WESTERN EUROPE: COPING WITH NATURAL GAS DISRUPTIONS

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• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00283R000200120007-6
• Release Decision: RIPPUB
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• Document Page Count: 23
• Document Creation Date: December 22, 2016
• Document Release Date: September 1, 2010
• Sequence Number: 7
• Publication Date: November 1, 1983
• Content Type: REPORT

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GI 83-10261
November 1983
f Cot.
t
t
Di
ora
e o
rec
Intelligence
Western Europe:
Coping With Natural
Gas Disruptions
390
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Directorate of
Intelligence
Western Europe:
Coping With Natural
Gas Disruptions
A Research Paper
This paper was prepared by lof the
Office of Global Issues. Comments and queries are
welcome and may be directed to the Chief,
Strategic Resources Division, OGI
Secret
GI 83-10261
November 1983
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Western Europe:
Coping With Natural
Gas Disruptions F
Summary In our judgment, dependence on imported natural gas from non-OECD
Information available sources in the 1980s will increase Western Europe's vulnerability to a
as of 30 October 1983 natural gas cutoff. The International Energy Agency (IEA) reports conti-
was used in this report.
nental West European gas purchasers may be importing more than 40
percent of their total gas supplies from the Soviet Union and Algeria by
1990. Detailed simulations of the West European gas distribution system
suggest that the integrated gas network can meet most of the demands of
gas disruptions from the Soviet Union and Algeria. To effectively use the
physical distribution system during a disruption, however, will require a
degree of regional planning and cooperation that is antithetical to the
national perspectives held by the West Europeans.
Under present gas distribution policies, any Soviet gas embargo during the
peak demand winter months could cause minor gas shortages in certain
areas even though the physical distribution system would otherwise be
adequate. Even under favorable circumstances, including extensive region-
al planning and cooperation, a simultaneous Soviet and Algerian embargo
lasting six.months-in which Algeria might seek economic leverage from
Soviet action-would severely strain the West European gas network by
the end of the decade. Such an embargo would require peak production
from all domestic sources, including the Netherlands. At the end of a joint
Soviet-Algerian embargo lasting 12 months, storage would be severely
depleted, leaving Europe extremely vulnerable to any additional supply
problems. Comprehensive regional planning and cooperation could allevi-
ate some of the effects of such major supply disruptions. Moreover, we
believe awareness of such planning might discourage gas exporters from
even attempting an embargo. 25X1
Until West European governments view gas supply availability in a
regional strategic perspective, the coordination necessary to use effectively
Europe's gas system during a disruption is highly unlikely. Even in recent
months, West European countries have been reluctant to share proprietary
information on gas contracts with the IEA, claiming the need to protect
against both commercial and domestic political backlash. Implementation
of current national West European gas supply emergency plans-which
vary widely in scope and depth-could even aggravate shortages in other
countries during a major disruption. 25X1
Secret
GI 83-10261
November 1983
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For the 1990s, Western Europe has several options for coping with possible
supply interruptions and growing gas demand, but the long leadtime on
these efforts requires prompt regional cooperation:
? Developing the North Sea gasfields.
? Establishing Groningen as a regional strategic gas reserve.
? Eliminating physical bottlenecks in the European gas system.
? Financing new gas projects in other regions.
Although the options are not justifiable economically, failure to adopt at
least some could seriously limit Western Europe's ability to cope with a
major gas embargo-even with coordinated emergency planning-during
the 1990s
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Contents
Summary
Gas Supply/Demand Outlook in 1990
Coping With Disruptions
Gas Storage 6
Contingency Plans 7
Soviet Embargo 8
Algerian Embargo 9
Soviet-Algerian Embargo 10
Bottlenecks in the European Gas Grid 11
Germany and Austria 12
The Need for Cooperation 12
European Options 13
Strategic West European Gas Reserves 14
Eliminating Bottlenecks 14
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Figure 1
Western Europe: Energy Projections
^ oil
^ Coal
^ Natural gas
^ Hydro and nuclear
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Western Europe:
Coping With Natural
Gas Disruption
Natural gas is expected to play an increasingly impor-
tant role as Western Europe attempts to fulfill its
energy requirements, yet avoid heavy dependence on
expensive imported oil. The share of gas in total .
energy use has increased from 2 percent in 1960 to
about 15 percent, where it is expected to remain
stable throughout the decade. Gas consumption for all
countries in Western Europe is projected to approach
260 billion cubic meters (BCM)-up from about 200
BCM in 1982 (figure 1). Growth in gas demand,
however, will vary greatly by sector and country.
