Natural Gas in Europe

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W O R K I I V G P A P E R

NATURAI; GAS

I Y

EUROPE

September 1996 W - 8 6 4 3 9

I n t e r n a t i o n a l I n s t i t u t e for Applied Systems Analysis

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NOT FOR QUOTATION WITHOUT THE PERMISSION O F THE AUTHORS

NATURAL

GAS

IN EUROPE

S. Messner A. &Lovine M . Strubegger

S e p t e m b e r 1986 WP-86-39

Working P a p e r s are interim r e p o r t s on work of t h e I n t e r n a t i o n a l I n s t i t u t e f o r Applied Systems Analysis a n d h a v e r e c e i v e d only limited review. Views o r opinions e x p r e s s e d h e r e i n d o n o t n e c e s s a r i l y r e p r e s e n t t h o s e of t h e I n s l t u t e or of i t s National Member Organizations.

INTERNATIONAL INSTITUTE FOR APPLIED SYSTEMS ANALYSIS 2361 L a x e n b u r g , Austria

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Foreword

The IIASA I n t e r n a t i o n a l Gas S t u d y analyzed t h e long-term p r o s p e c t s for n a t u r - a l g a s demand. supply, a n d t r a d e in E u r o p e a n e n e r g y m a r k e t s . The small IIASA s t u d y team c o o p e r a t e d informally with institutions a n d individuals involved in t h e b r o a d e r a s p e c t s of n a t u r a l g a s r e s e a r c h . A number of workshops, o r g a n i z e d a n d held at IIASA, were i n s t r u m e n t a l in communicating t h e IIASA a c t i v i t i e s to e x p e r t s from t h e g a s i n d u s t r i e s a n d c o o p e r a t i n g s c i e n t i f i c institutions.

This p a p e r summarizes t h e g e n e r a l a p p r o a c h of t h e s t u d y a n d r e p o r t s on t h e r e s u l t s of t h i s mathematical modeling e f f o r t .

W e t h a n k Academician M . S t y r i k o v i c h , L e a d e r of t h e Working Consulting Group to t h e P r e s i d e n t of t h e S o v i e t Academy of S c i e n c e s on Long-Term E n e r g y F o r e c a s t - ing for reviewing t h i s p a p e r .

Hans-Holger R o g n e r L e a d e r

I n t e r n a t i o n a l Gas Study

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Contents

Introduction

Historic P e r s p e c t i v e The Resource Base The Status Quo

The Determinants of Gas Consumption The Base Case

Lower Oil P r i c e s

The IIASA Study in P e r s p e c t i v e Conclusions

Final Remarks Bibliography

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NATURAL GAS IN EUROPE

Sabine Messner, Anatoli Golovine and Manfred S t r u b e g g e r

Introduction

During t h e l a s t 10 to 15 y e a r s a number of e n e r g y studies with varying regional and substantive focus were conducted a t IIASA. Among them w a s t h e comprehensive analysis of the global e n e r g y situation Energy in a Finite WorLd (Hafele 1981). as w e l l as regional (Nakicenovic a n d Messner 1982, Sassin et al.

1983) a n d country-specific s t u d i e s (Rogner and S t r u b e g g e r 1982

,

DiPrimio and S t r u b e g g e r 1981). An update of t h e model r u n s from Energy in a Finite World, t h e IIASA '83 Scenario o f E n s r g y Lkvelopmmt (Rogner 1984), pointed to t h e i n c r e a s e d r e l e v a n c e of n a t u r a l g a s as internationally t r a d e d fuel. Gas would, according to t h i s analysis, become t h e n e x t major s o u r c e of e n e r g y . This w a s a l r e a d y e a r l i e r concluded by C. Marchetti, who based his findings on a v e r y d i f f e r e n t methodological approach-the logistic substitution model (Marchetti and Nakicenovic 1979).

These considerations, t o g e t h e r with t h e n a t u r e and complexity of t h e problems r e l a t e d to g a s e x t r a c t i o n , t r a n s p o r t and t r a d e , lead to t h e initiation of t h e IIASA International Gas Study.

The focus of t h e IIASA g a s study w a s Europe. because, o u t of t h e regions with substantial g a s use, i t shows t h e highest complexity in international relations and e n e r g y t r a d e options. Other r e a s o n s are t h e high d e g r e e of economic development, allowing f o r t h e c a p i t a l intensive build-up of a g a s i n f r a s t r u c t u r e , and t h e obvious necessity to s t e p up e n e r g y imports in t h e f u t u r e .

One important issue i s t h e competitiveness of n a t u r a l g a s against o t h e r e n e r g y s o u r c e s . T h e r e f o r e a systems p e r s p e c t i v e w a s chosen, i.e. t h e e n e r g y system i s s e e n as a n entity-natural g a s is not singled o u t and t r e a t e d s e p a r a t e l y as in many

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o t h e r g a s studies. To be a b l e to study substitution processes and t o c o v e r o t h e r important a s p e c t s , like t h e build-up of new i n f r a s t r u c t u r e s and t h e implementation of new end-use technologies-all of them being relatively slow processes-the time horizon had t o b e extended well into t h e next century. But a l s o t h e need t o g e t a c l e a r p i c t u r e of t h e situation regarding t h e availability and consumption of r e s o u r c e s necessitates a n extended time horizon. Thus t h e study allows to shed some light on t h e period around 2010, when p r e s e n t c o n t r a c t s e x p i r e and when f

most of t h e c u r r e n t l y o p e r a t e d fields will be exploited.

The systems perspective-together with t h e long time horizon--shows t h e problems i n c u r r e d by simply extrapolating t h e s t r u c t u r e and dynamics of o u r p r e s e n t e n e r g y system. When looking some 20 to 30 y e a r s ahead, like in many o t h e r studies, s t r u c t u r a l problems d o not y e t have major consequences. Looking 50 y e a r s ahead, these problems cannot be o v e r s e e n any more-they have t o be considered in some way. The main point h e r e is, however, t h a t t h e s e changes a r e dynamic p r o c e s s e s taking place continuously, also in t h e next 20 y e a r s . By looking f a r a h e a d w e t r y t o c o v e r s h i f t s and changes t h a t cannot be s e e n easily in s h o r t e r view.

For similar reasons i t w a s n e c e s s a r y to r e f r a i n from simply using published figures on proven r e s e r v e s , which, as a l s o indicated l a t e r in this p a p e r , v a r y considerably o v e r time. Consequently, t h e r e s o u r c e s r e c o v e r a b l e in t h e next decades, as well as t h e cost of e x t r a c t i o n , had t o b e re-evaluated f o r this study.

The regional disaggregation w a s chosen with r e s p e c t to d e g r e e of economic development, p r e s e n t use of g a s , existing i n f r a s t r u c t u r e , and geographic c o h e r - ence. Basically t h e r e are two types of regions: n e t importers and n e t e x p o r t e r s of natural gas. The importers are located in Europe and grouped in five regions:

C e n t r a l E u r o p e , comprising t h e EC-9 e x c e p t Italy plus Austria and Switzerland, North E u r o p e r e p r e s e n t i n g Scandinavia, S o u t h West E u r o p e (Spain and Portugal), S o u t h E a s t E u r o p e (Italy, Greece, Yugoslavia and Turkey), and E a s t E u r o p e con- sisting of t h e CMEA c o u n t r i e s excluding t h e Soviet Union.

The s o u r c e s of n a t u r a l g a s are domestic e x t r a c t i o n in e a c h region and gas bought from t h e exporting regions. These e x p o r t e r s are t h e N e t h e r l a m i s , Nor- w a y , t h e Soviet U n i o n , N o r t h Africa and t h e Middle E a s t . They c o v e r a l l presently conceivable s o u r c e s of n a t u r a l g a s imports f o r Europe with a longer time perspective. Figure 1 shows t h e flows of n a t u r a l gas envisaged between t h e trading p a r t n e r s .

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SOVIET UNION

1

^{NORTH SEA} CENTRAL LUROPE EAST EUROPE w

SOUTHEAST EUROPE

A

MIDDLE EAST

Figure 1. Possible Gas T r a d e Flows.

