Europe´s Energy Future: Natural Gas Supply between Geopolitics and the Markets

Work package I The future role of natural gas - Trends and projections for demand and supply in 2030 2 Europe´s Energy Future Generously supported by Statoil, Otto Wolff-Stiftung, The Royal Norwegian Ministry of Foreign Affairs. Matthias Jäger, Institut fürEuropäische Politik Layout: Carla MariaSasse Assistance: Severin Fischer, Research Associate, Institut fürEuropäische Politik Dr. Katrin Böttger, Deputy Director, Institut fürEuropäische Politik Scientific Support: Manuel Mohr, hehasworked asResearch Associate at Institut fürEuropäische Politik. Author: Prof. Dr. Mathias Jopp,Director, Institut fürEuropäische Politik Supervison: Editorial Team www.iep-berlin.de well aspromotion ofthepractical application ofits research findings. the IEP’s task includescientific analyses of problems surrounding European politicsand integration, as The IEPworks at theinterface ofacademia, politics,administration, andciviceducation. Indoing so, and European policy. integration asanon-profit organisation. ItisoneofGermany’s leading research institutes on foreign Since 1959,theInstitut fürEuropäische Politik (IEP)hasbeenactive inthefieldof European About IEP Europe´s Energy Future 3 8 7 6 39 39 44 49 53 62 36 32 25 32 16 13 13 Russia, Norway and the Arctic Asia The Caspian Basin and Central The Middle East and Nigeria North Africa Production and export capacity forecasts for selected countries and regions and countries for selected forecasts capacity export and Production reserves and proven resources of The global distribution requirements and import production gas EU natural 2030 demand scenarios to and gas EU primary energy and maingas demand scenario assumptions natural influencing Factors and methodology composition Data 4.3.1 4.3.2 4.3.3 4.3.4 4.3 4.2 4.1 3.3 3.2 3.1 Conclusion forecasts supply gas Natural forecasts demand gas Natural The role of natural gas in the EU - status quo status in the EU - gas of natural role The Introduction 5 4 3 2 1 Summary Executive Table of Contents of Table 4 Europe´s Energy Future Table 5:Globalproved reserves andrecoverable resources ofnatural gas Table 3:Overview ofbasicscenarioassumptions Table 2:Factors influencing natural gas demand by sector Table 1:Fossil fuel priceassumption in various scenarios Figure 22:Nigeria -natural gas production Figure 21:Libya -natural gas production Figure 20:Egypt -natural gas production Figure 19:Algeria -natural gas production Figure 18:Iran -natural gas production Figure 17:Qatar -natural gas production Figure 16:Turkmenistan -natural gas production Figure 15:Azerbaijan -natural gas production Figure 14:Norway -natural gas production Figure 13:Russia-natural gas production Figure 12:Proven natural gas reserves ofcurrent andpotential future EUsuppliers Figure 11:EUnet natural gas imports Figure 10:EUnatural gas production Figure 9:OECD Europe natural gas demand Figure natural 8:EUprimary gas demand Figure 7:OECD Europe energy primary demand Figure energy 6:EUprimary demand Figure 5:World Energy Modelstructure Figure 4:PRIMES modularstructure Figure 3:EUnatural gas imports(2008) Figure 2:Useofnatural gas intheEUby sector (2007) Figure 1:EUGross InlandConsumption(2008) List ofFigures 36 26 25 20 60 58 56 55 53 51 48 46 43 41 37 34 32 31 29 28 27 15 14 10 9 8 Europe´s Energy Future 5 Carbon dioxide Energy for Directorate-General Gas Holding Company Natural Egyptian Administration Information Energy States United Union European System Trading Union Emissions European Gas Industry Natural Union of the European Product Domestic Gross Model Equilibrium General Gas Greenhouse Gas-to-liquids Oil Balance World Generate Agency Energy International Outlook Energy International Fund Monetary International Gas Model Natural International Gas Natural Liquefied of oil equivalent Million tonnes Gas Vehicles Natural Corporation Petroleum National Nigerian Development and Co-operation Economic for Organisation per annum Sources Energy Renewable Republic of Azerbaijan Oil Company State cubic metres Trillion Emirates Arab United Kingdom United Nations United States United Survey Geological States United Model Energy World Outlook Energy World Plus Projections Energy World Arab Gas Pipeline Arab Company Operating International Azerbaijan Billion cubic metres Petroleum British Appraisal Resource Circum-Arctic Gas Turbine Combined-Cycle and Storage Carbon Capture Associates Research Energy Cambridge and Power Combined Heat States of Independent Commonwealth

2 DG ENER EGAS EIA EU EU ETS EUROGAS GDP GEM GHG GTL GWOB IEA IEO IMF INGM LNG Mtoe NGVs NNPC OECD p.a. RES SOCAR Tcm UAE UK UN US USGS WEM WEO WEPS+ AGP AIOC Bcm BP CARA CCGT CCS CERA CHP CIS CO List of Abbreviations List of 6 Europe´s Energy Future requirements. EU’s import the projectedof additional covermost to able be will they combined, when that, suggest countries these for forecasts export and production The period. projection the throughout suppliers main EU’s the as serve to likely Algeria, Norway, are Nigeria, Russia, extent lesser that a finds to report Qatar,Turkmenistan,and Azerbaijan, The gas. of amounts required the with EU potential the their supply to to regard background, with this EU Against the period. outside projection countries the and regions of selected end examines chapter the the by bcm 580 to are 370 likely of level requirements a import reach EU’s to the Accordingly, consumption. gas lessthan projected covering EU’s thereby the in 2030, bcm of 100 20% to 70 at stand will production domestic scenarios that The suggest gas. produced domestically with consumption of levels such cover to able be will EU the which to extent the chapter, concerns side then, supply the in addressed be to question first The this report estimates theEU’s natural gas demand to range between 470and650bcmin2030. high CO high decades.Bycontrast, featuring scenarios a the energy RESrecovery policies, nuclear and ambitious of technologies and slack climate policies forecast EU gas demand to grow consistently over the next two considered in this report, the ones assuming high economic growth, limited deployment of low-carbon scenarios the technology.Of and policies, climate and energy developments, price fuel growth, GDP The demand side analysis identifies five factors to be the main determinants of natural gas demand: EU shed light onthe the with deals introduction the following chapter the While MacDonald. Mott firm consultancy the and (Eurogas), Industry Gas European Commission’s Directorate-General for Energy (DG ENER), the European Union of the Natural the Information Administration States Energy (EIA), United