Is Europe Running Low on Natural Gas?

Posted on January 5, 2009 | Filed Under | Leave a Comment

Recently, Rune Likvern wrote a post talking about the possibility of a natural gas shortage in the United Kingdom, possibly as soon as February or March 2009. Rune isn’t the only one worried about the supply of gas in Europe and the UK. A little over a year ago, Euan Mearns wrote two posts about the European natural gas supply, the first called European Natural Gas and a follow-up addendum called Daddy, will the lights be on at Christmas? In this post, we combine the two posts and re-run them. Besides being relevant to the gas shortage issue, the posts also provide some additional background related to current Russian/Ukrainian dispute.
OECD European gas production looks set to peak in 2008. After that, falling production combined with rising demand will see OECD European gas imports wanting to rise from current 197 BCM per annum to 442 BCM per annum by 2020. Where will this gas come from and how will rising European imports affect N America and the rest of the world?

Figure 1 OECD Europe gas production and conceptual forecast. Click all charts to enlarge

Executive summary

As of 2006, OECD Europe produced 55% of its own natural gas with the majority of gas imports coming from Russia and Algeria.

OECD Europe has three main gas producers - Norway, The UK and The Netherlands. Norwegian gas production is undergoing a major expansion, but this is forecast to halt at 130 BCM per annum next year for political resource conservation reasons. UK and Dutch gas production are in decline, and combined OECD Europe indigenous gas production looks set to peak in 2008.

Gas consumption has been rising at 2.6% per annum since 1980 and there are a number of reasons to suggest that rising demand for gas will continue into the future unless it is checked by high price or shortages of supply.

It is believed that Russia will do what she can to maintain gas exports to OECD Europe. But with their three biggest gas fields - Yamburg, Urengoy and Medvezhye - in decline, maintaining supplies from second tier assets will be a major challenge. In order to maintain supplies to the OECD Europe, supplies may have to be cut to other countries.

Algeria, Egypt and Libya will all see expansion of gas production in the years ahead, but will also experience growth in indigenous consumption, especially in Egypt. Gas exports from these North African states are forecast to peak in 2015. They may provide an additional 33 BCM of exported gas to the European market.

OECD Europe gas imports are forecast to grow from current 197 BCM per annum to 442 BCM per annum by 2020 - if we see business as usual growth in demand and consumption. Where will this additional 245 BCM come from? Some may come from N Africa and some from West Africa and Qatar. It seems unlikely that an increase in imports on this scale will be possible and that high price and shortage will ration supply. This market driven outcome may hit the poorer nations hardest and one may suspect this may have a destabalising effect.

Introduction
This post will provide a production forecast for Europe’s main gas producers (the UK, The Netherlands and Norway); it will examine existing import patterns in Europe’s main gas consumers (Germany, Italy and France) and the ability of gas exporters to meet growing OECD European demand - Egypt, Libya, Algeria, and in particular Russia. This article was initiated as part of study of UK gas security. The UK faces rapidly falling gas production and an equally rapid expansion of imports and the key question for the UK is where will this gas come from? This will be dealt with in a separate post.
There are a number of ways to divide Europe for economic analysis. I have chosen to break out data for European states that are members of the OECD. This includes the important oil and gas producer Norway, which is not a member of the European Union (EU) but excludes the Baltic States, Romania and Bulgaria which are EU members but have not yet joined the OECD.

Figure 2 Map of the European Union.
Turkey is a member of the OECD but lies mainly outside of Europe and is not included in this study. Turkey is a major importer of gas, especially from Russia.
Data sources and gas units
Throughout this article I have used data from the 2007 BP Statistical Review of World Energy. I have also used billion cubic metres (BCM) as the standard unit for gas measurement. According to BP, 1 BCM is equivalent to:
35.3 billion cubic feet (BCF)
0.73 million tonnes of liquified natural gas (LNG)
36.0 trillion British Thermal Units (BTU)
6.29 million barrels oil equivalent (BOE)
Gas production forecast
OECD Europe gas production is dominated by three countries - the UK, The Netherlands and Norway, with lesser but significant quantities produced by Denmark, Italy, Poland and Germany.

Figure 3 OECD Europe gas production and conceptual forecast.
The UK
The changing face of gas production in the UK lies at the heart of Europe’s emerging gas problem. In 2003, the UK was a net exporter of gas to Europe but with peak production in 2000 and production now falling at 8.7% per annum it had become a net importer by 2004. The challenge facing the UK gas industry will be the subject of a detailed post.

Figure 4 UK gas production and consumption history
The UK forecast is based simply on extrapolating the 8.7% decline to 2020 by which time production is forecast to be 26 BCM per annum. At peak in 2000, the UK produced 108 BCM per annum and in the space of 20 years the UK will have gone from net exporter to a major importer, being dependent upon imports of over 80 BCM per annum.
This view on decline of UK gas production is shared by the UK BERR (Department for Business and Enterprise Regulatory Reform - formerly the DTI). See for example Figure 5.2 in this report.
The Netherlands
The Netherlands is home to OECD Europe’s largest gas field. Discovered before WWII, the full extent of the Slochteren Field did not become apparent until the post-war years. It was the discovery of this field in the Permian Rotliegendes sandstone that sparked the exploration for gas and then oil in the North Sea.

Figure 5 Europe’s largest gas fields. Data for Slochteren from Rembrandt Koppelaar. Troll and Ormen Lange from the NPD.
Slochteren lies onshore in the Groningen area of northern Holland and dwarfs the giant Norwegian gas fields of Troll and Ormen Lange. Further fields were found around Slochteren in the on-shore and off-shore areas.
Slochteren was never produced flat out and the Dutch government has laterally set a production cap on the field. In the period 2006 to 2015 this cap is set at 425 BCM over the 10 year period. NAM (the Shell - Exxon operating consortium) can optimise production over this time frame but strictly within this overall limit. The production cap on Slochteren has resulted in a long drawn out production plateau analagous to that seen in the Saudi super giant oil fileds - a very enlightened production strategy on behalf of the Dutch government.

Figure 6 Dutch gas production and forecast based on data provided by Rembrandt Koppelaar. The smaller offshore fields are showing a decline similar to the UK. Note that the volumes here are substantially larger than quoted by BP (see Figure 7). Rembrandt suggested this could be due to adjustment by BP for the energy content of the gas.
The other fields were not subject to regulation and are now in decline in similar manner to the UK gas fields. According to Rembrandt, Slochteren will also begin to decline naturally after 2015 and the bottom line is that Dutch gas production is now in an irreversible decline phase.
The forecast for the Netherlands is based on data kindly supplied by Rembrandt. This has smaller fields declining at a similar rate to the UK, while Slochteren has a somewhat lower decline rate.

Figure 7 History of Dutch gas production and exports.

Figure 8 Destinations of Dutch gas exports. Note that the Dutch import gas from Russia and Norway for re-export.
It can be seen that Dutch gas exports have been declining irregularly since the late 1970s and that some day post 2020, the Dutch may become an importer of natural gas.
Norway
Norwegian gas production has expanded rapidly in recent years, mainly the result of the Troll Field development. This expansion is set to go on for another couple of years, but then I suspect the expansionary phase will come to a halt.
In 2006 Norway produced 87.6 BCM of gas. Since then the Langeled pipeline that connects the Ormen Lange Field to Easington in England (and also to continental Europe) has been completed. The capacity of Langeled is about 20 BCM per annum. Furthermore, the development of the Snøhvit Field in North Norway with an LNG train provides Norway with an additional 5.7 BCM capacity.
The Norwegian export pipeline system is reported to have a capacity of 120 BCM per annum. With domestic consumption running at 4.5 BCM and LNG production at 5.7 BCM, future Norwegian production is forecast to run at 130 BCM per annum.
With Europe becoming ever more thirsty for gas, there was a plan to expand production in the Troll Field by 20 BCM per annum. Most significantly, this consent was refused by the Norwegian parliament. Hence Norway is in a position of having ample reserves to sustain a short term production boost, but instead seems to be choosing the path of restrained production which will favour an extended plateau at lower than maximum possible production levels.

Figure 9 Norwegian gas infrastructure.
The map of the Norwegian gas pipeline export system shows where Norwegian gas enters the UK and Continental Europe. The UK imported gas from Norway during the 1970s and 1980s where gas from the Frigg Field was piped to Scotland via the Vesterled pipeline. Since then the UK has had no need for Norwegian gas - until recently where a massive expansion of import capacity has been built. The Vesterled pipeline is now connected to the Norwegian gas transmission network and has been one route into the UK for Norwegian gas in recent years. There are, however, two new pipeline systems. The already mentioned Langeled pipeline that connects the UK to Ormen Lange via the Sleipner hub. And the Tampen Link that connects Statfjord and other mature fields in the Tampen Spur area to the UK operated FLAGS pipeline system. FLAGS transports associated gas from the northern UK fields to St Fergus in Scotland and since that UK gas production is now in decline, the Tampen Link will fill that surplus capacity - for a while at least.
Five other pipelines make landfall in continental Europe at 4 import terminals. Three pipelines feed two terminals in North Germany. And one pipeline lands at Zeebrugge in Belgium and one at Dunkirk in France. These entry points are connected to a broader European gas transmission system which pipes Norwegian gas as far as Spain, Austria, the Czech Republic and Poland.

Figure 10 Export destinations for Norwegian gas. Up until 2006, all Norwegian exports were via pipelines to Europe. In 2007, Norway opened its first LNG train and it will be interesting to see where these LNG exports end up.
It can be seen that Germany is by far the largest importer of Norwegian gas, followed by France, Belgium, the UK and Italy. One curiosity in this data is that the Netherlands are shown as a net importer of Norwegian gas. I can but speculate that The Netherlands are importing Norwegian gas to meet export contracts whilst conserving their own gas reserves.
Demand and import patterns
Natural gas consumption within OECD Europe has grown on average at 2.6% per annum since 1980. Back in 1965, Europe consumed less than 25 BCM per annum and this grew to over 470 BCM per annum by 2005, fuelled by North Sea gas. Higher prices and shortage of Russian supply saw consumption fall in 2006.

Figure 11 Forty years of gas binge in OECD Europe.
Where next for European Natural gas demand? Will the past trend continue, or will high price curtail demand? This is impossible to answer, but there are a number political, demographic and resource factors consistent with demand continuing to grow unchecked.

Growing prosperity in former Eastern European states leading to growth in energy consumption.

Migration from East to West placing greater strain on infrastructure and energy use in the West.

Migration from Northern to Southern Europe leading to greater prosperity in the latter and ever increasing energy needs - see for example gas consumption data for Spain.

Climate policies which as a quick fix continues to drive gas power generation forward as a more efficient and CO2 friendly means of generating electricity.

Pending shortages in oil supplies may lead to substitution by natural gas in automobiles.

If demand for natural gas continues to grow then source of supply and the security of that source is highly relevant. The following section shows the main sources of supply for Europe’s main consumers (excluding the UK). One thing all gas import strategies have in common is diversity of supply.
Germany
Germany has some significant and stable indigenous gas production, but is heavily dependent upon The Netherlands, Norway and Russia for pipeline imports. With Dutch gas production in decline, Germany will presumably be looking to increase supplies from elsewhere.
The cornerstone of the German strategy is the Baltic pipeline that will assure supplies of Russian gas direct to Germany that will by-pass former Soviet republics and East European states.
Without LNG, the German strategy seems constrained, since falling UK and Dutch production will place greater demand on Norwegian and Russian gas from several other states.

Figure 12 The import sources of gas to Germany.
France
France is unique among major European gas consumers with no indigenous gas production. France produces no oil and only a little coal - hence their reliance upon nuclear energy for power generation.
Like Germany, France relies heavily upon Dutch, Norwegian and Russian gas pipeline imports. France also has a mature LNG import trade with significant imports from north and west Africa.

Figures 13 & 14 The import sources of gas to France.
Italy
Italy has significant but falling indigenous gas production. It also has a highly diversified gas importation infrastructure born in part from its geographic location. Italy imports gas from Norway, The Netherlands and Russia but is also linked to Algeria and more recently Libya by pipeline.
Italy also imports small amounts of LNG, mainly from Algeria. Note how there were significant imports from Nigeria in 2004 - but then nothing. It seems these cargoes may have switched to France in 2005 / 06.

