SIBERIAN GAS PIPELINE

Document Type: 
Collection: 
Document Number (FOIA) /ESDN (CREST): 
CIA-RDP85T00757R000100030023-3
Release Decision: 
RIFPUB
Original Classification: 
K
Document Page Count: 
5
Document Creation Date: 
December 20, 2016
Document Release Date: 
January 10, 2008
Sequence Number: 
23
Case Number: 
Publication Date: 
March 5, 1982
Content Type: 
MEMO
File: 
AttachmentSize
PDF icon CIA-RDP85T00757R000100030023-3.pdf906.16 KB
Body: 
Approved For Release 2008/01/10: CIA-RDP85T00757R00010003002 CENTRAL INT('GENCE National Intelligence Council 5 March 1982 NOTE FOR, See Distribution FROM : MG Edward B. Atkeson, USA NIO/General Purpose Forces SUBJECT : Siberian Gas Pipeline You may not have seen this article from the latest edition of International Defense Review, Vol. 15, No. 1/1982. Edward B. Atkeson Attachment: Subject Article DISTRIBUTION: C/NIC NIO/Econ Acting NIO/WE Acting NIO/USSR-EE DDI D/SOVA D/EURA Approved For Release 2008/01/10: CIA-RDP85T00757R000100030023-3 Approved For Release 2008/01/10: CIA-RDP85T0075'7R000100030023-3 by the approach of the year 1000 akin to the "finlandization" of Eu- Present fears about the year 2000, ^? surprised by the fact that for almost ' . .. .. .L-1 ICCO.. ....r more realistic; concerning as they ` mally very reticent.with this sort of energy. precise details about her. reserves of l hic L--- a geograp n l in th field o - done e _..--g. e - , neglected by the world as a whole,;: -.,make use of this new source. of gas deposit at Lacq. There are coup- also equally desirable for any for-> tries, though, which have a much eign countries which might have an brighter future. One example is the interest to be aware of the Soviet has good reasons for itsstatedint'n-- tion of aligning its energy policy to for try's natural-gas resources. Intense natural gas - - gigantic p' -,--- - - - -? gas pipeline running from theYamal gone by the oil trade following the peninsula to western Europe are all drastic price hikes of 1973. But this.- indicative of the importance the does not mean that the future is the Nairobi Conference last August may still come up with some plea- being as, clear-cut as it might (a - 'could be as high as 1,200 billion.; - k pro level. -- - n ; th i ---..-,;. ,.-. - . , pea y. e USSR),wnlleatLilt; salnvumema oftheoil=producingcountriesarefar.., s the.. Islamic revolution-.in-Iran, this= .-., oduction has been high- ..- .. ' 1---- s pr coup clearly-holds a.trump card in her ly problematical. Yet Iran is sitting'+ hand.-Although the significance of -',on 15-20%oftheworld's reserves- Russia's natural 'gas will only really supplies which, for the time being;,, make itself felt from 1985-1990 are frozen. The existence of the- onwards, it might well be advisable Iranian natural-gas pipeline-,does for the West to take note of .the ::;,,,mean, however, that-exports could' - t all,- berestartedrelativelyeasily=tothe situation straight away. At' events, last November's signing by {'.USSR. - :` ?her;armancmmnanvRuhroas(with - ? r=x important contract for the supply of ing amongst other things because of. Siberian gas (40 to 50 billion m3 per- thecountry's proximity to the indus- ? trialised nations of western Europe,.., annum) has initiated a process - which appears irreversible. And ir..- arealsobedevilledbytheunpredict seems likely that France, Switzer-- ability of the Algerian government's land, Italy, the Netherlands and Aus- policies. For instance, Algeria has efforts of President Carter and his the natural-gas liquefaction plants successor Ronald Reagan at the - envisaged in the current five-year, Ottawa summit to prevent an agree- :, plan (1980-1984) will not be con . 1 -_-J --- -11. Al h ?he h t oug technical departments of the IFP.~ .`:,Petroles) is. at present negotiating.: Te ti..;; r? ilo Fiance and the 'r. with. the .Algerian-government_1os been encoura The bitter facts - ion'. ihis.article ..r...,as:z...agm 9 r kr' z +e'n,:# Approved For Release 2008/01/10: CIA-RDP85T00757R000100030023-3 Approved For Release 2008/01/10: CIA-RDP85T00757R000100030023-3 were made plain some weeks ago during the French president M. Mit- terrand's visit to Algiers, when France was obliged to pay a high price for Algerian gas in return for guaranteed supplies (reportedly 9 billion m3 per year). Nigeria's potential production of 20billion m3 per year is quite simply being burnt away in the form of flares - which is no isolated phenomenon. Were this country to conz5ider marketing its product sometime around 1985, the propor- tion going to Europe would probably not exceed 8 billion m3. As for Qatar and Cameroon, negotiations' here are still at the talking stage. A certain amount of anxiety is bound to be aroused by the Soviet Union's potential hegemony in a market about which the only thing known