the (IEA), Agency International Energy the by compiled scenarios supply and demand natural gas of basis the on examined are questions These amounts ofnatural gas? import?And needto EU the required the with EU the supply to will position a in be will gas countries individual and finally, regions much which how and production domestic by covered be demand domestic will extent what to Second, develop? gas natural for demand EU’s the will how First, asks: specifically, study More the volumes. required the obtain may EU the where from so, if and, decades market. It seeks to establish whether natural gas will play a significant role in the EU over the next two The aim of this report is to draw a comprehensive picture of future developments in the EU natural gas gas resources are depleting. Europe’sownas decades,few next the over increase to set is dependence import this more, is What by suppliers. satisfied external be must EU’sconsumption gasthe annual percentof 60 roughly small, relatively is production domestic gas thatfact the to Due 2009. in bcm 550 than more of demand gas natural a with market, consumer gas natural largest secondworld’s the is (EU) Union European The Executive Summary 2 and oil prices predict gas demand to decline substantially. Based on the scenario forecasts, scenario the on substantially. Based decline to demand gas predict prices oil and future development ofEUnatural gas demandandsupply. role of natural gas in the EU, the two main chapters of the report the chaptersof main two the EU, the in gasnatural of role current Europe´s Energy Future 7 The EU, with a domestic natural gas demand of more than 550 bcm in 2009, is the world’s second largest largest second world’s the is 2009, in bcm 550 than more of demand gas natural domestic a with EU, The natural gas consumer market. As domestic production in the EU does not suffice levels cover to of demand, such60 approximately percent of high the gas consumed each year has to be imported. Over the next few decades, the EU is expected to become even more dependent on external suppliers, as depleting. - are region Sea mainly in the North - located resources gas own Europe’s The aim of this report is to draw a comprehensive picture of future developments in In gas market. the the part,first compares of the estimates study future EU gas therefore natural EU demand; natural in the second part it turns to analyzing the gas supply central questionspotential addressed of in this thestudy EU are: How and will third thecountries. EU’s demandfor The naturalgas To develop? what extent will domesticdemand becovered by domesticproduction? Meaning,what arethe EU’s whichregionsAnd and finally, future individualimport-requirements? countries will be in a position to gas? natural of amounts supply the EU with sufficient These questionsare answered on International Energythe basis Agency (IEA), the variety a United of States the Energy statistical of European Information Commission’s Administration Directorate data-sets General for (EIA), and Energy compiled by the and Transport the (DG report uses data-sets TREN). provided by the Additionally, European Union of the Natural Gas Industry (Eurogas) and the consultancy firm Mott MacDonald, which comprise differentscenarios forecasting futurelevels of natural gas demand and supply. The objective isto gain insight into the EU’s futuregas demand and supply by analysing and comparing these scenarios. The study is confinedto a projection period that 2030. year with the ending decades, two next the covers Following an major introductionidentifies it outlining the Subsequently, current analysis. rolethe in of included model natural energy gas each of in overview methodological the EU, thereport conducts a of drivers gas demand natural and the presents main scenario assumptions andvariables byemployed the EU (‘EU Energy Trends to 2030’), the IEA (‘World Energy Outlook’), the EIA (‘International Energy study the Gas Demand and Supply’). Natural Outlook for Ultimately, (‘Long-term Outlook’) and Eurogas organisations. above-mentioned the by compiled demand forecasts gas the natural compares Using the findings of the demand side analysis, thestudy then turnsto examining the supplyTo side. begin with, the analysis considers the EU’s own potentialto producegas period. throughout By thecontrasting projection the likely future levels of domesticproduction with estimated import requirements. gas future gas demand, Europe’s reveals it outside countries and regions selected which to extent the highlighting at aims study the this, on Based Europe are endowed with natural gas resources and proved reserves and able to meet the rising EU’s import needs. In so doing, the report will not only consider the EU’s current major suppliers - Russia, Norway and Algeria -, but also take into account other regions and countries that have the potential to remain or become important gas suppliers to the EU in the foreseeable the future. Caspian Among region, notably them Azerbaijan and are the Turkmenistan; Middle East, particularly Qatar and,to a lesser extent, Iran; a few African countries, namely Egypt, Libya and having Nigeria; examined their and resource bases, the these regions Arctic.and After countries are scrutinized withregard to the notably to with of and current regard state their potential future levelsgas ofindustry, gas production, existing and planned transportfacilities and export capacities.Here, the study oncemore draws upon EIA, IEA, the and MacDonald. by provided scenarios the The analysis of gasprojections of natural demand the and EU’s supply in thiswork serves package as a II and III. packages in work of policy measures the analyses basis for 1 Introduction 8 Europe´s Energy Future European Commission figures Commission European recent mix, fuel primary the in position third the occupying still fuels solid Despite decade. last the in hand, has grown only by moderate 1.9% annually in the 1990s and experienced a period of stagnation other the energy,on Nuclear 2008. in 8% reaching years, twenty past the over mix fuel the in share remarkable a gained have renewables Similarly, 1990. since rates growth significant featuring 25%, of share estimated an with 2008 in fuels primary all among second rankedgas Natural years. recent in declined slightly has demand although Europe’s dominates mix, energy still oil shows, chart the As selected fuels. natural resource. Figure 1 displays the overall distribution of primary energy consumption in the EU or by carrier energy an as gas of characteristics other as well as uses main its mix, energy EU the in gas Against this background, the following section addresses