Figures 15 & 16 The import sources of gas to Italy.
Current and future sources of supply
The chart shows that Russia and Algeria are by far the most important sources of imported gas to OECD Europe. This raises the questions of whether or not these countries will be able to maintain or increase future supplies and if not, where will Europe’s growing thirst for gas be met in the future?

Figure 17 Sources of gas in OECD Europe in 2006.
Russia
Russian gas production had an interim peak in 1991, and with the fall of the Soviet Union went into decline for a number of years. Since 1997, production has begun to rise again and a new high was reached in 2006 of over 600 BCM per annum. The $60K question is where next for Russian gas production? This question is just as important as the future direction of Saudi oil production.

Figure 18 Russian gas production, consumption and exports.

Figure 19 Destinations of Russian gas exports
Russia exports less than one third of its gas production. The majority of exports are to OECD Europe, though a significant amount still goes to former republics. But the amount going to Ukraine, Belarus and Moldova is not documented in the BP statistics, and is presumably included with Russian consumption data. The structure of Russian gas production makes exports vulnerable to any down turn in production and / or increase in domestic consumption. Russian gas exports have been essentially static since 1990, and with the largest fields in decline (see below) it seems unlikely that Russia could at this stage raise production to meet the rising import requirements of OECD Europe.

Figure 20 Map showing the west Siberian gas fields of Russia. The three giant fields of Yamburg, Urengoy and Medvezhye have historically provided the bulk of Russia’s gas. All three are now in decline (see below). Much of Russia’s remaining potential lies in this area, particularly on the Yamal peninsula, to the left of the circle. The map is borrowed from a presentation by Kjell Aleklett.

Figure 21 Russian gas production forecast by Jean Laherrere showing how second tier fields may compensate for decline in the three giants - Yamburg, Urengoy and Medvezhye.
Historically, more than 50% of Russian gas production has come from 3 giant fields - Urengoy, Yamburg and Medvezhye. This excellent chart (unpublished) from Laherrere shows that all three of these core producers are in decline. Since Russia has relied upon these three supergiants for core production they now have an inventory of second tier giant fields to develop that may compensate for the decline from The Big 3, as shown on Laherrere’s chart.
The challenges for Gazprom are immense. Bovanenko lies on the Yamal peninsula below permafrost. It is at the end of proposed piplelines shown as dashed red lines on the map above. Shtockman lies out of helicopter range in the Barents Sea. Recent reports suggest that the Russians want to use a floating nuclear reactor to power the production platform.

Figure 22 Russian gas production scenarios by Jean Laherrere. WEO forecasts show rising consumption matching rising production with flat exports of around 200 BCM per annum.
This new chart from Laherrere 2007 shows a peak in Russian gas production about 8 years from now with unconstrained production which is unlikely to happen. Instead, constrained production as indicated by the slowly rising WEO 2006 forecast matched by rising consumption will give rise to relatively flat gas exports forward to 2020. So it seems likely that Russia will be able to maintain gas exports but will unlikely be able to increase exports to compensate for falling OECD Europe production.
A critical geo-political question, however, is how these exports are distributed in future? The Sakahlin projects will see East Siberian gas entering the Asian markets for the first time. Furthermore, the Baltic Gas Pipeline will witness a new prioritisation of gas energy security in Germany and western Europe.
The Baltic Gas Pipeline, which is under construction under a joint venture between Gazprom and German companies BASF and E.ON, will deliver 27.5 BCM per annum direct to Germany in the first instance with the option to rise to 55 BCM. All of OECD Europe’s gas from Russia currently has to cross The Ukraine and then either Slovakia or Poland in order to reach the main destinations of Germany, Italy and France. As we saw in the winter of 2005 / 6, Russia struggled to meet all commitments given extreme cold weather at home and cut gas supplies to some unfavoured former Soviet enclaves. The spat with Ukraine at that time highlighted how dependent OECD Europe was on the goodwill of the Ukrainians and the Baltic Pipeline circumvents that problem, providing gas security to Germany at least.

Figure 23 Map of pipelines in Ukraine that carry Russian gas to western Europe via Poland and Slovakia. From Ukraine vs Russia: Tales of pipelines and dependence by Jerome a Paris
The Baltic pipeline will be fed primarly by gas from a new field. The Yuzhno-Russkoye field, which recently started production, is located in the same area as Urengoy, is included in Laherrere’s chart and is one of the new fields that will offset decline from The Big 3. This new export capacity, therefore, does not necessarily represent new productive capacity but merely a more secure route for Russian gas into the OECD.
OECD Europe currently receives 115 BCM per annum from Russia, so the Baltic pipeline may eventually secure almost half of those deliveries. However, should OECD Europe face gas shortages, it is those countries at the end of the pipeline that will still be most vulnerable. Some interesting negotiations may lie ahead.
In summary, it is exceedingly difficult to predict how reliable Russian gas exports to OECD Europe will be in future. It seems most likely that Russia will maintain current production levels of 600 BCM per annum until 2020. However, increasing domestic consumption, and exports to East Asia may see gas exports to the west declining. Germany will be in the strongest position to secure supplies. If the remaining supplies are rationed by ability to pay then some of the poorer eastern European states may suffer.
Algeria

Figure 24 Map of oil and gas infrastructure in Algeria. Europe is fortunate to have gas rich North Africa lying off its southern shores.
According to the BP Statistical Review, Algeria has 4.5 TCM remaining gas reserves placing it number 8 in the world. Accordng to the analysis of Jean Laherrere, Algeria has 4TCM gas reserves remaining, which is in fair agreement with the BP figure. It is fortunate for Europe that Algeria lies close to the southern border of the continent allowing Algerian gas to be piped into Italy and Spain. There is also a significant trade in LNG between Algeria and Europe.

Figure 25 Discovery and production gas models for Algeria by Jean Laherrere.
Laherrere provides a more detailed picture of gas production than can be compiled from the BP data. The main difference is production reported gross of re-injected gas. An unconstrained production peak some 17 BCM per annum higher than today’s production is shown around 2015.

Figure 26 Algeria gas production, consumption and exports. Production and exports have not risen since 1999.
Algerian production grew steadily until 1999 but has since stagnated. There was a new discovery cycle during the 1990s and it is this that may provide impetus for some new production growth. Algerian consumptin is growing slowly and this will consume a portion of new production. New gas export capacity is estimated roughly to be 12 BCM per annum by 2012.

Figure 27 Destinations for Algerian pipeline gas exports.
Algeria exports about 37 BCM per annum by pipeline but is also active in LNG production with LNG exports of 25BCM in 2006. Most of the LNG was exported to Europe (and Turkey) with only small quantities going further afield. Europe is a short trip for an LNG tanker from North Africa, and in terms of tanker utilisation I suspect it will continue to be more profitable to deliver N African LNG to Europe than further afield.

Figure 28 Destinations for Algerian LNG gas exports.
The IEA 2005 energy outlook had this to say:
Algeria is the third-largest exporter of natural gas in the world. Exports are expected to increase as pipeline and LNG projects are brought on line. Gas exports were 64 bcm in 2003 and are expected to climb to 76 bcm in 2010 and reach 144 bcm by 2030.
The IEA target for 2010 looks marginally optimistic and their target for 2030 is a reserves busting feat as indicated on Laherrere’s chart (Figure 25).
Libya and Egypt
Both Libya and Egypt have seen rapid expansion of their gas production and exports in recent years. This is set to continue at a slower pace for a number of years according to these forecast models from Jean Laherrere. Growing population and domestic gas consumption in Egypt looks set to outstrip production growth and Egypt may cease to be a gas exporter beyond 2025.

Figure 29 Gas discovery and production models for Libya by Jean Laherrere.

Figure 30 Gas discovery and production models for Egypt by Jean Laherrere. In the export model (Figure 31) I have used the “slow” production model for Egypt.
Combining the three production models of Laherrere from Algeria, Egypt and Libya provides this picture of gas exports from N Africa peaking at around 120 BCM per annum in 2015. That represents a 33 BCM per annum growth from current export levels.

Figure 31 Gas export model for N Africa showing expansion of production and exports in the years ahead but with a conceptual export peak around 2015.
OECD Europe gas security
With OECD Europe indigenous gas production set to decline and good reasons for believing that demand for natural gas will continue to expand in the future, OECD Europe faces the prospect of importing ever larger amounts of gas (LNG) from ever more remote parts of the world. Current imports are running at 197 BCM per annum and the BAU scenario shown below shows imports burgeoning to 442 BCM by 2020. Where will this additional 245 BCM come from?

Figure 32 Gas scenarios for OECD Europe summarising the indigenous supply forecasts and demand forecasts from the preceding sections. With the BAU demand scenario, imports will need to grow from current 197 BCM per annum to projected 442 BCM per annum by 2020 - an increase of 245 BCM per annum. It is doubtful that this quantity of gas may be sourced from African and Middle East markets. It is therefore considered more likely that high price and supply shortages will curtail demand for gas. It is conceivable that conservation, more efficient energy use and substitution with alternative sources of electricity may fill the gap left by declining gas supplies.
This is near impossible to answer with certainty. My feeling is that Russia will strive to meet current commitments which will result in their gas exports neither increasing nor decreasing in the 2020 time frame. N Africa will see strong growth in production that will be offset by strong growth in their domestic consumption. Up to 33 BCM of new supply may come from N Africa and it seems reasonable to assume that the majority of that gas will come to Europe. That leaves 212 BCM to source from else where and will inevitably entail a massive expansion of LNG export and import infrastructure beyond that which already exists. In the period 2010 to 2020 Europe will face fierce competition for LNG supplies from the mature markets of Japan, South Korea and Taiwan and growing competition from new markets for LNG in the USA and most likely also in China.
In 2006, the total global LNG trade was 211 BCM and so we are talking about doubling that by 2020 to satisfy OECD European needs alone. The main sources of new supply will be West Africa (Nigeria), Qatar and Iran. Since Qatar has declared a moratorium on new LNG projects forward to 2011 it is a major challenge for these three countries alone to meet global demand growth.

Figures 33 & 34 The changing face of gas security in OECD Europe. With a BAU demand scenario, OECD Europe will face importing ever growing quantities of LNG from remote sources around the globe.
The crux of this whole issue is how growing demand for gas is managed. The UK, and other OECD governments seem intent on allowing market forces to determine the outcome. I would be the first to admit that the dynamics of supply and demand in the European gas trade has so many dimensions that trying to regulate and plan this trade is not simple. But on the other hand, allowing market forces, national economic strength, and price to determine who gets and who doesn’t get the available energy may have disasterous and unforeseen outcomes. A scenario where the former Soviet Republics and then the east European states and perhaps Turkey are left in the cold whilst western Europe uses historic strengths to secure itself energy supplies may have unpleasant outcomes flowing from a newly destabilised former Soviet bloc. Energy poverty throughout the poorer parts of Western Europe may also have undesirable consequences for the warm middle and upper classes.
The main message of this post, therefore, is to call upon the politicians of the OECD in Europe to show some rare leadership, and to recognise that massive energy conservation, and expansion of sensible alternative energy schemes, offer a better alternative to the polarisation that is likely to result from allowing market forces to determine the outcome of energy decline.
Acknowledgement I am indebted to Jean Laherrere who upon my request sent his most recent work on gas resources in countries relevant to the European market. Many of the charts come from a paper titled “Etat des reserves de gaz des pays exportateurs vers l’Europe” presented at Club de Nice Energie et geopolitique 29 nov. - 1er dec. 2007.
Addendum: Daddy will the lights be on at Christmas?
… or is Europe running low on natural gas?
OECD Europe gas imports may grow by 295 BCM per annum by 2020. In the same time period, global LNG production is set to grow by 350 BCM per annum. So we Europeans should be OK, so long as the USA, Japan, China, South Korea, India and Taiwan are not planning to expand their LNG imports as well.

Edinburgh, the capital of Scotland, at Christmas. A wondrous site. And none of our politicians or the general public ever wonder where the energy comes from and how we will pay for it. Cutting CO2 emissions is a priority for all parties. Eliminating nuclear power is also high on the agenda. Confused? Our politicians certainly are. Visit Edinburgh while you can, it’s one of Europe’s finest cities.

