WESTERN EUROPE: ALTERNATIVE GAS SUPPLIES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84B00049R001403550035-1
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 4
• Document Creation Date: December 20, 2016
• Document Release Date: May 16, 2007
• Sequence Number: 35
• Publication Date: December 28, 1981
• Content Type: REPORT

pproved For Release 2007/05/16: CIA-RDP84B00049R0014035500
. Mi e4orandum for.
Director of Policy & Planning
Attached is the quickie assessment
we have done on some alternatives to the
Soviet pipeline. Nigeria is a reasonable
alternative, but only if agreement can be
reached on pricing issues. As things
now stand Lagos is insisting on prices
that are 25 percent higher than what the
Soviets are charging. The same is true
for Algeria which could constitute another
major alternative. As for Norway, the
reserves are there, but Oslo would have
to make the policy decision to sharply
increase deliveries to the Continent.
We think the Dutch option probably remains
the best alternative to Soviet gas in
the near term.
Director,
Office of Global Issues
 Approved For Release 2007/05/16: CIA-RDP84B00049R001403550035-1
WESTERN EUROPE: ALTERNATIVE GAS SUPPLIES
Sufficient natural gas is potentially available to West
European nations from several sources to provide alternatives to
the 500,00 b/d oil equivalent Soviet pipeline deal. Several
projects -- including a Nigerian proposal -- are viable from a
technical standpoint and could be in operation in the 1986-87
timeframe. To achieve this, however, the producing countries
would have to accept much lower prices for their gas than they
are now demanding. Alternatively, the West Europeans would have
to be willing to pay substantially more for the gas than the
Soviets are charging.
US assistance to encourage development of these alternative
projects through construction or pricing subsidies would be very
expensive since the subsidies would have to offset lower Soviet
gas prices. Pricing issues would be a major sticking point in
delaying potential Algerian and Nigerian supplies and may even
interfere with Norwegian projects already on the books. Perhaps
the best near-term alternative to Soviet gas is expansion of
Dutch gas supplies.
THE NIGERIAN OPTIONS
Lagos has contracted to ship the equivalent of at least
130,000 b/d of oil as liquefied natural gas (LNG) to Western
Europe with an option to double this amount if the United States
does not buy Nigerian LNG.
o Private financing has not been forthcoming, in part,
because of a perceived lack of Nigerian commitment to
the project.
o Participating companies also fear that a viable market
will not exist in Western Europe now that the Soviet
gas pipeline deal has been closed.
o To compete with Soviet prices ($4.60 per million Btu)
the Nigerians would have to accept an f.o.b. price of
less than $4 per million Btu. Lagos wants $4.80 or
more.
An alternative to the LNG project that has been considered
by Lagos is to transport the gas through North Africa to Western
Europe via a 2250-2600 mile pipeline.
o Construction would be less costly (preliminary estimate
of $10 billion) and less time consuming than the LNG
project if transit rights were quickly established.
o Fees charged by countries through which the pipeline
might transit could be exorbitant and subject the
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NORWAY
Nigerians or West Europeans to blackmail. Should the
line transit Algeria (the most direct route), Algiers
most certainly would charge a transit fee sufficient to
ensure that Nigerian gas is not more favorably priced
than Algerian gas.
New discoveries in the Arctic region off the Norwegian coast
have added to Norway's already vast gas potential. The latest
discoveries, however, have not been fully evaluated for export
potential as LNG or via pipeline.
o Because of present drilling restrictions in the area
and the Norwegian Government's hydrocarbon policy, it
is not likely that gas will be available for export
before 1990.
o Except for the Statfjord project (200,000 b/d oil
equivalent), other North Sea reserves will not be
developed before 1990.
o Producing companies believe even the contracted-for-
Statfjord project will not be viable if the Soviet
project is finalized because lower Soviet prices will
require the companies to adjust their prices downward.
NETHERLANDS
Dutch gas policy is to phase out export sales and conserve
gas for domestic uses:
o Shell and Esso, the major Dutch producers, believe
domestic gas reserves are much higher than official
Dutch figures.
o Stagnant or declining gas revenues could present Dutch
officials with budget problems in the next few years
and force them to consider expanding sales or at least
to extend present contracts.
ALGERIA
The Algerians alone could provide sufficient gas to offset
the volume proposed under the Soviet pipeline.
o Algeria's militant pricing policy has delayed
deliveries under existing contracts and postponed
signing of additional contracts.
o Although Algeria's revenue needs will force a more
conservative pricing policy, it may be a long time
before Algiers accept this reality.
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CAMEROON
French firms are pushing strongly to acquire the inside
track on developing Cameroon's LNG potential of 80-120,000 b/d
oil equivalent, deliverable in the late 1980s.
WEST EUROPEAN GAS DEMAND
Natural gas consumption in Western Europe declined another
three percent in 1981 after an unprecedented four percent drop
last year. Most forecasters have now revised their estimates of
future West European gas needs downward by at least 300,000 b/d
oil equivalent. If demand continues to slip and nothing is done
to realize the alternatives to Soviet gas that many West European
nations have already contracted for, Soviet gas will be a much
higher percentage of consumption than these West European nations
now envision.
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