With the increasing gas demand has come growing
West European reliance on gas imports from non-
OECD sources-currently about one-sixth of total
demand. The Soviet Union, with approximately 12
percent, and Algeria, with about 4 percent, are by far
the most important non-OECD suppliers of the natu-
ral gas consumed in Western Europe. On the conti-
nent, the Dutch Groningen gasfield is the principal
source of gas for continental Europe, while Norwe-
gian gas from the North Sea provides important
supplies to the United Kingdom and, through West
Germany, to the continent. Because of reserve or
pipeline constraints, however, the bulk of Western
Europe's increasing natural gas demand will have to
be satisfied by Algeria and the USSR. In view of this
growing dependence on non-OECD gas suppliers and
past Soviet and Algerian disruptions, Western Eu-
rope's largest gas importers-France, West Germany,
and Italy-will become increasingly vulnerable to
natural gas disruptions.
Gas Supply/Demand Outlook in 1990
Industry estimates of total West European gas con-
sumption approximate 245 BCM in 1985 and 260
BCM in 1990-an annual growth of less than 2
percent. The decline in West European gas consump-
tion from about 220 BCM in 1980 to 200 BCM in
1982, however, means that gas demand growth can be
expected to average about 3 percent annually from
Figure 2
Western Europe: Proven Natural Gas Reserves"
Other European 166
France 81
Italy 171
Germany 190
a As of January 1981.
b Closer to 2 trillion cubic meters due to recent increases in reserve
estimates for Groningen.
1982 to 1990. All major West European countries,
except the United Kingdom, are expected to register
substantial increases in gas demand during the dec-
ade. A reduction in gas infrastructure investment,
however, could reduce the rate of gas demand growth
in Italy in the early part of the period.
Industry projections of indigenous gas production in
Western Europe hover around 190 BCM in 1985 and
175 BCM in 1990. These production estimates are
more optimistic than previous forecasts, largely
because of industry expectations that Dutch gas pro-
duction in 1990 will be higher than previously antici-
pated-The Hague has recently liberalized its gas
export policy because of increased reserves and lower
domestic consumption projections (figure 2). Produc-
tion estimates for the United Kingdom have also
increased slightly because of recent North Sea tax
modifications.
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A Methodological Note:
Simulating the West European
Gas Distribution System
network to handle a supply disruption to the IEA countries.
West European countries began concluding contracts for additional gas supplies
from the USSR in 1981. These supplies, in addition to existing contracts for
Soviet gas, significantly increased the level of West European dependence on
Soviet imports and raised questions among US officials about the security of gas
supplies. At the insistence of the US Government, the International Energy
Agency (lEA) agreed in late 1982 to study the adequacy of the gas distribution
At the same time, the US Department of State requested that the Central
Intelligence Agency independently verify the results of the IEA study.
ing supply and delivery flows.
We adapted the industrial computer simulation model to evaluate the physical
capability of the network to balance supply and demand during a variety of
disruption scenarios occurring around 1990. The model represents the critical gas
production, import, storage, transmission, and compression facilities in Western
Europe. Physical constraints, such as pipeline capacity under varying conditions
and production rate limits, are automatically considered by the model in comput-
Scenarios Investigated: ? A North Sea interruption. Dutch exports increased from 32 to 50 BCM.
? A Soviet export embargo. Algerian exports increased from 27 to 32 BCM.
? An Algerian embargo. Soviet exports increased from 55 to 65 BCM.
? A simultaneous Soviet-Algerian embargo. Dutch exports increased from 32 to
74 BCM.
It is assumed that any gas-producing country not participating in an embargo
would increase its exports to the maximum physical limit and that imports from
other non-OECD sources would not significantly improve the supply situation until
after 1990.
? Combining storage withdrawals.
? Increasing domestic production.
? Increasing imports from nonembargoed sources
To determine if projected demand could be met during periods of disruption by:
Key Assumptions: ? Storage. Major facilities presumed full at beginning of disruption. Withdrawals
limited to capacity and physical rates planned for 1990. During slack demand
periods-summer months-storage recharged, if sufficient excess gas available.
25X1
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? Demand. Projections continually revised. Relatively high projections used for
slightly colder than normal winters. Demand estimated on quarterly basis for
each country and presumed to remain at normal level unless country directly
affected by an embargo. If affected, demand during embargo reduced by amount
of seasonally adjusted interruptible gas demand within country, estimates of
which derived from IEA study. Use of low-calorie gas from the Netherlands
assumed to pose no major technical problems for consumers.
? Domestic Production. Each country limited to projected normal level unless
directly affected by disruption. Affected countries' production increased by
estimated amount of surge potential, derived from IEA study.
? Disruption Length and Timing. Six months-1 October to 1 March-to test
system's ability to handle demands during disruption. Twelve months-begin-
ning 1 July-to test system's ability to withstand protracted disruption.
? Pipeline Network. All major pipelines planned for 1990, including Spain into
southern France connection.