This is a follow up to the post I had on European Gas last week. In the comments nrgyman2000 posted his forecast for Norwegian gas production that was somewhat more pessimistic than the assumptions I had made. The UK department of BERR also sent me some more reports with interesting data on Global LNG liquefaction and regasification capacity. SamuM posted a lengthy comment on Russian gas with 10 charts that is recommended reading. This post aims to pull this new information together and concludes that European gas and energy security is in a perilous situation.
Norwegian gas supplies
nrgyman2000 [Editor’s Note: Now known as Rune Likvern] posted this forecast for Norwegian gas production to 2020. This forecast looks realistic and is based on official reserves estimates for Norwegian gas fields and estimated decline rates. In essence the giant Troll (in red) and Ormen Lange Fields (in white) show no decline in the forecast period since they are producing well within capacity and are facilities constrained. Other gas fields and associated gas from oil fields decline as reserves become exhausted.

I sent this to the Norwegian Petroleum Directorate (NPD) and invited comment. As always the NPD were very obliging and sent me this link to this figure saying that this was the only official gas forecast from Norway for the last five years.

I need to point out that Norway does hold large gas reserves and could produce higher volumes but this is a political issue. The Norwegian government recently refused an application to expand gas production in the Troll Field by 20 BCM per annum - in the interest of maximising oil recovery from that field. A future expansion of Troll may well take place and new field discoveries and developments may further boost Norwegian production beyond the volumes forecast by nrgyman2000.
But in the absence of any firm commitments on behalf of Norway in this regard, Europe should be planning for reduced gas imports from Norway from 2010. Given the energy predicament that Europe finds itself in, it would be helpful if the Norwegian government provided some clearer guidance as to their future gas export potential and intention. It would be a sensible strategy for Norway to impose energy rationing upon Europe and in so doing instill best practice in energy consumption, lay the ground work for sustainable energy use and lower the vast amounts of CO2 that Norway exports to the rest of the world every year.
Russian gas exports
In an excellent comment, SamuM posted this chart attributed to Aleksandr Ananenkov, Deputy CEO of Gazprom. The chart seems to come from this presentation by Vladimir Milov in Budapest in September 2007, on the Nabucco pipeline proposal. I’ve uploaded this presentation on the TOD server and it can be downloaded here.

This chart tends to confirm the contention I made in my European Gas post, which was that new field development in Russia would be sufficient to offset declines in the years ahead, but no more.
A revised view of OECD Europe’s gas import growth
Taking into account the information posted by SamuM reinforces my view that Russia will maintain but will struggle to increase gas exports to OECD Europe in the years ahead. And taking into account the Norwegian gas forecast of nrgyman2000 suggests that Europe’s indigenous production may be lower than I previously assumed. The revised forecast shows an increase in OECD gas imports of 295 BCM per annum to 2020 if consumption follows historic trends. Where will this gas come from?

For good measure I have made a similar chart for OECD Europe oil imports. Anyone wondering why world oil prices have gone up and are still rising need look no further than this chart. Where next for the oil price?

Liquefied natural gas - LNG
The UK government department for Business Enterprise and Regulatory Reform (BERR) have sent me reports on gas amounting to thousands of pages in recent weeks. More on that when I post on UK gas early in 2008. However, two tables from this report (large pdf) by Global Insight caught my eye. I have often heard that global LNG import capacity far exceeds export capacity and these tables seem to verify this contention.
The first of these tables (Exhibit 3) details how the global LNG trade is expected to develop in the period to 2025. Focus on Case A which is an optimistic scenario. At present there is 250 BCM liquefaction capacity (400-150) and 510 BCM regasification capacity (800-290). Note that liquefaction capacity equates to export capacity and regasification equates to import capacity. So, globally there is double the import capacity than export capacity for LNG.

By 2020, the timeframe for most forecasts, liquefaction capacity is forecast to grow to 600 BCM per annum and regasification capacity will grow to 1000 BCM per annum. The imbalance is redressed slightly but import capacity will still exceed export capacity by a factor of 1.7. It seems like there will be many disappointed importers and in a competitive LNG market the stage looks set for gas prices to escalate.
The other highly significant feature of these data is that they give an indication of how the international gas market will grow in the years ahead. Global Insight appear to forecast growth of 350 BCM per annum. Comparing this with the forecast growth in OECD Europe imports of 295 BCM per annum shows that Europe alone will likely have the appetite to consume most of the new global LNG supply in the period to 2020. What about the USA, Japan, China, India, South Korea, and Taiwan?
This discrepancy is so large I wrote to BERR inviting comment but have not received a satisfactory response as to how 350 BCM new global LNG export capacity is to be shared around the OECD and India and China?
Looking at the strategies of the International Oil Companies (IOC’s) there is a similar picture (Exhibit 10). At present they have built 83 BCM of liquefaction capacity and 269 BCM of regasification capacity. I find this quite extraordinary that companies will happily invest in import infrastructure for non-existent product. The UK gas strategy will rely heavily upon LNG imports and there is a headlong rush to build import facilities.

Is it just me, or does anyone else sense the presence of an elephant?
Conclusion
Daddy, will the lights be on at Christmas? Most probably yes in the UK, though it is worth noting that with cold weather across continental Europe, UK gas spot prices have been running about double this year compared to last. With governments intent on pursuing market regulation of the energy sector we must wait for prices to get so high that this kills demand (the elderly freezing to death) and inflation kills our debt laden economy.
Next year I’d quite like to see the UK government commission studies on foreign gas supplies that goes beyond building import facilities and assuming the gas will be there to fill them. I’d also like to see the Norwegian government publish a clear statement of intent on their future gas production potential and strategy. It is no longer satisfactory to have national governments cite IEA reports that are built upon the incredible efforts of the United States Geological Survey.


DrumBeat: January 4, 2009

Posted on January 5, 2009 | Filed Under | Leave a Comment

Canadian oil-sand mines stuck as crude price plummets
Canada’s once booming oil sands industry is cooling fast as the plunging oil price undermines investment. More than US$60 billion (£41 billion) worth of projects to extract oil from the bitumen-rich sands of northern Alberta have been delayed in the past three months, according to a study of industry figures by The Times.

A string of companies, including Royal Dutch Shell, Petro-Canada and SunCor, have been among those that have frozen multibillion dollar projects - in some cases indefinitely.

Fall in oil price may trigger UK deflation
The recent slump in the price of oil could help boost the UK economy, but too much of a further fall could reverse the good done, said a study backed by accountancy firm Ernst & Young.

Russia kindles flame of hope in Bosnia refinery
BOSANSKI BROD, Bosnia (Reuters) - A flare at the top of a 50-meter high tower in the Balkans shows Russia building political capital in a notoriously fractured part of Europe.

The flame in late November marked the restart of operations in Brod, Bosnia’s sole oil refinery which had been out of action since 2005 after being seriously damaged during the 1992-95 war.
Blue laws and fuel conservation
During World War I, auto dealers supported closing gas stations on
Sunday to forestall government rationing of fuel. The most restrictive
blue laws in North America in Bergen County, New Jersey came about to
limit traffic congestion caused by massive retail development. Can
Blue Laws be used today to manage traffic, conserve fuel, moderate
fuel price increases, and help air quality?

Kurt Cobb: No second chance
It is the mission of nearly every mainstream economist to overcome the pessimism of those who study the natural world and who don’t see how the human endeavor can continue on its current course of endless exponential economic growth. “Now, now,” these economists will say to the natural scientists, “you are being alarmist just like many before you. Let the marketplace work its wonders and let economic prosperity come to all parts of the world and this will enable us with our newfound wealth to address the many environmental problems we need to face.”

Such arguments seem like mere nonsense to any scientist who believes that endless economic growth is the cause of those problems. But the difference between these two camps may be less than it appears. Enlightened economists do acknowledge the need to treat the environment which sustains us with more care. The main issue appears to be timetables.

Czechs are latest casualty in gas dispute
Russian natural gas supplies dropped by 5% to the Czech Republic. Turkey also seeing reduced flow. Emergency meeting called for Monday.

Tar sands refinery projects face sticky future
US refineries are expanding operations to process oil from Canada’s tar sands just as efforts are building to limit the use of the more polluting fuels.

Saudi Arabia hikes February light prices
Dubai: Saudi Arabia raised its official selling prices for February for light crude oil to customers in the United States and Asia, state oil firm Aramco said on Sunday.

Buyers of Saudi oil had expected the price to rise as the kingdom cuts supply under an agreement with the Organisation of the Petroleum Exporting Countries (Opec).

Low crude prices stifle growth of Saudi Arabia’s foreign assets
A steep decline in oil prices sharply depressed growth of Saudi Arabia’s foreign assets in November after recording their highest increase in the previous months of 2008 because of a surge in its petrodollar income.

Iraq Production, Conservation Could Keep Oil Price in Check for Years
I’ve always said that the apparent peaking of the global oil supply at about 86 mb/d that was seen during 2006 - 2008 in the face of rising demand was only partly due to the Peak Oil concept of rapid decline rates in old fields and the eventual inability of new fields coming on stream to overcome that. The other important constraint to growing the oil supply was above-ground issues of war and violence, primarily in Iraq and Nigeria. I’ve always maintained that if either or both of these countries manages to turn on their oil spigots as rapidly as nature would allow, the global oil supply could grow substantially from here and Peak Oil would be pushed off for some years.

…All of this suggests to me that when global growth resumes the price of oil will have some immediate rise but it is not likely to be a robust and rapid increase to and beyond $100 for some time. The exact time will depend on when global growth resumes. If we are lucky and that happens in 2010, then perhaps we will see the oil price reach and exceed 2008 heights around 2014 - 2016.

Gunmen seize oil services vessel off Nigeria: sources
LAGOS (Reuters) – Gunmen hijacked a vessel belonging to French oil services group Bourbon off Nigeria’s Niger Delta on Sunday as it traveled toward a Royal Dutch Shell offshore oilfield, security sources said.

The vessel was carrying four expatriates from Cameroon, Ghana and Lebanon when it was attacked near the Bonny Fairway buoy, a major shipping route for the Nigerian oil services industry, one of the sources said.

Russia toughens stance in gas dispute with Ukraine
MOSCOW: Gazprom, Russia’s gas monopoly, said Sunday that it was raising the price it wants Ukraine to pay for natural gas, hardening its position in a dispute that has decreased supplies to Europe.

Oiling the wheels
India’s oil companies have had a record of failing to pull off big acquisitions overseas and have often lost out to the Chinese in the race for oil. A week ago, the man at the helm of India’s “global” oil company — ONGC Videsh — pulled off the country’s largest acquisition in the oil sector, bang in the middle of a financial slowdown.

Israel: Oil Refineries beats import threat
In recent months, the fuel companies had been in talks to import fuel products, especially from Indian refineries.

Cut oil sales to Israel backers - Iranian commander
TEHRAN (Reuters) - An Iranian military commander called on Islamic countries to cut oil exports to Israel’s supporters in response to the Jewish state’s offensive in Gaza, the official IRNA news agency reported on Sunday.

IRNA, giving only his last name, quoted commander Bagherzadeh as saying oil was “one of the powerful elements of pressure” on the Jewish state’s Western backers in the “unequal war” faced by Palestinians in Gaza.

“Pointing at Westerners’ dependence on the Islamic countries’ oil and energy resources, he (Bagherzadeh) called for cutting the export of crude oil to the Zionist regime’s supporters the world over,” IRNA said.

OPEC’s Loss Is Grocers’ Gain
Groceries are the top item on which US consumers are spending their savings from lower gas prices, ahead of putting the money in savings, holiday gift-buying, and paying off credit cards, according to research from retail analytics firm Precima, Retailer Daily reports.

Of the 3,013 consumers who were asked to choose from a list of ways they use money saved on gas, 48% said they’re spending it on groceries, followed by saving (42%), holiday gift-buying (37%), paying off credit cards (30%), entertainment (10%), and other (14%).

Russia-Ukraine: A Market Dispute
Are the Russians and Ukrainians simply fated to go to the mat every year about this time, causing grief to their neighbors? Or is something else at work in their antagonism?