The methodological backbone of t h e study i s a system of models which analyze t h e development of e n e r g y demand, production and r e s o u r c e depletion, and i n t e r - national t r a d e . They were mainly based o n t h e demand model MEDEE-2 (Lapillonne 1978) and t h e e n e r g y supply and utilization model

MESSAGE

I1 (Messner 1984, S t r u - b e g g e r 1984). Additional h l s , like a n i n t e r a c t i v e model f o r t h e analysis of g a s t r a d e options (Messner 1986), and a code to investigate t h e e f f e c t s of various investment s t r a t e g i e s on t h e production p a t t e r n of g a s fields, were developed.

This p a p e r gives a s h o r t overview on t h e development of t h e g a s industry, the s e t u p of t h e study and t h e models used, and d e s c r i b e s t h e m o s t important r e s u l t s obtained. A full r e p o r t is in p r e p a r a t i o n and will a p p e a r in due c o u r s e .

H i s t o r i c P e m p e c t i v e

First uses of n a t u r a l g a s are r e p o r t e d from China around 900 B.C. f o r t h e production of s a l t and f r o m Baku at t h e Caspian S e a , where g a s w a s used a t t h e Temple of Z a r a t h o u s t r a (Brecht 1984). The f i r s t r e p o r t e d use of n a t u r a l g a s in o u r societies w a s in 1821 in t h e United States of America (Peebles 1980). While in t h e US n a t u r a l g a s and manufactured g a s industries developed in parallel, in Europe manufactured g a s produced from coal paved t h e way for t h e n a t u r a l g a s industry.

In E a s t Europe-here including, f o r s t a t i s t i c a l reasons, T s a r i s t Russia- commercial n a t u r a l g a s productlon s t a r t e d around 1915, while productlon in West

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Europe commenced by 1945. At t h a t time East E u r o p e had a l r e a d y r e a c h e d a production level of more t h a n 5 xlo9 m3 p e r y e a r . The biggest p r o d u c e r w a s , how- e v e r , North America with a production of 110 xlo9 m3 in 1945 ( s e e Table l).

Table 1. Development of World Commercial Gas Production, 1900-1985 (lo9 m3/yr).

North Latin West East* Africa Middle Asia World

America America Eur. E u r . E a s t Oceania

1900 6.7

- - - - - -

^6.7

1905 10.0

- - - - - -

¹⁰

.o

1910 14.6

- - - - - -

^14.6

1915 18.4

- -

^0.1

- - -

^18.5

1920 23.4

- -

^0.2

- - -

^23.6

1925 34.8

- -

^1.1

- - -

35.9

1930 56.7 0.2

-

^1.9

- - -

^58.8

1935 56.5 0.5

-

^3.8

- -

^0.1 ^60.9

1940 74.5 1.6

-

6.2

- -

^0.2 ^82.5

1945 109.8 2.3 0.1 5.5

- -

^0.1 ^117.8

1950 170.6 3.7 0.9 9.0

-

^0.1 ^0.3 ^184.6

1955 256.4 6.6 5.1 15.8

-

^1.3 ^0.5 ^285.7

1960 358.6 13 .O 11.9 56.7

-

^2.7 ^3.6 ^446.5

1965 464.4 24.5 19.2 148.2 1.9 4.5 15.9 678.6 1970 651.8 34.5 78.5 234.5 3.4 19.5 25.4 1047.6 1975 619.7 43.7 171.4 341.9 12.5 37.6 46.0 1272.8 1980 624.4 65.5 195.6 490.8 27.2 44.9 80.6 1529.0 1984 565.7 77.5 185.2 653.4 47.6 57.4 107.2 1679.4 1984 552.4 76.6 192.1 709.0 52.9 67.5 119.6 1770.1 Source: Valais et a l . 1982, Cedigaz 1985, PE 8/86.

*Includes Russia and l a t e r t h e Soviet Union.

E a s t European e x t r a c t i o n of g a s h a s been growing e v e r s i n c e t h e end of World War 11, reaching a s h a r e of 33% of world production in 1980. West European production g o t Its f i r s t push a f t e r t h e discovery of t h e l a r g e and c h e a p Groningen g a s field in 1959, t h e second one by t h e e x t r a c t i o n of North S e a oil and t h e associated gas. Production of oil and g a s in t h e North S e a became economic a f t e r t h e t w o oil p r i c e i n c r e a s e s in 1973 and 1979, while t h e p r e s e n t slump in oil p r i c e s e n d a n g e r s many p r o j e c t s in t h e North S e a . A p r e r e q u i s i t e f o r t h e exploitation of t h e Dutch Groningen field w a s t h e initiation of international t r a d e of n a t u r a l g a s to b e a b l e to utilize t h e high production capacity. The f i r s t i m p o r t e r w a s t h e FRG in 1963, followed by Belgium (1966). F r a n c e and Luxembourg (1967).

The Soviet Union s t a r t e d i t s n a t u r a l g a s e x p o r t s by delivering g a s to Poland a l r e a d y in 1946--a situation t h a t w a s due to t h e change in t h e national t e r r i t o r i e s

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after World War 11. When constructing t h e Bratstvo pipeline f o r e x p o r t L o Western Europe, t h e Soviet Union a l s o s t a r t e d to e x p o r t g a s to Czechoslovakia (1967). West European imports of Soviet g a s s t a r t e d in 1968 to Austria, only in 1973 t h e FRG and later on Finland, Italy and France followed. In 1984 Western E u r o p e imported 3 3

x l o 9

m3-28% of t h e t o t a l g a s imports-from t h e Soviet Union (Cedigaz 1985).

Already b e f o r e t h e Soviet Union e n t e r e d t h e West European g a s market, Algeria s t a r t e d to e x p o r t LNG to t h e United Kingdom and France. These deliveries, t h e world's f i r s t commercial LNG shipments, s t a r t e d in 1964 to t h e UK and in 1965 to France. L a t e r on, LNG w a s a l s o e x p o r t e d to Belgium, Spain and Italy. In 1981 a pipeline through t h e Mediterranean S e a , connecting Algeria with t h e European g a s m a r k e t (the Trans Mediterranean pipeline), w a s finished.

The newest actor on t h e European g a s s c e n e is Norway which has s t a r t e d oil production in t h e North S e a in t h e e a r l y 1970s and e n t e r e d t h e g a s m a r k e t in 1977, when t h e t r a n s p o r t of associated g a s from t h e Ekofisk field to Emden, FRG, began.

A t t h e same time t h e g a s field Frigg, 60.82% of which belong to Norway and 39.18%

to t h e UK, c a m e on stream a n d supplies g a s to t h e UK via S t . Fergus. In 1984 Nor- way produced 26 billion m3 g a s or 11% of t h e g a s used in Western E u r o p e (22% of t h e imports of t h i s region).

Due to t h e high c a p i t a l intensity and physically fix s t r u c t u r e of g a s t r a n s p o r t equipment, t r a d e with n a t u r a l g a s i s r a t h e r b i l a t e r a l than international. On t h e West European s i d e usually a consortium of buyers, lead by Ruhrgas of t h e FRG, negotiates with t h e c o u n t e r p a r t s f r o m t h e exporting c o u n t r i e s (Statoil f r o m N o r - way, S o n a t r a c h from Algeria, Soyuzgazexport f r o m t h e USSR and Gasunie from t h e Netherlands). The l a t e s t c o n t r a c t w a s signed between t h e Norwegians and t h e European Consortium on t h e import of 450 x109 m3 of g a s from t h e North S e a fields Sleipner and Troll o v e r 27 y e a r s , according to which deliveries will start in 1993 (Petroleum Economist 7/86).