some general questions regarding the role of turbine (CCGT), which transformed gas into aprominent fuelinelectricpower generation. of gas markets in Europe and technological innovations such as the highly efficient combined cycle gas n h rsdnil n cmeca scos scn, nutis s ntrl a for theproduction gas use natural industries second, sectors; commercial and residential the in one may discern three major areas of gas use: first, gas is a prominent fuel for space and water heating Today, natural gas serves various purposes depending on the respective sectoral application. Generally, over time. Figure 1:EUGross InlandConsumption (2008) residential, commercial and industry sectors. shocks raised the attractiveness of gas, as it qualified as a substitute for oil price products, particularly inthe oil 1979/80 and 1973/74 the however, the Only mid-1970s, underestimated. largely was the carrier energy Until this of mix. potential energy present EU’s the in role crucial a plays gas Natural 2 2 1 European Commission(2010). Press, p.223. Honoré, Stern, A.; J. (2007). The role ofnatural gas intheEU-statusquo A constrained future for gasinEurope? , In:Helm,D. (ed.):TheNew Energy Paradigm, Oxford University EU energytrendsto 2030-update 2009 Source: Author’s illustration basedonEurostat (2011).Grossinlandconsumption, by fuel 2 suggest that the share of hard coal and lignite are set to deteriorate to set are lignite and coal hard of share the that suggest 1 As a consequence, the following years saw the emergence . Luxemburg. [tsdcc320] . Europe´s Energy Future 9 bcm, having 3 5 . Presentation held at the OLF Energy Dialogue, Brussels 14 April 2010. at the OLF Energy held Presentation Nevertheless, in the EU gas power generation capacity has 4 EU Energy trends to 2030 - update 2009 2030 - update trends to EU Energy Source: Author’s illustration based on data obtained from Jean-Arnold Vinois, DG Energy (2010), EU Energy Policy on Natural Gas, Policy on Natural (2010), EU Energy DG Energy Jean-Arnold Vinois, from obtained based on data illustration Author’s Source: . Data in focus 20/2010. in focus in 2009. Data economy aspects of the natural gas (2010). Statistical Eurostat Commission (2010). European EWEA 2011. Wind in power. 2010 European statistics. 2010 European 2011. Wind in power. EWEA 3 4 5 experienced experienced a tremendous expansion over the past decade, amountingto roughly 120GW - This is period. in the respective source other energy any than for more As this high adverse level an undergone has of production gas EU consumptionsince especially elsewhere, mustfrom gas purchase to pressure be met by sufficient 1980s late supplies, the between rise constant a at was production While demand. gas its to compared the EUevolution is under enormous and it 2002, its where reached peak 250 at bcm, it since, decline itself with has a ever at found steady vast a creates this discrepancy Obviously, year. 200 bcm pervolumes of around EU production current supply gap that has to be met by external sources. Most the notably, two main internal suppliers of natural gas, the Netherlands and the United Kingdom, have seen production declining considerably for several years and this trend cannot be offsetby significantly smaller other, gasproducers such as of steam and process heat or as feedstock; third, natural gas is states. member in individual relevance albeit of differing a generation, prominent fuel in electric power Figure 2 shows that the power sector contributes the largest share to overall EU closely gas followed consumption, by households and industry. By comparing the composite share of the heat (residential/services) sector to that of the power segment, datareveals that theformer exceeds the latter as it accounts for roughly 38% of total EU gas consumption. Accordingto the chart, therole ofgas in of less than 1%. its share is negligible, given transport In absolute terms, the 2009 EU’s primary natural gas demand amounted to roughly 550 Figure 2: Use of natural gas in the EU by sector (2007) sector in the EU by gas 2: Use of natural Figure increased increased by some 50% over the past twenty years. The sharpest increment in consumption of some 2.9 % p.a. was seen in the course of the 1990s, but demand growth has gradually dwindled to rates of only 1.5% p.a. in the past decade. 10 Europe´s Energy Future Figure 3:EUnatural gas imports(2008) to asmuch350 since doubled than more accountedhaveimports needs foramountedwhen import approximately1990, EU 2010, haveIn bcm. 160 These requirements. import EU on consequences tremendous has demand increasing Unsurprisingly, alongside fields Europeanprogressiveexisting of gas the depletion Germany, Italy, DenmarkandPoland. of its energy security energy its of top on routes supply and supplies energy diversification of put has Commission European the Hence, fueled doubts regardinghas thesecurityofgas supplyto theEU. Belarus and Ukraine countries transit important and supplier,largest EU’s the Russia, between disputes gas of occurrence regular the decades, past the over suppliers external reliable fairly being While imports. total of 80% roughly for accounted together (16%) Algeria and (26%) Norway (37%), Russia 2008, In countries. producing major three from obtained are EU’simports the of majority The of gas to feed the 31 bcm pipeline, thereby fueling doubts regarding the line’s planned completion in line’scompletion regardingthe planned doubts fueling thereby pipeline, bcm 31 the feedto gas of East to Europe. However, the Nabucco consortium has thus far struggled to procure sufficient volumes The latter project is expected to carry natural gas from the2011/12. Caspian region, Centralby AsiaGermany and the Middle to gas Russian deliver will bcm, 55 of capacity design annual projected a with areway under currentlyprojects gas natural European prominent most the of transportation. Two of routes and suppliers external diversify help efforts shall Such EU. the outside and infrastructuralinside expandlinks to need the highlightedhave new Energy Strategy “Energy 2020 - Astrategy for competitive, sustainable (2010) secure and energy” 7 6 a similardesire for demandsecurityasconsumers dofor securityofsupply. It seems important to emphase atpoint this that securityisamulti-dimensional of supply concept, inwhich exporting countries have Ibid. 6 bcm,whichmeanstheEUgas importdependencehasreached more than60%. 