The Oil Drum

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

Topics include:

Economy – UK and Europe; Geopolitics - Caspian; Coal / China / Kyoto Protocol; Natural Gas - Iran; Russia - Wheat Exports; ASPO-USA P.O. Conf. – Media Response; Economy - USA

I am pleased to inform you that the Financial Times is publishing, in its edtion dated 1 February, an article by the Editor of the European Tribune and Contributing Editor to the Oil Drum which covers a number of topics that we've discussed here before. Its conclusion:

Taking into account pollution, carbon emissions and the expected depletion of resources, moving away from burning hydrocarbons should be an overriding long-term goal. A sane energy policy should focus, as a priority, on reducing our electricity demand via conservation and energy efficiency and on switching to capital-intensive, locally built, renewable energy sources. That will require thinking again about how we finance the sector.

Energy market deregulation is incompatible with the fight against global warming – markets like to finance gas plants – and with security of supply when exporters will not play by our rules. There is no reason to expect them to do so at a time of increasing tightness in energy markets. We have solutions available, if we act on demand reduction and promotion of renewable energy. Sadly, we seem to be doing the exact opposite.

Jerome also asks that folks please also read his most recent post on the topic: The Economist on European energy: wishful thinking and outright lies

[editor's note, by Chris Vernon] We have two articles today on the EU energy plan. Luís's take on it can be found here: A New Energy Policy for Europe

Now that the dust has settled and that the topic is already out of the news (displaced by Iraq, Beckham going to LA or the fact that oil prices are at record lows), it's time to revisit the EU energy proposals, by taking a look first at the original material (their press release and their attempt at responding to expected questions or objections on their sector enquiry and on climate change goals) and then at press commentary (Google selection, summary articles from Le Monde and the Financial Times, other coverage collected by Fran in the Salon thread).

Somewhat predictably, the EC dutifully, and valiantly, focused on climate change as the main priority, and that garnered most of the coverage from the superficial media (TV, press agency releases) which have understood that climate change "sells." However, the real action (identified, possibly, by the fact that the core documents are only available in English) focuses on energy markets "reform" and in particular the need for unbundling and other trustbusting measures to ensure competition. The more serious papers focus only on that aspect, ignoring the boring and expected climate change stuff - just like the stock market does not focus on the news of the day, but on how they were different from expectations. And the business world could not care less about climate change (except if it imposes financial costs on them) but does care about the juicy opportunities to be provided by unbundling, corporate resturcturing and the like.

(From the European Tribune. an earlier "live" discussion thread by kcurie can be found here)

Two things the evening. First, an exciting development is in the works around here. In consultation with the existing editors of TOD:UK, we have decided to expand the scope of that operation to cover the whole of Europe. So, as of tonight, TOD:UK becomes TOD:Europe!

The new staff of TOD:Europe will include: Chris Vernon (former editor of TOD:UK, MPhys Computational Physics); Euan Mearns (formerly of TOD:UK, PhD Isotope Geochemsitry: Ran isotope geochemsitry company 1991 - 2001: Freelance energy analyst and journalist); Jerome a Paris (of DKos and the European Tribune, Energy banker based, yes, in Paris, France); Luís de Sousa (of picodopetroleo.net, Assistant Teacher and Researcher at an Institute of Technology in Lisbon); Rembrandt Koppelaar (chairman of ASPO-Netherlands).

That's a pretty damned amazing staff. Please help me in welcoming them to our little endeavor.

Second, if anyone knows anything about wikipedia-ish software, how to start one up, basics, etc., discuss in the comment thread. Imagine if we could accumulate all of the information at The Oil Drum in one place without giving SuperG nightmares...

Well, I had to think about this for a little while, but I have decided to draw your attention to the BBC commentary on the current European vs Russian situation in regard to fuel pipelines, as described by Mark Mardell at the BBC yesterday.

