The Oil Drum

[With Centrica and EDF announcing hefty retail gas price increases in the UK this week, I thought it was worth reposting this story that was first published in December 2007. The follow on story Daddy will the lights be on at Christmas?, is perhaps more pertinent this year than last.]

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

Algeria is one of the world’s most important oil and gas exporters. Morocco has no significant oil and gas production, but has about 2/3 of the world’s rock phosphate reserves, a critical component in global fertilizer supply that increased 300% in price in the past year (.pdf) and may peak alongside global oil production. The two nations have historically been at odds, especially over the phosphate-rich territory of Western Sahara. Now, more than ever, their exports are critical to the energy and food supplies of the world. Alongside increasing importance, tensions between the two are on the rise as the US and Russia provoke the situation with massive opposing arms deals and bi-lateral trade agreements. This article will look at the forces behind these rising tensions and consider issues of fertilizer mercantilism, infrastructure vulnerability, and the potential formation of a natural gas cartel.

Will Demand for Gas & Fertilizer Bring New Conflict to Morocco & Algeria?

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

The following is a guest post by Phil Hart, a petroleum facilities engineer and member of ASPO-Australia. Phil worked for Shell in the UK for five years, before returning home to Melbourne in late 2006. Phil's blog can be found here.

Following a summary of EIA data for 2006, I thought I would make a more detailed country-by-country estimate of the potential for 2007.

Starting with the headline EIA figures for last year:

Crude Oil and Condensate: 73.5 Mb/d (down 0.2)
Natural Gas Liquids (NGLs): 7.9 Mb/d (up 0.14)
Other Liquids: 3.3 Mb/d (up 0.08)

Total Liquids: 84.6 Mb/d (up an insignificant 0.02)
Mb/d = million barrels per day
kb/d = thousand barrels per day

Numbers for November and December suggest real OPEC production cuts in Algeria, Libya, Qatar and UAE. The total cut could be 230kb/d which knocks around 50kb/d off annual average production. I did not expect to find evidence for cuts, but that's how the data looks to me - four small cuts made at the same time by countries that otherwise increased their production last year through announced projects. Thus, I believe those four OPEC members, but only those four, have the ability to restore that production. Without those cuts, crude and condensate production would still be clearly down, but total liquids would have shown a somewhat more significant increase.

As we start off 2007, it seemed helpful to list the oil producing countries that Oil Drum readers might keep an eye on, both in this and future years. Often, the global production curve is presented in an undifferentiated way or is divided between OPEC and non-OPEC countries (as with the EIA). Other standard data sources such as the IEA, BP, Oil & Gas Journal, etc. usually break out production by region.

Taking a different approach, I decided to single out those countries that have made significant production increases in recent years — defined as any producer nation that has contributed an additional 0.5% to the current global liquids supply from fossil fuels (crude oil, condensates + natural gas liquids) since the year 2000. The result is shown in Figure 1.

Countries contributing at least a 0.5% increase since 2000 in world production of liquids fromfossil fuels (grey) versus the rest of world (blue). Does not include CTL or GTL. Data from BP — Figure 1

Will these difference makers deliver us from the turbulence & chaos of economic contraction and provide peak oil salvation?

[editor's note, by Prof. Goose] This is a guest post by lads.

This article is a first simplistic (but comprehensive) assessment of World Oil Exports, here defined has the total amount of liquid hydrocarbons that are surpluses in producing countries. This assessment is made by projecting in to the future fixed change rates that reflect current trends in liquids production and consumption in countries where presently the difference between the two is positive. The outcome of this assessment is worrisome.

Concerning Algeria, Stuart had mentioned here that

Nice steady production increases throughout the period. Seems like a country we need to look into further, though it's not on a track to become a Russia or a Saudia Arabia soon.

So, I decided to do just that. First, from the EIA we see in the graph below that Algeria, like Kazakhstan, is a large oil exporter with the important difference being that Algeria is a mature producer while Kazakhstan is just getting started and faces many future difficulties extracting its oil and getting it to market.

Note: the graph reflects all liquids produced including crude oil, NGLs and condensates.

Let's look further into the future of this mid-tier OPEC supplier.

In the last two posts I have quoted some of the statistics relating to the current state of natural gas production in the US.  The picture looking ahead is a bit grim, for domestic production.  As a result, as with oil, we will need to look abroad for additional supplies. Unfortunately, apart from our immediate neighbors, it is not economic to move gas in its original form, rather it has to be turned into a liquid at a high pressure and low temperature, and then this liquefied natural gas (LNG) can be shipped in specially build vessels and brought from a facility that was built abroad to do the liquefying, to the United States and a special facility that can regasify the fluid and inject it into the gas pipelines.  Which means that if we are to ensure gas supplies we have to have liquefaction plants, LNG carriers and gasification plants.  While some of these exist, Platts points out that a fair amount of the ultimate supply will depend on facilities that are still being built or ordered. Quoting an LNG terminal developer

The world' liquefaction capacity is projected to reach 41 Bcf/d in 2010 from 2004's total of 17 Bcf/d, he said. There are already firm commitments to build 35 Bcf/d in liquefaction capacity by 2009, he added. LNG produced in the Atlantic Basin would mostly be shipped to the US and Europe, while LNG produced in the Pacific Basin would primarily be shipped to Asia, he said. The growing amount of production in the Middle East will help develop a global LNG swing market because the area is positioned between Atlantic and Pacific markets, he said.