Recently, Rune Likvern wrote a post talking about the possibility of a natural gas shortage in the United Kingdom, possibly as soon as February or March 2009. Rune isn't the only one worried about the supply of gas in Europe and the UK. A little over a year ago, Euan Mearns wrote two posts about the European natural gas supply, the first called European Natural Gas and a follow-up addendum called Daddy, will the lights be on at Christmas? In this post, we combine the two posts and re-run them. Besides being relevant to the gas shortage issue, the posts also provide some additional background related to current Russian/Ukrainian dispute.

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

Gail’s recent post on the fragility of the US distribution system and the shortages that will be imposed by refinery outages, is a reminder of our dependence on pipelines for supply. The dependence is not just in the US, though the debate over the reality of a new gas pipeline from Alaska to the lower 48 rumbles along as a part of the election debate.

Most of Europe also depends on pipelines, particularly natural gas ones, and it is because of that that I am going to take a somewhat nervous stance and disagree with a recent article by Jerome. Some considerable time ago we swopped comments about the likelihood of different pipelines being laid to exploit the natural gas in Turkmenistan, and so from that point, this post is an admission that his opinion at the time (that many of these pipes wouldn't happen) was correct. However part of the reason for this is the less than benevolent role that I see Russia is playing, and this is my disagreement with him.

My concern is emphasized by the difference in objectives of two recent trips around the periphery of Russia. First there was the trip by the Russian President, who, with Gazprom CEO Alexei Miller, toured oil and gas supplying countries such as Turkmenistan, Azerbaijan and Kazahkstan in July. Out of that came both an agreement for Russia to buy Turkmen gas but also for Gazprom to invest in the Turkmen gas infrastructure. (Quotes under fold)

This is the first posting of the ODAC (Oil Depletion Analysis Centre) bi-weekly newsletter. If TOD readers find it useful, it will be posted regularly. Keep in mind that the 'Comments' are aimed at regular subscribers for whom the newsletter may be their only source of information. The newsletter regularly covers oil and gas depletion, and related issues.

Well the situation East of Georgia continues to evolve. I thought to begin there since, as mentioned in an earlier post, there are a number of small countries in the strip that runs south of Russia and over into China where oil and gas issues will make the nations a bit more internationally prominent. Consider, for example, Azerbaijan. It was only a couple of days ago that, in the face of Russia doubling the gas price that Azerbaijan cut off its oil flow to Russia. It shut down its oil exports in order to fuel some of the power stations that would no longer be supplied with the Russian gas. The original plan was to do this until the gas from the Shakh Deniz field becomes available in April (though that may now have slipped to June).

Interestingly gas from Shakh Deniz was also scheduled to be supplied to Georgia at a price of $120 per thousand cubic meters (tcm). This is just over half the price that the Russians have been asking. However, since Georgia needs about 2 billion cu m per year it will still need to buy 1.1 bcm from Russia at the higher price. Azerbaijan has been supplying around 80,000 bd of oil to Russia through the Baku-Novorossiysk oil pipeline which belongs to the Russian pipeline company Transneft. Part of the intent of the increase in price to Azerbaijan was, apparently, to reduce their ability to supply Georgia. Azerbaijan bought 4.5 bcm of natural gas from Russia last year at a cost of $500 million. Apparently the thought was that, at the higher price, Azerbaijan would have to cut back on imports, and thus have less to make available to Georgia. However, by switching their power stations to oil-burning, they appear to have thwarted this idea.

Natural gas from Shakh Deniz will be fed into the Baku-Tbilisi-Erzerum pipeline, which is almost ready to receive and deliver the gas. Note that this is a different pipeline to the recently completed Baku-Tbilisi-Ceyhan pipeline, which carries oil and which, between January and October carried some 4.8 million (though it does not say if this is tonnes or barrels).