? System Utilization. Optimized within physical constraints during each scenario.
Actions of individual governments that could aggravate shortages in other
countries not considered.
? West European Cooperation. Assumed all governments cooperated extensively,
particularly if directly affected. Domestic production allowed to surge and
interruptible services curtailed only in affected countries. Unaffected countries
limited cooperation to participation in swapping arrangements except for the
Netherlands, which allowed full production capacity at Groningen gasfield to
offset interrupted supplies. Full-scale cooperative political efforts, including 25X1
demand restraint and gas-sharing provisions similar to those for oil under the
IEA Emergency Sharing Plan, were not considered to be in effect.
The 1990 allocation of gas supplies will vary depending on domestic gas production
and consumption. The assumed balance for supply and demand of natural gas in
1990 are:
Domestically Nether- USSR Algeria Libya Norway Total
Consumed lands Demand
Production
Total a 105 32 55 27 1 38
257
Netherlands 32 3
35
Austria 1 1 5
6
Germany 16 15 22 10
62
France 4 6 13 9 3
35
Italy 10 6 15 12
43
Luxembourg 1
I
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Table 1
Major West European Pipelines
Length
(km)
Diameter
(cm)
Groningen Field (Netherlands)-Aachen (German border)
342
96/71 a
Aachen (German border)-Rheinfelden (Swiss border)
500
96
Rheinfelden (Swiss border)-Sackingen (Italian border)
160
86
Sackingen (Italian border)-Mortara (Italy)
156
86
Hilvarenbeek (Dutch border)-Taisnieres (Belgian border)
170
91 a
Taisnieres (Belgian border)-Paris (France)
242
91 a
Megal
Waidhaus (German border)-Medelsheim (French border)
460
120/80 a
Medelsheim (French border)-Voisines (France)
220
120/90 a
Wag
Baumgarten (Austrian border)-Oberkappel (German border)
250
80
Tag
Baumgarten (Austrian border)-Tarvisio (Italian border)
382
96/91 a
Tarvisio (Italian border)-Sergnano (Italy)
485
120/86 a
Transmed
Hassi R'Mel (Algeria)-Cape Bon (Sicily)
916
123
Cape Bon (Sicily)-Marzara (Italy)
160
51
Marzara (Italy)-Minerbio (Italy)
1,514
123
a Several lines are parallel; the number and diameters of lines vary
with location.
the midrange
of consumption and production projections for 1990
suggest Western Europe could require net natural gas
imports of only 67 BCM in 1990-about 20 percent
less than anticipated. Gas supplies available from the
Soviet Union, Algeria, and Libya, however, could
easily total as much as 83 BCM by 1990. This
perceived surplus in available gas supplies will encour-
age some West European countries to reduce or defer
purchases of imported gas or shut in domestic produc-
tion. The surplus could also delay or prevent develop-
ment of more costly North Sea gasfields needed to
limit dependence on non-OECD gas supplies. Should
demand in 1990 prove greater than anticipated,
Western Europe may find the only readily available
supplemental gas supplies are from the USSR and
Algeria-the suppliers most likely to disrupt gas
supplies for political or economic reasons.
In our judgment, the major gas pipelines in Western
Europe are capable of transporting domestic and
imported gas wherever needed (see map). The largest
developed gas reserves in Western Europe are located
in the Netherlands at the Groningen gasfield, from
which major transmission lines extend south through
Belgium into France. The Trans-European Natural
Gas Pipeline (Tenp) runs north-south through Germa-
ny, transporting gas from the Netherlands and Nor-
way through Germany and Switzerland into Italy.
The Middle European Gas Pipeline (Megal) system
carries Soviet gas across Germany into France. The
large capacity of the Megal system makes it one of
the major links in the West European network. The
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Previous Gas Interruptions
Western Europe has already weathered several gas
supply interruptions with little difficulty:
? In early 1980 Algeria stopped all LNG deliveries to
France-ostensibly because of technical problems
in the gas liquefaction plants at Skikda and Arzew.
French officials, however, viewed the action as an
effort to force France to agree to double the price
for Algerian gas.
? Libya halted LNG shipments to Italy in August
1980 because of price disputes.
? In January 1981 the Soviet Union reduced exports
to Western Europe by 30 percent because of surges
in Soviet winter demand.
Temporary Soviet cutbacks of gas deliveries to West-
ern Europe have been a recurrent problem, even
though Moscow has always met contractual obliga-
tions on an annual basis. West European countries
were able to alleviate these shortfalls by increasing
imports from the Netherlands and curtailing service
to interruptible customers.
West Austrian Gasleitung (Wag) system carries Sovi-
et gas across northern Austria into Germany, where it
links with the Megal system. The Trans-Austria
Gasleitung (Tag) transports Soviet gas through south-
ern Austria into Italy. The Trans-Mediterranean
pipeline (Trans-Med) crosses the Mediterranean Sea
into Italy from Algeria.