for certain is that it will grow -and grow rapidly. West Germany'sposi- tion in this connection is significant: of the 40-50 billion m3 per year which western Europe should be receiving from Siberia from 1985 onwards, Bonn hopes to get over 10 billion m3. The German opposition is therefore quite justified in evok- ing the spectre of economic pres- sure being applied in the political arena in an attempt to "neutralize" the Federal German Republic. However, the structure of the future market for natural gas will call for enormous investments, and this necessity will largely rule out the likelihood of continuous and uneco- nomical fluctuations on the part of either the suppliers or the consum- ers, each side finding its interests closely interwoven with those of the other. The role of the USSR in. the natural-gas market As demonstrated quite clearly by the 11 th World Energy Conference, natural gas has become one of the essential sources of primaryenergy. For example, it accounts for 16- 18% of the primary energy used by Common Market countries, and its contribution is likely to go on grow- ing well beyond the year 2000. Its political significance is therefore acquiring very notable dimensions. Better known in the West under the name "Russia No. 6", this pipeline construction project now in progress is intended to supply western Europe with at least 40 billion m3 of additional natural gas per year. As things stand at present, West Germany is scheduled to receive from 1984 on 10.5 billion m3 per year (plus, possibly, another 0.7 billion m3 intended exclusively for West Berlin), France 8 billion m3, Italy 6-7 billion m3, the Netherlands and Belgium 5 billion m3 each, Austria 3 billion m3, while Switzerland will probably require only 1 billion m3. Latest estimates of the overall cost of the project are about US$ 15 billion. The 5,500km-long pipeline will link the gas fields in western Siberia (Urengoy and Medvezhe) with the German- Czech birder. It would appear that the USSR has, for technical reasons, chosen to lay two 1.42m-diameter pipes operating at a pressure of 45 bars, rather than a single one operating at 140 bars. The total capacity of the double line is understood to be 50.70 billion m3 per year. This will leave a pipeline capacity of at least 10 billion m3 per year by the and of this decade for supplies to other European countries. It should be noted that, according to Petrostudies projections, which do not include the new Siberian fields, Soviet natural-gas exports, having reached 58.3 billion m3 in 1981, are likely to level out at 59.8 billion m3 per annum by 1984before decreasing again after 1994. Added to this will be the flow of Siberian gas, which is likely to make itself felt in two stages. The initial deliveries, from 1984 onwards, Supplies of Soviet natural gas to western Europe in 1990 as a percentage of total natural-gas supplies and overall energy supplies CIA estimates EEC estimates Natural gas Energy Natural gas Energy West'Germany 29% 6% 34% 7% France 23-28% 4% 26% 4% Italy 29% ? . 5%. 35% 6% Netherlands ? 10% - 4% --11% 4% Belgium 32% 8% 38% 9.5%- 16 Approved For Release 2008/01/10: CIA-RDP85T00757R000100030023-3 The current instability in Iran and, to a lesser degree, in Iraq and Afghanistan means that Middle East reserves have for the time being lost their importance, so the Soviets look like becoming the world leaders in the production - and therefore the export-of natural gas. Within the 22 million square kilometres of Soviet territory, characterized as it is by vast regions of sedimentary origin, over 10 mil- lion square kilometres may be of interest to the oil industry. These figures reveal sufficiently clearly both the size of the task i nvol ved a nd the immensity of the prospects. In 1860, Baku became the first centre of exploitation for both oil and gas. Since then, the Ukraine and the Orenburg region have developed into zones of large-scale production. The deposits between the Volga and the Urals provide the major part of Soviet gas, most of it contained in the sandstone of the Devonian period and the limestone of the Carboniferous/ Permian periods. The northern part of these deposits tween depths of 250 and 1,200m. The Apsheron peninsula and the southern end of western Turkmeni- stan have also produced results at 350m and below. But the world's biggest reserves of natural gas are almost certainly in Arctic Siberia (Cenomanian sands of the lower Ob). These deposits, which probably extend out under the Arctic Ocean, are fairly near the surface (approx- imately 1,500m down) and do not contain any heavy oil fractions. Systematic prospecting appears to have- started in 1965, when, despiteall kinds of technical difficul- ties, the USSR set about exploring that immense cornucopia, Siberia. At that time, proven