7 agenda. Specifically, the “Second Strategic Energy Review” (2008) and the EU’s the and (2008) StrategicReview” Energy Specifically, “Second agenda. the and the and Nord Stream Nabucco Source: Eurostat (2010).Data infocus 20/2010. pipeline. The former link, former The pipeline. Europe´s Energy Future 11 10 With 13 . This swift evolution was evolution swift This . In: Energiewirtschaftliche In: Energiewirtschaftliche 12 . Available online at: http://www.euractiv.com/en/energy/ online at: . Available . Statisitcal Review of World Energy 2010 World of Review Statisitcal 9 . Versa Press: East Peoria. East Press: . Versa controversy look at the liquefied natural gas LNG - A level-headed Europas Gasmärkte im Wandel: Welche Rolle spielt unkonventionelles Erdgas? spielt unkonventionelles Rolle Welche im Wandel: Gasmärkte Europas . Presentation held at the 16th annual Euroforum Meeting, at the 16th annual Euroforum held . Presentation sich wandelnder Märkte Zeiten in Erdgasperspektiven A joint ondeclaration the Southern Gas Corridor signedby the European Commission 8 14 of EU gas consumption. As forecast projections LNG to markets experience rapidgrowth in the Behrens, A. (2010). Behrens, europes-southern-gas-corridor-great-pipeline-race-linksdossier-498558 (last accessed: 02.02.2011). (last europes-southern-gas-corridor-great-pipeline-race-linksdossier-498558 4. in chapter will be presented Europe across and planned pipeline projects of existing overview A detailed L. (2007). V. Thorndike, Link, R. (2010). 26th, 2010 ; BP Berlin October Europe’s southern gas corridor: The great pipeline race southern gas corridor: (2010). Europe’s Euractiv Tagesfragen, 11/2010, p. 14-16. Tagesfragen, is highly concentrated. the global LNG market that in this context note to It is important . EU gas market The role of LNG in the (2008). The geopolitics of EU gas supply. Programme Energy International Clingendael 11 12 9 10 11 8 13 14 upcoming decades, the share of LNG might eventually be pushed to 25-30% to pushed be eventually might LNG of share the decades, upcoming The previous elaborations have shed light on various characteristics of natural gas. Besides this, aspects this, Besides gas. natural of characteristics various on light shed have elaborations previous The such as the current of state European natural gas in markets the light of ceasing economic recession, technological advances, and climate policy initiatives appear relevant as points ofreference for the analyses. Since 2000, LNG has experienced sustained growth 14% in Europe and currently accounts for around In additionto theconstruction ofnew pipelines, a secondmode of gastrade has taken prominent a role in recent years, namely that with liquefied naturalgas (LNG). As an alternative form of gas, natural it implies a more flexibleway of delivering thecommodity from producersto consumers via sea routes and is particularlyattractive gasto reserve holders lacking the ability physically to link consumer to up markets. Natural gas is liquefied subsequentto production,stored and then shippedfrom the supplier to the consumer Once market. at its terminals LNG transform re-gasification destination, via pipeline. consumers to final can be transported it so that of aggregation, state its original into 2016. One of the main hindrances to its breakthrough is the existence of a multitude ofpipeline projects competing for the Southern such Gas as Corridor, the Russian-led South Stream Italy- Initiative, Greece Interconnector, Trans-AdriaticPipeline, White Stream. Azerbaijan-Georgia-Romania Interconnector and and the Azeri government on 13 January 2011 may implementation. increase Aside from the the mentioned likelihood pipelines,two of other projects Nabucco’s will eventual contributeto meeting the EU’s security of supply objectives, namely the two 8 bcm/y Galsi the EU. to North Africa and Medgaz pipelines linking not only favoured by the decreasing marginal cost of production at simultaneously high gas prices, but prices, gas high simultaneously at production of cost marginal decreasing the by favoured only not is also owed to the inherent of advantages LNG over traditionalgas trade. Comparedto pipelinegas, short notice. In addition, relatively at available gas and make competition help increase can LNG trade with associated risks reducing to as well as suppliers and routes transport diversifying to contributes it cross-border transit by land. Nonetheless, just as with pipeline gas, LNG trade may be threatened in the event of politically motivated blockades of major sea routes or hijacking of LNG vessels. regards regards to marketing, LNG allowsfor both long-termcontracting and short-term spottrade and thus competition. to supply comes when it gas markets the functioning of European improve help to may Untilrecently, high gas prices have further boosted theexpansion of LNGcapacity, not least on the assumption of future surges in USgas import needs. LNG as a flexiblytradable commodity has also started to serve arbitration purposes,reacting on price signals on either side of thePacific. Atlantic Asor the theshare recent in emerge to short-term of started has markets Asian traded and European US, between competition price contracts, LNG has risen relative to still the years. long-term dominant 12 Europe´s Energy Future coal by gas would reduce CO reduce would gas by coal sector, replacing power the in Specifically, system. energy EU’s the decarbonizing to contribute can or transitiontowards fuel more sustainable a energy system.a bridging believenatural that there is Yet, reason gas as potential its for awareness create to task crafty a appears it system, energy fossil a with associated closely is gas As decades. pastEurope’shave dominatedthe thatfor fuels mix energy fossil the among ranks gas coal, and oil to Next account. intotaken be to has economylow-carbon a in role its of terms in nature of gas specific the currentgasglut, the associatedwith issues from Aside better understanding ofpossiblefuture developments. a gain to help may supply and demand gas natural of projections various of analysis subsequent The individual suppliers and supplier regions with a view to their contribution to Europe’s gas supply gas Europe’s to contribution their to security upto theyear 2030. view a with regions of supplier role potential and the suppliers highlight individual to seeks it Simultaneously, decades. two next the over demand gas factorsthese Bearing reportto naturalgivethis evolution EU aims insightinto mind, of possible in the prerequisite for alow-carbon energy future willprevail. oil. of those from decouple Ultimately, to it image whethernatural the seen of remains be to necessary past a a the as or of gas relic continue prices gas if viable, economically become fact in may kind gas vis-à-vis otherfossil fuelswould beimproved dueto itsrelatively low carbon-impact. natural of competitiveness the that hopes raised it