Gulf and European Energy Supply Security - Feem-project.net

More documents

Recommendations

Info

Energy Security: Potential for EU-GCC Cooperation Although the long-term trend points to LNG taking a growing share of gas trade, future global gas requirements are very difficult to predict. The development of Alberta tar sands would require extensive use of Canadian gas, which would subsequently not be available for export to the US. On the other hand, the US possesses very large unconventional gas reserves. As the IEA notes: “In the reference scenario, unconventional gas output worldwide rises from 367 bcm in 2007 to 629 bcm in 2030, with much of the increase coming from the United States and Canada. The share of unconventional gas in total US gas production rises from over 50% in 2008 to nearly 60% in 2030.” 24 If the US starts producing such large volumes of unconventional gas, its need for imported LNG would be much lower. China’s and India’s needs also are difficult to predict. It is therefore not certain that the gas market will favor sellers in the future, and it is also not certain that the increase of LNG trade will bring competition detrimental to European energy security. LNG transportation costs will never be as low as for oil, and regasification plants are still relatively few (although this is about to change). The gas market will most probably continue to primarily use long-term contracts in order to share the heavy upstream investment costs between the producer and the customer. Nevertheless, shortterm contracts and spot sales will have growing importance in satisfying marginal changes in the demand/supply relationship. LNG will also allow for a greater fluidity of the market and allow the EU to partially diversify its sources by tapping exporters inaccessible by pipelines. Concerning geopolitical issues, LNG is not fully risk-free. The entire transportation chain could be threatened by terrorist acts and the explosion of a regasification plant could have a very negative influence on the public perception of this energy source. Maritime routes also present certain risks. However, the probabilities of such events remain small, and even if one occurred, its consequences would be minor for global trade. The role of LNG is growing in Europe and regasification capacities are expanding, with new plants currently being built in Spain, Italy, the Netherlands and Sweden and more proposed in almost all European countries possessing a coastline (Germany, the Balkans, France, UK, Ireland, Lithuania, Romania, and Ukraine). 25 This means that the willingness to import more LNG is present in Europe; among other factors, the need for increased flexibility is a major determinant of this trend. Also, LNG must be seen by the EU as a way to increase security of supply in countries poorly linked to the main network (Baltic States and Balkans). In particular, Greece has recently shown interest in increasing the capacity of the Revithoussa regasification plant, in order to become a hub for supplying gas to the rest of the region (notably, Bulgaria and Serbia). Producing countries such as Qatar should view this as a positive sign that LNG is an energy source that will grow in the coming years and that, despite the buyer’s market experienced currently, is certainly worth being developed. To sum up, LNG will hardly become a major geopolitical risk and, while it is not a panacea, will provide additional security of supply for EU countries by offering some diversification possibilities. It could also offer leverage for those countries to counter the dominant attitude of producer and transit countries, in case the latter fail to honor their engagements or try to take advantage of their position. 5.Unconventional Gas Unconventional has been one of the hottest topics in the gas industry in recent years. Unlike conventional gas, which is gas that has been trapped in large pools by impermeable rock, unconventional gas can be divided into four different types: • Tight Sands Gas – formed in sandstone or carbonate. • Coalbed Methane (CBM) – formed in coal deposits. • Shale Gas – formed in fine-grained shale rock (called gas shales) • Methane Hydrates – a crystalline combination of natural gas and water The breakthrough of new technology in the US, which has led to massive increases in the production
