.
Matthew Bryza, an oil analyst at the U.S. State Department, says the U.S. priority is that energy markets operate efficiently. He said Washington wants free competition and multiple pipeline routes. He calls the recently completed $4 billion BTC pipeline from Azerbaijan to Turkey a great success story.
"We are trying to stimulate economic cooperation and investment between Central Asia and South Asia, particularly Afghanistan," he said. "Our long-term vision is that hopefully Kazakhstan will emerge as a locomotive of regional economic growth."
U.S. energy policy in the region is handicapped by Washington's refusal to deal with Iran, itself a large energy producer situated on the south shore of the Caspian Sea.
Julia Nanay of PFC Energy agrees that Kazakhstan, the major new producer of Caspian oil, has choices whether to send oil east or west. "I think Kazakhstan is going to be the critical country that we will all watch as to where they get their oil and gas out," she said.
Nanay says a wild card in the Central Asian energy market is Turkmenistan, north of Iran, which has large reserves of natural gas.
With world energy demand outpacing supply and with oil prices at record highs, new pipeline construction is becoming both more feasible and potentially profitable.