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

Click all charts to enlarge, without call out.

This BERR assessment (960 kb pdf, 58 slides) of oil and gas production on the UK continental shelf arrived in my mail box last week. It is one of the best summaries I've seen and should be read by all with an interest in the future of UK and European energy security. The chart above is based upon the BERR forecast for UK oil and gas production. It is time for Alistair Darling and Mervyn King to explain to the British people why they see current problems with energy prices and associated inflation as a transient blip when the UK seems to be in a terminal dive towards insolvency.

This is a guest post from Rune Likvern (nrgyman2000 on The Oil Drum). Rune is an independent energy and financial analyst from Norway who has decades of experience from holding various positions within several international oil companies and also runs a blog called "Kveldssong for Hydrokarbonar". When Rune posts on The Oil Drum we usually pay attention to what he has to say.

This post presents the development of the energy mix for UK, how UK in less than a decade went from being a substantial energy exporter to a substantial net energy importer. A more detailed look on what to expect for UK natural gas prices in the near term and a brief discussion on the real options available for future UK energy consumption.

The UK development in energy consumption and energy mix for the years 1965 - 2007 in MTOE. Click to enlarge.
(MTOE; Million Ton Oil Equivalents; 1 MTOE approximates 20 000 bbl/d (oil))

With Consumer Prices Index (CPI) rising to 3.3% (year on year to May-08), the fastest rate of increase in over a decade, the Governor of the Bank of England has written to the Chancellor to explain.

Open letter from Mervyn King governor of the Bank of England to Alistair Darling, Chancellor of the Exchequer. Click for full letter.

Rising North Sea oil production was a significant factor in keeping oil prices under control in the 1970s, 80s and 90s. Production peaked at 6.4 million barrels per day in 2000 and since then, declining North Sea Oil production is one significant reason that oil prices are now rising exponentially.

This article from The Telegraph is a wonderful example of pundit cluelessness and or wanton incompetence, and I'm going to rip it to shreds in detail below.

Gordon Brown landed North Sea oil in choppy water

The Treasury is enjoying a windfall as oil soars but taxation policy may have knock-on effects

The rest of us may have been too busy partying like it was 1999, but on the eve of the millennium Britain was quietly, unwittingly, selling off the family silver on the cheap.

Gordon Brown's choice of that year to start selling off Britain's gold reserves with the precious metal's price close to an unprecedented low is well documented. What is less well known is that 1999 marked the peak for North Sea oil production and - by an unfortunate twist of fate - the very nadir of the oil price.

Extended from the European Tribune version, which was itself inspired by earlier coverage here on TOD. More relevant background can be found in these two articles from a few months ago: UK Energy security and The European Gas Market, both by Euan Mearns.

Now that the news that the Forties pipeline has to close down is known, the blame game has started:

UK resists fuel curbs despite strike The UK is “nowhere near” having to impose emergency powers to restrict fuel supplies to essential users, the government insisted on Sunday, despite a strike forcing the closure of a pipeline that carries nearly half of Britain’s North Sea oil. (...) But the Conservatives sought to make political capital from the unrest. On Sunday, they argued that the strike was a byproduct of his weakness. “Whether it is teachers or whether it is oil workers or whoever else, they’re actually saying we can push this guy around,” David Cameron told the BBC. The Tory leader argued that Mr Brown was indirectly to blame for the dispute because of his changes as chancellor to employer pension schemes. “Who is the man who wrecked the British pension system? He is the prime minister,” Mr Cameron said. The Grangemouth workers are protesting over the company’s intention to close their final-salary pension scheme to new employees from August 1. Ineos has offered to suspend plans to make existing employees start making contributions, pending further talks.

I'd like to flag just a few points that seem to be typical of our times, and maybe warrant making this a symptom of the Anglo Disease, ie the wholesale domination of our economies by reckless financial capitalism:

On Thursday 10th January 2008 Business Secretary John Hutton announced to MPs that he was giving the green light for new nuclear build in the UK. He is inviting energy companies to bring forward plans to build and operate new nuclear power plants. However considering the nuclear cliff, has the decision come too late to maintain the nuclear contribution?

The nameplate capacity of the UK nuclear fleet, stacked, from the peak capacity in the late nineties and following the published decommission schedule. Three life extensions are shown in red. Source: British Energy & Nuclear Decommissioning Agency

...not when you take into account the uranium-peak, the energy return on energy invested in the nuclear life-cycle, and the prospect of much of the legacy of nuclear waste being abandoned for ever. This is a guest article by Dr. David Fleming. Fleming is the Founder Director of the Lean Economy Connection, and an independent writer in the fields of energy, environment, economics, society and culture. The article is based on Fleming’s recent 56-page booklet, The Lean Guide to Nuclear Energy, which expands and references the arguments presented. The booklet is available to download here: The Lean Guide to Nuclear Energy

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