sector,as gas the in investmentsencouraged has EU, in the effectively operating scheme trading emissions an Moreover,having trend. of prospect the competitive energy sourcein the EU. Declining gas prices at European spot markets have reflected this divertedbeing is LNG to European markets, thereby rendering natural gas morea affordable and cost- in the US has added to the oversupply of natural gas.natural of oversupply the to added has US the in production gas unconventional in surge massive a that, of top On infrastructure. LNG in particularly in previous years, there has been a marked expansionof investment activity inthe global gas industry, prices high of period a simultaneously,by Almosttriggeredhowever, Europe.primarily in and gas for and reduced primary fossil fuel input for climate policy purposes have contributed to lowering demand demand in the past two to three years. The development of alternative power generationgas industrial technologies slackening of trend this of driver main one certainly activity, was economic reduced in has called a “glut of global gas-supply capacity” Global as well as European gas markets are currently experiencing what the International Energy Agency have created a natural gas glut. gasnatural created a have gasother the declining on and demand hand one gasexpansionthe the global on short, of supplies In 18 17 16 15 DB Research (2010). europäischen Integration, EU-Monitor 75,27.05.2010. Deutsche BankResearch (2010). (2010)andBehrens,see alsoLink,R. (2010). A. International Energy Agency (2010).World Energy Outlook2010,Paris, p.179. Gasschwemme erreicht Europa. Gasschwemme erreicht Europa. Starke Effekte aufPreise, SicherheitundMarktstruktur. Beiträge zur 2 emissions per kWh by around 50 to 60%. A fuel substitution of this of substitution fuel A 60%. to 50 around by kWh per emissions 18 How the current situation in Europe will evolve remains to be seen. be to evolve remains will Europe in situation current the How 15 . The economic downturn, which has manifested itself 16 This causes tremendous effects as low-priced as effects tremendous causes This 17

Europe´s Energy Future 13 Energy and climate policy assumptionsare also included in the 19 PRIMES quantifies future EU energy demand and supply by simulating a market 20 Natural gas demand forecasts demand gas Natural Data composition and methodology and Data composition Primarily these data are obtained from the Eurostat Energy Balances, IEA and other institutions. Supply side information has been information Supply side and other institutions. Balances, IEA Energy the Eurostat from obtained are Primarily these data well as research DG from and figures database the Admire-Rebus SA, EASAP from others amongst databases, various from obtained Zero the database, TechPol from the taken technologies is generation supply and power on energy Information the EEA. as from VGB database. and the Platform Emission Technology model or the model and the GEM-E3 macroeconomic energy world the POLES by others amongst is complemented PRIMES model respectively. PROMETHEUS 19 20 equilibrium solution.Equilibrium is determinedby the level of energy prices necessaryto ensure that equilibrium model the Hence, time. in point a given at consumption matches production energy future Figure (see model PRIMES the of structure modular The period. time each for static and driven price is 4) combined with its iterative modeling processes, also however, accountsfor dynamic relationships projection period. entire over the segments market different between and interactions As the model assumes a distributed decision-making process among energy system agents, demand energy and supply as well as technology choice are considered to be subject to regulation), rational subsidies, of(taxes, policies decisions byconsiderations influenced Agents’ are economic behaviour. market economics and industry structures. At the end of this price formationmodel process, the anticipates PRIMES market clearing (equilibrium), where quantity the demanded. supplied equalsthe quantity to With the regard quantification of its scenarios, the PRIMES model comprisedis of broad range of a variables. On the one hand, available demand and supply technologies and international fuel prices are assumed to be influenced exogenously. On the other, the modeland ensures supply energy behaviour, prices and energy that investment in demand new fixed assets (i.e. plant/equipment/other infrastructure) are determined endogenously. What is discount prices, fuel expected as such more, indicators incorporating by simulated are potentialprogress technological futurecost structures and EU Energy trends to 2030 (2007 and 2009 updates) 2030 (2007 and to trends EU Energy The European Commission conducts research to assess the possible evolution of EU energy markets on a regular basis. The latest two editions of the “EU energy trendsto 2030”were published in early methodology: same the follow studies Both 2010. September in and crisis) economic the to (prior 2008 drawn are technology and activities sectoral as well as macroeconomic prices, energy on data historical from EU and external databases. 3.1 This chapter aims to give an overview of EU natural gas demand scenarios including projections until market energy the underlying assumptions methodological main the distinguishes it end, this To 2030. models provided by the European Commission, the International projections Energydemand energy Agency, different the thethis, on Based others. and United Administration Information States Energy are compared and analyzed with regard to the future role of natural gas in the EU. In order reader for to the properly interpret the data presented, the following sections will briefly outline the main study. of each and basic assumptions characteristics methodological 3 dataset, representing a crucial feature of the EU projections. feature a crucial representing dataset, Scenario construction within the “EUTrends Energyto 2030” iseffectuated by means of the PRIMES model. This is a partial equilibrium model term projections. of the Energy EU providingSystem medium- and long 14 Europe´s Energy Future Figure 4:PRIMES modularstructure is a large scale mathematical, partial equilibrium model that generates detailed sectoral energy sectoral detailed that generates modular a features WEM the PRIMES, model to Similar 5). (Figure scale regional and global equilibrium a on projections partial mathematical, scale large a is WEM The used. is (WEM) Model Energy World the projections, market energy WEO the Toquantify Oil andGasJournal. OECD, the IMF, as sources informationsuch obtained other additional is from