The Resource Base

P r e s e n t l y t h e Soviet Union holds 39% of t h e world's p r o v e n r e s e r v e s of n a t u r a l gas, while t h e s h a r e of a l l West European c o u n t r i e s t o g e t h e r i s 6% (Cedigaz 1985). Since 1970 world p r o v e n r e s e r v e s have grown at a n annual a v e r a g e rate of 6% (see Table 2). The biggest i n c r e a s e of roughly 25 trillion m3 i s to b e a t t r i b u t e d to t h e Soviet Union, t h e Middle E a s t gained s o m e 1 9 trillion m3 s i n c e 1970. The only region of t h e world with declining r e s e r v e s i s t h e US-a f a c t which could p a r t l y r e f l e c t t h e r e g u l a t o r y policies of setting low well-head p r i c e s which slow down exploration.

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Table 2. Development of World P r o v e n Gas R e s e r v e s , 1940-1986 (loi2 m3) and S h a r e s .

N o r t h Latin West E a s t Africa Middle Asia World America America E u r . E u r . E a s t Oceania

Total

1940 2.6 0.2 0.0 0.0 0.0 0.5 0.2 3.5

1950 5.3 0.7 0.1 0.1 0.0 1.8 0.5 8.5

1960 8.1 1.4 0.3 1.8 0.6 4.4 0.5 17.0

1965 9.2 1.7 1.5 3.1 1.9 5.8 0.9 24.2

1970 9.4 1.9 3.6 12.6 3.8 6.8 1.5 39.6

1975 8.5 2.4 4.0 24.3 5.2 15.5 3.4 63.3

1980 8.0 4.4 3.9 31.6 5.7 18.7 4.8 77 .O

1984 8.3 5.3 5.4 36.6 5.9 22.4 6.4 90.4

1985 8.3 5.5 5.6 38.1 5.9 25.6 7.2 96.2

1986 8.1 5.5 5.4 39.1 5.9 26.2 7.5 97.7

S h a r e s

1940 74.3 5.7 0 .O 0.0 0.0 14.3 5.7 100.0

1950 62.4 8.2 1.2 1.2 0.0 21.2 5.9 100.0

1960 47.6 8.2 1.8 10.6 3.5 25.9 2.9 100.0

1965 38 .O 7.0 6.2 12.8 7.9 24.0 3.7 100

.o

1970 23.8 4.7 9.0 31.8 9.7 17.1 3.9 100.0

1975 13.5 3.7 6.3 38.4 8.3 24.5 5.3 100 .O

1980 10.4 5.7 5.0 41.0 7.4 24.3 6.2 100.0

1984 9.2 5.9 6.0 40.5 6.6 24.8 7.1 100.0

1985 8.7 5.7 5.8 39.6 6.1 26.6 7.5 100.0

1986 8.3 5.7 5.5 40.0 6.1 26.8 7.5 100.0

S o u r c e : Valais et a l . 1982, Cedigaz 1985, P E 8/86.

But also t h e S o v i e t Union, d e s p i t e t h e numerically v e r y high r e s o u r c e b a s e , f a c e s a complex s i t u a t i o n . Most of t h e newer g a s finds are l o c a t e d in t h e Asian p a r t of t h e c o u n t r y , f a r away from potential consumers. Table 3 shows t h e development of t h e d i s t r i b u t i o n of USSR's g a s r e s e r v e s o v e r t h e p e r i o d 1955 to 1985. While i n 1955 more t h a n 90% of t h e known r e s e r v e s w e r e r e l a t i v e l y n e a r to t h e consumption c e n t e r s in t h e E u r o p e a n p a r t of t h e c o u n t r y , t h e s i t u a t i o n i s r e v e r s e d in 1985. P r e s e n t l y only 13X of t h e known r e s e r v e s are in E u r o p e , t h e rest i s l o c a t e d In Asla in climatically u n f a v o r a b l e a n d g e o g r a p h i c a l l y r e m o t e areas.

The d i s t r i b u t i o n of g a s r e s o u r c e s among t h e nations in both E a s t a n d West E u r o p e stresses t h e n e c e s s i t y of n a t u r a l g a s t r a d e . While in E a s t E u r o p e t h e S o v i e t Union owns basically a l l n a t u r a l g a s r e s e r v e s (1.1.85: 98.5X, see Table 4), in Western E u r o p e t h r e e c o u n t r i e s h a v e a c o n s i d e r a b l e potential: The N e t h e r l a n d s (35X), t h e United Kingdom (13X) a n d Norway (40X). The United Kingdom with a

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- 7 -

Table 3. Natural Gas R e s e r v e s (A+B+Cl) of t h e Soviet Union (lo9 m3).

E u r o p e Asia Whole USSR

1955 642 50 692

1965 1803 1763 3566

1975 4200 21600 25800

1980 4570 28520 33090

1985 6080 42050 48130

Source: S t e r n (1984) and Databook: Natural Gas and Condensate Deposits, 1983 (updated).

Table 4. Development of P r o v e n Gas R e s e r v e s in Selected Regions, 1960

-

¹⁹⁸⁶

(lo9 m3).

Nether- United N o r - Alge- Soviet Middle

lands Kingdom way r i a Union E a s t

1960 10

- -

⁶⁰⁰ 1700 4360

1965 1100

- -

¹⁷⁰⁰ ²⁷⁸⁶ ⁵⁸³⁰

1970 2042 850

-

²⁸⁷⁵ ⁹³⁰⁰ ⁶⁷⁹⁰

1975 1963 762 550 2840 19820 15570

1980 1626 754 828 3700 25750 18690

1985 1890 725 2236 3087 37500 25609

1986 1855 648 2228 3030 38500 26150

S o u r c e : Valais et a l . 1982, Cedigaz 1985, PE 8/86.

r e s e r v e to production r a t i o ( R / P ) of 16 y e a r s in 1984 d o e s not plan to e x p o r t n a t u r a l gas, i t r a t h e r imports North S e a gas from Norway. The Netherlands with a R / P r a t i o of 25 y e a r s and n e a r l y s t a b l e r e s e r v e s since 1970 are s t a r t i n g to handle t h e i r r e s o u r c e s with growing caution. Norway has, within Europe, by far t h e larg- est r e s o u r c e base. These g a s r e s o u r c e s do, however, lie to a l a r g e e x t e n t f a r up in t h e North S e a and are costly to exploit. This leads to similar problems as i n c u r r e d with long distance g a s t r a n s p o r t : t h e s h a r e of investments in t o t a l g a s production costs i s unfavorably high (77Z f o r North S e a oil and g a s according to Lorentsen et a l . 1984).

Algerian r e s e r v e s s t a r t e d to decline around 1980. This situation could b e t h e r e s u l t of t h e political and economic t a r g e t s of t h e country at t h a t time. Algeria t r i e d to e n f o r c e oil p r i c e p a r i t y in t h e p r i c e of g a s e x p o r t s , which r e s u l t e d in lower t a k e s from t h e importing countries. Lately, specially with t h e falling oil p r i c e , t h e Algerian position s e e m s to a d a p t to r e a l i t y .

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Besides t h e p r e s e n t e x p o r t e r s to E u r o p e , also t h e l a r g e d r y g a s r e s e r v e s in t h e Middle E a s t , s p e c i a l l y in I r a n ( p r o v e n r e s e r v e s beginning of 1986:

13.9 x 1 0 ~ ~ m ~ ) a n d Q u a t a r (4.4 ~ 1 0 ~ ~ m ~ ) , could b e used f o r e x p o r t to E u r o p e , e i t h e r as LNG o r via a p i p e l i n e t h r o u g h Turkey. Even c o n v e r s i o n to o t h e r liquid p r o d u c t s like methanol o r middle d i s t i l l a t e s s e e m s f e a s i b l e . The p r o v e n r e s e r v e s In t h i s r e g i o n a r e , although h a r d l y a n y p r o s p e c t i v e e f f o r t s are u n d e r t a k e n , growing f a s t a n d are in t h e s a m e o r d e r of magnitude as i n t h e S o v i e t Union.

