Consumers will have to pay hundreds of pounds more on their electricity bills in future because the Government has failed to invest enough in cheap alternative sources like wind and solar power, the Royal Society has warned.
The UK Government has committed to cutting greenhouse gases by 80 per cent by 2050 to tackle climate change. Most of the cuts will have to come from switching from fossil fuels such as oil and coal to renewable energy sources like the wind or waves.
However a new report by the Royal Society has found a “disappointing rate of progress” on new technology such as offshore wind turbines, solar panels and biofuels.
The document by the country’s leading scientists said the UK will have to invest billions more in developing new technologies as well as building a new generation of nuclear power stations and investing in “clean coal”. The bill is most likely to be paid by energy companies through a system of incentives and taxes.
Professor John Shepherd, lead author of the report, said ultimately consumers will end up paying.
“We have to be prepared to pay more for energy as a whole than we have been used to in order to avoid the side effects on the environment and have cleaner sources of energy in the future,” he said.
Lord Turner, the Government’s adviser on climate change, has already warned that electricity bills may have to rise by around £500 per annum over the next decade.
Prof Shepherd said it was likely to cost the consumer hundreds of pounds every year. However he said the cost could be even greater if the UK continues to rely on fossil fuels as the cost of oil and coal continues to rise.
“Would a few per cent on your electricity bills really be too much to pay for a sustainable energy future?” he asked. “I do not think it would.”
Prof Shepherd also said the UK will have to invest in nuclear despite safety concerns. Britain’s nuclear watchdog recently admitted there were more than 1,750 leaks, breakdowns or other “events” over the past seven years.
Again Prof Shepherd said the Government has failed to invest in the technology but the industry could be developed by employing more engineers and experts from abroad.
Coal will also have to be used in the future despite concerns about the carbon emissions through investing in carbon capture and storage (CCS) technology. The Royal Society are calling for any new power stations to capture 90 per cent of carbon dioxide emissions by 2020 – much tougher than the Government’s “disappointing” current policy.
However in the long run Prof Shepherd, a climate scientist at Southampton University, said the UK must rely on renewables like solar and wind.
“For the sake of future generations we cannot afford to wait until our climate is changed dramatically or the oil runs out before we end our dependency on fossil fuels,” he warned.
Ed Miliband, the energy and climate change minister, said the UK will be setting out a vision for renewables in a white paper due to be revealed next month.
“We have identified ways to tackle the challenges – we will need a mix of renewables, clean fossil fuels and nuclear and we’re already making world leading progress in those areas,” he said.
Source - The Telegraph
Showing posts with label oil. Show all posts
Showing posts with label oil. Show all posts
Sunday, 5 July 2009
Thursday, 18 June 2009
Africa's sun to power Europe's homes?
A group of 20 German companies wants to invest $555 billion in concentrated solar power plants in northern Africa to sell green power to Europe and make the continent less dependent on oil and gas imports.
It would be one of the world's biggest private renewable energy projects: Some 20 German companies are planning to join forces to build CSP plants in northern Africa and transport the electricity to Europe via new, direct current power grids.
The consortium, to be formed by mid-July, includes, among others, economic powerhouse Siemens, finance institution Deutsche Bank and energy giant RWE, the Sueddeutsche Zeitung newspaper reports. The ambitious green project, dubbed "Desertec," could produce power as early as 2019 and eventually satisfy 15 percent of Europe's electricity demand, Torsten Jeworrek, a Munich Re board member, told the newspaper.
The companies, backed by German government officials and the Club of Rome, plan to invest some $555 billion in the deserts of northern Africa. The money would not only be used for building the CSP plants, but also the gird infrastructure needed to bring the electricity to Europe.
"This is no longer a distant vision but technologically fascinating and also achievable," Jeworrek said in a statement Tuesday. "Desertec is clearly banking on the right incentives in the long term, namely climate protection and a low-carbon energy sector."
European energy experts have long advocated making the sunny African deserts Europe's power bank in order to reduce the continent's dependence on oil and gas imports from Russia and the Middle East. As its domestic fossil fuel resources are quickly depleting, Europe will have to transform its energy mix to avoid rising import dependence, experts say. In the case of solar power from Africa, however, investors have always been deterred by the high up-front investment required.