The philosophical answer is that, while it’s hard to imagine these two former Soviet states living as friendly neighbors any time soon, the current dispute is a separate matter.

Aide says EU faces tougher Russia if does not help Ukraine
The European Union must help Ukraine solve its gas row with Russia, which has led to a supply cut, or face a tougher stance from Moscow on energy security and other issues, a Ukrainian presidential aide said on Sunday. Skip related content

Oleksander Shlapak, First Deputy Chief of Staff of President Viktor Yushchenko, also said Gazprom’s proposal that Ukraine pay $418 per 1,000 cubic metres is “utter nonsense.”

Growth of China’s energy imports slows in Jan.-Nov. 2008 but value soars
BEIJING (Xinhua) — China imported 240 million tonnes of major energy commodities (oil, refined products, natural gas and coal) in the first 11 months of 2008, up 3.7 percent year-on-year, according to a report released on Sunday by the General Administration of Customs.

Move to Increase Logging on Oregon Land
The Interior Department announced a controversial decision late Wednesday to double the rate of logging on 2.6 million acres of federally owned forests in southwestern Oregon. In doing so, it brushed aside the objections of the governor and two federal agencies charged with guarding the quality of the area’s water and the health of the fish that depend on it.

Error Seen in E.P.A. Report on Contaminant
The Environmental Protection Agency failed to follow its own guidelines and made a basic error in evaluating how a toxic contaminant in rocket fuel harms human health, according to a report by the agency’s inspector general.

The contaminant, perchlorate, has been found in significant levels in drinking water in at least 400 locations; scientific studies indicate that perchlorate blocks the necessary accumulation of iodide in human thyroid glands. Iodide insufficiencies in pregnant women are “associated with permanent mental deficits in the children,” the E.P.A. said.

Walking While Intoxicated
Every year, New Year’s revelers are warned about the risks of drunk driving. But what about drunk walking?

Looking Forward: Anticipated Production Start-Ups for 2009
Looking beyond oil and gas prices for the coming year, there is a number of anticipated production start-ups planned for 2009. Spanning the globe — from the deep waters of the Gulf of Mexico to the harsh conditions of the North Sea — the following projects are scheduled to commence production this year.

Saudi May Lead Price Hikes, Volume Cuts
SINGAPORE –Middle East crude oil producers led by Saudi Arabia are expected to raise official selling prices next week as a prelude to volume reductions, potentially keeping Asian refiners on the defensive.

Pakistan: President’s directives about loadshedding fall flat
PESHAWAR: Despite directives by President Asif Ali Zardari to end the prolonged power and natural gas suspension, people faced immense hardships as the problems persisted on Saturday.

The frequent hours-long electricity breakdown and gas supply-drop and low pressure coupled with severe winter due to downpour have made life miserable for the residents of Peshawar and adjoining areas.

Pakistan: Protest turns violent, leaves dozens injured
FAISALABAD: Thousands of textile workers took out violent rallies in different parts of city on Saturday and police fired in the air to disperse the protestors. Angry mobs burned tyres in the streets and pelted police with stones during a day of protests. More than 30 people were arrested and two dozen policemen were injured. The protestors set on fire many vehicles in various parts of the city. Windowpanes of a branch of UBL bank were smashed by the protestors located in front of Govt. Islamia College, Sargodha Road.

Xinjiang Becomes China’s Second Largest Crude Oil Producer
The western Xinjiang Uygur Autonomous Region became China’s second largest oil production base in 2008 with an output of 27.4 million tonnes, up 1 million tonnes from 2007.

According to Thursday’s Chinanews.com., Xinjiang overtook Shangdong Province, the previous second largest.

The Last Day of the Iraq War
It’s too late to fix Iraq before the pullout date. All U.S. troops can do now is keep trying to slow the killing and get out. They call it ‘Iraqi good enough.’

Venezuela’s PDVSA Tripled Net Profit to $12B
Venezuelan state oil company Petroleos de Venezuela more than tripled its net profit in the first nine months of the year, taking in billions of dollars in additional gains due to record high oil prices.

Petroleos de Venezuela’s, or PdVSA, net profit through Sept. 30 stood at $12.145 billion, a 225% increase from the $3.734 billion in the same period in 2007, according to the company’s latest financial report posted on its Web site.

Pipeline manager suspended over oil crisis
Kenya Pipeline Company has suspended a senior manager for allegedly stopping pumping of petroleum products inland from Mombasa.

Aspirational Futurism, Uncertainty and Resilience
One of the secondary effects of the latest set of crises to grip the world is the rise of essays and articles from various insightful folks, laying out scenarios of what the future will look like in an era of limited resources, energy, money, and so forth. Most of these follow a similar pattern: a list of reasonable depictions of a more limited future, and at least one item that seems completely out of the blue.

The best example has to come from James Kunstler’s description of the world to come in his “non-fiction” The Long Emergency and his explicitly fictional World Made By Hand. Along with his schadenfreude-soaked claims about the end of suburbia, automobiles, and all things superficial, he comes in with stark assertions that we’ll all be making our own music and acting on stage for each other, instead of listening to that damnable recorded “rock-roll” music and the disco and suchlike.

Depression: a nation in pain
On Dec 15, 1935 , a High Point woman wrote President Franklin D. Roosevelt about her underwear.

She didn’t have any. Neither did anyone in her family.

“Please give my children and myself some underclothes or we will freeze to death (in) this cold weather,” the woman pleaded. “We cannot make it.”

The family also needed money for rent, food and fuel.

The woman said her husband made only $6.75 a week, not enough to feed and clothe a family of nine .

A Cleaner Way to Keep the City Running
A new building with affordable rents in the Bronx will be powered partly by 10 wind turbines, which should cut its utility bills for common areas in half.

Urban Singapore Prepares to Gobble Up Its Last Village
The country’s last rural village has been designated for demolition and redevelopment, a final step in one of the world’s most extreme national makeovers.

Ethanol innovator driven to replace oil
“There is not a shortage on the means to produce food and fuel on the surface of Planet Earth,” he says, tapping his fingers for effect on the conference table in his spacious, yet spartan, office. “There are those out there who would have you believe there’s a problem out there. There is not a problem out there.”

Energy demand is down sharply – and could stay that way
People worldwide are driving less, flying less and using less electricity — but for how long?

Less gasoline. Less jet fuel. Less crude oil. Less natural gas. Less electricity.

At the end of 2008, Americans were getting downright stingy with their energy use. Between wildly volatile energy prices and a deepening recession, Americans are curtailing their renowned reputation for energy consumption in what some believe could be a long-term trend.

The economists’ term for it is “demand destruction.” This year’s poster child is driving, as the number of miles driven is showing the biggest drop since the federal government started keeping the statistic.

Where Will Oil End 2009?
Is 2009 going to be an exciting year for oil? Institutional investors don`t think so. Their estimates are very similar - much of Wall Street expects oil prices to average about $50 a barrel in 2009. Some of the firms and their specific forecasts:

Project aims to increase oil, gas kept in salt domes
About a half-mile from the marker of the original Spindletop gusher — a flagpole next to a lake and marsh — AGL is drilling into a salt dome that stretches 30,000 feet below the surface to carve out the first of two cylindrical natural gas storage caverns taller than two Williams Towers.

The $310 million project aims to increase storage capacity for gas used by power generators and marketers so they can park the gas when they don’t need it and get at it quickly when they do.

Canada’s Africa Oil stops Somali exploration:staff
DHAROOR, Somalia (Reuters) - Canadian oil and gas exploration company Africa Oil Corp has stopped exploration in Somalia’s Puntland region for lack of funds, local staff and contractors said on Sunday.

The company had started seismic mapping in a region it believed had strong prospects of holding rich oil deposits like those in geologically similar Yemen, a neighbour across the Gulf of Aden.

“Africa Oil Corp has failed in its objective … due to lack of funds,” Ahmed Ali, a local staff member, told Reuters. “We have not received salaries for three months. Foreign staff have already flown out and the company has stopped its operation.”

The Peak Oil Scam Controlling Oil Prices
Fifty year ago, experts stated that Peak Oil would be reached by the year 2000. Now, most experts [Oilempire.us] say that this number will probably be in the year 2020. If you knew you were being told that a product would soon be in low supply, and you believed it, you could raise prices on a whim.

US Mineral Management Services (MMS) reveals that natural leakage of oil from the ocean floor is 620,500 barrels per year around North America alone. Considering that the world ocean area is over ten times that area, it can easily be extrapolated that at least 6 million barrels per year leak out into the world oceans.

Tehran to reform subsidy scheme for oil products
TEHRAN: Iran will begin deregulating the heavily subsidised prices for oil products in three stages in the year starting in March.

Deputy oil minister in charge of planning Akbar Torkan said it was part of President Mahmoud Ahmadinejad’s economic reform plan that includes increasing energy prices and paying direct subsidies to the needy people instead.

Iran Budget to be Based on Oil Price of $37.5: Report
TEHRAN (Reuters) - Iran’s 2009-10 budget is expected to be based on an oil price of $37.5 per barrel, a “logical” level in view of last year’s price fall, Oil Minister Gholamhossein Nozari was quoted as saying on Sunday.

Nigeria’s foreign exchange reserves fall by $6 bln in December
As the global credit crisis takes its toll on the world economy and further depresses oil prices, Nigeria ’s foreign exchange reserves fell by 6 billion U.S. dollars or 8.2 percent in December last year to 52.7 billion dollars.

Agip pipeline sabotaged in southern Nigeria: army
LAGOS (AFP) – A pipeline belonging to Agip, a unit of Italian energy giant ENI, was blown up with dynamite in restive southern Nigeria, a military officer said Sunday.

There were no casualties in the explosion which happened on Friday night, General Wuyep Rimtip, the military commander in charge of the southern oil-producing states of Bayelsa and Delta, told AFP.

Ukraine accuses Russia of sabotaging Europe’s gas
KIEV/MOSCOW (Reuters) - Ukraine accused Russia on Sunday of
deliberately reducing gas flows to customers in Europe as they face freezing
winter temperatures.

Poland, Hungary, Romania, Bulgaria and Turkey have reported drops in
supplies after Russian state-controlled gas export monopoly Gazprom cut off
Ukraine on New Year’s Day in a dispute over prices.

Ukraine Seeks EU Involvement in Resolving Russian Gas Dispute
(Bloomberg) — Ukraine sought assistance from the European Union in resolving its dispute with Russia over the pricing of gas supplies as OAO Gazprom increased natural-gas deliveries to Europe via three alternative routes.

Customers told dispute could affect gas supply
KIEV, Ukraine (AP) — A top Ukrainian official warned Saturday that European customers could see serious natural gas disruptions in about two weeks if the energy dispute between Russia and Ukraine is not resolved, and the Russian gas monopoly Gazprom accused Ukraine of boycotting contract negotiations.

Governors ask Uncle Sam for $1 trillion
PHILADELPHIA (Reuters) — Governors of five states urged the federal government to provide $1 trillion in aid to the country’s 50 states to help pay for education, welfare and infrastructure, as states struggle with steep budget deficits amid a deepening recession.

China seeks cure for Spring Festival rail travel headache
BEIJING (Xinhua) — For many Chinese who want to nab railway tickets home for the annual Spring Festival migration, the government’s promise of having a better system by 2012 is just a distant hope.

Starting Friday, the first day to book tickets for the travel rush expected to last from Jan. 11 to Feb. 28, long queues appeared at ticket booths in almost every major railway hub.

Release Stranglehold On Domestic Oil
It’s going to be another cold winter in many parts of the country. Staying warm will likely come at a high cost, with heating bills expected to jump by as much as 25 percent. Those bills may become even steeper during the next few years, if Congress pursues any of the counterproductive energy solutions that lawmakers and candidates have recently touted in their campaigns.

Oil market lessons
The longer I study economic phenomena, the more I learn two truths. The first truth is how little I know. This is very humbling. There is just too much information out there for any one human being to process. The second truth is that this abstract thing we call “the market” can and does do what no human being or computer can - it does process all the pertinent information.

Hey! Who’s stealing my country anyway?
As an award-winning agrologist, Holm focuses on food and agriculture. She sees the SPP as a direct threat to Canadian farmers (who would lose the protection of supply-management regimes) and Canadian consumers.