gas reserves were of the order of 1,800 billion m3. Five years later they had already reached 9,800 billion m3 and by 1980 the figure had risen to 21,000 billion m3 or more than two-thirds of Soviet reserves. In all probability, therefore, the USSR possesses sup- which should by 1985 reach half the scheduled annual volume of 40 billion m3, will be followed by a second phase, estimated to begin in 1989, when the pipeline is working at full capacity. In other words, the USSR will come close to doubling its natural-gas production capacity between now and the end of the 1980s. According to figures published by the Defense Intelligence Agency, Soviet natural-gas exports brought in $2 billion in 1978 (equivalent to 4.1% of the country's exports), $ 2.82 billion in 1979 and $4.98 billion in 1980 (7.4% of exports). During the same period, oil exports, which peaked at 3.16 million barrels per day in 1978, have declined markedly, particularly those to non-communist countries. This explains the lively interest being shown by the USSR in Siberian gas. It is worth noting here that it was not until 1980 that annual revenues from sales of gas to West European countries Is 2,514 billion) overtook those from gas deliveries to COMECON states ($ 2,471 billion dollars), the respective volumes being 22.65 and 32.28 billion m3. The explanation to this apparent paradox lies in the different pricing policies adopted by the western Europe. For each 28,300m3 (1,000f13) of gas, the Western countries paid an average of $ 3.14, compared with $ 2.70 paid by the USSR's communist brothers, who thus clearly benefited from special sales conditions. In 1980, furthermore. East Germany paid $481 million and Italy $ 691 million for the same quantity of Soviet gas. The "Russia No. 6" project will, as can be clearly seen, play a major role in supplying a large number of countries with energy. Although President Reagan, driven more by internal-political motives than any other, threatened on December 29, 1981, not to supply the Soviet Union with some of the 1.42m-diameter pipes it needs to complete the trans-Siberian pipeline, this embargo could very well be an illusory one (the measure would in fact only affect Caterpillar which, if it could not successfully complete scheduled deliveries of pipelaying equipment, would be forced to lay off large numbers of personnel and, to a lesser extent, General Electric which has a contract to supply compressor turbines). In the first place, it would appear that Canada could take over responsibility for the contracts. Secondly, it is difficult to believe that the Europeans will actually revoke the signed agreements. Certain contracts have, in fact, already been awarded by the Soviet Union notably those forthe purchase of 41 gas compression stations, 22 of which are to be supplied by the Mannesman group (West Germany) and Creusot-Loire (France), the remainder coming from Nuovo Pignone (Italy). Mannesman has already-chosen AEG-Kanis as sub1contractor, while Creusot-Loire seems likely to select Alsthom- Atlantique. It would appear, moreover, that data-processing equipment worth nearly FFr2,000 million has been ordered from the French firm Thomson-CSF. The values of the contracts for Mannesman and Creusot-Loire total $ 1,400 million, while the Nuovo Pignone equipment order is worth $1,100 million. In addition, the Scottish firm John Brown has a contract for # 104 million to supply 21 turbines, each rated at 26,OOOkW (35,000hp). At the moment, the Soviet Union is negotiating with several West European countries (including West Germany, France, Belgium, Italy and the Netherlands) for the delivery of equipment from 1'984 onwards. Provisional agreements have been signed with ENI (Italy) and Ruhrgas (West Germany). In the second half of January 1982, there was a meeting between a delegation from Gaz de France and its counterpart from Soyuzgazexport, but as we went to press it was not yet known whether any signed agreement resulted. In spite of President Reagan's threats, it seems that it will be difficult to stop a process which has all the appearances of being irreversible. There are those, it is true, who are disquieted -or perhaps prudent -enough to worry about the level of dependence on Soviet natural gas (see table) which this new contract would entail for the countries of the West. (Following the recent declaration of martial law in Poland, Italy, for one, has threatened to suspend negotiations with the Soviets.) But, in the absence of a technological breakthrough during the next few years - something which does not appear to be on the cards at present-western Europo, with the exception of the UK, will remain heavily dependent on other countries for supplies of energy. In these circumstances, it might perhaps be better for western Europe to accept