Munich Re is now banking on several international partners, also from the government side, to help finance the project.
"We are very optimistic when it comes to Italy and Spain, and we are also getting positive signals out of northern Africa," Jeworrek told the Sueddeutsche Zeitung. Only France, he added, might be hard to convince because of its reliance on nuclear energy.
A similar project in southern Spain was realized only when a feed-in tariff was implemented to pay for the electricity generated there. But Jeworrek said the plant would not need permanent support. He expects Desertec to be competitive "within 10 to 15 years."
Jeworrek added the consortium would choose the plants' locations according to political stability. The host countries would benefit from taxes, job creation and technology transfer, observers say.
Source - Solardaily
It would be one of the world's biggest private renewable energy projects: Some 20 German companies are planning to join forces to build CSP plants in northern Africa and transport the electricity to Europe via new, direct current power grids.
The consortium, to be formed by mid-July, includes, among others, economic powerhouse Siemens, finance institution Deutsche Bank and energy giant RWE, the Sueddeutsche Zeitung newspaper reports. The ambitious green project, dubbed "Desertec," could produce power as early as 2019 and eventually satisfy 15 percent of Europe's electricity demand, Torsten Jeworrek, a Munich Re board member, told the newspaper.
The companies, backed by German government officials and the Club of Rome, plan to invest some $555 billion in the deserts of northern Africa. The money would not only be used for building the CSP plants, but also the gird infrastructure needed to bring the electricity to Europe.
"This is no longer a distant vision but technologically fascinating and also achievable," Jeworrek said in a statement Tuesday. "Desertec is clearly banking on the right incentives in the long term, namely climate protection and a low-carbon energy sector."
European energy experts have long advocated making the sunny African deserts Europe's power bank in order to reduce the continent's dependence on oil and gas imports from Russia and the Middle East. As its domestic fossil fuel resources are quickly depleting, Europe will have to transform its energy mix to avoid rising import dependence, experts say. In the case of solar power from Africa, however, investors have always been deterred by the high up-front investment required.
Munich Re is now banking on several international partners, also from the government side, to help finance the project.
"We are very optimistic when it comes to Italy and Spain, and we are also getting positive signals out of northern Africa," Jeworrek told the Sueddeutsche Zeitung. Only France, he added, might be hard to convince because of its reliance on nuclear energy.
A similar project in southern Spain was realized only when a feed-in tariff was implemented to pay for the electricity generated there. But Jeworrek said the plant would not need permanent support. He expects Desertec to be competitive "within 10 to 15 years."
Jeworrek added the consortium would choose the plants' locations according to political stability. The host countries would benefit from taxes, job creation and technology transfer, observers say.
Source - Solardaily
Monday, 18 May 2009
Norwegian energy supply falls 7%
Norway, the world’s fourth biggest crude exporter and the UK’s second largest gas supplier, said Monday that its oil production fell a sizeable 7% in April to 1.99 million barrels a day last month from 2.15 million barrels a day in March.
Though preliminary, the data highlight one of the big underlying supply problems in non-OPEC states that many oil analysts believe is likely to send crude prices back over the $100 a barrel mark in coming years. Oil closed Friday at $58.63, its highest settle since mid-November. It is trading around $57.75 a barrel this morning.
The Norwegian situation is being replicated in other non-OPEC oil producers, such as Mexico and the U.K. These regions are mature and giving up less oil, meaning that keeping production flat is getting harder and harder.
If analysts are right, this underlying supply struggle will keep oil prices relatively strong in coming years. And that’s a boon for renewable energy developers. Not just are they set to receive an enormous infusion of cash, low-interest loans and other support out of capitals from Washington D.C. to Beijing, they appear set to get some tailwind from high oil prices. If the worst global recession in decades can’t derail oil prices for long, that’s a good sign that the global economy is entering a period of oil prices high enough to support ongoing investment in renewable (a.k.a. competing) energy sources.
