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Page added on February 17, 2014
Five Potential Sources of Gas for Europe
In his assessment of potential sources of gas for Europe at the European Gas Conference 2014, John Roberts, Energy security Specialist, Methinks speaks, said it was too early to judge the potential of natural gas from the Eastern Mediterranean. “We know that there’s about 1TCF of reserves there, there’s probably more to be found,” he remarked.
“We don’t know when and how much will be approved for export, because instead of trying to think of it as 60% being for the Israeli market and 40% for export, it’s far more important to realize that in practice Israel simply wants to retain a basic minimum and anything above that is available for export.
“So, in other words, as more gas is found, the percentage will change in favor of export,” said Mr. Roberts, who said it was realistic to assume that the Tamar gas field would continue to supply Israel domestically, for the next 20 years or so, while the Leviathan would be primarily used for export.
What about the Aphrodite discovery off of Cyprus? he asked. “A contraction in the size of the reserve means it’s not worth developing right now, except if it is used for Cypriot domestic purposes.”
But then what about preserving a decent volume for LNG exports in the future?
Towards that prospect, he said: “Because Israel may be prepared to provide gas to Vasilikos for LNG if it’s not going to be the supplier of most of the gas for Vasilikos.”
On the subject of export routes, he said there were two completely different views on maritime boundaries involving Cyprus-Greece and Turkey-Egypt and the connotations for underwater pipelines. However, given that political circumstances surrounding the Cyprus problem were somewhat better than they’d been for a while, Mr. Roberts said a twin track approach was possible that would enable Leviathan exports to go by pipeline to Turkey, which would cost an estimated USD 2 billion.
He asked, “Does it have an impact on Europe? Yes, very simply, if you put 6-7BCM/year into southern Turkey you don’t need to connect it up to Europe to have an impact because of the large demand for gas in southern Turkey.”
This, he explained, would free up gas there coming from other sources.
Regarding Iraq, he said there were more definite plans to get gas into Turkey, even though estimated volumes were over optimistic, according to him.
“One does have to realize,” he pointed out, “that this is not stranded resources – this is stranded production. The investment has, in many cases, already been made, which means they want to get the gas out and they are in a position to do so if we get a positive result one way or the other for the current impasse over Kurdish oil exports.”
Then, offered Mr. Roberts, there was the gas that would come from the Southern Corridor. He started off speaking about the cost.
“We’re talking about USD 50 billion for the whole chain, and it is not complete. TANAP (Trans Anatolian Pipeline) is being built with expansion in mind; TAP (Trans Adriatic Pipeline) is being built with expansion in mind and we’ve heard it can be incremental.”
Meanwhile, USD 4-5 billion was being spent on the South Caucasus Pipeline, but only to the full extent that it could carry the full output of Shah Deniz II in addition to Shah Deniz I. With additional source considerations, like the Absheron gas field, a loop pipeline of 200km through the mountains of Georgia might be required, at significant cost. He commented, “That’s at least a couple of billion dollars.”
Without that investment, he opined, there would be no scope for such gas developments down the line, including from Turkmenistan.
Of TANAP’s costs, he said they ranged USD 7.9 to 17.9 billion.
“We are talking about an awful lot of money. A report on Natural Gas Europe said it could cost as much as USD 20 billion. No wonder Statoil and TOTAL got cold feet, questioning whether there was any present value in the project; if you’re BP that’s part of the capital outlay that you have to pay,” he said.
Still, according to Mr. Roberts, it would be built and would be able to carry more than the initial 10BCM. “So it does provide the backbone to cover the basic core of a new artery to Europe.”
And what of Russia’s Southern Corridor? He said it was another USD 50 billion project, but noted that Gazprom had been told by the Ministry of Economy to cut capital spending by 10%/year for 5 years, a cumulative total of around 40%.
“So it’s going to be tight and we haven’t got into the costs that South Stream itself will cost USD 10-12 billion, and that’s just for the maritime section,” he explained.
His presentation read “two strings probable, four strings questionable.” There was also uncertainty regarding the minority shareholders’ commitment to the project, he said, judging from a major announcement regarding the project over a year ago.
Mr. Roberts commented: “When did you ever see the third sentence of a major announcement saying ‘the minority shareholders maintain the right to leave the project in case their preconditions will not be satisfied in the future’? That’s usually left in small print – not usually put at the end of the first paragraph.
“Yet, what is more interesting is that this is a project that is going to be built.”
The Russians, he recalled, had recently said they would be speaking to the EU about South Stream, likely seeking exemptions. “It means they will go ahead with the project under EU regulations. The Second Energy Package makes it absolutely clear that they have a right to develop an energy project on a commercial basis that ensures they get a return on their investment,” he explained.
Finally, Mr. Roberts mentioned Iran, calling it a “real oddity.” Solving the nuclear problem there, he said, was necessary but not sufficient.
“You also need reform of the domestic economy and, secondly, we have a major immediate issue in gas: in the next 3 years we have 90BCM of new capacity is coming online from four phases of the South Caspian development.
“For the first time, we are likely to see Iranian production vastly outstrip the increase in Iranian consumption. They will have a surplus to export. They now have a focus on exports and I think this is what makes the (President) Hassan Rouhani administration different from its predecessors in that it’s not simply looking to provide oil for foreign currency, but gas.”
Finally, John Roberts advised not to rule out Turkey as a natural gas market for East Mediterranean gas, which would have a knock-on impact for Europe, as would gas from Northern Iraq.