the situation as it is. plie self 20` gro tior Sea thir fon gas ind ow out yeti corgi ha,. m3 i nc; the bill an( cre 19 bill grc An do, Approved For Release 2008/01/10: CIA-RDP85T00757R000100030023-3 plies which should give it economic self-sufficiency up to about the year 2050, even allowing for regular growth of production and consump- tion. (By way of comparison, North Sea natural gas reserves amount to thirty times less.) In 1956, having previously formed part of the oil industry, the gas sector in the USSR became independent and even acquired its own ministry. Moreover the marked output increases over the last 25 years are indicative of the role ac- corded to gas as a substitute for oil - having stood at roughly 7.5 billion m3 from 1955 to 1960, the annual increase rose to 15 billion m3 during the following decade to reach 26.5 billion m3 per year between 1970 and 1980. Annual production in- creased ten-fold during the period 1960 to 1980 (from 45.3 to 435 billion m3), a markedly higher growth rate than the world average. And in spite of a slight slowing down, the likelihood is that 600 billion m3 will be produced in 1990. A careful examination of this trend also reveals a rather troubling feature, namely that the gas indus- try's period of renewed growth began in 1973, the date of the first oil crisis. Merely a coincidence? Perhaps, but at the very least it calls for a number of comments. The tripling of the price of oil at that time was far from being a purely spon- taneous affair. Although aimed os- tensibly at the. United States (the embargo which followed provided sufficient confirmation of that), this threatening move presented an even greater danger to the indus- tries of Europe and Japan whose primary energy resources were practically non-existent. And fur- thermore the whole world was caught up in a period of crisis. A steady weakening of Europe has always been one of the Soviet Union's more or less veiled objec- tives and it is hardly surprising that certain kremlinologists have seen the, shadow of Moscow lurking behind the 1973 crisis. If this was the case, natural gas would then A , Natural-gas exports, a trump card for the Soviet economy, began flowing in earnest in 1973. The change of policy which evidently took place in 1978 reveals the dilemma confronting the USSR: to maintain her pressure on the COMECON countries with the aid of this new weapon or to obtain hard currency and equipment from western Europe. The Russians will have to show considerable political skill in this field not to be seen to be favouring one of these markets too overtly by comparison with the other. -zA CIA estimates and analyses by the Swedish consultancy firm Petrostudiesfor 1978-90donot differseriously-as theydo in the case of oil -when it comes to Soviet reserves ofnatural gas. Even at the presentstage of exploration, Soviet gas reserves already amount to over 30, 000 billion m 3 or the equivalent of a good sixty years' production at the 1980 rate of extrac- tion. good:eversince 1973, theyearof the firstoilcrisis. Twenty-five new deposits have.been found during the last three years and the giant deposit at Dauleta- bad (Turkmenistan) was discovered in 1974. Output doubled between 1970 results for 1980(422 billion m3) and for the first nine Months of 1981 (342 billion m3, equivalent to an annual figure of 456 billion m3) already put the level of production roughly 5% below the least optimistic projected figure. - . Forecast (lower li it) 4f i i i Natural g as + d, Natural g oil gas alone Oil gas purpose being to supply the coun- tries of the Eastern Bloc. The signifi- cance cance of the project, which is desig- nated "Soyuz", can be gauged from the fact that the North Sea gas pipelines have a maximum capacity of between 15 and 22 billion m3 per year. As for the countries of western Europe, natural gas is becoming an increasingly crucial necessity for them from year to year. At present, these countries are linked to the oilfields of the Ukraine and in partic- ular to the one at Shebelinka, al- though production there is declining markedly. A gas pipeline running 5,500km from Medvezhe (western Siberia) to the Czech frontier should enter service in 1984. The volume of Soviet supplies - indispendable to Europe -will then be close on 100 onlion m- per year The first. commercial links were established with Austria in 1968, West Germany and Italy not follow- ing until 1975 and France in 1976. By 1980 France was spending the equivalent of FFr 13 billion on Soviet Petrostudies estimate .