In addition to the so-called “below ground” geological issues, non-OPEC producers, which currently meet about 60% of the world’s daily crude demand, are grappling with the global economic recession. The International Energy Agency in Paris last month cut its 2009 non-OPEC supply forecast by 320,000 barrels a day to 50.3 million barrels a day due to falling spending on drilling projects. It was the IEA’s eighth straight monthly downward revision to non-OPEC supply.
Source - Wall Street Journal
Though preliminary, the data highlight one of the big underlying supply problems in non-OPEC states that many oil analysts believe is likely to send crude prices back over the $100 a barrel mark in coming years. Oil closed Friday at $58.63, its highest settle since mid-November. It is trading around $57.75 a barrel this morning.
The Norwegian situation is being replicated in other non-OPEC oil producers, such as Mexico and the U.K. These regions are mature and giving up less oil, meaning that keeping production flat is getting harder and harder.
If analysts are right, this underlying supply struggle will keep oil prices relatively strong in coming years. And that’s a boon for renewable energy developers. Not just are they set to receive an enormous infusion of cash, low-interest loans and other support out of capitals from Washington D.C. to Beijing, they appear set to get some tailwind from high oil prices. If the worst global recession in decades can’t derail oil prices for long, that’s a good sign that the global economy is entering a period of oil prices high enough to support ongoing investment in renewable (a.k.a. competing) energy sources.
In addition to the so-called “below ground” geological issues, non-OPEC producers, which currently meet about 60% of the world’s daily crude demand, are grappling with the global economic recession. The International Energy Agency in Paris last month cut its 2009 non-OPEC supply forecast by 320,000 barrels a day to 50.3 million barrels a day due to falling spending on drilling projects. It was the IEA’s eighth straight monthly downward revision to non-OPEC supply.
Source - Wall Street Journal
Wednesday, 29 April 2009
BP profits slump 62%
Energy giant to cut spending on finding and developing new oil and gas reserves
BP is cutting spending on new projects after suffering a 62% drop in profits following the slump in the oil price.
The energy giant reported this morning that it made a profit of $2.387bn (£1.64bn) in the first three months of this year, down from $6.231bn a year ago. It blamed the fall in the price of oil, which fluctuated between $35 and $50 a barrel during the quarter, while a year ago a barrel cost more than $100.
With profits also lower than in the last three months of 2008, when BP made $2.587bn, the company is now planning to spend less on finding and developing new oil and gas reserves. It warned today that it will spend less than $20bn on capital expenditure this year, down from an earlier target of $20bn-$22bn. This comes after Opec, the group of oil-producing nations, threatened to cut production unless the oil price rose soon.
The cut in capital expenditure could have long-term consequences for BP's future growth. It is not clear which projects will be affected by the cutbacks, but environmentalists are likely to welcome the move, given the controversy over projects such as the tar sands scheme in Canada.
The move comes less than a month after BP said it will reduce the headcount at its solar power division by 620, or nearly a quarter, in a cost-cutting drive.
BP today also reported a drop in sales at its solar division, which makes solar panels. Its sales during the quarter would generate 15 megawatts of power, down from 34 MW in the same period in 2008. BP said this reflected "ongoing weak demand in the market".
Shareholders will receive a dividend of 14 cents per share, the same as in the last quarter and nearly half a cent more than a year ago.
Shares in BP rose by 3p this morning to 486.25p.
Source - The guardian
BP is cutting spending on new projects after suffering a 62% drop in profits following the slump in the oil price.
The energy giant reported this morning that it made a profit of $2.387bn (£1.64bn) in the first three months of this year, down from $6.231bn a year ago. It blamed the fall in the price of oil, which fluctuated between $35 and $50 a barrel during the quarter, while a year ago a barrel cost more than $100.
With profits also lower than in the last three months of 2008, when BP made $2.587bn, the company is now planning to spend less on finding and developing new oil and gas reserves. It warned today that it will spend less than $20bn on capital expenditure this year, down from an earlier target of $20bn-$22bn. This comes after Opec, the group of oil-producing nations, threatened to cut production unless the oil price rose soon.
The cut in capital expenditure could have long-term consequences for BP's future growth. It is not clear which projects will be affected by the cutbacks, but environmentalists are likely to welcome the move, given the controversy over projects such as the tar sands scheme in Canada.
