(SANITIZED)EUROPEAN GAS STUDY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP83M00914R001000060011-7
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 16
• Document Creation Date: December 19, 2016
• Document Release Date: February 20, 2007
• Sequence Number: 11
• Publication Date: December 16, 1982
• Content Type: MEMO

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DATE
TRANSMITTAL SLIP I 16 Dec. 1982
TO:
Executive Registry
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ROOM NO. BUILDING
7E12
BUILDING
nS
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European Gas Demand and Alternatives to Siberian Gas
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 Approved For Release 2007/( { :~ AR4?RP,3M00914R001000060011-7
European Gas Deir.a r-1 and Alt~ern-)tives to Siberian Gas
A. Although West European demand For gas has softened in
recent years, the f.allof': is expected to bottom out this year and
demand to revive as economic. recovery begin.:;.
Several. indu: try forecasts est mate ti, it demand for gas
in Western Europe will increase From about 3.6 million
barrels per day oil equivalent: ;b/don) in 1980 to about
4.1 million b/doe in 1990 and to 4,5-5.0 million h/doe
by the year 2000.
2. As domestic, West European supp - ies of gas are depleted
or shut in, the import dependence of the region will
rise---from 13 percent currently to about fit percent by
the turn of the century.
3. Provided some new deliveries of Soviet gas begin in the
late 1980s, West E uropean countries expect to be able
to meet projected demand through 190 from supplies
they have already lined up.
-- West Germany and France have signed contracts,
including these for Soviet gas, that will probably
a ive them access to more ;;:as than they will use in
the 1980s.
-- Italy stir has not inalized negotiations with
Algeria and the Soviet Union to fulfill gas
requirements for the 1980s.
4. For the 1990s, however, West European countries will
have to line up new supplies of 1.2 to 1.3 million
b/doe.
5. The Soviets are anxic'us to it crease gas exports to
Western Europe and, with th'.' completion of the -Siberian
gas pipeline, could more than double current sales by
1990.
The Soviet Union is currently delivering about
430,000 b/doe of gas to W.stern Europe.
-- Total Soviet gas ex.:oor-ts to Western Europe in the
late 1950s could be about 900,000 b/doe, about 25
percent of West European n-Aan, requirements and 3
percent of total energy needs.
6. If the West Europeans were to forego increases in
Soviet gas deliveries they could technically balance
supply and demand through the decade. However, the
economic and political decisions necessary to bring
about this combination of events would require a ma jo~5x1
reversal of existing policies.
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-- Increased production of Dutch gas would be needed.
Development of Norway's Sleipner field would have
to be accelerated.
-- Domestic production in France, West Germany, and
Ital.y would have to be sustained or increased from
present levels.
-- Gas consumption would probably have to fall below
present expectations.
B. Maximizii'g non--Soviet suppli in the 1990s will depend
on Western Europe's assessment of the relative rests of
alternative gas ssupplies and their concerns over security and
diversification of supplies.
1. Norwegian gas offers a secure but costly alternative to
Soviet gas in the 1990s.
-- Norway could supply an additional 670,000 to
830,000 b/d oil equivalent, which would cover the
bulk of the increase projected for West European
demand in the 1990s.
Deliveries from the Block 31/2 (Troll) field in the
North Sea could reach 500,000 to 670,000 b/d oil
equivalent by the late-1990s.
o New technologies must be developed to exploit
the field, which lies in very deep water and
contains a thin oil layer that could delay
development.
o It would cost $15-20 billion to develop and
deliver 500,000 b/doe of gas directly to the
continent.
-- Another area for potential development is the
Tromsa area off the northern coast of Norway.
o Recent discoveries i_nd4cate a large reserve
potential, but simultaneous development of
Tromsa and Troll is unlikely and transportation
of gas from Tromsa is likely to be very
expensive.
-- Norway's Sleipner area--with reserves of about 8
trillion cubic feet--offers the greatest potential
for development in the near term.
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2. The United Kingdom is not likely to become a net
exporter of gas to the continent but could serve as a
conduit for Norwegian c;a.c.
-- If such a tri t u~ti i. .~r de,al coal d ` e arranged with
Norwegian gas from Sleipner going to the UK in
exchange for, { eas to the continent, 170,000 to
250,000 b/d oil equivalent could e delivered in
t`.'+e early 1990s.
-- Development and pipeline construction costs could
total about $6 billion.
3. West European importers' most reliable and economical.
source of additional. gas would be the Netherlands,
currently Western Europe' 5 largest gas supplier.