Spain will also probably be connected to the
urn network via a line from Barcelona into
southern France by 1990.
Coping With Disruptions
Western Europe's natural gas system permits some
flexibility in coping with supply losses:
? The surplus production potential in a few countries
can be tapped.
? Subject to substantial seasonal and sector con-
straints, gas demand can be adjusted.
Substantial storage capacity can be used.
Table 2
OECD Europe: Domestic Gas
Production
1980
Normal
1990 (Estimated)
Normal
Surge
197
174
249
2
1
1
France
11
4
4
Germany
19
16
17
Italy
13
10
11
Netherlands
90
64
132
25
38
38
NEGL I 1
25X1
Production Flexibility
Although almost every country in Europe has some
gas production, the Netherlands, the United King-
dom, Norway, and West Germany have the greatest 25X1
gas production potential. During a major supply
disruption, each country should be able to surge
production at least 5 to 10 percent above normal levels
for a sustained period (table 3). Except for the Nether-
lands, however, we believe it unlikely that any West
European country not directly affected by.the disrup-
tion would surge domestic gas production to help 25X1
another country because most countries strictly ob-
serve a domestic-use policy. Although Norway's
North Sea gas reserves are substantial, we expect that 25X1
delivery of gas to continental Europe will be con-
strained to existing pipeline capacity of 20 BCM well 25X1
25X1
Gas Demand Flexibility
The European gas distribution network was designed
to accommodate fluctuations in demand. In Western
Europe the weather and the number of consumers
using gas for space heating can cause peak winter gas
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Table 3
Projected Netherlands Gas
Allocations in 1990 a
Billion cubic meters The Role of Dutch Gas
Onshore
48
Offshore
16
Imports from Norway
9
To the Netherlands
3
To France and Belgium
6
Demand
73
demand to be more than three times greater than
summer demand. Daily gas demand can fluctuate
even more during the early morning and evening when
residential demand is highest.
Natural gas use is split among three major sectors:
residential, heavy industrial, and electric power gener-
ation. Many of the industrial and utility users receive
gas service on an interruptible supply basis-in ex-
change for lower prices, users agree to allow supplies
to be terminated on short notice. Nearly all gas users
served on this basis have made provisions for using
alternative fuels. On the European mainland, these
service interruptions could reduce demand by about
10 percent, or more than 20 BCM, per year during a
yearlong emergency. During the winter months, how-
ever, this flexibility is severely reduced-to less than 5
BCM-because many of the interruptible services
have already been routinely terminated. Conservation
and demand restraint measures, such as limiting
production.
Western Europe will continue to depend on the
Netherlands-the largest gas producer on the main-
land-for surge production on the continent. Dutch
gas production comes primarily from the Groningen
field, which contains 85 percent of proven Dutch gas
reserves. Total Dutch gas production is expected to
decline from 90 BCM to about 64 BCM by 1990
because of The Hague's policy to save the Groningen
Yield as a strategic domestic gas reserve. Recent
Hague decisions to permit the extension of some
foreign contracts, however, may reflect a new trend to
permit higher production. Annually, the Netherlands
is technically capable of sustained gas production of
more than 130 BCM. Moreover, the transmission
network is capable of sustained exports of more than
100 BCM per year, although bottlenecks in neighbor-
ing countries could limit exports to 74 BCM annual-
ly, according to our analysis. Although maximum
field deliverability will decline slightly with contin-
ued production, this field should remain capable of
substantial increases in production well beyond 1990.
This additional surge capacity could alleviate the
effects of an import disruption throughout Europe, if
the Dutch are willing to allow such high levels of
hours of gas service and establishing allocation priori-
ties, could reduce demand even more, if implemented
in a timely manner and strictly enforced.
Gas Storage
Because gas demand fluctuates widely on a daily and
seasonal basis, the European gas network includes
substantial gas storage to balance supply and demand.
Approximately 75 percent of West European storage
capacity is in France and Italy. Storage facilities are
commonly located close to points of peak demand and
are filled during the low-demand months, allowing
production and transmission facilities to be designed
for average, rather than peak conditions.
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Figure 3
Projected Gas Storage as a Percent of
Annual Consumption in 1990
According to IEA studies, the primary gas storage
facilities in Europe' should accommodate about 34
BCM by 1990. Austria, Italy, and France will each
have enough storage to accommodate about one-third
of their gas needs for one year. Although Germany
could only cover about 10 percent of its annual needs,
it will continue to have ready access to additional gas
from the Netherlands, as do Switzerland, Belgium,
and Luxembourg. Spain will remain the only Europe-
an nation without any effective storage or contractual
access to gas supplies from the Netherlands. The
flexibility of the European gas network, however,
allows gas to be withdrawn from almost any storage
location in Europe through complex gas swapping
arrangements. Spain will be able to take advantage of
this capability once its connection to the West Euro-
pean gas grid in southern France is completed in the
next few years.