The move comes less than a month after BP said it will reduce the headcount at its solar power division by 620, or nearly a quarter, in a cost-cutting drive.
BP today also reported a drop in sales at its solar division, which makes solar panels. Its sales during the quarter would generate 15 megawatts of power, down from 34 MW in the same period in 2008. BP said this reflected "ongoing weak demand in the market".
Shareholders will receive a dividend of 14 cents per share, the same as in the last quarter and nearly half a cent more than a year ago.
Shares in BP rose by 3p this morning to 486.25p.
Source - The guardian
Friday, 27 February 2009
Water 'more important than oil' businesses told
Dwindling water supplies are a greater risk to businesses than oil running out, a report for investors has warned.
Among the industries most at risk are high-tech companies, especially those using huge quantities of water to manufacture silicon chips; electricity suppliers who use vast amounts of water for cooling; and agriculture, which uses 70% of global freshwater, , says the study, commissioned by the powerful CERES group, whose members have $7tn under management. Other high-risk sectors are beverages, clothing, biotechnology and pharmaceuticals, forest products, and metals and mining, it says.
"Water is one of our most critical resources – even more important than oil," says the report, published today . "The impact of water scarcity and declining water on businesses will be far-reaching. We've already seen decreases in companies' water allotments, more stringent regulations [and] higher costs for water."
Droughts "attributable in significant part to climate change" are already causing "acute water shortages" around the world, and pressure on supplies will increase with further global warming and a growing world population, says the report written by the US-based Pacific Institute.
"It is increasingly clear that the era of cheap and easy access to water is ending, posing a potentially greater threat to businesses than the loss of any other natural resource, including fossil fuel resources," it adds. "This is because there are various alternatives for oil, but for many industrial processes, and for human survival itself, there is no substitute for water."
In a joint statement, CERES' president Mindy Lubber and Peter Gleick, president of the Pacific Institute, urged more companies and investors to work out their dependence on water and future supplies, and make plans to cope with increased shortages and prices.
"Few companies and investors are thinking strategically about the profound business risks that will exist in a world where climate change is likely to exacerbate already diminishing water supplies," they say.
"Companies that treat pressing water risks as a strategic challenge will be far better positioned in future," they add.
The CERES report adds to growing concern about a looming water crisis. In the Economist's report, The World in 2009 , Peter Brabeck-Letmathe, chairman of food giant NestlĂ©, wrote: "under present conditions… we will run out of water long before we run out of fuel". And at its annual meeting this year the World Economic Forum issued what it itself called a "stark warning" that "the world simply cannot manage water in the future in the same way as in the past or the economic web will collapse".
CERES, which has members in the US and Europe, made recommendations, including that companies should measure their water footprints from suppliers through to product use, and integrate water into strategic planning, and that investors should independently assess companies' water risk and "demand" better disclosure from boards.
Source - The guardian
Among the industries most at risk are high-tech companies, especially those using huge quantities of water to manufacture silicon chips; electricity suppliers who use vast amounts of water for cooling; and agriculture, which uses 70% of global freshwater, , says the study, commissioned by the powerful CERES group, whose members have $7tn under management. Other high-risk sectors are beverages, clothing, biotechnology and pharmaceuticals, forest products, and metals and mining, it says.
"Water is one of our most critical resources – even more important than oil," says the report, published today . "The impact of water scarcity and declining water on businesses will be far-reaching. We've already seen decreases in companies' water allotments, more stringent regulations [and] higher costs for water."
Droughts "attributable in significant part to climate change" are already causing "acute water shortages" around the world, and pressure on supplies will increase with further global warming and a growing world population, says the report written by the US-based Pacific Institute.
"It is increasingly clear that the era of cheap and easy access to water is ending, posing a potentially greater threat to businesses than the loss of any other natural resource, including fossil fuel resources," it adds. "This is because there are various alternatives for oil, but for many industrial processes, and for human survival itself, there is no substitute for water."
In a joint statement, CERES' president Mindy Lubber and Peter Gleick, president of the Pacific Institute, urged more companies and investors to work out their dependence on water and future supplies, and make plans to cope with increased shortages and prices.