9 Comments on "Five Potential Sources of Gas for Europe"
Davy, Hermann, MO on Mon, 17th Feb 2014 2:23 pm
Damn, they are throwing around 20BIL and 50BIL numbers like they are at the football match. Guys everything revolves around confidence in the financial markets at this point. Capex is driven by liquidity and liquidity is driven by confidence. This grandiose ideas will never lift off the ground without these variables in a stable growing financial environment. We are seeing a very delicate financial situation now. There are dark clouds around. EM are under extreme pressure currently. These projects have long lead times and will need good roi business plans to get the kind of financing that will be needed. If you are financing these projects do you want to be the one making a donation to these countries or companies? This is what happened when money is lost in a bad investment. I see these developments as very important but very shaky.
GregT on Mon, 17th Feb 2014 4:40 pm
Davy,
I understand why you don’t prescribe to the crash BAU ASAP program. The consequence would be unfathomable. The soft landing alternative makes complete sense, to those that are contemplating one. The problem, the way I see it is, we are not using these resources to prepare for a soft landing, we are using them to promote some semblance of BAU. The longer we pursue BAU, and the more fossil fuels we burn, the harder the landing will be.
We are going to get there eventually, and there is simply no way of mitigating the effects, at least not in any amount that will really make a difference. I still believe that the best option, for the least amount of pain and suffering, is to just get the inevitable over with, pick up the pieces and move on. Realistically, I know, that is not going to happen. We will hang on for as long as possible, most likely, far past the point of no return. But it does feel good to have some hope for a future.
Davy, Hermann, MO on Mon, 17th Feb 2014 5:30 pm
GregT – a part of me is for the quick collapse route. The advantages are of course limiting the damage that BAU can do each and every day to the earth ecosystem and climate. Everyday another additional mouth to feed. A part of me has a spiritual connection to Mother Nature. We are causing a disturbance in the “force” as a Hollywood mind’s eye description. Our Karma is very bad for us and all creation. Then you know my other route is ride BAU down and hope for a soft landing. I have spoken at length why I consider this approach. Either route could happen any day due to multiple tipping points from various systematic risks. The most obvious is the financial system but there are many traditional ones, new ones, and yet to know ones. My biggest concern with the quick approach is I feel it is a game ender for most of us. A lucky few may climb out of a hole and carry on our species in a barely habitable world. Kind of like the small little mammal did when the dinosaurs bit the dust. The game ending nature is the WMD’s, nuk waste, and the multitude of industrial poisons that must be managed in an ecosystem decent like what will occur. We can’t have our cake and eat it. BAU dissolves so does our ability to manage this stuff. A slower approach might not work but it may buy us time to live. We live in the moment anyway or we should. The “future” our human mind lives in is probably another evolutionary dead end feature of humans. I feel a purposeful managed de-growth of BAU is probably not possible. That is plain to see today in economics and politics. Some of us could get lucky and maybe experience a soft landing if a soft landing happened. The facts are we are way over carrying capacity minus fossil fuels. Yet, it is a big earth relative to our local lives. Many complex linear processes in play we don’t understand. Our whole complex global interconnect system is pretty much self-organizing. I see hope not with our managing the energy gradient down but a degree of luck with our self-organizing ecosystem (including the Human) organizing its way down. I am hoping this decent somehow allows the management of the worst of industrial man’s poison, weapons, bio-hazards, and pollutions. I imagine just wishful thinking for any kind of decent survival. Maybe an extraterrestrial will show up with precisely the answer to the problem from their own experiences and we will be save……another good sci-fi movie plot!
GregT on Mon, 17th Feb 2014 5:43 pm
“Maybe an extraterrestrial will show up with precisely the answer to the problem from their own experiences and we will be save……another good sci-fi movie plot!”
Sounds more like a biblical plot to me. In any event, it isn’t looking at all likely that us humans are heading in the direction of a managed decent. Lots of people talking, not much doing. IMHO, a managed decent with a soft landing would be liken to the ‘war effort’ times thousands. Doable for sure, being done, nope, and time is rapidly running out for viable solutions.
Davy, Hermann, MO on Mon, 17th Feb 2014 5:45 pm
@Greg T -agreed
MSN fanboy on Mon, 17th Feb 2014 5:55 pm
“GregT – a part of me is for the quick collapse route” lol
yet you still have a rudimentary grasp on systems theory which suggests there ‘AINT NO COLLAPSE’.
You know what, explain it to me.
1,Capex wtf is that?
2, Why global warming is (Certainly) bad.
3,The economic price of oil.
4, What the difference is between lederhosen and pants.
GregT on Mon, 17th Feb 2014 6:43 pm
MSN,
Remind the nice nurse that it’s time for more medication. Limiting your internet access might be a good idea too. It doesn’t appear to be helping.
Davy, Hermann, MO on Mon, 17th Feb 2014 8:20 pm
@MSN – Capital Expenditures. MSN you know what that is?…I presume. MSN I like system theory. I probably use it too much but when you are dealing with a complex subject in most cases you have to draw on science and math otherwise you are being subjective and emotional. Nothing wrong with subjective and emotional with a painting, movie, or your girlfriend. These subjects are very complicated and relevant to our survival. We are talking about dangers of collapse and I guarantee analysist at the world intelligence agencies, insurance companies, emergency providers, and health care officials all discuss similar topics. MSN you going to bash these guys? If you don’t think they talk about these things then you are naïve. They just don’t want too many people like you to hear about it because panic sets in. Then we have a loss of confidence leading to a financial crisis. They don’t mind us here because we are on the fringe and the GP thinks we are loons. So one loon to another.
Kenz300 on Mon, 17th Feb 2014 10:52 pm
Local distributed energy systems provide local jobs and local energy production.
Wind, solar, wave energy, geothermal and second generation biofuels made from algae, cellulose and waste are better options than relying on energy sourced from around the world.