*1 oil'and.natural gas (4 billion m3),.' although even this is only half as much as the quantities imported by the pace. But afterthatthe trend was reversed and the COMECON coun- tries began to receive preferential treatment from the USSR in respect of natural-gas exports. There are several possible explanations .for this: 1. From 1976 onwards signs of latent discontent have become ap- parent in the Eastern Bloc countries. Faced with this situation, the Krem- lin leadership has begun to see a special need to tighten Soviet links" with the European satellites. while at the same time trying. to reduce their debt with Western banks: With the Soviet Union's oil ,.surplusaimmisnrngvs lyandmall- probability being reserved mainly Approved For Release 2008/01/10: CIA-RDP85T00757R000100030023-3 have played its part as a political weapon for the first time. Exports are of course the key factor in the USSR's natural-gas policy and the Kremlin leadership must have paid very special atten- tion to this aspect of the question. Moreover it has to be recognized that their efforts were well reward- ed: between 1975 and 1979, out- put rose by 41 %, domestic con- sumption by 30% and exports by 135%, while imports declined by 75%. Up to 1967, the only countries to benefit from supplies of Russian gas -all of it from the Ukraine -were a few members of COMECON such as Czechoslovakia and Poland. It was not until 1979 that a large-scale gas pipeline (diameter 1.42m) financed and built jointly by the USSR and its satellites entered service. This pipe- line starts at Orenburg in the Urals and has an average annual capacity of some 30 billion m3, its main Approved For Release 2008/01/10: CIA-RDP85T00757R000100030023-3 for military purposes, natural gas has put in a very timely appearance as far as straightening out COME- CON's energy policy is concerned. 2. Although still inadequate, sys- tematic efforts to save energy in western Europe were beginning to pay off and were generally turning out to be more effective than most people admitted. 3. November 1977 saw the appear- ance on the market of the first substantial and regular deliveries of natural gas (especially LNG) from the North Sea. These three factors may not be the only ones involved, but they suffice on their own to explain the change of trend. Soviet natural gas clearly has potential, but extracting it is by no means a mere formality. In the first place, the problem facing the Mos- cow leadership is made very much more difficult by the fact that pros- pecting and production must take place largely in the eastern part of the country. Whileoverfour-fifths of the proven reserves are situated in Siberia and the extreme East of the USSR, 80% of consumption occurs -for obvious reasons-in the west- ern regions. Nor are matters simpli- fied by the geographical dispersion of these resources over a vast terri- tory twenty times the size of France. Moreover as the USSR has no gas liquefaction plants, production depends upon the pipelines operat- ing properly. These, however, are subject to. the very considerable differences between day and night temperatures and are exposed to the snow-storms of Siberia and sand- storms of Turkmenistan. Frequent floods caused by the big Siberian rivers such as the Ob and Irtysh make them hard of access during much of the year. For the most part, new sections can only be laid during the winter. r{:: In addition, deliveries of equip-' ment, which are generally incom- plete and irregular, can be delayed for long periods and this has a very bad effect on the quality of the work (welding, insulation, etc). When of Soviet origin, the materials them- selves are only rarely of the quality needed for applications of this kind. The infrastructure lags behind the prospecting program and the whole process is hampered by notorious organizational shortcomings. Rail- ways, roads, river ports, living quar- ters. power supplies, etc, are still very inadequate. Moreover it has not always been possible to release the necessary funds (the Baikal- Amur section, for example, has not yet been completed as called for in the previous five-year plan). Total dependence on pipelines for supplies continues to be a major handicap. For instance, the network of large-volume gas pipelines (1.22- 1.42m diameter) is already ex- periencing serious setbacks al- though constructed roughly five years after its oil counterpart. This explains why in 1979 supplies to western Europe, although tradition- ally dependent upon the fields in western Siberia and the Ukraine, were taken from the Orenburg depo- sit. This natural gas has a sulphur content of 5%, which would be nothing compared with the roughly 15% at Lacq if the desulphurization plant at Orenburg - although of French design - were not prone to perpetual breakdowns. As a result, Western consumers experienced daily drops of up to 40% in supplies during the period in question and also had to put up with the strongly sulphurous smell of the gas they did - receive. Furthermore, the presence of H2 S can lead to a fair amount of