“Canadians have not put a priority on farm and food policy because as a nation we have never gone without,” Holm writes. “Embarrassingly, Canada remains one of the few nations in the world that does NOT have a national food policy. But things are quickly changing, and community discussions around peak oil, peak food, food security, food safety, food miles, food sovereignty and food democracy are moving that change forward.”

Under the SPP, such discussions would be pointless. Canada would lose the right to create or enforce national policies in areas like food, energy and investment. Removing that right is precisely the objective of the SPP.

Hamas holding Natural gas discoveries off coast of Gaza hostage in 2006?
An unexpected energy windfall on Israel’s doorstep promises to resolve Israel’s energy security concerns for years to come. Unfortunately for Israel, it is the Palestinian Authority that controls the licensing of these reserves. So, as Operation Summer Rains washes away the administrative and political structures in the occupied territories, has Israel decided to use Hamas as an excuse to dismantle the PA and seize its energy assets.

China violates accord with Japan over disputed gas field: report
TOKYO (AFP) – China has violated an agreement with Japan and continued developing a gas field in a disputed area in the East China Sea, a press report said Sunday.

End of the ethanol era
The Iranian hostage crisis prompted Jimmy Carter to look for a home-grown alternative to Mideast oil. Cornell University scientist David Pimental began studying the concept. He added up the energy used in manufacturing ethanol and compared it to the amount of energy the fuel produces. There was a net loss, he decided. But the farm lobby succeeded in winning tax breaks and subsidies for the fuel.

“We’re actually importing more oil to produce ethanol,” is Pimental’s assessment. “It’s not making us oil-independent, and it’s costing us a lot of money.”

Solar Panel in a Most Unlikely Place

Browsing through this set of photos of one man’s trek through the Caucasus mountains in the eastern European country of Georgia, I was awed by the sight of a solar panel on a home that resembled a centuries-old stone barn.

Soot reduction ‘could help to stop global warming’
Governments could slow global warming dramatically, and buy time to avert disastrous climate change, by slashing emissions of one of humanity’s most familiar pollutants – soot – according to Nasa scientists. A study by the space agency shows that cutting down on the pollutant, which has so far been largely ignored by climate scientists, can have an immediate cooling effect – and prevent hundreds of thousands of deaths from air pollution at the same time.

Global Warming May Become the Instigator of World War IV
Global warming is the cause of a number of damaging effects to the earth and its inhabitants, such as climate change, glacier retreat, rising sea levels, and now we may have a new threat on the horizon… world war! According to the 2007 CNA Corporation report, there is clear indication that as the tensions of global warming continue to heat up, so may the possibilities of war.


Re: If there are solutions, what are they?

Posted on January 5, 2009 | Filed Under | Leave a Comment

Tom You say INMR/RNMR is old hat. I am well aware of the fact that there have been people, like Sumner, who have appreciated what is really happening but I am


growth and senescence of civilization spreadsheet model

Posted on January 5, 2009 | Filed Under | Leave a Comment

I am in the process of developing an Excel spreadsheet model called ‘Growth and senescence of civilization’ for assessing the materialistic development of


Good Morning America, How are you

Posted on January 5, 2009 | Filed Under | Leave a Comment

Don’t you know me I’m your native son I’m the train they call the City of New Orleans I’ll be gone five hundred miles, before day is done. Arlo Guthrie gave a


Re: 34 Stunning LEED Platinum Projects

Posted on January 5, 2009 | Filed Under | Leave a Comment

That was a severely frustrating page - no direct information whatsoever on the projects - the only one of merit (to me) was the small area footprint home (ugly


Re: If there are solutions, what are they?

Posted on January 5, 2009 | Filed Under Our Future | Leave a Comment

Tom You say INMR/RNMR is old hat. I am well aware of the fact that there have been people, like Sumner, who have appreciated what is really happening but I am

Read full story


growth and senescence of civilization spreadsheet model

Posted on January 5, 2009 | Filed Under Our Future | Leave a Comment

I am in the process of developing an Excel spreadsheet model called ‘Growth and senescence of civilization’ for assessing the materialistic development of

Read full story


DrumBeat: January 4, 2009

Posted on January 5, 2009 | Filed Under Our Future | Leave a Comment

Canadian oil-sand mines stuck as crude price plummets
Canada’s once booming oil sands industry is cooling fast as the plunging oil price undermines investment. More than US$60 billion (£41 billion) worth of projects to extract oil from the bitumen-rich sands of northern Alberta have been delayed in the past three months, according to a study of industry figures by The Times.

A string of companies, including Royal Dutch Shell, Petro-Canada and SunCor, have been among those that have frozen multibillion dollar projects - in some cases indefinitely.

Fall in oil price may trigger UK deflation
The recent slump in the price of oil could help boost the UK economy, but too much of a further fall could reverse the good done, said a study backed by accountancy firm Ernst & Young.

Russia kindles flame of hope in Bosnia refinery
BOSANSKI BROD, Bosnia (Reuters) - A flare at the top of a 50-meter high tower in the Balkans shows Russia building political capital in a notoriously fractured part of Europe.

The flame in late November marked the restart of operations in Brod, Bosnia’s sole oil refinery which had been out of action since 2005 after being seriously damaged during the 1992-95 war.
Blue laws and fuel conservation
During World War I, auto dealers supported closing gas stations on
Sunday to forestall government rationing of fuel. The most restrictive
blue laws in North America in Bergen County, New Jersey came about to
limit traffic congestion caused by massive retail development. Can
Blue Laws be used today to manage traffic, conserve fuel, moderate
fuel price increases, and help air quality?

Kurt Cobb: No second chance
It is the mission of nearly every mainstream economist to overcome the pessimism of those who study the natural world and who don’t see how the human endeavor can continue on its current course of endless exponential economic growth. “Now, now,” these economists will say to the natural scientists, “you are being alarmist just like many before you. Let the marketplace work its wonders and let economic prosperity come to all parts of the world and this will enable us with our newfound wealth to address the many environmental problems we need to face.”

Such arguments seem like mere nonsense to any scientist who believes that endless economic growth is the cause of those problems. But the difference between these two camps may be less than it appears. Enlightened economists do acknowledge the need to treat the environment which sustains us with more care. The main issue appears to be timetables.

Czechs are latest casualty in gas dispute
Russian natural gas supplies dropped by 5% to the Czech Republic. Turkey also seeing reduced flow. Emergency meeting called for Monday.

Tar sands refinery projects face sticky future
US refineries are expanding operations to process oil from Canada’s tar sands just as efforts are building to limit the use of the more polluting fuels.

Saudi Arabia hikes February light prices
Dubai: Saudi Arabia raised its official selling prices for February for light crude oil to customers in the United States and Asia, state oil firm Aramco said on Sunday.

Buyers of Saudi oil had expected the price to rise as the kingdom cuts supply under an agreement with the Organisation of the Petroleum Exporting Countries (Opec).

Low crude prices stifle growth of Saudi Arabia’s foreign assets
A steep decline in oil prices sharply depressed growth of Saudi Arabia’s foreign assets in November after recording their highest increase in the previous months of 2008 because of a surge in its petrodollar income.

Iraq Production, Conservation Could Keep Oil Price in Check for Years
I’ve always said that the apparent peaking of the global oil supply at about 86 mb/d that was seen during 2006 - 2008 in the face of rising demand was only partly due to the Peak Oil concept of rapid decline rates in old fields and the eventual inability of new fields coming on stream to overcome that. The other important constraint to growing the oil supply was above-ground issues of war and violence, primarily in Iraq and Nigeria. I’ve always maintained that if either or both of these countries manages to turn on their oil spigots as rapidly as nature would allow, the global oil supply could grow substantially from here and Peak Oil would be pushed off for some years.

…All of this suggests to me that when global growth resumes the price of oil will have some immediate rise but it is not likely to be a robust and rapid increase to and beyond $100 for some time. The exact time will depend on when global growth resumes. If we are lucky and that happens in 2010, then perhaps we will see the oil price reach and exceed 2008 heights around 2014 - 2016.

Gunmen seize oil services vessel off Nigeria: sources
LAGOS (Reuters) – Gunmen hijacked a vessel belonging to French oil services group Bourbon off Nigeria’s Niger Delta on Sunday as it traveled toward a Royal Dutch Shell offshore oilfield, security sources said.

The vessel was carrying four expatriates from Cameroon, Ghana and Lebanon when it was attacked near the Bonny Fairway buoy, a major shipping route for the Nigerian oil services industry, one of the sources said.

Russia toughens stance in gas dispute with Ukraine
MOSCOW: Gazprom, Russia’s gas monopoly, said Sunday that it was raising the price it wants Ukraine to pay for natural gas, hardening its position in a dispute that has decreased supplies to Europe.

Oiling the wheels
India’s oil companies have had a record of failing to pull off big acquisitions overseas and have often lost out to the Chinese in the race for oil. A week ago, the man at the helm of India’s “global” oil company — ONGC Videsh — pulled off the country’s largest acquisition in the oil sector, bang in the middle of a financial slowdown.

Israel: Oil Refineries beats import threat
In recent months, the fuel companies had been in talks to import fuel products, especially from Indian refineries.

Cut oil sales to Israel backers - Iranian commander
TEHRAN (Reuters) - An Iranian military commander called on Islamic countries to cut oil exports to Israel’s supporters in response to the Jewish state’s offensive in Gaza, the official IRNA news agency reported on Sunday.

IRNA, giving only his last name, quoted commander Bagherzadeh as saying oil was “one of the powerful elements of pressure” on the Jewish state’s Western backers in the “unequal war” faced by Palestinians in Gaza.

“Pointing at Westerners’ dependence on the Islamic countries’ oil and energy resources, he (Bagherzadeh) called for cutting the export of crude oil to the Zionist regime’s supporters the world over,” IRNA said.

OPEC’s Loss Is Grocers’ Gain
Groceries are the top item on which US consumers are spending their savings from lower gas prices, ahead of putting the money in savings, holiday gift-buying, and paying off credit cards, according to research from retail analytics firm Precima, Retailer Daily reports.

Of the 3,013 consumers who were asked to choose from a list of ways they use money saved on gas, 48% said they’re spending it on groceries, followed by saving (42%), holiday gift-buying (37%), paying off credit cards (30%), entertainment (10%), and other (14%).

Russia-Ukraine: A Market Dispute
Are the Russians and Ukrainians simply fated to go to the mat every year about this time, causing grief to their neighbors? Or is something else at work in their antagonism?

The philosophical answer is that, while it’s hard to imagine these two former Soviet states living as friendly neighbors any time soon, the current dispute is a separate matter.

Aide says EU faces tougher Russia if does not help Ukraine
The European Union must help Ukraine solve its gas row with Russia, which has led to a supply cut, or face a tougher stance from Moscow on energy security and other issues, a Ukrainian presidential aide said on Sunday. Skip related content

Oleksander Shlapak, First Deputy Chief of Staff of President Viktor Yushchenko, also said Gazprom’s proposal that Ukraine pay $418 per 1,000 cubic metres is “utter nonsense.”

Growth of China’s energy imports slows in Jan.-Nov. 2008 but value soars
BEIJING (Xinhua) — China imported 240 million tonnes of major energy commodities (oil, refined products, natural gas and coal) in the first 11 months of 2008, up 3.7 percent year-on-year, according to a report released on Sunday by the General Administration of Customs.

Move to Increase Logging on Oregon Land
The Interior Department announced a controversial decision late Wednesday to double the rate of logging on 2.6 million acres of federally owned forests in southwestern Oregon. In doing so, it brushed aside the objections of the governor and two federal agencies charged with guarding the quality of the area’s water and the health of the fish that depend on it.

Error Seen in E.P.A. Report on Contaminant
The Environmental Protection Agency failed to follow its own guidelines and made a basic error in evaluating how a toxic contaminant in rocket fuel harms human health, according to a report by the agency’s inspector general.

The contaminant, perchlorate, has been found in significant levels in drinking water in at least 400 locations; scientific studies indicate that perchlorate blocks the necessary accumulation of iodide in human thyroid glands. Iodide insufficiencies in pregnant women are “associated with permanent mental deficits in the children,” the E.P.A. said.

Walking While Intoxicated
Every year, New Year’s revelers are warned about the risks of drunk driving. But what about drunk walking?