the and BP Bank, World in its annual mainly drawn projections from the organization’s own energy market and economic is statistics studies databases and these energy in some of cases compilation the for data global Historical (WEO). Outlook Energy provides World the publication, (IEA) Agency Energy International The IEA World Energy Outlook (2008,2009and2010) more ambitiousclimate andenergy policyassumptions. upon rest projections Reference 2010 the construction), scenario of time the (at policies and trends 2030” set uponeBaselinescenario in2007 purpose to “EU Trends The as a assessments. general impact policy and construction scenario for tool be regarded a as can serving model, it Overall, PRIMES. into is integrated policies of set defined transport various sectors, industrial on twelve modes, dwelling types, fossil fuels and energy carriers for each EU member state. In addition, data a clearly covers it specifically, More demand. sectoral and conversion energysupply, fuel components: main three around organized is model PRIMES The rates andinformation onplant closure as well asproduction trajectories ofEUmember states. 2009 22 21 EN n a and Baseline 2009was finalized inDecember 2009andthe Reference 2010inApril2010. Balances, cover onlythe periodfrom 1990to 2005.Information onenergy prices contains figures up to2006. Baseline 2007isbasedonstatistical data that was available until June2007. However, the mainsource, the Eurostat Energy Source: EUCommission(2008). demand (twelve industrial sectors, transport,resi renewables, electricity and steam production, in The model isorganisedbyenergysupplysub-system: oilproducts,natural gas,coal, use sectorsmay alsobesuppliers,forexampl using energyin12genericprocesses (air subdivided into26sub-sectors; 12 industrialsectors: PRIMES energysystem covers(seeFigure A1): For each EU-27Member State,EU candidatecountry and neighbouring country, the technologies andpollutionabatem The model isbehavioural.Italsorepres steam. 3 services sectors using ener etc.); 12 typesofelectrical durablegoods(refriger energy in 5 processes (e.g. space heating, c 5 dwellingtypes(reside 4 transport modes, 9 transport m considerations areconceivedsoastoinfluencemarketbehaviourofenergysystem agents. market economics, industry structure, energy

2010 Reference case upymodules Supply Oil and gas supply gas and Oil transmission and transmission 10 energy types Renewables distribution Natural gas Coal Europe’s current andfutureenergyposition.Demand-resources -investments, SEC(2008) 2871,p.56. ntial sector) using: 22 Electricity and steam and Electricity . While the baseline scenarios refer to a continuation of current continuation a to refer scenarios baseline the While . PRIMES energy sectorcoverage PRIMES energy module PRIMES modularstructure gy in 6 genericprocesses (airconditioning, office eans and 10 vehicle technologies; ent technologies. Thesystement 21 Conversion modules Conversion andtwothe 2009 scenariosinupdate, namely aBaseline Market clearing Market Price formation Price R MES PRI compression, furnaces,electricarc,etc.); Figure A1 ooking, waterheating andairconditioning); Box A1 ents theavailableenergydemand andsupply 56 /environmental policies and regulation. These ators, washing machines, television sets, cluding conversion,andbyend-usesectorsfor e industrialco-generator Oil refinery Oil dential, servicesandagriculture).Some end- module reflects considerations about 12 Industrial sectors Industrial 12 12 generic processes generic 12 12 types of electrical of 12 types 4 Transportmodes 5 generic5 processes 5 generic5 processes sector Agriculture generic6 processes Residential sector Residential 3Services sectors 9 transport means transport 9 eadmodules Demand 5 dwelling5 types 10vehicle types 26 sub-sectors durable goods s ofelectricityand

EN Europe´s Energy Future 15

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23 24 Figure 5: World Energy Model structure Energy 5: World Figure and comprises three scenarios: a Current Policies Scenario, which resembles the previous Reference case; a New Policies Scenario implying relatively ambitious renewable energy targets and of the 450 Scenario. version and an updated emission reductions; Beginning with the WEO 2007, the IEA started combining a General equilibrium model (GEM) with the the with (GEM) model equilibrium General a combining started IEA the 2007, WEO the with Beginning partial equilibrium WEM model in between onto order energy forecasts interactions further improve developments. and macroeconomic markets The 2009 edition of the WEO is based on comprehensive historical data up to 2007 and complemented complemented and 2007 to up data historical comprehensive on based is WEO the of edition 2009 The been gas-supply modules have and generation the power 2008. Notably, for data preliminary some by this overhauled for edition and to extended theregional 24 granulation units to compared 21 inWEO Scenario Reference a comprising approach scenario a uses 2009 WEO editions, previous with As 2008. and a 450 Scenario. While the aformer reflects business-as-usualcase, to thecaters the latter notion GHG in of concentration the of a limitation implying mitigation, change climate and decarbonization of CO million per parts 450 to atmosphere, the structure structure to mirror essentialenergy components. market It iscomprised of six distinct modules: final energy demand (including sectoral sub-models); power fossiltransformation; fuel generation supply;CO andheat; refinery and other determined determined endogenously at the regional level. As far as assumptionsexogenous areconcerned, the prices fuel fossil international development, demographic growth, economic account into takes model and technological progress. Fuel price trajectories are determined on the basis of the level of prices demand” projected to meet in supply investment sufficient encourage “needed to simplified overview of the structure of the model. World requirements based on global oildemand. energy demand and power generation modules. modules. generation power and demand energy The main exogenous assumptions and technological developments. refinery and For a description ofprevious enhancements to the WEM refer please to Annex 1. 