corrosion, the effects of which have been particularly marked in the Orenburg-Zainsk section. This prob- lerin is in?fact so worrying that the Europeans are considering the pos- sibility of building two additional industry increased by no more than 20% during the same timespan. However, this is due partly to the massive rise in the cost of construct- ing the pipelines and to getting the first Siberian fields into production. On the other hand - and this has become even more clear since 1973 - these new resources have given the Russians an important political weapon. One example of what this could mean was seen not long ago in Poland during Mr Gromyko's most recent visit to Warsaw. Certainly, the main step taken by the.Soviet side was to renew officially the clauses relating to "mutual assist- ance" by Poland and the USSR (a declaration of this sort, of course, preceded the invasions of Hungary, Czechoslovakia and Afghanistan). But the threat to stop supplying natural gas to Poland-which enjoys special advantages in this field -- V Partial view of the 3rd section of the Tekhmashimport desulphurization plant at Orenburg (USSR). Designed by the French company.Technip and completed in 1978, this complex has a treatment capacity of 50 billion m? per year, which makes it the world's biggest gas treatment unit. When President Reagan lifted A. the grain embargoagainst the USSR last April, it demonstrated quite F clearly that such measures are illu .1' sort' if taken by a single country, a capitalist system, characterized as i. well. In view of the world distribu- tion of primary energy and the pres- ent lack of stability of the market, on the other hand, we cannot rule out a fated in other terms. The European their energy needs. So the question arises as to whether they would desulphurization plants, one at Waidhaus (German-Czech border) and the other at Baumgarten (Aus- trian-Czech border). This clearly shows their interest in future, sup- plies of Soviet gas. How things stand . The USSR's natural-gas industry has experienced a remarkable boom, particularly during the period of the 10th five-year plan, as can be seen from certain key figures. Pipe manufacture for the gas industry is at present running at double the level of production for the oil sector. Investment in the oil industry has risen from 2 to 6 billionroubles-i.e. tripled-in 15 years. The increase in investment in the natural-gas indus- try has been a seven-fold one over the same period and investment has now reached practically the same volume as with oil. In 1978-1979 .alone it apparently . doubled, .whereas credits granted to the-oil present time commercial relations .have been based essentially on an exchange of gas for pipes; this type of operation could well become problematical before very long. The export of petroleum products to Western countries could provide the USSR with an estimated annual market of over $ 17 billion, which is equivalent to what Libya earns from her oil. It would be well to recall that in a speech before Congress last April General Haig was insistent about the considerable sums which he claimed the USSR was spending to maintain or provoke hotbeds of unrest throughout the Third World. Seen in this context, natural gas has every semblance of becoming a new pressure point in time of tension, particularly when we also consider the "pacifist" movements which are increasingly active in central Europe.- and especially West Ger- many - and are known beyond any their supplies on countries like Iran and Saudi Arabia or to rely on the pipeline mean an impressive amount of work for a Europe which can no longerafford to ignore its ten million unemployed. underrate either the political or the economic consequences of the con- tracts signed by Ruhrgas or of those which are likely to follow in their wake. But Europe hasthetechnolog- ical ability to provide itself with safeguards. It would certainly be sensible for Europe to think about these things while time is still avail- able and to ensure now that she has the means of countering any future blackmail. ''-,that the energy requirements of the I" their proven energy reserves at pre- sent amount to no more than 15%. energy consumption of all the indus- trialized countries together. The Soviet Union for her part has not forgotten the essential facts. Those in possession of oil will be able to a large extent to control the military situation; those with natural gas could well hold one of the keys to the Third ? World of tomorrow. The USSR has both. We might leave the final word on this matter to an article published by our German colleagues from the journal OEL: "You. can always trust the Russians in matters of business. In this case they'll-either. send us their Approved For Release 2008/01/10: CIA-RDP85T00757R000100030023-3