The

Stat- Quo

Table 5 summarizes r e s e r v e s , domestic p r o d u c t i o n a n d consumption f o r t h e c o u n t r i e s c o n s i d e r e d , g r o u p e d a c c o r d i n g to t h e a g g r e g a t i o n used in t h e IIASA Gas Study. P r o v e n g a s r e s e r v e s are, as a l r e a d y mentioned, d i s t r i b u t e d v e r y unevenly among t h e nations. But also t h e d e g r e e of g a s utilization v a r i e s c o n s i d e r a b l y .

Some c o u n t r i e s , l i k e T u r k e y a n d Sweden, did n o t u s e a n y n a t u r a l g a s in 1984.

However, Sweden s t a r t e d to i m p o r t g a s from Denmark in t h e summer of 1 9 8 5 , a n d Turkey j u s t signed a c o n t r a c t with t h e S o v i e t Union to buy up to 6 X l o 9 m3 of g a s p e r y e a r s t a r t i n g in 1987. I t w i l l b e t r a n s p o r t e d via a pipeline f r o m t h e S o v i e t Union t h r o u g h Bulgaria, across T h r a c e a n d t h e Sea of Marmara to Gemlik and A n k a r a (PE 3/86). The l a r g e s t u s e r s of n a t u r a l g a s are t h e N e t h e r l a n d s with a g a s s h a r e in p r i m a r y e n e r g y u s e of 47% a n d t h e United Kingdom with 24% in 1984. Both belong to t h e n a t i o n s with r e l a t i v e l y l a r g e r e s e r v e s , b u t only t h e N e t h e r l a n d s are self-sufficient in g a s s u p p l y .

In E a s t E u r o p e Romania h a s t h e l a r g e s t r e s o u r c e b a s e in t e r m s of b o t h liquid a n d g a s e o u s h y d r o c a r b o n s . I n comparison, however, t h e g a s r e s e r v e s are only In.

t h e same r a n g e as t h e r e s e r v e s of t h e FRG. All E a s t E u r o p e a n c o u n t r i e s d e p e n d on g a s i m p o r t s from t h e S o v i e t Union.

F o r t h e a g g r e g a t e d r e g i o n s of W e s t E u r o p e , Table 6 g i v e s t h e o v e r a l l e n e r g y consumption mix f o r 1984. The d e p e n d e n c e o n o i l v a r i e s between 38% f o r t h e n o r t h e r n c o u n t r i e s a n d 58% f o r S o u t h W e s t E u r o p e . T h e r e are only a few n a t i o n s w h e r e o i l i s n o t t h e s i n g l e most i m p o r t a n t s o u r c e of e n e r g y , namely Norway with 70% h y d r o p o w e r , t h e N e t h e r l a n d s with 47% g a s , a n d Yugoslavia with 3 5 X coal in t h e e n e r g y s u p p l y mix.

On t h e a v e r a g e , n a t u r a l g a s s u p p l i e s 15.6% of t h e p r i m a r y e n e r g y consumed.

In t h e r e g i o n N o r t h E u r o p e , Finland w a s t h e only c o n s u m e r of g a s in 1984. T h e r e - f o r e t h e a v e r a g e s h a r e of g a s w a s below I % , while i n c e n t r a l E u r o p e only Belgium

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Table 5. Some C h a r a c t e r i s t i c F i g u r e s f o r N a t u r a l Gas in t h e Nations of E u r o p e , 1984 (lo9 m3).

P r o v e n Marketed Domestic N e t

R e s e r v e s P r o d u c t i o n Consumption Imports

1.1.85 1984 1984 1984

North E u r o p e

Finland 0 0.00 0.77 0.77

Norway 2236 27.28 1.04 -26.24

Sweden 0 0 .OO 0.00 0.00

Total 2236 27.28 1.81 -25.47

CentraL Europe

Austria 18 1.27 5.34 4.07

Belgium-Lux. 0 0.00 9.30 9.30

Denmark 100 0.32 0.62 0.30

FRG 191 18.57 54.00 35.43

F r a n c e 40 6.26 28.88 22.62

I r e l a n d 32 2.34 2 -34 0.00

N e t h e r l a n d s 1890 75.14 40.81 -34.33

Switzerland 0 0.00 1.60 1.60

U K

725 40.16 53.76 13.60

Total 2996 144.06 196.65 52.59

S u t h East Europe

G r e e c e 3 0.06 0.06 0.00

Italy 250 13.62 32.82 19.20

T u r k e y 35 0 .OO 0 .OO 0.00

Yugoslavia 88 2.05 5.67 3.62

Total 376 15 -73 38.55 22.82

S o u t h West E u r o p e

P o r t u g a l 0 0 .OO 0.00 0.00

S p a i n 26 0.17 2.18 2.01

Total 26 0.17 2.18 2.01

East Europe

Bulgaria 5 0.10 5.15 5.05

Czechoslovakia 10 0.74 10.30 9.56

GDR 115 12.37 19.02 6.65

H u n g a r y 120 6.90 11.15 4.25

Poland 110 6.00 11.70 5.70

Romania 2 10 37.90 39.50 1.60

Total 570 64 .O1 96.82 32.81

West E u r o p e 5634 187.24 239.19 51.95

Total E u r o p e 6204 251.25 336.01 84.76

S o u r c e : Cedigaz 1985.

Note: F o r t h e model c a l i b r a t i o n , s p e c i a l l y f o r E a s t E u r o p e , o t h e r s t a t i s t i c a l b a s e s were included, r e s u l t i n g in d i f f e r e n t f i g u r e s f o r consumption a n d p r o d u c t i o n .

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Table 6. Primary Energy Consumptlon in West Europe, 1984 (lo1' J ) and S h a r e s .

I

^{O i l} ^Gas ^Coal ^Hydro ^Nuclear ^Total

I

P r i m a r y E n e r g y

North 1.61 0.03

Cen bra1 16.62 7 .OO

South E a s t 5.73 1.37

South West 2.39 0.11

West Europe 26.35 8.51

Shares per Region

North 41.22 0.80

Central 45.67 19.25

South E a s t 56.07 13.35

West E u r o p e 48.32 15.60 Shares per Energ y C a r r i e r

North 6.11 0.37

Central 63.08 82.33

South E a s t 21.76 16.04

West Europe 100.00 100.00

S o u r c e : British Petroleum 1985.

Note: Hydro and n u c l e a r are given as primary e n e r g y equivalent, calculated with an efficiency of 37%.

and Switzerland supplied l e s s t h a n 15% with g a s in 1984. Hydropower provides roughly t h e s a m e amount as n u c l e a r e n e r g y , mainly because of t h e l a r g e potential in North Europe-37% of h y d r o e l e c t r i c i t y is produced in North Europe, while 79%

of t h e n u c l e a r e l e c t r i c i t y comes from Central Europe (37% from F r a n c e alone).

T h e D e t e r m i n a n t s o f Gas C o n s u m p t i o n

The r o l e of n a t u r a l g a s in t h e f u t u r e c a n , as with any o t h e r e n e r g y c a r r i e r , only b e assessed using a systems wide a p p r o a c h . I t i s influenced by t h e o v e r a l l e n e r g y consumption of t h e s o c i e t y and t h e r e l a t i v e competitiveness and availability. Total e n e r g y use i s primarily determined by t h e size of t h e population and t h e economic activity in t h e region. They influence p r i v a t e and industrial/commercia1 consumption of e n e r g y .

Energy Demand

The projections of population growth w e r e t a k e n from Keyfitz and J u s t (1982), while t h e development of t h e g r o s s domestic p r o d u c t (GDP) r e p r e s e n t s a

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continuation of the p r e s e n t sluggish performance well into t h e 1990s, a revitaliza- tion of economic development t h e r e a f t e r , followed by a slow-down l a t e r next century. Additionally, a differentiation in economic development from North t o South w a s assumed, with t h e S o u t h e r n c o u n t r i e s showing a more dynamic development.

Table 7 gives t h e a g g r e g a t e figures f o r population and economic activity f o r the y e a r s 1985, 2000 and 2030 f o r the regions considered. Analyses of industrial s t r u c t u r a l change, e n e r g y intensiveness in t h e industrial b r a n c h e s , development of specific s p a c e h e a t requirements and e n e r g y conservation measures lead t o a s c e n a r i o about t h e f u t u r e e n e r g y requirements of industry, households, t h e ser- vice s e c t o r s and t r a n s p o r t .