Contingency Plans
Despite the flexibility of the West European gas
system as a whole, emergency gas planning has
proceeded only on a national basis. The variety in
national gas disruption response planning is evident
by the following IEA illustrations:
? Austria has not established any significant gas
emergency plan.
? Belgium has contingency plans for 10- and 20-
percent gas supply disruptions. The emergency
measures are contained in Belgium's Civil Defense
Plan. A province-by-province plan is being studied
and a list of gas users to be given supply priority
during emergencies has already been established.
? France will rely primarily on its gas storage capaci-
ty and interruptible demand during an emergency.
By 1990 France will have the greatest gas storage
capacity in Europe, and Gaz de France is planning
to increase its interruptible contracts from 15 per-
cent of current total gas demand to 20 percent.
? West Germany prefers to act through industry and
has created a clearing body to coordinate private
efforts. Should industry be unable to balance supply
and demand, government units can directly inter-
vene in production, purchasing, and gas sales, as
well as establish consumption priorities. 25X1
? Italy will use its state-owned gas companies to
coordinate management of all energy resources dur-
ing an emergency, including storage and building or
upgrading production facilities for exclusive use in
an emergency.
? The Netherlands has not established any emergency
plan other than a general policy to safeguard the
flexibility of domestic production by conserving gas
from Groningen and maximizing output from other
Dutch gasfields.
? Switzerland has formed a government/industry
group that is establishing criteria for demand re-
straint priorities. At present, there are no firm plans
for strategic storage, surge capacity utilization, or
other direct supply actions.
25X1
? Spain will rely primarily on interruptions of dual-
fired industrial users to reduce demand in an emer-
gency. Since 1980 new residences have been
required to have dual-fired capability to burn pro-
pane or butane, if natural gas is not available.
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Figure 4
Projected European Gas Storage in 1990
Belgium
Germany
Austria
Italy
0 40 80
Storage depletion rate (days)
? The United Kingdom can regulate energy use if
required, however, measures are not established in
advance. London will rely primarily on its surplus
production capacity, storage, and interruptible de-
mand during an emergency. There are no specific
plans for surge production or fuel switching, except
as already encompassed by interruptible contracts.
Supply Disruption Scenarios
Even with the well-developed national emergency
plans, the flexibility of the West European natural gas
system will steadily erode as gas demand begins to
approach the system's capacity toward the end of the
decade. Under these circumstances, Moscow and Al-
giers will add to their political and economic leverage
by becoming the primary surge gas suppliers in the
event of demand surges or temporary supply problems
in the European grid. Beyond this, however, these
countries are also in the best position to seriously
disrupt West European gas supplies. The following,
based on a comprehensive analysis, looks at Soviet,
Algerian, and joint Soviet-Algerian embargoes and
assesses the supply consequences for Western Europe,
without accounting for any political or contractual
constraints that might impede the flow of gas between
countries.
Soviet Embargo
Moscow is committed to deliver about 48 BCM
annually by 1990. In a high-demand scenario, how-
ever, the Soviet Union could be exporting about 55
BCM of gas to Western Europe-roughly two-thirds
of all imports from non-OECD suppliers. A total
embargo of Soviet gas would severely affect Austria,
France, Germany, and Italy. Barring serious system
failures, most European nations could deal with such
an embargo
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Table 4
Projected 1990 Continental European Gas Balance
During a Soviet Embargo a
Import sources
57
34
103
53
Algeria
14
23
27
32
Libya
1
1
1
1
USSR
32
0
55
0
Regional sources
62
76
95
123
Netherlands
46
59
64
88
All others
16
17
31
35
Net storage withdrawals
4
10
0
2
a Excludes UK and Scandinavia.'
b Six-month period begins 1 October; 12-month period begins 1
July.
c Adjusted seasonally for additional interruptible demand.
West Germany-the largest importer of Soviet gas-
could meet its demand by increasing domestic produc-
tion and imports of gas from the Netherlands. France
could surge domestic production and accelerate im-
ports from Algeria. During a long embargo, it could
be forced to use storage or to conserve by refusing aid
to Spain. The other small European nations could
increase exports from the Netherlands.
Italy and Austria-too dependent on Soviet gas to
have all their needs provided for by increasing imports
of gas from the Netherlands-will have to use stor-
age. Under the high-demand scenario the Soviet
Union could be supplying as much as 35 percent of
Italian demand and 75 percent of Austrian demand
by 1990. Net storage withdrawals of about 10
BCM-more than 65 percent of capacity-would be
absolutely necessary during the winter in Austria and
Italy, even if all interruptible services were terminated
and strict conservation procedures invoked.