Unless the current conservation policies r,f the
i- anue change, hov?ever, the amount of Dutch gas
available for eXport in the late 1990:: will dwindle
to less than one-four!--h it,; present vo1umoo.
Should the Dutch opt to sell more gus in the 1990s,
the most they cculd provide would provably be about
150,000 to 200,000 b/d oil eeq,uivalent; for a t-ewN
years.
4. Gas production on the continent i. expected to
decline over the next two decades. Intensified
exploratory drilling might slow the expected decline
but probably will not yield i ar_ge additional supplies
for Europe.
5. West. European imports of l _,NG from Nigeria, Cameroon,
Qatar, or other sources could total 11.50,000 b/d oil
equivalent hut would be very .cost.]. ,, and could pose
security risks.
-- Nigeria's Bonny LNG project might be restructured
at half the original s:.-;-r` but would not be complete
until the early 1990x.
Qatar could supply sizable quay t ities of gas in the
mid to late 1990s but transportation costs would be
very high.
6. Gas imports from North T rica or the Middle East ;ia
pipeline could offer a more economical al.L_ernative than
LNG imports., but may be politicall._ undesirable.
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-- Additional gas could be delivered in the mid-1990s
through existing pipelines from Algeria to Italy,
and up to 250,000 b/doe through a possible new
pipeline to Spain.
The proposed Iranian gas pipeline to Eurce via
Turkey, still has to undergo an economic
feasibility study and could pose serious security
risks.
-- Various proposed pip-)elinr.s from the middle Fast are
probably neither economically nor po]_itically
feasible.
7. US. coal could provide some additional energy supplies
to Western Europe by 1990.
Western Europe would need to -expand coal handling
capabilities even fur.thez.
Some type of Subsidy would probably be needed to
encourage greater use of coal in industry.
C. Although steps are being taken to expand gas storage
capacity in Western Euur.ope, growing dependence on imported gas in
the late 1980s will increase vulnerability to disruptions.
1. By 1990, gas supplies subject to disruption (from
Algeria, Libya, and the Soviet union) could supply
almost 40 percent of overall gas demand in Western
Europe and an even higher percentage in France and
Italy.
2. The seasonal nature of gas demand will tend to magnify
the :otential impact of a disr'uption..
3. Potential Dutch surge capacity over existing production
levels is estimated to be 1.7 million b/doe,
sustainable for one Year.
4. Plans call for gas storage capacity to be increased
more than 50 percent by the mid 1980s.
Current storage capacity is Lhe equivalent of only
35 lays average 1981 cons,_mmption.
Much of the storage capacity will be required to
meet peak seasonal deman:'.
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CONF-,-;)Ei:;TI7J,
Case I
o This graph shows declining indiccrnous production
particularly after 1985 as ',Nest SurJpean gas sup_)1_ios are
depleted or shut in.
By 1990, indigenous production would approximate 95
billion cubic meters (bcrn), falling to abou`-- 60 bcm by
the year 2000.
- Contracted Norwegian exports are then) shown at about 20
bcm-in 1990, ~zlling to 12 bcrr, by 2000.
Contracted Sovieet exports follow at. 26 bc-i in 1990 and
18 bcm by 2000,
xi tini orl% act's Cr7._}a. =0'_" No,---i., A[rl.cu to provide
approxim,atoly ?E, '-)ooi.h 1,390 and 2000.
o A supply shortFall begins to emerge after 1990, increasi.n?j
substantially as alr"ea _/ contracted oupplies (excluding
S .beri.an gas) fall port of projected demand. With demar,,
at 200 ben, the shortfall
i'11 b
lmost .:,0 bc:-rl in 1.990
The gap widens to 108 bcm
b con .
in 2000
wher durnand reaches 2211
Wi?thout S ~berian gas, Norwegian (gas coupled with
,~__gF ien
gas, US coal, some LNG and =7 slows rate of the phase out
of Dutch Exports could baT,;,ncc: supply a~0
demand. However, the ercnorilic: and )O.li_ti"cai decisions
necessary to bring about this combination of events would
requi _~e
a r,aj;)r rev, rsa1. of axisting policies wit yin the
next few years, which does no!- appear likely.