Table 7 . European Regional Development of GDP and Population, 1985 to 2030.

1985 2000 2030

P o p u t a t w n [ m i t t i o n ]

North 17 18 18

Central 222 232 242

South East 142 162 190

South West 50 56 64

E a s t 113 120 129

GDP

[ ~ o ~ u s S ' ~ O ]

North 233 313 519

Central 2732 3786 6858

South East 606 878 2010

South West 253 372 759

E a s t 545 778 1633

The framework used for t h e construction of t h e regional demand s c e n a r i o s is MEDEE-2 Olapillonne 1978). This model r e q u i r e s information on specific e n e r g y use f o r various processes, like passenger or f r e i g h t t r a n s p o r t , s t e e l production, s p a c e and p r o c e s s h e a t production. Additionally, MEDEE-2 considers s t r u c t u r a l changes between important industrial sectors and behavioral factors like t h e load f a c t o r of c a r s , t h e distance driven p e r p e r s o n p e r y e a r , o r t h e size and insulation level of newly-built housing stock. This information is combined with t h e g e n e r a l assumptions regarding population and economic activity t o give a p i c t u r e of t h e demand development, disaggregated into specific e l e c t r i c i t y and liquid fuels, useful thermal h e a t in t h r e e t e m p e r a t u r e ranges, and s p a c e and water heat. These demands s e r v e as import t o t h e supply model.

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E n e r g y ^Supply

For t h e analysis of e n e r g y supply a techno-economic a p p r o a c h w a s taken. A dynamic l i n e a r programming model w a s used to minimize t h e o v e r a l l c o s t of supplying useful e n e r g y under technical, economic and ecological considerations and constraints. This model d e p i c t s the whole e n e r g y supply chain from domestic e x t r a c t i o n and imports via t r a n s p o r t and conversion to distribution and consumption of final energy.

In t h e p r e s e n t application special emphasis w a s given to t h e economics of gas use t h a t v a r i e s with consumption density and distance to t h e main line due t o t h e capital intensive t r a n s p o r t . The competition with d i s t r i c t h e a t on t h e s p a c e heating market, d i f f e r e n t economics f o r different industrial applications and techno- logical improvements like high-efficient combined cycles and, as a r e p r e s e n t a t i v e of qualitatively new technologies, h e a t pumps w e r e taken into account. The e n e r g y supply model d e r i v e s a supply s t r a t e g y f o r given e n e r g y import prices. Sensitivity analyses on t h e oil p r i c e development and t h e g a s and coal p r i c e s in relation were undertaken, as well as investigations of t h e e f f e c t s of lower emissions in t h e whole regions on the e n e r g y system and t h e r e l a t e d c o s t s , o r a ban on nuclear energy.

On t h e basis of t h e s t r u c t u r e of primary e n e r g y supply in t h e European regions, t h e international supply of g a s is determined. This r e q u i r e s considerations on supply s e c u r i t y , r e s o u r c e b a s e s and e x t r a c t i o n c o s t s of t h e e x p o r t e r s , investment necessities and t r a n s p o r t i n f r a s t r u c t u r e . Table 8 shows t h e n a t u r a l g a s and oil r e s o u r c e s considered f o r t h e major European producers. Based on t h e distribution of known g a s fields, historic development of known r e s e r v e s and expecta- tions about finding r a t e s , t h e ultimately r e c o v e r a b l e r e s o u r c e s 4 i s t r i b u t e d to c o s t categories-were estimated*. Similar estimates were derived f o r a l l regions and all e n e r g y s o u r c e s considered.

F o r t h e Soviet Union, Table 9 shows t h e distribution of t h e r e s o u r c e s (proven plus probable in known fields) o v e r t h e depth. Presently, most of t h e r e s e r v e s are in d e p t h s between 1.1 and 3 km. This i s c e r t a i n l y r e l a t e d to drilling technology and experience. Recently t h e USSR launched a d e e p drilling programme, expressing t h e t r u s t t h a t major new oil o r gas fields will be discovered in d e e p e r strata than c u r r e n t l y explored. This, a n d intensified exploration in y e t untouched a r e a s will almost certainly lead to i n c r e a s e s in t h e USSR's g a s r e s e r v e s . The distribution of

*

F o r Norway, t h e e s t i m a t e could be higher, b u t t h e model r e s u l t s would b e i n f l u e n c e d o n l y marginally due t o t h e a l r e a d y now high p r o v e n r e s e r v e s .

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Table 8. N a t u r a l Gas R e s o u r c e s a n d E x t r a c t i o n Costs Considered f o r t h e Major P r o d u c e r s of Western E u r o p e .

Table 9. R e s e r v e s of N a t u r a l Gas as of 1 9 8 6 4 1 4 1 , USSR (billion rn3).

Norway

Uni t e d Kingdom

N e t h e r - l a n d s

Depth [km]

<

^1.1 ^1.1-3. ^3.-5. ^>5. Total

USSR ( t o t a l ) 11040 28900 7890 300 48130

E u r o p e a n P a r t 250 3800 1740 290 6080

Asian P a r t 10790 25100 6150 10 42050

E x t r a c -

C a t e g o r y tion Cost R e s o u r c e

[ust/~ooo

m31

[lo9 m31

Frigg e t c . 26.2 370

S l e i p n e r etc. 48.2 385

T r o l l e t c . ^89.6 ¹¹⁵⁴

N o r t h of 6znd 141.4 1538

P r o v e n s o u t h e r n N o r t h Sea 18.5 585 P r o v e n n o r t h e r n N o r t h Sea 40.6 692

Additional s o u t h e r n N o r t h Sea 60.0 846

Additional n o r t h e r n N o r t h Sea 129.0 1538

Groningen 10.9 1422

Additional Onshore 20.2 248

P r o v e n O f f s h o r e 16.0 338

Additional O f f s h o r e 52.8 808

S o u r c e : Data Book: N a t u r a l Gas a n d Condensate Deposits, 1983 (updated).

t h e r e s o u r c e s to d e p t h , t o g e t h e r with field s i z e s a n d investment s t r a t e g i e s o v e r t h e l i f e of t h e f i e l d s t h a t l e a d to t h e r e q u i r e d p r o d u c t i o n p r o f i l e , are used as indi- c a t o r f o r t h e investment costs f o r g a s e x t r a c t i o n .

The

Base Case

Based o n t h e demand development, domestic r e s o u r c e a v a i l a b i l i t y a n d a s c e n a r i o o n t h e f u t u r e development of t h e o i l p r i c e s , which w a s d e v e l o p e d by Dr.

A. P a p i n at t h e S i b e r i a n E n e r g y I n s t i t u t e (SEI)* o n t h e b a s i s of t h e IIASA '83 S c e n a r i o (Rogner 1984), t h e Base Case g i v e s a p i c t u r e of t h e E u r o p e a n e n e r g y s u p p l y i n a s u r p r i s e - f r e e f u t u r e .

*

^Thisprice would, from e level of 15S/bbl, increase n t en nnnuel average rate of 2%.

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Western Europe

Primary e n e r g y consumption in West Europe would s t a g n a t e until 1990, and t h e r e a f t e r resume growth at a r a t e below 1% p e r y e a r , reaching 6 0 EJ in 2000 and 7 5 EJ in 2030. Nuclear e n e r g y would expand from presently 7% of primary e n e r g y to 12% in 2000 a n d 18% in 2030, some 230 GW(e) (see Figure 2). Hydroelectricity would grow slowly, just keeping i t s s h a r e roughly constant at 7%. while t h e use of oil (52% in 1980) would decline to 37% in 2000 and 25% in 2030. The market of n a t u r a l g a s grows by 40% up t o 2000, from 8.5 EJ in 1984 to 1 2 EJ in 2000. By 2030 gas consumption doubles, r e a c h i n g 16.4 EJ and constituting 22% of primary energy.