of unconventional gas, has already had significant impact on the EU gas market via world LNG trade flows and spot market prices for gas. The increase in US indigenous production has led to a change in worldwide LNG trade flows in the few last years. European gas spot market prices have decoupled from oil and pipeline gas prices. Lower spot market prices in the EU led to a temporary change of Russian long-term contracts: a 15 percent gas-to-gas price component in the long-term contracts was introduced and will be valid for three years. The decoupling of gas prices is due to the economic and financial crisis and the decline in gas demand, not just to changes in LNG flows. With the decline in LNG demand in the US, more LNG has found its way to the EU. The decrease in US demand, in combination with the fact that additional liquefaction capacity has come online from Qatar and elsewhere in the same period, has encouraged EU gas importers to increase LNG purchases. This results in increased diversification of EU imports and increases flexibility, facilitating the replenishment of gas storage after the very cold winter of 2009. LNG imports into the EU increased by 26 percent, from around 50 bcm in 2008 to 63 bcm in 2009. This happened despite an overall decrease of 6 percent in EU natural gas demand. In short, unconventional gas has increased world gas reserves and production, and LNG has allowed regional developments to impact the world gas market. Regardless of whether the EU will be able to replicate the production revolution witnessed in the US, the increasing supply of unconventional gas has already had significant influence on the world gas market and thus on the EU, where it has put a downward pressure on gas prices. However, if unconventional gas turns into a waiting game for global gas investments, then this could lead to a serious security of supply threat because of the long lead-times for gas infrastructure projects. 5.1 Unconventional Gas Reserves in Europe 26 Currently, Europe has an estimated 5.4 tcm (trillion cubic meters) of proven reserves enough to Geopolitical Issues of Europe’s Future Gas Supply meet approximately 10 years of EU consumption. When it comes to unconventional gas resources, these reserves become significantly higher as total resources are estimated at approximately 35 tcm for Europe. Gas recovery rates vary from around 8 to 30 percent, but this could increase to approximately 40 percent with a production cost of around $100 to $300 per 1000 m3 in the long run, according to IEA estimates. At recovery rates of 40 percent, this would mean an increase in European gas reserves from 5.4 TCM to 19.4 tcm. Assuming an annual indigenous European production (EU and Norway) of 300bcm per year, we can assume that indigenous European production, at 300bcm per year, could be extended from 18 years to 65 years. Assuming a less optimistic recovery rate of 25 percent would increase European reserves by 8.75bcm, increasing the current R/P ratio from 18 years to 47 years. This would have a considerable effect on security of supply in the EU, but whether the US experience can be replicated in the EU is subject to a number of uncertainties. Very little is known about potential costs, environmental impact and the legislative framework of unconventional gas production. Environmental and legal issues may significantly hinder the production of shale gas in Europe. Europe has a more stringent legislation, a different geography and a much higher population density. Unconventional gas production, know-how and technology have so far been limited to the US. Although major consolidation has taken place in recent years, whereby international oil and gas companies have acquired unconventional gas firms, the transfer of this know-how to the EU and the rest of Europe has not yet begun. Critical technology know-how includes horizontal drilling and hydraulic fracturing, which are key techniques to be mastered in order to make unconventional gas economically viable and to ensure that underground aquifers are not contaminated. Finally, the connection of unconventional gas production to the EU gas grid is also an issue of uncertainty.
Page 1 and 2:
Gulf Research Center Foundation
Page 3:
Contents Introduction 5 I. The Euro
Page 6 and 7:
Energy Security: Potential for EU-G
Page 8 and 9:
Page 10 and 11:
Page 12 and 13:
Page 14 and 15:
Page 16 and 17:
Page 18 and 19:
Page 20 and 21:
Page 22 and 23:
Page 24 and 25:
Page 26 and 27:
Page 28 and 29:
Page 30 and 31:
Page 32 and 33:
Page 34 and 35:
Page 36 and 37: Energy Security: Potential for EU-G
Page 73 and 74: SESSION IV: LNG and Gas Supplies to
Page 75 and 76: had a drastically different vision
Page 77 and 78: now, China has preferred the LNG op
Page 79 and 80: considered an issue. Though the bor
Page 81 and 82: 70bcm/yr by 2020. Even if only a fr
Page 83 and 84: that Russia and China have started
Page 85: (Parliament) which favors the use o
Page 89 and 90: Geopolitical Issues of Europe’s F
Page 91 and 92: • • • • • • • • •
Page 93 and 94: SESSION V: Renewable Sources in EU-
Page 95 and 96: • technologies, overall technical
Page 97 and 98: Figure 2: Overview of Opportunities
Page 99 and 100: onshore (378 TWh/yr), large-scale h
Page 101 and 102: world. Hence, renewable energy supp
Page 103 and 104: case. Figure 8 shows the developmen
Page 105 and 106: Overview of RES Characteristics and
Page 107 and 108: keep the RES surcharges for the ene
Page 109 and 110: in the electricity sector, particul
Page 111: References • • • • • •
Page 124: Gulf Research Center Foundation
show all

Gulf and European Energy Supply Security - Feem-project.net

Create successful ePaper yourself

Delete template?

Save as template?