"Few companies and investors are thinking strategically about the profound business risks that will exist in a world where climate change is likely to exacerbate already diminishing water supplies," they say.
"Companies that treat pressing water risks as a strategic challenge will be far better positioned in future," they add.
The CERES report adds to growing concern about a looming water crisis. In the Economist's report, The World in 2009 , Peter Brabeck-Letmathe, chairman of food giant NestlĂ©, wrote: "under present conditions… we will run out of water long before we run out of fuel". And at its annual meeting this year the World Economic Forum issued what it itself called a "stark warning" that "the world simply cannot manage water in the future in the same way as in the past or the economic web will collapse".
CERES, which has members in the US and Europe, made recommendations, including that companies should measure their water footprints from suppliers through to product use, and integrate water into strategic planning, and that investors should independently assess companies' water risk and "demand" better disclosure from boards.
Source - The guardian
Sunday, 21 December 2008
Swiss engineer completes first world tour in solar-powered car
A Swiss engineer completed Thursday the first ever round-the-world trip in a solar-powered car after more than 17 months on the road during which he crossed almost 40 countries.
Louis Palmer, 36, arrived back in Lucerne in central Switzerland in his "solar taxi" after covering 53,451 kilometres (33,213 miles) over four continents.
Since his departure on July 3 2007, he travelled through eastern Europe, the Middle East and India before heading to New Zealand, Australia, southeast Asia and China and finally the United States.
He finished his trip after a detour through France, England, Scandinavia and Germany.
"We have achieved our first world tour without using a single drop of oil," Palmer rejoiced at the end of his trip.
The three-wheeler solar taxi, which towed a trailer packed with batteries charged by the sun, reached speeds of 90 kilometres (55 miles) per hour. It had a battery for travel in the night and in cloudy conditions.
"One of my goals was to persuade as many people as possible that renewable energy is ecological, economical and reliable," Palmer told reporters.
His vehicle only broke down twice during the tour, he said, and surmounted the extreme heat in the Middle East and the hazardous terrain in America's Rocky mountains.
The small blue-and-white vehicle carried around 1,000 passengers, including United Nations Secretary General Ban Ki-moon and Rajendra Pachauri, head of the Nobel-winning Intergovernmental Panel on Climate Change (IPCC).
Palmer has previously said the prototype for the solar taxi could be mass produced but that it would need serious modifications.
He said he plans to travel around the world in 80 days for his next challenge, but in a faster car.
Source - Solar daily
Louis Palmer, 36, arrived back in Lucerne in central Switzerland in his "solar taxi" after covering 53,451 kilometres (33,213 miles) over four continents.
Since his departure on July 3 2007, he travelled through eastern Europe, the Middle East and India before heading to New Zealand, Australia, southeast Asia and China and finally the United States.
He finished his trip after a detour through France, England, Scandinavia and Germany.
"We have achieved our first world tour without using a single drop of oil," Palmer rejoiced at the end of his trip.
The three-wheeler solar taxi, which towed a trailer packed with batteries charged by the sun, reached speeds of 90 kilometres (55 miles) per hour. It had a battery for travel in the night and in cloudy conditions.
"One of my goals was to persuade as many people as possible that renewable energy is ecological, economical and reliable," Palmer told reporters.
His vehicle only broke down twice during the tour, he said, and surmounted the extreme heat in the Middle East and the hazardous terrain in America's Rocky mountains.
The small blue-and-white vehicle carried around 1,000 passengers, including United Nations Secretary General Ban Ki-moon and Rajendra Pachauri, head of the Nobel-winning Intergovernmental Panel on Climate Change (IPCC).
Palmer has previously said the prototype for the solar taxi could be mass produced but that it would need serious modifications.
He said he plans to travel around the world in 80 days for his next challenge, but in a faster car.
Source - Solar daily
Thursday, 30 October 2008
UK energy supply has entered into terminal decline
In recent years, the UK has become increasingly dependent on natural gas as its primary energy source. This strategy may soon be found to be based upon poor assumptions/perceptions regarding development of domestic and neighbouring natural gas reserves and, in general, regional and global supply capabilities.