Looking Forward: Anticipated Production Start-Ups for 2009
Looking beyond oil and gas prices for the coming year, there is a number of anticipated production start-ups planned for 2009. Spanning the globe — from the deep waters of the Gulf of Mexico to the harsh conditions of the North Sea — the following projects are scheduled to commence production this year.

Saudi May Lead Price Hikes, Volume Cuts
SINGAPORE –Middle East crude oil producers led by Saudi Arabia are expected to raise official selling prices next week as a prelude to volume reductions, potentially keeping Asian refiners on the defensive.

Pakistan: President’s directives about loadshedding fall flat
PESHAWAR: Despite directives by President Asif Ali Zardari to end the prolonged power and natural gas suspension, people faced immense hardships as the problems persisted on Saturday.

The frequent hours-long electricity breakdown and gas supply-drop and low pressure coupled with severe winter due to downpour have made life miserable for the residents of Peshawar and adjoining areas.

Pakistan: Protest turns violent, leaves dozens injured
FAISALABAD: Thousands of textile workers took out violent rallies in different parts of city on Saturday and police fired in the air to disperse the protestors. Angry mobs burned tyres in the streets and pelted police with stones during a day of protests. More than 30 people were arrested and two dozen policemen were injured. The protestors set on fire many vehicles in various parts of the city. Windowpanes of a branch of UBL bank were smashed by the protestors located in front of Govt. Islamia College, Sargodha Road.

Xinjiang Becomes China’s Second Largest Crude Oil Producer
The western Xinjiang Uygur Autonomous Region became China’s second largest oil production base in 2008 with an output of 27.4 million tonnes, up 1 million tonnes from 2007.

According to Thursday’s Chinanews.com., Xinjiang overtook Shangdong Province, the previous second largest.

The Last Day of the Iraq War
It’s too late to fix Iraq before the pullout date. All U.S. troops can do now is keep trying to slow the killing and get out. They call it ‘Iraqi good enough.’

Venezuela’s PDVSA Tripled Net Profit to $12B
Venezuelan state oil company Petroleos de Venezuela more than tripled its net profit in the first nine months of the year, taking in billions of dollars in additional gains due to record high oil prices.

Petroleos de Venezuela’s, or PdVSA, net profit through Sept. 30 stood at $12.145 billion, a 225% increase from the $3.734 billion in the same period in 2007, according to the company’s latest financial report posted on its Web site.

Pipeline manager suspended over oil crisis
Kenya Pipeline Company has suspended a senior manager for allegedly stopping pumping of petroleum products inland from Mombasa.

Aspirational Futurism, Uncertainty and Resilience
One of the secondary effects of the latest set of crises to grip the world is the rise of essays and articles from various insightful folks, laying out scenarios of what the future will look like in an era of limited resources, energy, money, and so forth. Most of these follow a similar pattern: a list of reasonable depictions of a more limited future, and at least one item that seems completely out of the blue.

The best example has to come from James Kunstler’s description of the world to come in his “non-fiction” The Long Emergency and his explicitly fictional World Made By Hand. Along with his schadenfreude-soaked claims about the end of suburbia, automobiles, and all things superficial, he comes in with stark assertions that we’ll all be making our own music and acting on stage for each other, instead of listening to that damnable recorded “rock-roll” music and the disco and suchlike.

Depression: a nation in pain
On Dec 15, 1935 , a High Point woman wrote President Franklin D. Roosevelt about her underwear.

She didn’t have any. Neither did anyone in her family.

“Please give my children and myself some underclothes or we will freeze to death (in) this cold weather,” the woman pleaded. “We cannot make it.”

The family also needed money for rent, food and fuel.

The woman said her husband made only $6.75 a week, not enough to feed and clothe a family of nine .

A Cleaner Way to Keep the City Running
A new building with affordable rents in the Bronx will be powered partly by 10 wind turbines, which should cut its utility bills for common areas in half.

Urban Singapore Prepares to Gobble Up Its Last Village
The country’s last rural village has been designated for demolition and redevelopment, a final step in one of the world’s most extreme national makeovers.

Ethanol innovator driven to replace oil
“There is not a shortage on the means to produce food and fuel on the surface of Planet Earth,” he says, tapping his fingers for effect on the conference table in his spacious, yet spartan, office. “There are those out there who would have you believe there’s a problem out there. There is not a problem out there.”

Energy demand is down sharply – and could stay that way
People worldwide are driving less, flying less and using less electricity — but for how long?

Less gasoline. Less jet fuel. Less crude oil. Less natural gas. Less electricity.

At the end of 2008, Americans were getting downright stingy with their energy use. Between wildly volatile energy prices and a deepening recession, Americans are curtailing their renowned reputation for energy consumption in what some believe could be a long-term trend.

The economists’ term for it is “demand destruction.” This year’s poster child is driving, as the number of miles driven is showing the biggest drop since the federal government started keeping the statistic.

Where Will Oil End 2009?
Is 2009 going to be an exciting year for oil? Institutional investors don`t think so. Their estimates are very similar - much of Wall Street expects oil prices to average about $50 a barrel in 2009. Some of the firms and their specific forecasts:

Project aims to increase oil, gas kept in salt domes
About a half-mile from the marker of the original Spindletop gusher — a flagpole next to a lake and marsh — AGL is drilling into a salt dome that stretches 30,000 feet below the surface to carve out the first of two cylindrical natural gas storage caverns taller than two Williams Towers.

The $310 million project aims to increase storage capacity for gas used by power generators and marketers so they can park the gas when they don’t need it and get at it quickly when they do.

Canada’s Africa Oil stops Somali exploration:staff
DHAROOR, Somalia (Reuters) - Canadian oil and gas exploration company Africa Oil Corp has stopped exploration in Somalia’s Puntland region for lack of funds, local staff and contractors said on Sunday.

The company had started seismic mapping in a region it believed had strong prospects of holding rich oil deposits like those in geologically similar Yemen, a neighbour across the Gulf of Aden.

“Africa Oil Corp has failed in its objective … due to lack of funds,” Ahmed Ali, a local staff member, told Reuters. “We have not received salaries for three months. Foreign staff have already flown out and the company has stopped its operation.”

The Peak Oil Scam Controlling Oil Prices
Fifty year ago, experts stated that Peak Oil would be reached by the year 2000. Now, most experts [Oilempire.us] say that this number will probably be in the year 2020. If you knew you were being told that a product would soon be in low supply, and you believed it, you could raise prices on a whim.

US Mineral Management Services (MMS) reveals that natural leakage of oil from the ocean floor is 620,500 barrels per year around North America alone. Considering that the world ocean area is over ten times that area, it can easily be extrapolated that at least 6 million barrels per year leak out into the world oceans.

Tehran to reform subsidy scheme for oil products
TEHRAN: Iran will begin deregulating the heavily subsidised prices for oil products in three stages in the year starting in March.

Deputy oil minister in charge of planning Akbar Torkan said it was part of President Mahmoud Ahmadinejad’s economic reform plan that includes increasing energy prices and paying direct subsidies to the needy people instead.

Iran Budget to be Based on Oil Price of $37.5: Report
TEHRAN (Reuters) - Iran’s 2009-10 budget is expected to be based on an oil price of $37.5 per barrel, a “logical” level in view of last year’s price fall, Oil Minister Gholamhossein Nozari was quoted as saying on Sunday.

Nigeria’s foreign exchange reserves fall by $6 bln in December
As the global credit crisis takes its toll on the world economy and further depresses oil prices, Nigeria ’s foreign exchange reserves fell by 6 billion U.S. dollars or 8.2 percent in December last year to 52.7 billion dollars.

Agip pipeline sabotaged in southern Nigeria: army
LAGOS (AFP) – A pipeline belonging to Agip, a unit of Italian energy giant ENI, was blown up with dynamite in restive southern Nigeria, a military officer said Sunday.

There were no casualties in the explosion which happened on Friday night, General Wuyep Rimtip, the military commander in charge of the southern oil-producing states of Bayelsa and Delta, told AFP.

Ukraine accuses Russia of sabotaging Europe’s gas
KIEV/MOSCOW (Reuters) - Ukraine accused Russia on Sunday of
deliberately reducing gas flows to customers in Europe as they face freezing
winter temperatures.

Poland, Hungary, Romania, Bulgaria and Turkey have reported drops in
supplies after Russian state-controlled gas export monopoly Gazprom cut off
Ukraine on New Year’s Day in a dispute over prices.

Ukraine Seeks EU Involvement in Resolving Russian Gas Dispute
(Bloomberg) — Ukraine sought assistance from the European Union in resolving its dispute with Russia over the pricing of gas supplies as OAO Gazprom increased natural-gas deliveries to Europe via three alternative routes.

Customers told dispute could affect gas supply
KIEV, Ukraine (AP) — A top Ukrainian official warned Saturday that European customers could see serious natural gas disruptions in about two weeks if the energy dispute between Russia and Ukraine is not resolved, and the Russian gas monopoly Gazprom accused Ukraine of boycotting contract negotiations.

Governors ask Uncle Sam for $1 trillion
PHILADELPHIA (Reuters) — Governors of five states urged the federal government to provide $1 trillion in aid to the country’s 50 states to help pay for education, welfare and infrastructure, as states struggle with steep budget deficits amid a deepening recession.

China seeks cure for Spring Festival rail travel headache
BEIJING (Xinhua) — For many Chinese who want to nab railway tickets home for the annual Spring Festival migration, the government’s promise of having a better system by 2012 is just a distant hope.

Starting Friday, the first day to book tickets for the travel rush expected to last from Jan. 11 to Feb. 28, long queues appeared at ticket booths in almost every major railway hub.

Release Stranglehold On Domestic Oil
It’s going to be another cold winter in many parts of the country. Staying warm will likely come at a high cost, with heating bills expected to jump by as much as 25 percent. Those bills may become even steeper during the next few years, if Congress pursues any of the counterproductive energy solutions that lawmakers and candidates have recently touted in their campaigns.

Oil market lessons
The longer I study economic phenomena, the more I learn two truths. The first truth is how little I know. This is very humbling. There is just too much information out there for any one human being to process. The second truth is that this abstract thing we call “the market” can and does do what no human being or computer can - it does process all the pertinent information.

Hey! Who’s stealing my country anyway?
As an award-winning agrologist, Holm focuses on food and agriculture. She sees the SPP as a direct threat to Canadian farmers (who would lose the protection of supply-management regimes) and Canadian consumers.

“Canadians have not put a priority on farm and food policy because as a nation we have never gone without,” Holm writes. “Embarrassingly, Canada remains one of the few nations in the world that does NOT have a national food policy. But things are quickly changing, and community discussions around peak oil, peak food, food security, food safety, food miles, food sovereignty and food democracy are moving that change forward.”

Under the SPP, such discussions would be pointless. Canada would lose the right to create or enforce national policies in areas like food, energy and investment. Removing that right is precisely the objective of the SPP.

Hamas holding Natural gas discoveries off coast of Gaza hostage in 2006?
An unexpected energy windfall on Israel’s doorstep promises to resolve Israel’s energy security concerns for years to come. Unfortunately for Israel, it is the Palestinian Authority that controls the licensing of these reserves. So, as Operation Summer Rains washes away the administrative and political structures in the occupied territories, has Israel decided to use Hamas as an excuse to dismantle the PA and seize its energy assets.

China violates accord with Japan over disputed gas field: report
TOKYO (AFP) – China has violated an agreement with Japan and continued developing a gas field in a disputed area in the East China Sea, a press report said Sunday.

End of the ethanol era
The Iranian hostage crisis prompted Jimmy Carter to look for a home-grown alternative to Mideast oil. Cornell University scientist David Pimental began studying the concept. He added up the energy used in manufacturing ethanol and compared it to the amount of energy the fuel produces. There was a net loss, he decided. But the farm lobby succeeded in winning tax breaks and subsidies for the fuel.

“We’re actually importing more oil to produce ethanol,” is Pimental’s assessment. “It’s not making us oil-independent, and it’s costing us a lot of money.”

Solar Panel in a Most Unlikely Place

Browsing through this set of photos of one man’s trek through the Caucasus mountains in the eastern European country of Georgia, I was awed by the sight of a solar panel on a home that resembled a centuries-old stone barn.