Algerian Embargo
We expect Algerian gas exports to Western Europe to
exceed 25 BCM by 1990. Although a disruption of
gas sales to Western Europe would cost Algeria about
$400 million each month in lost revenues that it can ill
afford, Algiers may believe the opportunity to extract
long-term price concessions from customers is worth
the short-term risk. Over half of the imported gas
from Algeria will be in the form of LNG; the
remainder will be natural gas transported to Italy
through the Trans-Mediterranean pipeline. By 1990
Algerian gas could supply about 60 percent of Span-
ish consumption, 30 percent of Italian consumption,
and more than 25 percent of French consumption.
Even with this level of dependence, an embargo can
be adequately compensated for by increasing domestic
production and imports from the Netherlands and the
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 Declassified in Part - Sanitized Copy Approved for Release 2012/02/10: CIA-RDP85T00283R000200120007-6
Secret
Table 5
Projected 1990 Continental European Gas Balance
During an Algerian Embargo a
Six Months b
12 Months b
Normal
Embargo
Normal
Embargo
Demand c
123
121
198
186
Supplies
123
121
198
186
Import sources
57
44
103
86
Algeria
14
27
Norway
10
10
20
20
USSR
32
33
55
65
Regional sources
62
73~
95
100
Netherlands
46
56
64
68
All others
16
- 17
31
32
Net storage withdrawals
4
4
a Excludes UK and Scandinavia.
b Six-month period begins 1 October; 12-month period begins
1 July.
c Adjusted seasonally for additional interruptible demand.
Soviet Union. Net storage withdrawals of about 4
BCM-more than one-third its available storage-
would be,required in France during the winter, even if
all interruptible services were terminated by Gaz de
France and effective conservation procedures invoked
by the government.
Soviet-Algerian Embargo
A simultaneous Soviet and Algerian embargo in 1990
could cripple Western Europe. The Soviets-for polit-
ical, economic, or technical reasons-might shut off
the gas flow to Western Europe, and Algeria could
seize this opportunity to extract price concessions
from its customers by halting deliveries. The impact
would primarily be felt by industrial and residential
gas users. We expect combined Soviet and Algerian
gas exports to comprise about 40 percent of continen-
tal West European gas consumption in 1990. None-
theless, should the Netherlands be willing to produce
gas at much higher than normal levels, Western
Europe physically has enough production and storage
Secret
capacity to survive a yearlong Soviet-Algerian embar-
go. At the end of that time, however, storage would be
severely depleted, just as the next peak demand period
approached
Storage withdrawal of 22 BCM-about 70 percent of
total storage capacity-would be required to meet
projected demand, even with all affected countries
increasing domestic-production. Storage in France
and Italy would be virtually depleted and West
Germany would be forced to use more than 20 percent
of its stored gas supplies. The Netherlands would have
to produce at near-maximum physical capacity during
peak demand periods and average more than double
the annual export rate it currently plans. If West
European countries act decisively to limit demand by
implementing coordinated emergency plans at the
start of the embargo, the time they could withstand
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Secret
Table 6
Projected 1990 Continental European Gas Balance
During a Soviet-Algerian Embargo a
Normal
Embargo
Supplies
123
117
Import sources
57
11
Algeria
14
0
Libya
1
1
10
10
32
0
62
84
Netherlands
46
67
All others
16
17
Net storage withdrawals
4
22
e Excludes UK and Scandinavia.
b Six-month period begins 1 October; 12-month period begins
1 July.
c Adjusted seasonally for additional interruptible demand.
Normal
Embargo
198
176
103
21
27
0
1
1
20
20
55
0
95
141
64
106
31
35
0
14
the disruption would be substantially lengthened. If
not, West European countries would not have suffi-
cient gas in storage to meet demand during the second
winter of an extended embargo
Bottlenecks in the European Gas Grid
The pipeline system in Western Europe is an integrat-
ed distribution network capable of transporting
enough gas from almost any storage, production, or
import facility in Western Europe to meet demand
requirements in any area under normal conditions.
Under our scenarios, which require surge flows, how-
ever, several bottlenecks would restrict the system's.
ability to move large quantities of gas from the
Netherlands to southern Europe. These system re-
strictions could force some countries-Italy and Aus-
tria, in particular-to rely more heavily on stored gas
pipelines from Germany and Belgium. Indeed, when
flows from both pipelines are simultaneously in-
creased, neither pipeline can reach maximum capaci-
ty. The problem is most apparent when LNG supplies
from Algeria are disrupted causing Soviet and Dutch
gas to be transported to southern France from the 25X1
north. Linking Spain to the European network
through France merely increases delivery problems
for France. To meet Spanish gas requirements during
an Algerian disruption, France would probably have
to swap gas-using gas from storage in southern
France-to supply Spain in exchange for gas from the
Soviet Union or the Netherlands contracted for by
Spain. A connection between France and Italy would
greatly enhance the network's ability to transport
Soviet gas to southern France and Spain.
during a disruption.