1. UK marketable nat gas production (also gross) peaked in 2000 close to 110 Gcm/a.
2. During the last three years, UK nat gas production has declined at an annual rate of 8 - 10 %, which many energy analysts expect will continue.
3. Nat gas constituted more than 38 % of the UK primary energy consumption in 2007.
4. Several analyses expect UK to import 80 % of their nat gas consumption by 2020.
5. UK was a net exporter of nat gas for a brief period.
In 2007, more than 38 % of the UK’s primary energy consumption came from nat gas. Of the EU/OECD countries, only Italy has a higher portion of nat gas consumption. In comparison, the USA gets 25 % of its primary energy consumption from natural gas; France, 15 %; and Germany, 24 %.
In general, high nat gas usage is primarily found among countries with huge nat gas reserves like Russia, where nat gas amounted to more than 57 % of primary energy production in 2007. Russia is the world’s largest exporter of nat gas and second largest exporter of oil, so this high domestic usage frees up oil for export. Since oil generates more income than nat gas, based on units of energy exported, this approach maximizes export revenue.
The UK and Continental Europe have both benefitted from the bidirectional Interconnector that since 1998 has allowed for increased flexibility in nat gas supplies. Due to the decline in UK indigenous supplies and a tighter supply situation on Continental Europe, the importance of the Interconnector is expected to slowly diminish unless future Russian supplies are shipped through the system to UK.
Nat gas production within EU was on a plateau from 1996 to 2004 and has now entered into terminal decline. Increased nat gas production from Norway (which is not a full EU member) has slowed the decline. The balance of consumption within EU has been secured through increasing imports, primarily from Russia, North Africa and LNG. The diagram above suggests that imports into EU will need to grow quickly, from 200 Gcm/a at present to projected 400 Gcm/a by 2020, to fill the rapidly growing gap between declining supplies and projected growth in consumption.
If projected growth in EU nat gas consumption by 2020 is to be met, it will be necessary to double present imports of 200 Gcm/a from Russia, North Africa and LNG, a challenging task. With the ongoing credit crisis still unfolding, an increase in imports that allows maintenance of present EU consumption levels may turn out to be a major accomplishment.
As of 2007, 25 % of EU’s nat gas consumption was imported from Russia. Russian nat gas exports to the EU grew substantially after the completion of pipelines between Western Siberia and Europe by the mid 80’s.
There are good reasons to believe that the Russians (meaning Gazprom) planned their exports to the EU based upon available official data and forecasts from amongst others, EU members and Norway. This is of course a sensible thing to do if the goal is to maximize the profits from the Russian resource base and to optimize the allocation of investment funds. Why invest in expansions of production and infrastructure, if these investments are likely to contribute to an oversupply and a subsequent downward pressure on prices?
Perhaps what is needed is an energy czar. I think it was Matt Simmons who first used the expression “energy czar”, perhaps with a hidden meaning that Russians leaders far better understand the strategic nature of energy than their western counterparts, even though their access to data is not as good.
In 1995 - 1998, the UK exported nat gas to Ireland. In 1998, the Interconnector, the bidirectional pipeline between Bacton in UK and Zeebrugge in Belgium, started to flow. After that, the UK became a moderate exporter of nat gas to Continental Europe.
EU production of natural gas has peaked, and is expected to decline. EU exclusive of UK nat gas production peaked in 1996. Since then, natural gas production has been in a general decline and is expected to continue to decline. Recently Dutch authorities confirmed that their nat gas production is set to decline. These milestones were passed without much attention. For the next several years, projected increases in Norwegian nat gas production are expected to partly offset declines in production in the EU, but the overall production trend is expected to remain downward.
UK has for some years had an important role in securing a unique flexibility with respect to the EU nat gas supply chain. The combined effect of the declining nat gas production in UK and the rest of the EU has already tightened the supply situation for EU (ref the recent price growth within the liberalized UK market), and has the potential to develop into a severe nat gas supply crunch. Such a supply crunch could have cascading effects, and may affect other energy systems. These interrelationships seem to be poorly understood among those responsible for developing energy supply strategies.