The use of c o a l does a l s o show considerable growth. However, p e r c e n t a g e wise i t s t a g n a t e s around 21% of primary e n e r g y until 2010 and r e a c h e s 22.7% by 2030.

1950 1970 1990 2010 2030

Figure 2. P r i m a r y Energy Consumption in Western Europe, Base Case, 1950-2030.

Table 1 0 shows t h e s t r u c t u r e of primary e n e r g y consumption o n a regional basis. For a l l regions a n i n c r e a s e in diversification and t h u s h i g h e r resilience of e n e r g y supply is noticeable. By 2030, t h e highest s h a r e of a single s o u r c e of e n e r g y i s hydropower with 32% in n o r t h Europe. A l l o t h e r s o u r c e s of e n e r g y i n t h e n o r t h and all s o u r c e s in t h e o t h e r regions c o n t r i b u t e less t h a n 30% of primary e n e r g y in 2030.

The development of final e n e r g y use i s r a t h e r s t a b l e . Up to 2000, t h e use of coal i s constant, while oil p r o d u c t s a r e substituted by gas. The growth in consumption is basically supplied ( o r c r e a t e d ) by e l e c t r i c i t y and s o m e d i s t r i c t h e a t .

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Table 10. Base Case: Primary Energy Consumption in t h e Regions of Western Eu- r o p e , 1990 to 2030, in S h a r e s and Total (lo1* J).

Hydro Nuclear Coal Oil Gas Other Total

Western Europe

1990 7.69 8.80 20.59 43.62 17.61 1.70 57.84 2000 7.62 12.27 21.23 36.82 19.61 2.44 60.78 2030 7.11 17.68 22.65 24.78 21.74 6.04 75.47 North E u r o p e

1990 32.66 13.61 17.79 32.32 3.36 0.26 4.69 2000 32.51 15.27 21.23 25.22 5.30 0.47 4.71 2030 32.27 20.40 . 16.60 17.77 7 -20 5.76 4.75 CantraL Europe

1990 3.72 10.48 21.21 42.85 20.69 1.05 37.68 2000 3.69 13 -58 21.06 37.88 22.29 1.49 38.01 2030 3.57 20.64 21.10 27.05 25.51 2.13 40.94 S o u t h East Europe

1990 9.52 2.20 19.61 45.93 17.84 4.90 11.29 2000 8.70 7.81 19.78 34.87 22.55 6.31 13.13 2030 7.26 12.80 26.12 19.31 21.33 13.18 22.16 S u t h West Europe

1990 24.91 14.38 35.60 11.58 12.49 1.04 1.76 2000 18.71 18.58 29.07 23.52 7.94 2.18 2.97 2030 13.24 18.94 29.84 13.87 15.62 8.49 5.75

In 2000 g a s supplies 20% of final e n e r g y (presently 15%), by 2030 t h e market grows by only 1% to 21% of final energy. The s t r u c t u r e of t h e g a s market can b e s e e n in Figure 3. The low growth of g a s used as final e n e r g y c a r r i e r a f t e r 2000 c a n b e a t t r i b u t e d t o t h e introduction of new, e n e r g y saving technologies-here

r e p r e s e n t e d by h e a t pumps. The major growth of g a s consumption does also come from a new technique, t h e introduction of highly efficient combined cycle turbines, r e p r e s e n t i n g 25% and 33% (130 xlo9 m3) of t h e g a s market by 2000 and 2030, respectively.

Overall e n e r g y imports c a n be n e a r l y stabilized up to 2000, t h e r e a f t e r they grow at roughly 1% p e r y e a r . Oil imports decline to 17 EJ by 2000, while imports of g a s grow from slightly above 100 xlo9 m3 in 1984 t o 200 xlo9 m3 in 2000. The f u r t h e r growth of g a s imports, which is, as mentioned above, induced by gas-fired e l e c t r i c i t y generation and, eventually, co-generation of e l e c t r i c i t y and h e a t , leads to imports in t h e r a n g e of 300 x 10' m3 a f t s r 2010 and 350

x

10' m3 by 2030. But a l s o t h e supply of sufficient c o a l h a s to be s e c u r e d by considerable imports. By 2030, 55% of t h e coal used h a s to b e imported. I t should b e noted t h a t t h e r e i s sufficient coal available in Western Europe. However, due to high production c o s t s and t h e high s u l f u r content i t is, from a n economic and environmental viewpoint, p r e f e r a b l e t o import coal.

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16

-

12

-

- 3 0 0

Heat pumpjesidential

/ & commercial

High temperature heat,indurtry

I I I I I I I 1

--

^Fedstock

I I

Figure 3. Uses of Natural Gas In Western Europe, Base Case, 1980-2030.

Domestic supply of n a t u r a l g a s i s s e c u r e d mainly by t h e Netherlands and t h e United Kingdom. A c r u c i a l assumption in this r e s p e c t i s t h e amount of n a t u r a l g a s r e c o v e r a b l e in t h e

UK

continental shelf. The real development will b e heavily influenced by t h e Incentives given f o r exploration by t h e t a x regime and o t h e r government measures.

The e x t r a c t i o n profile envisaged f o r t h e

UK

u n d e r t h e conditions outlined f o r t h e Base Case-specially t h e p r i c e development-is shown In Figure 4. Supplies from t h e p r e s e n t l y proven fields will, a f t e r a peak around 1995, decline d r a s t i - cally. Gas production In t h e Netherlands will, a f t e r a s t e a d y decline, level o u t a r o u n d 35 %lo9 m3, t h e domestic consumption level (Figure 5).

East Europe

The E a s t European situation d i f f e r s substantially from Western E u r o p e in t h e p r e s e n t supply mix. More t h a n 50% of primary e n e r g y i s supplied from-mostly domestic--coal (see Figure 6). I t will not b e possible to maintain t h i s high s h a r e of domestic coal, s i n c e e x t r a c t i o n i s reaching i t s limits. Of t h e 11.9 EJ of c o a l fore- s e e n f o r 2030 roughly 2.8 EJ are imported.

The use of oil could b e reduced slightly, while g a s use c a n , d u e to t h e necessity to build up new i n f r a s t r u c t u r e s , b e i n c r e a s e d only slightly by 2000.

T h e r e a f t e r t h e growth potential I s l a r g e r , with a n annual a v e r a g e growth of 2.2%

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-

^Proven

-

I I I I I I

Figure 4: Natural Gas Extraction in the United Kingdom, Base Case, 1980-2030.

I I I I I I I I I

-

- -

-

Additional offshore

1980 1990 2000 2010 2020 2030

Figure 5: Natural G a s Extraction in the Netherlands, Base Case, 1980-2030.

between 2000 and 2030, supplying 20% of primary energy then. Nuclear energy would supply 8% in 2000 and 21% in 2030.

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1950 1970 1990 2010

/

²⁰³⁰

Hydro + 0 t h

Figure 6. P r i m a r y Energy Consumption in E a s t Europe, Base Case, 1950-2030.

The supply of liquid fuels would, a f t e r 2000, b e s e c u r e d by t h e conversion of coal to methanol. This implies t h e build-up of c a p i t a l intensive p r o c e s s e s to d e c r e a s e foreign c u r r e n c y e x p e n d i t u r e s ( o r e x p o r t of equivalent goods) f o r e n e r g y imports. By 2030 14% of t h e liquid fuels consumed would b e derived from coal.

Import requirements, at p r e s e n t basically oil, would i n c r e a s e from 25% of primary e n e r g y use to ^2'7%in 2000 and 41% in 2030. A t t h a t time 44% of t h e e n e r g y imports would b e in t h e form of g a s and 25% or n e a r l y 200 million t o n s of coal equivalent p e r y e a r in t h e form of coal.

G a s Ezporters

The Netherlands will, as a l r e a d y mentioned, supply declining amounts of g a s to t h e customers and stabilize production at t h e level of domestic consumption around 2010. By t h i s time t h e c h e a p Groningen field will-optimizing discounted gains from e x p o r t s minus e x t r a c t i o n costs and disregarding o t h e r considerations-be nearly completely exploi Led.