Belgium, France, and Spain. Our model indicates
that restricted line capacities will severely limit
France's ability to import additional gas through
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Secret
Table 7
Projected Effects of Gas Network
Bottlenecks
Additional Storage
Withdrawals Required a
Six Months
12 Months
Soviet embargo
10
2
Algerian embargo
4
0
Soviet-Algerian embargo
5
13
a Six-month period begins on 1 October; 12-month period begins on
1 July.
Italy and Switzerland. In Switzerland, according to
our model, limited pipeline capacity restricts Italy's
ability to import Dutch gas or export Algerian gas.
Likewise, the internal distribution system in northern
Italy consists primarily of a diffuse network of small
diameter pipelines. While this may facilitate distribu-
tion within the region, it also increases the difficulty
of moving large volumes of gas through the region.
Shipments through the pipeline from Algeria could be
increased significantly by adding additional compres-
sion capacity. Without this additional capacity, Italy
will remain heavily dependent on its gas storage.
Germany and Austria. Germany will not be seriously
affected by a loss of any single supply source because
of its proximity to Norwegian, Dutch, and Soviet gas.
During a simultaneous Soviet and Algerian embargo,
our model shows it would be necessary to use the
existing reverse flow capabilities on sections of the
Megal and Wag gaslines across Germany into Aus-
tria. Once the minor operational difficulties from
reversing the direction of flow were solved, the lines
could carry sufficient gas from the Netherlands to
meet all of Austria's and part of Italy's needs. Addi-
tional compression on the lines through Austria would
ease the flow of gas from the Netherlands to Italy.
We believe Western Europe's natural gas system is
sufficiently versatile to cope with the effects of almost
any gas supply disruption through 1990; however,
effective use of that capacity requires substantial
regional cooperation. West European governments
have been unwilling to cooperate to achieve the
efficient emergency use of the available gas system.
Under current emergency planning, each West Euro-
pean country will respond to an embargo only if it is
directly affected; no provisions have been made for
effective coordination or cooperation between coun-
tries. Indeed, without coordinated planning, one coun-
try's plans could negate the. effectiveness of another
country's. These conflicting national plans could ag-
gravate the effects of the original disruption. For
example, Italy may expect to receive Dutch gas in a
Soviet-Algerian disruption, but that gas may already
be committed to France or cannot be delivered be-
cause Switzerland may preempt the excess pipeline
capacity for its own needs
Coordinated gas emergency planning would have
other benefits for regional programs as well. Coordi-
nated gas planning would free substantial financial
resources that might otherwise be wasted by adding
redundant capacity to national distribution systems.
We believe awareness of such planning might also
discourage gas exporters from even attempting an
. embargo.
We doubt, however, that West European governments
will cooperate sufficiently to develop the coordinated
plans and operating procedures necessary to cope with
a major gas supply disruption without a major change
in the way they'view natural gas-and other energy-
issues. Gas supply problems are viewed in a national
or bilateral commercial context. Even in matters of
national defense, where most West European nations
readily acknowledge the continuing need for coopera-
tion, each country staunchly asserts its political
autonomy. In areas of potential general economic
25X1
25X1
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Secret
cooperation, the West Europeans have been only
moderately successful-for example, the European
Economic Community continues to squabble over
trade and commodity allocations.
In matters the West Europeans perceive to be primar-
ily commercial-such as securing gas supplies-inter-
national cooperation is most difficult. Indeed, the
IEA's gas security study was seriously hindered be-
cause West European governments and their gas
companies steadfastly refused to provide what they
deemed to be sensitive commercial data. Each coun
try, whether a gas supplier or purchaser, jealously
protects the terms of its contracts.
the Dutch do not want the. terms of
contracts with t eir customers known for fear of being
whipsawed by other customers seeking more favorable
terms. Likewise, gas buyers try to avoid disclosure of
contract terms with the USSR and Algeria, so as to
avoid political problems at home and abroad. Until
the availability of gas becomes a regional strategic
issue rather than a commercial question, the coopera-
tion necessary to coordinate emergency gas planning
is highly unlikely.
Faced with a major gas supply disruption, we believe
the West Europeans eventually would cooperate. The
mechanisms that would enable Western Europe to
fully use or enhance its gas distribution network,
however, must be in place well before a disruption.
