ALTERNATIVE ENERGY MISSION: SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84B00049R000400700023-1
• Release Decision: RIFPUB
• Original Classification: C
• Document Page Count: 4
• Document Creation Date: December 20, 2016
• Document Release Date: December 20, 2007
• Sequence Number: 23
• Publication Date: December 3, 1982
• Content Type: CABLE

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NATIONAL SECURITY COUNCIL
MESSAGE CENTER
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FOR SECRETARY SHULTZ FROM AMBASSADOR GALBRAITH
PASS TO NSC FOR JUDGE CLARK
E. O. 12356: DECL: OADR
TAGS: ENG, EEWT, NO, UR
SUBJ: ALTERNATIVE ENERGY MISSION: SUMMARY
2. ABOUT SIX MONTHS HAVE PASSED SINCE I BEGAN MY
ALTERNATIVE ENERGY MISSION, AND I WOULD LIKE TO OFFER
A BRIEF SUMMARY OF MY FINDINGS BASED ON DISCUSSIONS
WITH GOVERNMENT AND INDUSTRY OFFICIALS IN FRANCE,
GERMANY, THE UK, THE NETHERLANDS, AND NORWAY. I WOULD
ALSO LIKE TO SUGGEST WHERE WE SHOULD GO FROM HERE.
3. THE DEVELOPMENT OF NORWEGIAN GAS DEPENDS FUNDAMENTALLY
ON THE AVAILABILITY OF WILLING SELLERS AND WILLING BUYERS.
DESPITE CURRENT UNCERTAINTIES IN THE EUROPEAN GAS MARKET
PROMPTED BY THE RECENT DECLINE IN DEMAND, THE MAJOR
EUROPEAN GAS DISTRIBUTORS ARE CONVINCED THAT THEY WILL
NEED SUBSTANTIAL ADDITIONAL QUANTITIES OF GAS (PROBABLY
AROUND 50 BCM FOR THE CONTINENT ALONE) BY THE END OF
THE 1990'S WHICH HAVE NOT YET BEEN CONTRACTED FOR.
THE DISTRIBUTORS ARE LOOKING AT ALL VIABLE SOURCES,
BUT THE LARGEST SUPPLIES ARE IN THE SOVIET UNION AND
NORWAY. THE NORWEGIAN GOVERNMENT HAS GIVEN ASSURANCES
IT IS WILLING TO BE A MAJOR SUPPLIER OF GAS FOR EUROPE
IN THE 1990'S AND THE OWNERS OF SLEIPNER AND TROLL ARE
ANXIOUS TO SELL. I HAVE NO DOUBT THAT THE CURRENT
NEGOTIATIONS ON SELLING SLEIPNER GAS WILL BE SUCCESSFUL
AND SLEIPNER WILL BE DEVELOPED. (CURRENT CONSENSUS SEEMS
TO BE THAT THE UK WILL SUCCEED IN BUYING MOST OF THIS
GAS; VERY LITTLE WILL GO TO THE CONTINENT.) THE
DEVELOPMENT OF THE TROLL FIELD IS ALSO PROBABLE, BUT
LESS CERTAIN, BECAUSE OF HIGH COST AND TECHNICAL
PROBLEMS. THIS HIGH COST OF THE TROLL GAS MEANS THAT
THE EUROPEANS COULD PROBABLY BUY GAS MORE CHEAPLY FROM
THE SOVIETS THAN FROM THE NORWEGIAN TROLL FIELD TO FILL
THEIR NEEDS THROUGH THE END OF THE 1990' S AND BEYOND.
HOWEVER, THIS WOULD ENTAIL A SIGNIFICANT INCREASE IN
THE PERCENTAGE OF THEIR DEPENDENCE ON THE SOVIET UNION.
4. THE MAJOR EUROPEAN DISTRIBUTORS CLAIM THEY ARE NOT
SEEKING TO CONTRACT FOR MORE SOVIET GAS AND THEY PROFESS
A COMMITMENT TO TROLL GAS. IT IS TOO EARLY TO CONTRACT
State Dept. review
completed
NSC review completed - may be declassified in
full I-
CONFIDENTIAL
Approved For Release 2007/12/20: CIA-RDP84B00049R000400700023-1
 Approved For Release 2007/12/20: CIA-RDP84B00049R000400700023-1
C-ONFIGENTIAL
NATIONAL SECURITY COUNCIL
MESSAGE CENTER
FOR THIS GAS, HOWEVER, AND SOVIET STICKS AND CARROTS WILL
BE AT WORK BETWEEN NOW AND THEN. (ONCE THE NEW SOVIET
EXPORT LINE IS COMPLETED THE SOVIETS' EXCESS GAS AND
TRANSMISSION CAPACITY WILL ALLOW THEM TO OFFER GAS
WHOSE INCREMENTAL COST TO THE SOVIET UNION IS ALMOST
ZERO.) THE FUTURE PRICE OF OIL IS ALSO A POTENTIAL
THREAT TO THE DEVELOPMENT OF TROLL; INDEED, A PRECIPITOUS
DROP IN PRICE COULD KILL IT. THE OPTIMISTIC VIEW OF
THE DEVELOPMENT OF TROLL IS BASED ON AN ASSUMPTION THAT
THE EUROPEAN GOVERNMENTS WOULD NOT ALLOW THEMSELVES
TO GO BEYOND A CERTAIN LEVEL (30 PERCENT) OF DEPENDENCE
ON THE SOVIET UNION AS A SOURCE OF NATURAL GAS NO MATTER
WHAT PRICES ARE OFFERED BY THE SOVIETS OR WHAT HAPPENS
TO OIL PRICES; THIS MAY BE DANGEROUS WISHFUL THINKING.