Soot reduction ‘could help to stop global warming’
Governments could slow global warming dramatically, and buy time to avert disastrous climate change, by slashing emissions of one of humanity’s most familiar pollutants – soot – according to Nasa scientists. A study by the space agency shows that cutting down on the pollutant, which has so far been largely ignored by climate scientists, can have an immediate cooling effect – and prevent hundreds of thousands of deaths from air pollution at the same time.

Global Warming May Become the Instigator of World War IV
Global warming is the cause of a number of damaging effects to the earth and its inhabitants, such as climate change, glacier retreat, rising sea levels, and now we may have a new threat on the horizon… world war! According to the 2007 CNA Corporation report, there is clear indication that as the tensions of global warming continue to heat up, so may the possibilities of war.



Read full story


Is Europe Running Low on Natural Gas?

Posted on January 5, 2009 | Filed Under Our Future | Leave a Comment

Recently, Rune Likvern wrote a post talking about the possibility of a natural gas shortage in the United Kingdom, possibly as soon as February or March 2009. Rune isn’t the only one worried about the supply of gas in Europe and the UK. A little over a year ago, Euan Mearns wrote two posts about the European natural gas supply, the first called European Natural Gas and a follow-up addendum called Daddy, will the lights be on at Christmas? In this post, we combine the two posts and re-run them. Besides being relevant to the gas shortage issue, the posts also provide some additional background related to current Russian/Ukrainian dispute.
OECD European gas production looks set to peak in 2008. After that, falling production combined with rising demand will see OECD European gas imports wanting to rise from current 197 BCM per annum to 442 BCM per annum by 2020. Where will this gas come from and how will rising European imports affect N America and the rest of the world?

Figure 1 OECD Europe gas production and conceptual forecast. Click all charts to enlarge

Executive summary

As of 2006, OECD Europe produced 55% of its own natural gas with the majority of gas imports coming from Russia and Algeria.

OECD Europe has three main gas producers - Norway, The UK and The Netherlands. Norwegian gas production is undergoing a major expansion, but this is forecast to halt at 130 BCM per annum next year for political resource conservation reasons. UK and Dutch gas production are in decline, and combined OECD Europe indigenous gas production looks set to peak in 2008.

Gas consumption has been rising at 2.6% per annum since 1980 and there are a number of reasons to suggest that rising demand for gas will continue into the future unless it is checked by high price or shortages of supply.

It is believed that Russia will do what she can to maintain gas exports to OECD Europe. But with their three biggest gas fields - Yamburg, Urengoy and Medvezhye - in decline, maintaining supplies from second tier assets will be a major challenge. In order to maintain supplies to the OECD Europe, supplies may have to be cut to other countries.

Algeria, Egypt and Libya will all see expansion of gas production in the years ahead, but will also experience growth in indigenous consumption, especially in Egypt. Gas exports from these North African states are forecast to peak in 2015. They may provide an additional 33 BCM of exported gas to the European market.

OECD Europe gas imports are forecast to grow from current 197 BCM per annum to 442 BCM per annum by 2020 - if we see business as usual growth in demand and consumption. Where will this additional 245 BCM come from? Some may come from N Africa and some from West Africa and Qatar. It seems unlikely that an increase in imports on this scale will be possible and that high price and shortage will ration supply. This market driven outcome may hit the poorer nations hardest and one may suspect this may have a destabalising effect.

Introduction
This post will provide a production forecast for Europe’s main gas producers (the UK, The Netherlands and Norway); it will examine existing import patterns in Europe’s main gas consumers (Germany, Italy and France) and the ability of gas exporters to meet growing OECD European demand - Egypt, Libya, Algeria, and in particular Russia. This article was initiated as part of study of UK gas security. The UK faces rapidly falling gas production and an equally rapid expansion of imports and the key question for the UK is where will this gas come from? This will be dealt with in a separate post.
There are a number of ways to divide Europe for economic analysis. I have chosen to break out data for European states that are members of the OECD. This includes the important oil and gas producer Norway, which is not a member of the European Union (EU) but excludes the Baltic States, Romania and Bulgaria which are EU members but have not yet joined the OECD.

Figure 2 Map of the European Union.
Turkey is a member of the OECD but lies mainly outside of Europe and is not included in this study. Turkey is a major importer of gas, especially from Russia.
Data sources and gas units
Throughout this article I have used data from the 2007 BP Statistical Review of World Energy. I have also used billion cubic metres (BCM) as the standard unit for gas measurement. According to BP, 1 BCM is equivalent to:
35.3 billion cubic feet (BCF)
0.73 million tonnes of liquified natural gas (LNG)
36.0 trillion British Thermal Units (BTU)
6.29 million barrels oil equivalent (BOE)
Gas production forecast
OECD Europe gas production is dominated by three countries - the UK, The Netherlands and Norway, with lesser but significant quantities produced by Denmark, Italy, Poland and Germany.

Figure 3 OECD Europe gas production and conceptual forecast.
The UK
The changing face of gas production in the UK lies at the heart of Europe’s emerging gas problem. In 2003, the UK was a net exporter of gas to Europe but with peak production in 2000 and production now falling at 8.7% per annum it had become a net importer by 2004. The challenge facing the UK gas industry will be the subject of a detailed post.

Figure 4 UK gas production and consumption history
The UK forecast is based simply on extrapolating the 8.7% decline to 2020 by which time production is forecast to be 26 BCM per annum. At peak in 2000, the UK produced 108 BCM per annum and in the space of 20 years the UK will have gone from net exporter to a major importer, being dependent upon imports of over 80 BCM per annum.
This view on decline of UK gas production is shared by the UK BERR (Department for Business and Enterprise Regulatory Reform - formerly the DTI). See for example Figure 5.2 in this report.
The Netherlands
The Netherlands is home to OECD Europe’s largest gas field. Discovered before WWII, the full extent of the Slochteren Field did not become apparent until the post-war years. It was the discovery of this field in the Permian Rotliegendes sandstone that sparked the exploration for gas and then oil in the North Sea.

Figure 5 Europe’s largest gas fields. Data for Slochteren from Rembrandt Koppelaar. Troll and Ormen Lange from the NPD.
Slochteren lies onshore in the Groningen area of northern Holland and dwarfs the giant Norwegian gas fields of Troll and Ormen Lange. Further fields were found around Slochteren in the on-shore and off-shore areas.
Slochteren was never produced flat out and the Dutch government has laterally set a production cap on the field. In the period 2006 to 2015 this cap is set at 425 BCM over the 10 year period. NAM (the Shell - Exxon operating consortium) can optimise production over this time frame but strictly within this overall limit. The production cap on Slochteren has resulted in a long drawn out production plateau analagous to that seen in the Saudi super giant oil fileds - a very enlightened production strategy on behalf of the Dutch government.

Figure 6 Dutch gas production and forecast based on data provided by Rembrandt Koppelaar. The smaller offshore fields are showing a decline similar to the UK. Note that the volumes here are substantially larger than quoted by BP (see Figure 7). Rembrandt suggested this could be due to adjustment by BP for the energy content of the gas.
The other fields were not subject to regulation and are now in decline in similar manner to the UK gas fields. According to Rembrandt, Slochteren will also begin to decline naturally after 2015 and the bottom line is that Dutch gas production is now in an irreversible decline phase.
The forecast for the Netherlands is based on data kindly supplied by Rembrandt. This has smaller fields declining at a similar rate to the UK, while Slochteren has a somewhat lower decline rate.

Figure 7 History of Dutch gas production and exports.

Figure 8 Destinations of Dutch gas exports. Note that the Dutch import gas from Russia and Norway for re-export.
It can be seen that Dutch gas exports have been declining irregularly since the late 1970s and that some day post 2020, the Dutch may become an importer of natural gas.
Norway
Norwegian gas production has expanded rapidly in recent years, mainly the result of the Troll Field development. This expansion is set to go on for another couple of years, but then I suspect the expansionary phase will come to a halt.
In 2006 Norway produced 87.6 BCM of gas. Since then the Langeled pipeline that connects the Ormen Lange Field to Easington in England (and also to continental Europe) has been completed. The capacity of Langeled is about 20 BCM per annum. Furthermore, the development of the Snøhvit Field in North Norway with an LNG train provides Norway with an additional 5.7 BCM capacity.
The Norwegian export pipeline system is reported to have a capacity of 120 BCM per annum. With domestic consumption running at 4.5 BCM and LNG production at 5.7 BCM, future Norwegian production is forecast to run at 130 BCM per annum.
With Europe becoming ever more thirsty for gas, there was a plan to expand production in the Troll Field by 20 BCM per annum. Most significantly, this consent was refused by the Norwegian parliament. Hence Norway is in a position of having ample reserves to sustain a short term production boost, but instead seems to be choosing the path of restrained production which will favour an extended plateau at lower than maximum possible production levels.

Figure 9 Norwegian gas infrastructure.
The map of the Norwegian gas pipeline export system shows where Norwegian gas enters the UK and Continental Europe. The UK imported gas from Norway during the 1970s and 1980s where gas from the Frigg Field was piped to Scotland via the Vesterled pipeline. Since then the UK has had no need for Norwegian gas - until recently where a massive expansion of import capacity has been built. The Vesterled pipeline is now connected to the Norwegian gas transmission network and has been one route into the UK for Norwegian gas in recent years. There are, however, two new pipeline systems. The already mentioned Langeled pipeline that connects the UK to Ormen Lange via the Sleipner hub. And the Tampen Link that connects Statfjord and other mature fields in the Tampen Spur area to the UK operated FLAGS pipeline system. FLAGS transports associated gas from the northern UK fields to St Fergus in Scotland and since that UK gas production is now in decline, the Tampen Link will fill that surplus capacity - for a while at least.
Five other pipelines make landfall in continental Europe at 4 import terminals. Three pipelines feed two terminals in North Germany. And one pipeline lands at Zeebrugge in Belgium and one at Dunkirk in France. These entry points are connected to a broader European gas transmission system which pipes Norwegian gas as far as Spain, Austria, the Czech Republic and Poland.

Figure 10 Export destinations for Norwegian gas. Up until 2006, all Norwegian exports were via pipelines to Europe. In 2007, Norway opened its first LNG train and it will be interesting to see where these LNG exports end up.
It can be seen that Germany is by far the largest importer of Norwegian gas, followed by France, Belgium, the UK and Italy. One curiosity in this data is that the Netherlands are shown as a net importer of Norwegian gas. I can but speculate that The Netherlands are importing Norwegian gas to meet export contracts whilst conserving their own gas reserves.
Demand and import patterns
Natural gas consumption within OECD Europe has grown on average at 2.6% per annum since 1980. Back in 1965, Europe consumed less than 25 BCM per annum and this grew to over 470 BCM per annum by 2005, fuelled by North Sea gas. Higher prices and shortage of Russian supply saw consumption fall in 2006.

Figure 11 Forty years of gas binge in OECD Europe.
Where next for European Natural gas demand? Will the past trend continue, or will high price curtail demand? This is impossible to answer, but there are a number political, demographic and resource factors consistent with demand continuing to grow unchecked.

Growing prosperity in former Eastern European states leading to growth in energy consumption.

Migration from East to West placing greater strain on infrastructure and energy use in the West.

Migration from Northern to Southern Europe leading to greater prosperity in the latter and ever increasing energy needs - see for example gas consumption data for Spain.

Climate policies which as a quick fix continues to drive gas power generation forward as a more efficient and CO2 friendly means of generating electricity.

Pending shortages in oil supplies may lead to substitution by natural gas in automobiles.

If demand for natural gas continues to grow then source of supply and the security of that source is highly relevant. The following section shows the main sources of supply for Europe’s main consumers (excluding the UK). One thing all gas import strategies have in common is diversity of supply.
Germany
Germany has some significant and stable indigenous gas production, but is heavily dependent upon The Netherlands, Norway and Russia for pipeline imports. With Dutch gas production in decline, Germany will presumably be looking to increase supplies from elsewhere.
The cornerstone of the German strategy is the Baltic pipeline that will assure supplies of Russian gas direct to Germany that will by-pass former Soviet republics and East European states.
Without LNG, the German strategy seems constrained, since falling UK and Dutch production will place greater demand on Norwegian and Russian gas from several other states.