1.3 The WEM is a mathematical model made up of 16 Europe´s Energy Future order to facilitate thecomparison ofthepresented energy models. in detail in explored be will variables major Six demand. gas natural of drivers essential highlight will chapter following the account, into different scenarios the of assumptions Takingmethodological the in which natural gassupply plays acrucialrole. energy sustainable more a assuming Scenario, Environmental an and policies, and trends On the basis of two sets of assumptions, Many ofthesmallerorganizations, however, are onlyable to provide qualitative estimates. The figures provided by large member organizations are, in fact, often based on mathematical models. organizations. member Eurogas of experts the among survey standardized a conducted organization Natural GasIndustry (Eurogas) A rather different approach to energy scenario construction was applied by the Eurogas –Long-term Outlook for Natural GasDemand andSupply 2010 (GWOB). Balance Oil WorldGenerate the of means by simulated is supply liquids world while INGM, the from natural marketsIEO’s derived are global gas The on Scenario. projections Growth High and Low a and Scenario, Price Oil High and Low a Case, Reference a scenarios: five generates 2010 IEO the Overall, entire projection period. is price market takes but accountdynamic period into interactions the time over static single model and a driven for the Thus, time. a given at equilibrium market of function a is formation price where EIA’s International the to Natural new linkage Gas Model (INGM). a Similar to PRIMES, WEPS+ assumes and an iterative model process stock/flow of market a clearance in choice technology incorporates fuelsupply modules that projecting generation module power electric new featuresa supply Moreover,2010 prices. IEO wholesale the and and heat generation) and (electricity an intermediate module consumption module, consumption end-use multi-sectoral a namely sub-modules, several with structure modular a features WEPS+ presented, previously were that models mathematic two the As To generate energy market projections the EIA uses the World Energy Projections Plus (WEPS+) model. Global Insight andtheOilGasJournal,amongothers. as IHS such sources external from is obtained information additional cases its energy some In publications. EIA underlying Data (IEO). other and database Statistics Outlook Energy EIA’sInternational the from Energy derived predominantly is International scenarios annual world its energy on in supply projections and provides demand (EIA) Administration Information Energy States United The Energy Information Administration -International Energy Outlook 2010 drivers of natural gas demand, but also indicates the basic assumptions underlying each of the EU, IEA, main the identifies only not chapter This scenarios. individual interactin to assumed are these which the in at main way and factors the demand influencing at following gas look takessection the closer a Europe, in natural gas of prospects expectations the regarding dissimilar of existence the expound to seeksto report order In the relevantcomponents. most their into models energy disassembling hardly surprising, by discrepancies explain is this While directions. different rather take to demand gas natural EU projected have report this in analyzed scenarios energy the assumptions, varying to Due Drivers ofNatural GasDemand Factors influencing natural gas demand and main 3.2 . Instead of using mathematical models like the EU, IEA and EIA, this EIA, and IEA EU, the like models mathematical using of Instead . Eurogas created two scenarios: a Base Case, reflecting current scenario assumptions Europeanthe of Union Europe´s Energy Future 17 As a result, the overall 27 . IMF Working Paper 02/40, p. 23. Paper . IMF Working 25 cause the average size of homes per capita , European Gas Watch, March 2009, p. 6. March Gas Watch, , European . 29 Issues in global natural gas: a primer and analysis

. This is particularlygas the trueregarding demand natural of industrial 28 26 . Energy Trends to 2030- update 2009 2030- update to Trends Energy 30 Europe. Providing a home for global gas supplies? a home for Providing Europe. , p. 58. Other factors such as population growth, weather conditions and demographic development are also correlated with energy with energy correlated are also development conditions and demographic weather growth, such as population Other factors and only annual next decades over the stable fairly remain to projected is population future as the EU’s However, consumption. As far as analysis. in the neglected are variables these variations) seasonal demand report (offsetting in this compared are figures an influence have may in the number of households in Europe increase particularly the slight concerned, are other demographics gas demand the impact of of main drivers introduced previously to the compared Nevertheless, consumption. gas on residential the purpose of this study. negligible for is considered household numbers (2009). WEOIEA Commission (2010). European IHS CERA (2009). Measured in GDP per capita. Measured Fund (2002). Monetary International 25 26 27 28 29 30 The EIA 2010 Low Growth and High Growth Scenarios GDP and gas support demand growth across the sectors (see expected Figure 9). correlationThe “EU between Energy to Trends 2030 - update forecasts that however, GDP 2009”, growth and primary energy demand are set to further decouple in the future as a result of energy efficiency improvements, energysavings and a shifttowards energy less intensive production. Be that as it may, the global economic crisis has shown that negative GDP growth As opposed GDP to other and between the growth variables, primary causal linkage or energy natural gas consumption isfairly obvious. High economic growth indicates increased economic activity and hence more economic output. the Not IEA surprisingly, considers GDP growth “the principal driver of demand for energy services” EIA and Eurogas projections. EIA and Eurogas The academic literature suggests that there is a demand for natural gas. wide Some variables primarily have short-term range effects, while others influence gas of factors stimulating or diminishing demand in the long-term. For the purpose of this report, long-term drivers are particularly relevant. Most energy market models consider economic activityDomestic Product (GDP), orto be growth, the most generally significant explanatory variable. measuredAbsolute and relative fuel in Gross prices are regarded as a second fundamental determinant of natural gas demand. energy market In modeling has recent also years, increasingly acknowledged the role of energy and climate policies and their impact on fossil fuel consumption. In addition,available technologies, their respectivecost structures, efficiency levels andcarbon intensity are assumed to impact on fuel choices. a considerable influence have to and actors market investment decisions of consumers. consumers. In times of economicexpansion, industrial sectors usually show rising production rates