5. AS LONG AS A LIMIT ON DEPENDENCE ON THE SOVIET UNION
REMAINS AN ASSUMPTION AND NOT REALITY, WE ARE FACED
WITH THE VERY REAL POSSIBILITY THAT IN AN ERA OF WEAK OIL
PRICES THE SOVIET UNION WILL FINALLY UNDERBID THE NOR-
WEGIANS AND PREVENT THE DEVELOPMENT OF TROLL. AFTER DUTCH
SUPPLIES RUN DOWN, THE SOVIETS COULD THEN FIND THEMSELVES
IN A POSITION TO CONTROL THE EUROPEAN MARKET. THE
EUROPEAN GAS DISTRIBUTORS HAVE TO MAKE THEIR PURCHASE
CONTRACT DECISIONS ON A COMMERCIAL BASIS. ALTHOUGH THEY
ARE RELUCTANT TO BE OVERLY DEPENDENT ON ANY ONE SOURCE,
THEY GENERALLY VIEW THE SDVIET UNION AS A RELIABLE
SUPPLIER, AND IF THEY HAD THE POLITICAL GO-AHEAD TO DO SO,
THEY MIGHT NOT BE ADVERSE TO INCREASING THEIR DEPENDENCE
ON THE SOVIET UNION. OTHERWISE, THEY MIGHT LOSE THEIR
CUSTOMERS TO FUEL OIL. IT IS ALSO POSSIBLE THAT THE UK
WILL BID SO AGGRESSIVELY FOR THE TROLL GAS AND DRIVE
THE PRICE SO HIGH THAT THE CONTINENTAL BUYERS WILL
BE CLOSED OUT.
THEY COULD THEN ARGUE THEY WERE FORCED TO BUY MORE
SOVIET GAS TO MEET THEIR NEEDS.
COMMITMENT NOW FROM THE GOVERNMENTS OF THE EUROPEAN
GAS-CONSUMING NATIONS THAT, OVER THE LONG TERM, THEY
WILL LIMIT THEIR PURCHASES OF SOVIET GAS -- IDEALLY
THAT THEY WILL PURCHASE NO MORE SOVIET GAS BEYOND
BT
CONFIDENTIAL
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 1LII11lill11111illillIIlII III II illil111H
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GONF I-DENT I AL
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WHAT THEY HAVE ALREADY CONTRACTED FOR. SUCH A POLICY
WOULD ASSURE THE DEVELOPMENT OF THE TROLL FIELD AND
WOULD PREVENT OUR BEING FACED IN A FEW YEARS WITH
ANOTHER EUROPEAN-SOVIET GAS DEAL. THE EUROPEANS WOULD
BE AGREEING, IN EFFECT, TO PAY A "SECURITY PREMIUM"
FOR THE MORE EXPENSIVE NORWEGIAN GAS.
7. I AM STILL PONDERING THE VARIOUS APPROACHES WE
MIGHT TAKE TO GETTING SUCH AN AGREEMENT AND THE PROS
AND CONS OF THE VARIOUS FORMS SUCH A COMMITMENT MIGHT
TAKE. WE MUST BEAR IN MIND THAT THE EUROPEANS ARE
LIKELY TO ASK WHAT WE HAVE TO OFFER TO COMPENSATE FOR
THE HIGHER GAS PRICES THEY WILL BE PAYING. WE MUST
ALSO AVOID CREATING A SITUATION SO FAVORABLE TO THE
NORWEGIANS THAT THEY ARE ABLE TO MAKE WINDFALL PROFITS
AT THE EXPENSE OF THEIR ALLIES.
8. THESE THOUGHTS OBVIOUSLY NEED MORE DEVELOPMENT.
I LOOK FORWARD TO DISCUSSING THEM WITH YOU AND WITH
MY COLLEAGUES FROM OTHER EUROPEAN CAPITALS AT THE
COM CONFERENCE NEXT MONTH.
GALBRAITH
BT
CONFIDENTIAL
Approved For Release 2007/12/20: CIA-RDP84B00049R000400700023-1
 Approved For Release 2007/12/20: CIA-RDP84B00049R000400700023-1
MR. WILLIAM J. CASEY
Approved For Release 2007/12/20: CIA-RDP84B00049R000400700023-1