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Norway would, by 1990, produce 8

x l o 9

m3 p e r y e a r from S l e i p n e r and similar fields. reaching a peak of 13

x

10' m3/yr by 2000 (see Figure 7). In 2000. Troll would a l r e a d y supply 1 0 ~ 1 0 ' m3 p e r y e a r to t h e European market. The o v e r a l l Norwegian production in this y e a r would b e 42 X

lo9

^m3, ^13%of t h e g a s consumed in Western Europe in t h i s y e a r . Including t h e expensive gas from n o r t h of t h e 6znd p a r a l l e l , Norwegian gas production would r e a c h 47

%lo9

m3 in 2030 (10% of t h e West European market).

PJ 1ogm3

3000 80

1980 1990 2000 2010 2020 2030

Figure 7. Natural Gas E x t r a c t i o n in Norway, Base Case, 1980-2030.

The resulting n e t g a s import requirements of Western Europe amounts to 73

x l o 9

m3 in 1990, 1 3 7 in 2000 a n d 295 in 2030 (see Table 11). Assuming t h a t a maximum of one t h i r d of t h e imports c a n c o m e from a single s o u r c e , in 1990 4 8

x l o g

m3 could c o m e from t h e Soviet Union, t h e rest from North Africa. F o r 2000 t h e Figures would b e 67 and 69

% l o 9

m3. Applying t h e r u l e also to North Africa would l e a v e a n o t h e r 2 XIO' m3 to o t h e r s u p p l i e r s , e.g., t h e Middle East.

In 2030 t h e maximum f o r a single s u p p l i e r would b e 114 X l o 9 m3 a n d would apply to both regions, t h e Soviet Union and North Africa, leaving 6 7

x l o 9

m3 f o r o t h e r suppliers. Up to 2000 t h e s e supply f i g u r e s s e e m technically and r e s o u r c e - wise feasible. Including e x p o r t s of 6 0 to 65 m3 to E a s t Europe and a domestic consumption of 740 to 840 m3 f o r t h e Soviet Union, t h e total production would have to r e a c h 890 to 1000 m3 (Main Directions, 1986). I t i s possible to sustain t h e production level with p r e s e n t proven r e s e r v e s f o r twenty y e a r s a f t e r 2000. However, t h e r e i s evidence t h a t t h e p r o v e n r e s e r v e s of t h e USSR will i n c r e a s e considerably

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Table 11: Possible Development of Consumption and Supply of N a t u r a l Gas, 1990 to 2030 (lo9 m3).

1990 2000 2030

Cas C o n s u m p t i o n

Western Europe 273.0 320.0 440.0

E a s t Europe 68.2 76.5 146.4

Soviet Union 609.3 766.5 732.7

Cas P r o d u c t i o n

Western E u r o p e 44.3 44.8 32.8

Netherlands 68.5 57.5 35.0

United Kingdom 49.8 39 .O 30.8

Norway 37.4 42.2 46.7

Total Western E u r o p e 200.0 183.5 145.3

E a s t Europe 19.9 14.1 14.2

Net Demand

Western Europe 73.0 136.5 294.7

E a s t Europe 48.3 62.4 132.2

30%RuLefor Gas Imports

Soviet Union to Western E u r o p e 48.0 67.1 113.8

North Africa to Western Europe 25.0 67.1 113.8

Middle E a s t to Western Europe 0.0 2.4 67.1

Production Soviet Union 705.5 896.0 978.7

30% RuLe for Total Gas C o n s u m p t i o n

Soviet Union to Western Europe 73.0 106.7 146.7

North Africa to Western E u r o p e 0.0 29.8 146.7

Middle E a s t to Western Europe 0.0 0.0 1.4

Production Soviet Union 730.5 935.6 1011.6

o v e r time, making a ceiling of 1100 xlo9 m3 or even more feasible even o v e r a n extended period of time.

E x p o r t s from North Africa at a level of 67 x109 m3, as f o r e s e e n f o r 2000 could, alone by Algeria, b e sustained f o r 47 y e a r s . On t h i s b a s i s a production of 114 xlo9 m3, a s indicated f o r 2030, s e e m s unlikely under p r e s e n t conditions. The Middle E a s t as s o u r c e , with p r o v e n r e s e r v e s of 25600 xlo9 m3 and a low probability of a high level of domestic g a s consumption, i s a virtually infinite s o u r c e of n a t u r a l gas. Problems r e l a t e d to t h i s s o u r c e are t h e v e r y long distance t o be c o v e r e d and t h e f a c t t h a t t h i s region a l s o supplies a l a r g e s h a r e of t h e oil imports. F o r economic r e a s o n s i t is conceivable t h a t g a s from t h e Middle E a s t i s r a t h e r e x p o r t e d a s liquid fuel, e.g., c o n v e r t e d to methanol, than in t h e form of g a s (Stru- b e g g e r and Messner 1986).

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Another i n t e r p r e t a t i o n of t h e 30% r u l e would allow imports from a single s o u r c e up to one t h i r d of t o t a l g a s consumption. Under this condition, t h e g a s production of t h e Soviet Union would r e a c h roughly 935 xlo9 m3 by 2000, s t i l l below t h e t a r g e t . The production in 2030 would be 1012 xlo9 m3, which would b e a feasible production path if t h e existing r e s o u r c e s are upgraded by s o m e 5 to ^10%.

The g a s consumption f i g u r e s f o r t h e Soviet Union are based o n t h e assumption t h a t total e n e r g y use would grow by 2% p e r y e a r between 1985 and 2000, and by 1.3% p e r y e a r t h e r e a f t e r . Compared to h i s t o r i c growth rates (1950 to 1970: 11.6%

p e r y e a r , 1970 to 1980: 5.7% p e r y e a r , 1981 to 1985: slightly below 3% p e r y e a r ) , t h e s e low growth rates c a n b e considered fairly r e a l i s t i c . Recent changes in t h e setting of economic t a r g e t s , like t h e change from quantity to quality in t h e m e a s - urement of production, allow optimism in this r e s p e c t .

P r e s e n t t r e n d s in t h e e n e r g y consumption of t h e USSR show a s t r o n g tendency to s u b s t i t u t e coal and fueloil by n a t u r a l gas. By t h e end of t h e c e n t u r y t h i s substitution will mainly t a k e place in industrial e n e r g y use. t h e fields of e l e c t r i c i t y gen- e r a t i o n and d i s t r i c t heating, and to some e x t e n t in t h e use of e n e r g y s o u r c e s f o r non-energetic p u r p o s e s (e.g., a s chemical feedstock). Similar t r e n d s are expected f o r t h e period from 2000 to 2030, with s o m e changes in s c a l e and directions. The design of t h e e n e r g y consumption s c e n a r i o f o r t h e USSR a f t e r 2000 i s based on t h e following assumptions:

-

small and medium-scale heating, feedstocks and o t h e r non-fuel consumers of primary e n e r g y s o u r c e s will remain important and consume fossil e n e r g y ;

-

i n c r e a s e s of e n e r g y demand in t h e fields mentioned above will b e c o v e r e d by n a t u r a l gas, with t h e exception of small consumers in remote a r e a s which will b e supplied by solids, liquids or e l e c t r i c i t y ;

-

t h e s t r o n g t r e n d to use n a t u r a l g a s f o r d i s t r i c t heating will b e complemented by t h e possibility to supply medium t e m p e r a t u r e industrial h e a t from com- b i n e d c y c l e c o - g e n e r a t i o n units; and

-

despite t h e increasing growth of nuclear power generation capacities, elec- t r i c i t y generation will still r e l y heavily on fossil fuels; only t h e oil p r o d u c t s will b e substituted by n a t u r a l gas, and l a t e r on by coal (in c e n t r a l S i b e r i a and o t h e r a r e a s with c h e a p local coal r e s o u r c e s ) .

The above assumptions are r e p o r t e d to b e t h e k e y t r e n d s in t h e national e n e r g y development in t h e Soviet l i t e r a t u r e (e.g., Energy Complex, 1983).