Source - The Oil Drum
1. UK marketable nat gas production (also gross) peaked in 2000 close to 110 Gcm/a.
2. During the last three years, UK nat gas production has declined at an annual rate of 8 - 10 %, which many energy analysts expect will continue.
3. Nat gas constituted more than 38 % of the UK primary energy consumption in 2007.
4. Several analyses expect UK to import 80 % of their nat gas consumption by 2020.
5. UK was a net exporter of nat gas for a brief period.
In 2007, more than 38 % of the UK’s primary energy consumption came from nat gas. Of the EU/OECD countries, only Italy has a higher portion of nat gas consumption. In comparison, the USA gets 25 % of its primary energy consumption from natural gas; France, 15 %; and Germany, 24 %.
In general, high nat gas usage is primarily found among countries with huge nat gas reserves like Russia, where nat gas amounted to more than 57 % of primary energy production in 2007. Russia is the world’s largest exporter of nat gas and second largest exporter of oil, so this high domestic usage frees up oil for export. Since oil generates more income than nat gas, based on units of energy exported, this approach maximizes export revenue.
The UK and Continental Europe have both benefitted from the bidirectional Interconnector that since 1998 has allowed for increased flexibility in nat gas supplies. Due to the decline in UK indigenous supplies and a tighter supply situation on Continental Europe, the importance of the Interconnector is expected to slowly diminish unless future Russian supplies are shipped through the system to UK.
Nat gas production within EU was on a plateau from 1996 to 2004 and has now entered into terminal decline. Increased nat gas production from Norway (which is not a full EU member) has slowed the decline. The balance of consumption within EU has been secured through increasing imports, primarily from Russia, North Africa and LNG. The diagram above suggests that imports into EU will need to grow quickly, from 200 Gcm/a at present to projected 400 Gcm/a by 2020, to fill the rapidly growing gap between declining supplies and projected growth in consumption.
If projected growth in EU nat gas consumption by 2020 is to be met, it will be necessary to double present imports of 200 Gcm/a from Russia, North Africa and LNG, a challenging task. With the ongoing credit crisis still unfolding, an increase in imports that allows maintenance of present EU consumption levels may turn out to be a major accomplishment.
As of 2007, 25 % of EU’s nat gas consumption was imported from Russia. Russian nat gas exports to the EU grew substantially after the completion of pipelines between Western Siberia and Europe by the mid 80’s.
There are good reasons to believe that the Russians (meaning Gazprom) planned their exports to the EU based upon available official data and forecasts from amongst others, EU members and Norway. This is of course a sensible thing to do if the goal is to maximize the profits from the Russian resource base and to optimize the allocation of investment funds. Why invest in expansions of production and infrastructure, if these investments are likely to contribute to an oversupply and a subsequent downward pressure on prices?
Perhaps what is needed is an energy czar. I think it was Matt Simmons who first used the expression “energy czar”, perhaps with a hidden meaning that Russians leaders far better understand the strategic nature of energy than their western counterparts, even though their access to data is not as good.
In 1995 - 1998, the UK exported nat gas to Ireland. In 1998, the Interconnector, the bidirectional pipeline between Bacton in UK and Zeebrugge in Belgium, started to flow. After that, the UK became a moderate exporter of nat gas to Continental Europe.
EU production of natural gas has peaked, and is expected to decline. EU exclusive of UK nat gas production peaked in 1996. Since then, natural gas production has been in a general decline and is expected to continue to decline. Recently Dutch authorities confirmed that their nat gas production is set to decline. These milestones were passed without much attention. For the next several years, projected increases in Norwegian nat gas production are expected to partly offset declines in production in the EU, but the overall production trend is expected to remain downward.
UK has for some years had an important role in securing a unique flexibility with respect to the EU nat gas supply chain. The combined effect of the declining nat gas production in UK and the rest of the EU has already tightened the supply situation for EU (ref the recent price growth within the liberalized UK market), and has the potential to develop into a severe nat gas supply crunch. Such a supply crunch could have cascading effects, and may affect other energy systems. These interrelationships seem to be poorly understood among those responsible for developing energy supply strategies.
Source - The Oil Drum
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