Failure to coordinate national strategies well in ad-
vance will only increase demand for gas from storage
or alternative oil supplies, as well as increase the
potential for spot shortages during a disruption. In our
judgment, the termination of additional interruptible
gas customers in Western Europe during a gas supply
disruption, for example, could increase demand for oil
by as much as 350,000 b/d. The additional demand is
likely to create short-term pressures on all fuel prices-
Aside Aside from the development of a coordinated ap-
proach to emergency gas supply planning, Western
Europe could reduce its dependence on imports of
Soviet and Algerian gas in the 1990s by:
? Developing the North Sea gasfields.
? Designating the Groningen gasfield in the Nether-
lands as the strategic gas reserve for Western
Europe, until the North Sea gasfields are developed.
? Eliminating the bottlenecks in the gas distribution
system. 25X1
? Financing development of gas projects in other
regions. 25X1
Despite this long-term potential, there are substantial
political and economic roadblocks to pursuing each of
these objectives 25X1
North Sea Gasfields
Although there will not be enough North Sea gas by
1990 to offset the effects of a major gas embargo,
development of Norway's gas reserves could substan-
tially reduce the effects of a Soviet and Algerian gas 25X1
embargo after 1990. The Norwegian Government has
recently shown a willingness to make substantial
volumes of gas available to Western Europe, but it
will not move ahead with development until customers
are firmly committed to buying the gas. Should the
Soviet Union proceed with construction of a second
export pipeline or significantly increase capacity of
existing lines and adopt an aggressive marketing
posture, development of additional North Sea gas- 25X1
fields could be delayed indefinitely.2
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 Declassified in Part - Sanitized Copy Approved for Release 2012/02/10: CIA-RDP85T00283R000200120007-6
Secret
Strategic West European Gas Reserves
The Netherlands can continue to be a major exporter
of natural gas to continental Europe. In addition to
being Western Europe's most reliable and inexpensive
source of additional gas, it has a highly flexible gas
transmission system and large gas reserves that enable
it to cope with extreme fluctuations in peak demand.
Despite its export potential, the Government of the
Netherlands has adopted policies designed to conserve
gas resources. Under these policies, Dutch gas exports
will continue to dwindle
Given the size of Dutch gas reserves-about 2 trillion
cubic meters since recent upward revisions of Gro-
ningen's reserves-and the attractiveness of the po-
tential gas revenues, the current conservation policies
are under continuing review by the Dutch Govern-
ment. Budgetary pressures have already encouraged
The Hague to authorize modest extensions of existing
contracts, but the Dutch have shown little willingness
to unilaterally assume the role of strategic gas reserve
for all of Western Europe. Individual countries, such
as Germany and Belgium have, however, apparently
received private assurances that adequate gas will be
available during an emergency. Although the Nether-
lands may be willing to provide gas during an emer-
gency, we believe they will demand compensation to
hold strategic reserves for other countries. Without
such compensation, The Hague is not likely to allow
additional development for the Groningen gasfield.
This additional infield development of Groningen is
necessary to increase well productive capacity to
maximize use of the existing gas transmission facili-
ties in the Netherlands.
Eliminating Bottlenecks
The West European gas distribution network can
meet all normal demand requirements through the
remainder of this decade. Our analysis shows the
system is unable, however, to move large quantities of
gas from the Netherlands to southern Europe under
some surge flow conditions. Although Italy and Aus-
tria are most affected by these system restrictions,
France and Spain could also be forced to rely more
heavily on stored gas during a disruption. In most
cases, the pipeline restriction is located outside the
country affected and could be corrected only through
international cooperation
Non-European Gas Supplies
Algeria and the Soviet Union are in an excellent
position to supply natural gas to Western Europe in
the 1990s because of their substantial gas reserves. As
much as 12 BCM of gas,.however, could be available
from a variety of other suppliers, including Cameroon,
Nigeria, Qatar, Libya, and Canada. We believe it is
increasingly doubtful, however, that any of these
projects will proceed. The gas projects under consider-
ation require extensive capital investments and would
result in per-unit gas costs substantially higher than
gas from existing sources. At the same time, we
expect the continued softness in energy markets to
keep gas prices down. So long as surplus capacity is
available from existing sources at acceptable prices,
new projects are unlikely unless West European gov-
ernments reevaluate their positions on buying addi-
tional gas from the USSR and Algeria. Given the
likelihood of continued softness in the world gas
market, these options cannot be justified on near-term
commercial or even regional economic grounds. In a
regional strategic perspective, however, completion of
these options would provide important redundant
capacity to cope with the most severe disruption of
natural gas supplies through the balance of the centu-
ry. Failure to adopt at least some of these options
could seriously affect Western Europe's ability to
cope with a major gas embargo-even with coordinat-
ed emergency planning-during the 1990s.
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 Declassified in Part - Sanitized Copy Approved for Release 2012!02110 : CIA-RDP85T00283R000200120007-6
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