Figure 12 The import sources of gas to Germany.
France
France is unique among major European gas consumers with no indigenous gas production. France produces no oil and only a little coal - hence their reliance upon nuclear energy for power generation.
Like Germany, France relies heavily upon Dutch, Norwegian and Russian gas pipeline imports. France also has a mature LNG import trade with significant imports from north and west Africa.

Figures 13 & 14 The import sources of gas to France.
Italy
Italy has significant but falling indigenous gas production. It also has a highly diversified gas importation infrastructure born in part from its geographic location. Italy imports gas from Norway, The Netherlands and Russia but is also linked to Algeria and more recently Libya by pipeline.
Italy also imports small amounts of LNG, mainly from Algeria. Note how there were significant imports from Nigeria in 2004 - but then nothing. It seems these cargoes may have switched to France in 2005 / 06.

Figures 15 & 16 The import sources of gas to Italy.
Current and future sources of supply
The chart shows that Russia and Algeria are by far the most important sources of imported gas to OECD Europe. This raises the questions of whether or not these countries will be able to maintain or increase future supplies and if not, where will Europe’s growing thirst for gas be met in the future?

Figure 17 Sources of gas in OECD Europe in 2006.
Russia
Russian gas production had an interim peak in 1991, and with the fall of the Soviet Union went into decline for a number of years. Since 1997, production has begun to rise again and a new high was reached in 2006 of over 600 BCM per annum. The $60K question is where next for Russian gas production? This question is just as important as the future direction of Saudi oil production.

Figure 18 Russian gas production, consumption and exports.

Figure 19 Destinations of Russian gas exports
Russia exports less than one third of its gas production. The majority of exports are to OECD Europe, though a significant amount still goes to former republics. But the amount going to Ukraine, Belarus and Moldova is not documented in the BP statistics, and is presumably included with Russian consumption data. The structure of Russian gas production makes exports vulnerable to any down turn in production and / or increase in domestic consumption. Russian gas exports have been essentially static since 1990, and with the largest fields in decline (see below) it seems unlikely that Russia could at this stage raise production to meet the rising import requirements of OECD Europe.

Figure 20 Map showing the west Siberian gas fields of Russia. The three giant fields of Yamburg, Urengoy and Medvezhye have historically provided the bulk of Russia’s gas. All three are now in decline (see below). Much of Russia’s remaining potential lies in this area, particularly on the Yamal peninsula, to the left of the circle. The map is borrowed from a presentation by Kjell Aleklett.

Figure 21 Russian gas production forecast by Jean Laherrere showing how second tier fields may compensate for decline in the three giants - Yamburg, Urengoy and Medvezhye.
Historically, more than 50% of Russian gas production has come from 3 giant fields - Urengoy, Yamburg and Medvezhye. This excellent chart (unpublished) from Laherrere shows that all three of these core producers are in decline. Since Russia has relied upon these three supergiants for core production they now have an inventory of second tier giant fields to develop that may compensate for the decline from The Big 3, as shown on Laherrere’s chart.
The challenges for Gazprom are immense. Bovanenko lies on the Yamal peninsula below permafrost. It is at the end of proposed piplelines shown as dashed red lines on the map above. Shtockman lies out of helicopter range in the Barents Sea. Recent reports suggest that the Russians want to use a floating nuclear reactor to power the production platform.

Figure 22 Russian gas production scenarios by Jean Laherrere. WEO forecasts show rising consumption matching rising production with flat exports of around 200 BCM per annum.
This new chart from Laherrere 2007 shows a peak in Russian gas production about 8 years from now with unconstrained production which is unlikely to happen. Instead, constrained production as indicated by the slowly rising WEO 2006 forecast matched by rising consumption will give rise to relatively flat gas exports forward to 2020. So it seems likely that Russia will be able to maintain gas exports but will unlikely be able to increase exports to compensate for falling OECD Europe production.
A critical geo-political question, however, is how these exports are distributed in future? The Sakahlin projects will see East Siberian gas entering the Asian markets for the first time. Furthermore, the Baltic Gas Pipeline will witness a new prioritisation of gas energy security in Germany and western Europe.
The Baltic Gas Pipeline, which is under construction under a joint venture between Gazprom and German companies BASF and E.ON, will deliver 27.5 BCM per annum direct to Germany in the first instance with the option to rise to 55 BCM. All of OECD Europe’s gas from Russia currently has to cross The Ukraine and then either Slovakia or Poland in order to reach the main destinations of Germany, Italy and France. As we saw in the winter of 2005 / 6, Russia struggled to meet all commitments given extreme cold weather at home and cut gas supplies to some unfavoured former Soviet enclaves. The spat with Ukraine at that time highlighted how dependent OECD Europe was on the goodwill of the Ukrainians and the Baltic Pipeline circumvents that problem, providing gas security to Germany at least.

Figure 23 Map of pipelines in Ukraine that carry Russian gas to western Europe via Poland and Slovakia. From Ukraine vs Russia: Tales of pipelines and dependence by Jerome a Paris
The Baltic pipeline will be fed primarly by gas from a new field. The Yuzhno-Russkoye field, which recently started production, is located in the same area as Urengoy, is included in Laherrere’s chart and is one of the new fields that will offset decline from The Big 3. This new export capacity, therefore, does not necessarily represent new productive capacity but merely a more secure route for Russian gas into the OECD.
OECD Europe currently receives 115 BCM per annum from Russia, so the Baltic pipeline may eventually secure almost half of those deliveries. However, should OECD Europe face gas shortages, it is those countries at the end of the pipeline that will still be most vulnerable. Some interesting negotiations may lie ahead.
In summary, it is exceedingly difficult to predict how reliable Russian gas exports to OECD Europe will be in future. It seems most likely that Russia will maintain current production levels of 600 BCM per annum until 2020. However, increasing domestic consumption, and exports to East Asia may see gas exports to the west declining. Germany will be in the strongest position to secure supplies. If the remaining supplies are rationed by ability to pay then some of the poorer eastern European states may suffer.
Algeria

Figure 24 Map of oil and gas infrastructure in Algeria. Europe is fortunate to have gas rich North Africa lying off its southern shores.
According to the BP Statistical Review, Algeria has 4.5 TCM remaining gas reserves placing it number 8 in the world. Accordng to the analysis of Jean Laherrere, Algeria has 4TCM gas reserves remaining, which is in fair agreement with the BP figure. It is fortunate for Europe that Algeria lies close to the southern border of the continent allowing Algerian gas to be piped into Italy and Spain. There is also a significant trade in LNG between Algeria and Europe.

Figure 25 Discovery and production gas models for Algeria by Jean Laherrere.
Laherrere provides a more detailed picture of gas production than can be compiled from the BP data. The main difference is production reported gross of re-injected gas. An unconstrained production peak some 17 BCM per annum higher than today’s production is shown around 2015.

Figure 26 Algeria gas production, consumption and exports. Production and exports have not risen since 1999.
Algerian production grew steadily until 1999 but has since stagnated. There was a new discovery cycle during the 1990s and it is this that may provide impetus for some new production growth. Algerian consumptin is growing slowly and this will consume a portion of new production. New gas export capacity is estimated roughly to be 12 BCM per annum by 2012.

Figure 27 Destinations for Algerian pipeline gas exports.
Algeria exports about 37 BCM per annum by pipeline but is also active in LNG production with LNG exports of 25BCM in 2006. Most of the LNG was exported to Europe (and Turkey) with only small quantities going further afield. Europe is a short trip for an LNG tanker from North Africa, and in terms of tanker utilisation I suspect it will continue to be more profitable to deliver N African LNG to Europe than further afield.

Figure 28 Destinations for Algerian LNG gas exports.
The IEA 2005 energy outlook had this to say:
Algeria is the third-largest exporter of natural gas in the world. Exports are expected to increase as pipeline and LNG projects are brought on line. Gas exports were 64 bcm in 2003 and are expected to climb to 76 bcm in 2010 and reach 144 bcm by 2030.
The IEA target for 2010 looks marginally optimistic and their target for 2030 is a reserves busting feat as indicated on Laherrere’s chart (Figure 25).
Libya and Egypt
Both Libya and Egypt have seen rapid expansion of their gas production and exports in recent years. This is set to continue at a slower pace for a number of years according to these forecast models from Jean Laherrere. Growing population and domestic gas consumption in Egypt looks set to outstrip production growth and Egypt may cease to be a gas exporter beyond 2025.

Figure 29 Gas discovery and production models for Libya by Jean Laherrere.

Figure 30 Gas discovery and production models for Egypt by Jean Laherrere. In the export model (Figure 31) I have used the “slow” production model for Egypt.
Combining the three production models of Laherrere from Algeria, Egypt and Libya provides this picture of gas exports from N Africa peaking at around 120 BCM per annum in 2015. That represents a 33 BCM per annum growth from current export levels.

Figure 31 Gas export model for N Africa showing expansion of production and exports in the years ahead but with a conceptual export peak around 2015.
OECD Europe gas security
With OECD Europe indigenous gas production set to decline and good reasons for believing that demand for natural gas will continue to expand in the future, OECD Europe faces the prospect of importing ever larger amounts of gas (LNG) from ever more remote parts of the world. Current imports are running at 197 BCM per annum and the BAU scenario shown below shows imports burgeoning to 442 BCM by 2020. Where will this additional 245 BCM come from?

Figure 32 Gas scenarios for OECD Europe summarising the indigenous supply forecasts and demand forecasts from the preceding sections. With the BAU demand scenario, imports will need to grow from current 197 BCM per annum to projected 442 BCM per annum by 2020 - an increase of 245 BCM per annum. It is doubtful that this quantity of gas may be sourced from African and Middle East markets. It is therefore considered more likely that high price and supply shortages will curtail demand for gas. It is conceivable that conservation, more efficient energy use and substitution with alternative sources of electricity may fill the gap left by declining gas supplies.
This is near impossible to answer with certainty. My feeling is that Russia will strive to meet current commitments which will result in their gas exports neither increasing nor decreasing in the 2020 time frame. N Africa will see strong growth in production that will be offset by strong growth in their domestic consumption. Up to 33 BCM of new supply may come from N Africa and it seems reasonable to assume that the majority of that gas will come to Europe. That leaves 212 BCM to source from else where and will inevitably entail a massive expansion of LNG export and import infrastructure beyond that which already exists. In the period 2010 to 2020 Europe will face fierce competition for LNG supplies from the mature markets of Japan, South Korea and Taiwan and growing competition from new markets for LNG in the USA and most likely also in China.
In 2006, the total global LNG trade was 211 BCM and so we are talking about doubling that by 2020 to satisfy OECD European needs alone. The main sources of new supply will be West Africa (Nigeria), Qatar and Iran. Since Qatar has declared a moratorium on new LNG projects forward to 2011 it is a major challenge for these three countries alone to meet global demand growth.

Figures 33 & 34 The changing face of gas security in OECD Europe. With a BAU demand scenario, OECD Europe will face importing ever growing quantities of LNG from remote sources around the globe.
The crux of this whole issue is how growing demand for gas is managed. The UK, and other OECD governments seem intent on allowing market forces to determine the outcome. I would be the first to admit that the dynamics of supply and demand in the European gas trade has so many dimensions that trying to regulate and plan this trade is not simple. But on the other hand, allowing market forces, national economic strength, and price to determine who gets and who doesn’t get the available energy may have disasterous and unforeseen outcomes. A scenario where the former Soviet Republics and then the east European states and perhaps Turkey are left in the cold whilst western Europe uses historic strengths to secure itself energy supplies may have unpleasant outcomes flowing from a newly destabilised former Soviet bloc. Energy poverty throughout the poorer parts of Western Europe may also have undesirable consequences for the warm middle and upper classes.
The main message of this post, therefore, is to call upon the politicians of the OECD in Europe to show some rare leadership, and to recognise that massive energy conservation, and expansion of sensible alternative energy schemes, offer a better alternative to the polarisation that is likely to result from allowing market forces to determine the outcome of energy decline.
Acknowledgement I am indebted to Jean Laherrere who upon my request sent his most recent work on gas resources in countries relevant to the European market. Many of the ch