Norway is reluctant to speed up ,development because of
concerns over the imaact it would have ^rl the domestic
,:~ conomr,y. Consumers may be un,vill_in5 Eo pay the high
prices demanded by the Norwegians for new gas
contract-z. In addition, pr i,.' ~ cc companies -.way be unable
to finance ma joY: gas dcveln)pment. projects.
t~1ge ~e s milit-irlt pric_ -i1' p ,' 7_c,z and its ~ri'tlateral
suspension of gaa del:ivo i= s; to and the United
cu It in 1900 -make n l potentially
u n?:reliab e saup;~1
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CONFIDENTIAL
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X?H TCENTIAI.
- The U can provide some additional coal by 1990.
Western Eurone already has amoitious plans to use coal
and would ntie A to expand coal hauling capabilities even
further. Some type of subsidy would probably be needed
to encourage greater industrial coal use.
-- LNG from North Africa or other sources would be very
costly.
Without a change in the current conservation policies of
the Hague, the amount of Dutch gas available for export
in the late 1990s will dwindle to less than one-fourth
its-present volume.
2
CONFTDENTIAI.
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Continental Europe: Natural Gas
Supply and ern nd Forecast
STUION "Ic 1980-2000
T 1113 TET
*.~ flficllf,n?a
L
Notl
Igao 1955
Case I:
? 3 Lm H, a n Ca :
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CONFIDEN'T'IAL.
Case II
(Limitation c)f Soviet Gas to Existing Contracts)
o This graph assumo, that the Siberian p'.pe ine is completed
and that no new gas contracts beyond those presently be'z
contemplated are agreed to.
o Siberian gas purchases 1A?-ill probably provide 23 bcm
(:mi ~i.mum) or 32 bcm (maximum) in both 1990 and 2000,
supplementing, exiting Soviet gas supplies which will
steadily deciino from about 26 bcm in 1990 to almost
13' ben in 2000,
o Siberian gas will not eliminate the prospect of a supply
shortfall in the 1990s. Assumir:,r minimum purchases of
Sib,~rian gas, the shortfall is likely to be about 85 bcro in
2000. With maximum purchases the shortfall would probabl;;
approximate 80 bc:m in 2000.
o In this case, substantial volumes of additional gas will
not be needed until the mid 1990s. This cushion could
provide the lead time required to bring major gas projects
on line from the North Sea.
3
CONFIDENTIAL
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Continental Europe: Natural Gas
Supply and Demand Forecast
PILLIM "IC 1980-2000
PzrM FU YFTR
OciaO IIa
LLmLtc,tLon of SovLet
Gas to Ex stLn Contrasts
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CON;' I DEN'i T AT.
Casa !IT_
(maximum Uti l ..gat .nn of Lx Lstin j an(--, n- _anned
Soviet Pipelines)
o Colpletion oA= the Siberian pipeline to the Czechoslovak
border will add approximately 29 bcm of capacity to the
probable current Soviet export- capacity of 55-60 born,
bringing the system's 'total export capacity to 85-89 bcm.
After accounting for gas sales to East Germany and Western
Furope including 20 bcm of Siberian gas, excess capacity of
the Sos?iet-Czech system would total 22-26 bcm. If Italy
decides to purchase 6-S bcm of Sihe ian gas, the system ?s
total excess capacity will drop to 16-13 beta by 1990
o Expansion of the Czech domestic nets-,;ork in addition to the
29 bcm Siberian pipeline capacity would yield an excess
capacity in the Czech system of about l.1-13 bcm, (Italy?s
purchase of 6-8 hcm is factored into this calculation,)
o With projected excess cavaci.ty on the order of 16-18 bcm,,
the Soviets could effectively capture an even larger share
of the West European gas market in the 1990s. `.t'e Soviets
could:
reduce the market or Troll gas to about 20 bcm. A
reduction in the market for Troll gas could render field
development uneconomical until the late 1990s.
-- or eliminate any North African projects such as Algerian
gas, Nigerian or Cameroonian LNG.
4
CONFIDENTIAL
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Continental Europe: N turral Ga2
Supply and Demand Forecast
01U.zrm IG 1980-2000
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Case IV
(Second Strand of Siberian Pipelne)
o Construction of a second strand Siberian pipeline could
bring an additional 30 bcm of Soviet gas to Western Europe.
o The market for gas from other suppliers would shrink to
only about 20 bcm in the year 2G00,
5
CONFIDENTIAL
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Continental Europe: Natural Gas
Supply and Demand forecast
# 3IC 1980-2000
Jomand
a
taxLe Lm
vt,
Z
et San
IlL9erLa
Norwaj
t nd 3i
K L n Pt pe Une
1965 180(1
ell
Case IV R
Second Strand of'
SLbsrLari F'LpeLLna
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