The Oil Drum: Europe

[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

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

Seven am breakfasts in O’Hare are not a habit I plan on developing but there was I, for the second day running, at the same table even at Wolfgang Pucks.. But all in a good cause, as I headed off to Houston for ASPO. Going to the hotel - very new and needed, as the cabby proudly told me,– he asked which Convention I was here for (there is an Olympics meeting of some sort down the hall). I explained about Peak Oil and though initially he had not heard about it, he then mentioned a Houston City Council effort to have the cab companies use hybrids. This is now on hold, since it did not appear to be a well-received suggestion. Concerns that he brought up included the small size of the cars, that they were only 4-cylinder and would not stand the wear that a cab life would impose, and that the cabbies, who have to buy the cabs, could not afford the $3,000 to replace the batteries. Apparently the cab companies had suggested that they would comply right after the police Department bought theirs. Talking at an ASPO break about this, apparently Denver are experimenting with the process, but have only just introduced it with a few cabs., and a quick Google shows that a number of cities have already bitten that bullet.

With getting here a little late I walked into the first joint sessions after they had started, and, as with the ASPO in Cork, the atmosphere immediately conveyed that the meeting would be a success. (Though the initial judgment was made because I had to drop my bag and lean against the wall since there were no free seats, and when more were brought they were still not enough). The audience was obviously knowledgeable and the questions were technical, as were the answers. For the first “Workshop” day the sessions were divided, with TOD stalwarts Stuart Staniford and Euan Mearns giving the story of their incredible detective work in, as an audience member put it, developing the story of Saudi oil with virtually none of the resources or computing power of Aramco, and yet coming very close to what has to be the real story. Stuart explained how the numbers that he, and others at TOD, had put together and painted the picture of Ghawar depletion, (which is in the citation so I won’t repeat it) and Euan put this in the broader context of Saudi Arabia in general. Gail Tverberg acted as moderator to the session and the discussion. Perhaps the crux of the issue is that the authors do not think that Saudi Aramco can produce the volumes that they claim for Ghawar since, in part they assume a higher recovery factor that has been historically true for this type of rock, and with around half the production gone, things are not looking all that good. Reference was made in questions to other papers coming in the meeting that will bring further light to the topic, including such a comment from Matt Simmons.

Topics include:

ASPO-6 DVDs / Presentations; Oil Supplies / Prices; Food Prices; Natural Gas / LNG - Qatar; Economics - UK; Coal Prices; Film Review - A Crude Awakening; Peak Oil - South Africa

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.

[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.

This past week has been one where, despite the torpor that starts to fill the summer press, the progress of reality across the energy supply situation is beginning to make its uncomfortable presence known in the MSM. We have, it appears, reached that time where demand destruction, a phrase I heard for the first time not that much more than a year ago, is now beginning more evidently to impact the demand side of the oil and gas balance between supply and demand.

As I noted the other day, when talking about the oil sands, cornucopian thinking still seems to control the attitude of government. The comment by the Canadian National Energy Board that Dave cited includes the comment on gas needs

It takes about 34 cubic metres (1 200 cubic feet) of natural gas to produce one barrel of bitumen from in situ projects and about 20 cubic metres (700 cubic feet) for integrated projects. Currently, the oil sands industry uses about 21 million cubic metres (0.7 billion cubic feet) per day of purchased gas, or about five percent of the Western Canada Sedimentary Basin production. By 2015, this increases to about 60 million cubic metres (2.1 billion cubic feet) per day, or nearly 12 percent, assuming gas production remains at 482 million cubic metres (17 billion cubic feet) per day.

This seems to imply that the demand increase is not that significant relative to supply. But to continue Dave's thread onto a slightly larger scale, the failure to put the demand into a global picture can lead to considerable, and unfounded, complacency.

As the G8 finance ministers have been discussing the state-of-the-world, prior to the meeting of the principals in mid-July, our friends at Gazprom seem to be adding a little more sand to the gears of international diplomacy. The first problem that arises is, as has been noted by several of us over the past year, that Gazprom has been acquiring controlling interests in the distribution networks of an increasing number of countries. It has recently negotiated to take a share in the second gas pipeline to run from mainland Europe to the UK, and is trying to acquire Centrica, the British gas supply company. There is some resistance from the British Government to this move, though that is not universally supported in the UK. Now the second shoe is hanging, rather openly, in the air.

[editor's note, by Dave] Generously, Matt Simmons and SCI have given me permission to reference their report Simmons Oil Monthly - Qatar, by Robert A. Kessler, April 24, 2006. Matt wanted me to "alert readers that SCI made a major exception to their strict rules of only sending their institutional research to their institutional clients". My thanks to Matt and SCI for making this report available. I believe it will appear soon on the Simmons & Company International website. I'll do an update when that happens.

Update [2006-6-11 15:33:22 by Dave]: The SCI report I used for this story is now available there. Simmons Oil Monthly - Qatar (large pdf warning).

Without much fanfare, Qatar announced a moratorium on new development of the natural gas North Field basin, a decision that had actually been taken in 2005. At the same time, in a recent presentation by Matt Simmons entitled Tight Oil Supplies, we run into this intriguing slide (#44, big pdf warning).

The North Field/South Pars Natural Gas Complex
Figure 1 -- Click to Enlarge

This report will go into considerable detail about the future role of the North Field/South Pars natural gas field, it's size and importance, the reasons for the moratorium and finally important questions about both the geology and proven reserves of the field. As Simmons notes in his slide, there is a "large degree of uncertainty regarding [the] true potential [of this field]". The topic is important regarding the uncommon phrase "peak natural gas" on a global scale. As we know, natural gas production has already peaked in North America.

With a couple of stories in the news this week, one's first inclination might be to think that we should stop worrying so much about immediate fuel supply problems.  Consider the report that natural gas supplies are at the highest level since 1984.  At a level of some 197 tcf, set against an annual production of around 18.3 tcf, this would appear to give us a reasonably good supply for over ten years.  Unfortunately life is not that simple.  As Dave pointed out our reserves are increasingly coming from unconventional sources.  And as the OGJ article points out

Production growth hasn't followed the increase in reserves, noted Chris McGill, AGA's managing director of policy analysis.

 "In 2005, over 27,000 gas wells were completed in the United States, which is the highest level of completions on record," he said. "However, most of these wells were drilled onshore in shale, tight sands, and coal seams, which are low-yield and slow-yield resources."