"You know what happens when they get in the same room as Putin. They all drop their trousers and say 'I love you Vladimir'." This is the gloomy and cynical view from a senior EU insider, of the leaders of the European Union's 25 countries. Perhaps it's intended to chivvy rather than insult. But there is no doubt that the EU summit in Finland is a rather odd event.

There has been much debate over the reliability of the Russian oil and gas supplies to the rest of the world, with many commentators noting the historic reliability of the source. But as Gazprom takes over an increasing percentage of the world's delivery system, there are some concerns that perhaps need to be highlighted. This is particularly true for the United States with our "Just in time" philosophy, which (as I noted) James Woolsey worried about in St Louis.

The BBC article notes three concerns with the situation a) the threat of a supply disruption, b) the increasingly monopolistic position of Gazprom as a supplier, and c) the lack of a common resolve among nations as to how to deal with this.

Deloitte's Energy, Infrastructure and Utilities division have recently published a report on the UK electricity environment. Its title: 2020 vision - Meeting UK power generation objectives in 2020.

The focus of the report is quite rightly on UK electricity supply recognising that 2006 should be "a watershed in UK energy policy." The executive summary includes this on the emerging energy gap:

By 2020, over 50GW of new or refurbished generation capacity will be required which represents circa two-thirds of current capacity - equivalent to either 55 new CCGT's, 30 new nuclear power stations, 95,000 on-shore - or 40,000 off-shore wind turbines.

These figures give an idea of the challange the UK faces over the next 14 years, more than 3.5GW per year starting now. It's clear 2006 isn't going to hit that target so the objective, if business as usual is to continue unchanged looks more like at least 4GW per year starting in a few years time.

As an introductory piece we should look at the overall energy landscape in the UK. The media are regularly talking about the prospect of an energy gap but the analysis is often no more than pointing out the gap left by the nuclear decommission programme. The situation is more serious that that. The most recent DTI (Department of Trade and Industry) Energy Trends publication states that:

Provisional figures for 2005 show total production to be 216.2 million tonnes of oil equivalent, 9.3 per cent lower than in 2004. Within this production of petroleum fell by 11.2 per cent, production of Natural Gas fell by 8.2 per cent and production of coal fell by 16.0 per cent.

For the three months October 2005 to December 2005 compared to the same period a year earlier:

• production of petroleum fell by 12.1 per cent;
• production of natural gas fell by 8.8 per cent;
• production of coal and other solid fuels fell by 11.7 per cent;
• electricity produced from nuclear sources fell by 1.6 per cent;
• electricity produced from wind and natural flow hydro fell by 10.4 per cent.

(Source: Energy Trends 1.1)

The graph illustrates the total primary energy production and consumption of the UK

Click to enlarge. (Source Energy Trends 1.1 & 1.2)

Let's take a look at what's driving this...

While the debate in the United States about what changes the State of the Union message, and its fallout, might have on future energy supply continues, the debate addresses programs and funding that will not come to fruition for some time yet to come.  In the meanwhile the world goes on and intervening events may change a lot of minds before those programs become cast in dollars and opportunities. Much more under the fold.

Grin! Given the nature of much of the discussion here, dare I mention that I was up in Indianapolis at an event that has a relation to NASCAR vehicles (duck!) Thought not!

More seriously as I traveled, I noted that the USA Today is reporting that the bad weather in Central Europe is continuing. As a result for the sixth day Gazprom was unable to meet its international market commitments.  And, with sabotage to the pipelines, supplies to Georgia and Armenia remain cut-off. The Turkmenistan President is in Moscow possibly to talk about Gazprom taking over Turkmen gas. The BBC reports that:

some experts doubt that Turkmenistan has the gas, or the pumping capacity, to cope with what is expected to be a 30% increase in demand for its gas from Ukraine.

In fact some think that Turkmen gas may be at peak levels.

For the short term Gazprom is sending some gas to Georgia via Azerbaijan but if the cold weather persists, as is anticipated, it may get more complicated.  Iran, for example, is also willing to supply Georgia.  This may be needed since the Russian supply is providing only 35% of that which is needed.