Following t h e s e assumptions g a s use would, in our s c e n a r i o , i n c r e a s e from

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presently (1985) 32% of primary e n e r g y to 38% in 2000, mainly substituting oil pro- ducts, which would decline from 36% in 1980 and 32% in 1985 to 19.6% in 2000. Until 2030 oil consumption would f u r t h e r d e c r e a s e from 7-9 EJ or 6-8% of primary e n e r g y use. The s h a r e of n a t u r a l g a s would a l s o decline again from 2 4 4 7 % . The major s u p p l i e r s would t h e n b e n u c l e a r e n e r g y and c o a l with 30% and 36% of primary e n e r g y , respectively. Roughly 33 EJ of thermal e n e r g y from n u c l e a r sources would b e used for heating, p r o c e s s h e a t and e l e c t r i c i t y generation. The use of c o a l would b e around 40 EJ (1370 t c e ) , nearly 2.8 times t h e amount used in 1980 (see Figure 8).

EJ

Hydro + Other I

I I I I I I I

1950 1970 1990 2010 2030

Figure 8. P r i m a r y Energy Consumption in t h e Soviet Union, Base Case, 1950-2030.

Compared to o t h e r studies, t h e assumptions f o r t h e supply of n u c l e a r e n e r g y and c o a l are not unrealistic. In a s c e n a r i o developed by Sinyak (1984), t h e growth rates for n u c l e a r e n e r g y up to 2000 are in t h e s a m e range: n u c l e a r thermal e n e r g y supply i n c r e a s e s from roughly 1.5 EJ in 1985 to 8-10 EJ thermal nuclear e n e r g y in 2000. Even m o r e optimistic are Sinyak's assumptions on t h e production of coal, which will r e a c h up to 58 EJ by 2030. These high coal production and consumption levels could b e r e a c h e d by l a r g e p r o j e c t s devoted to t h e large-scale development of such enormous coal basins as Kuznetsk and Kansk-Achinsk. Along with conventional c o a l technology, allothermal p r o c e s s e s for t h e conversion of c o a l to liquids, which would b e based o n h e a t from high t e m p e r a t u r e r e a c t o r s , are under investigation. If t h e s e plans materialize, m o r e coal could b e available and utilized domestically, e i t h e r increasing t h e domestic consumption or setting more e n e r g y free for e x p o r t .

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Concerning t h e level of i n t e r n a l n a t u r a l g a s consumption in t h e USSR, t h e r e are good p r o s p e c t s f o r i t s stabilization at a Level of 750 to 8 0 0 m3 p e r y e a r o v e r t h e p e r i o d 2000 to 2030. The main reasons f o r t h i s c o n s t a n t n a t u r a l g a s consumption level are t h e fast growth of n u c l e a r and c o a l production (including c o a l conversion) and t h e completion of t h e oil-to-gas substitution p r o c e s s by t h e y e a r 2000. An e x t r e m e option would b e t h e enhanced switch of i n t e r n a l consumption to n u c l e a r and c o a l in o r d e r to i n c r e a s e t h e g a s e x p o r t potential. If e f f o r t s in t h i s d i r e c t i o n s u c c e e d , t h e e x p o r t potential of g a s a f t e r 2000 could b e in t h e r a n g e of 250 to 400

x

109m3 p e r y e a r .

h e r Oil Pricer

Following r e c e n t developments o n t h e i n t e r n a t i o n a l oil m a r k e t s , investigations on t h e long-term e f f e c t s of lower oil a n d , consequently g a s a n d c o a l , i m p o r t p r i c e s w e r e undertaken. A l l t h e s e p r i c e s w e r e maintained at t h e l o w level of 1985/86 f o r t h e whole time horizon. The e f f e c t up to t h e y e a r 2000 would b e r e l a t i v e l y small.

Compared to t h e Base Case t h e u s e of coal i s r e d u c e d by 10% (1.2 EJ), oil consumption i n c r e a s e s by 5.7% ( o r 0.92 E J ) ( s e e Figure 9). The use of g a s i s by 7

x l o 9

m3 (0.3 E J ) h i g h e r t h a n in t h e Base Case.

EJ 1ogm3

100

2500

Figure 9. P r i m a r y E n e r g y Consumption in Western E u r o p e , Low Oil P r i c e s , 1950- 2030.

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By 2030, a d i f f e r e n c e in t h e build-up of expensive hydropower a n d t h e con- s t r u c t i o n of n u c l e a r power-plants '(roughly 2 0 GW(e) o r 10% le s s ) i s noticeable.

The use of c o a l would, d u e to t h e high c a p i t a l intensity a n d a d v e r s e environmental influences, b e r e d u c e d a f t e r 1995, r e a c h i n g l e s s t h a n 10 EJ o r 13% of p r i m a r y e n e r g y in 2030. Crude oil would r e a c h a s h a r e of 32% (compared

to

25% i n t h e B a s e Case), a n d n a t u r a l g a s 30% or 600 x 10' m3.

Possible s u p p l i e s f o r t h i s huge g a s consumption are more difficult to assess t h a n in t h e Base Case. H i g h e r imports from E u r o p e a n s o u r c e s o r t h e Soviet Union s e e m r a t h e r problematic as well as additional s u p p l i e s from North Africa. F u t u r e options f o r t h e supply of n a t u r a l g a s would b e imports from t h e Middle E a s t as LNG, o r e v e n c o n v e r t e d to o t h e r liquid fuels. O t h e r c o n s i d e r a t i o n s s u g g e s t t h a t virtually unlimited amounts of n a t u r a l g a s from a b i o t i c o r i g i n c a n b e found at many loca- tions, if drilling r e a c h e s t h e a p p r o p r i a t e d e p t h (Gold a n d Soter 1980, Gold 1985).

In summary, c o n s t a n t e n e r g y supply p r i c e s o v e r t h e n e x t 50 y e a r s seem incon- s i s t e n t with p r e s e n t knowledge a b o u t r e s o u r c e availability a n d r e g i o n a l distribution. They would l e a d to i n c r e a s e s in consumption, which would, in t h e l o n g e r t e r m , i n i t i a t e a new p r i c e hike. The model r u n s with low import p r i c e s should t h e r e f o r e just b e viewed as sensitivity analysis a n d investigation of t h e maximum potential u n d e r f a v o r a b l e conditions.

The IIASA Study in Perspective

Comparing t h e r e s u l t s of t h e IIASA g a s s t u d y with two s t u d i e s finished r e c e n t l y (a study by t h e I n t e r n a t i o n a l E n e r g y Agency Natural G a s Prospects (IEA 1986) and a s t u d y of t h e Working Consulting Group of t h e P r e s i d e n t of t h e Soviet Academy of S c i e n c e s o n Long-Term E n e r g y Forecasting (WCG) International Natural G a s Market (Styrikovich 1986)) o p e n s some i n t e r e s t i n g a s p e c t s . Both s t u d i e s focus

mainly o n n a t u r a l g a s , b u t both use a d i f f e r e n t methodology a n d time f r a m e and r e p o r t d i f f e r e n t t y p e s of r e s u l t s . Whereas t h e IIASA g a s s t u d y looks at t h e com- p l e t e e n e r g y system-including a l l e n e r g y c a r r i e r s a n d t o t a l e n e r g y demands-the o t h e r t w o s t u d i e s focus solely (IEA) or mainly (WCG) o n gas. The IEA study comprises t h e information g a t h e r e d from t h e member c o u n t r i e s . The IIASA a n d WCG s t u d i e s are b a s e d o n mathematical models.

A common b a s i s c a n b e found in t h e use of g a s in Western E u r o p e from 1990 to 2010 f o r t h e IEA s t u d y a n d to 2020 f o r t h e WCG s t u d y (see Table 1 2 ) . The WCG developed t h r e e demand s c e n a r i o s r e l a t i n g t o d i f f e r e n t oil p r i c e developments, f o r e a c h of which some t r a d e a l t e r n a t i v e s are analyzed. In o u r comparison w e u s e t h e