as well as higher energy and natural gas consumption, specifically wheregas is needed heat forprocess and steam-raising. In turn, the recent economic crisis has caused production aswell energy as their primary energy andintensive electricity demandto plunge. industries’ gas gas demand has suffered notably. This development furtherwas aggravated bycomplemented electricity of ademand the deterioration inter-fuel in the sector, power generation by a sharp decline in prices. coal in drop a simultaneous and prices gas high sustained from resulting gas, of competitiveness As GDP growth is highly with correlated electricity demand, its role as a driver of gas natural demand underestimated. not be must Apart from the power the sector, correlation of GDP growth andgas demand is alsorelevant in the residential sector, where higher household incomes to grow, to leading grow, to increased expenditure on heating andcooling. while However, this holds true sector household the in in demand gas on […] income of effect “the that posits IMF the theory, economic is unlikely to be significant since the fuel is an essential good, the demand for levels” whichmuch with income does not vary 18 Europe´s Energy Future terms, price elasticity of natural gas demand is rather low in the residential and commercial sectors, commercial and residential the in low rather is demand gas natural of elasticity price terms, economic In notice. short at even fuels alternative to switch to it allows which systems, energy fuel osmn sco ad s iey ecie t b te an rvr f U a dmn i te coming the in demand gas EU of driver years. main the be to perceived widely is and sector consuming generation largestpower power single generationand sectors.industry Electric currently the as ranks commercial, residential, the among distributed primarily is consumption gas EU above, mentioned As between gas andotherenergy sources. competition inter-fuel of potential the analyzing for point starting a as serves This sectors. industry consuming gas natural main the to back refers briefly paragraph following the point, this addressing Before prices. fuel are naturalconsumption fossil gasin changesprominentfactor explainingAnother Fossil fuelprices developments dependsonhow rapidly GDPgrowth isdecoupled from energy primary demand. booms or recessions. The extent to which natural gas consumption will be affected by macroeconomic en seily n 2009 in especially seen be could which drop, even or stagnate to consumption gas natural cause may 5% to 4 of rates GDP “the same argument applies to commercial establishments” commercial to applies argument same “the and term” long usually is homes in usage“capital gasascertained,investmentfor IMF the As limited. rather is price gas the This inter-fuel in changes to demand of responsiveness short-term the carrier. sectors, commercial energy and residential In the viable generation. power electric and economically industry to applies particularly more substitutability another, by can be gas substituted if adjustments appropriately demand-side cause only will peaks price Gas sector. each of capabilities fuels affect actual demand for natural gas in the in gas natural for demand actual affect fuels and residual gas between differences price relative and fluctuations price fuel fossil extent whatTo In transportation, ontheotherhand, gas plays andisprojected to play anegligible role. heating. water and space in prominently features it sectors, services and residential the feedstock.In Low Growth cases reflect a variance of0.5%above andbelow thisgrowth figure respectively. of a 1.7% GDP growth p.a. in the Reference, High Oil and Low Oil Price Scenarios. The EIA’s High and directly comparable to the previous figures, the EIA energy projections are based on the expectation annual growth averagerate of compound1.6%. Although tailored a for OECD implies Europe and, due 2010 to its geographicWEO scope, not updated the Similarly, Scenarios. 450 the and Reference 2009 the in both to 2030 up of 1.5% growth an annual rate more estimating forecast, only its in been cautious recently has 2009 IEA the p.a., 1.8% of growth GDP average an of assumption the on a to mere figure 1.95% for this the 2010 torevised 2030 period. Scenarios Compared Referenceto its 2010 2008 Referenceand Scenario, which Baseline was based EU 2009 the whereas 2030, to up projections of the EU (dating back to 2007) assumed an average annual EU GDP growth rate of 2.2% inthisreport, analyzed to be pre-crisis The market projections. energy of deviations the explaining variable main thescenarios one constitute in contained ones the as assumptions, growth GDP Scenario assumptions 33 32 31 IMF (2002). IEA (2010). WEO IHS CERA(2009),Europe. Providing ahomefor globalgassupplies? 32 In industry, gas is used for the generation of process heat or steam and in some cases as some in and or steam heat process of generation the for used is gas industry, In Issues inglobalnaturalgas , p.183. 31 . This clearly indicates the sensitivity of energy consumption toeconomic consumption energy of sensitivity the indicates clearly This . , p.23. short termshort , p.7. , primarily depends on the fuel-switching the on depends primarily , 33 . Conversely, industry often uses multi- uses often Conversely,industry . Europe´s Energy Future 19

39

35 , Luxemburg. Note: Electricity ranks among Electricity ranks Note: , Luxemburg. per unit of electricity generated”. Please find per unit of electricity generated”. 2 This effect is most visible in the power 37 Carbon prices exert a two-pronged effect 41 , p. 196; DB Research 2010, p . 4-6). , p. 196; DB Research Plants with a higher proportion of fixed costs, such as , p. 382. 38 A high gas to coal price ratio has a negative impact on the share of 40 prices arising from the EU Emission Trading Scheme (EU ETS) affects ) gas prices decrease total primary demand for natural gas because the and, to some extent, petroleum products. petroleum some extent, and, to 2 , the gas to coal price ratio crucially determines investment decisions in 36 34 EU Energy and Transport. Trends to 2030 - update 2007 2030 - update to Trends and Transport. EU Energy Federal Reserve Bank of Dallas, Working Paper 0703, p. 12. Paper Bank of Dallas, Working Reserve Federal What drives natural gas prices? . In: Energiewirtschaftliche Tagesfragen, Tagesfragen, bis 2030. In: Energiewirtschaftliche der Energiemärkte 2009: Die Entwicklung Energieprognose . Oxford Institute for Energy Studies, for Energy Institute . Oxford sector of the power The importance natural gas demand in Europe. Future allowances thereby progressively impinges on investment decisions and dispatching in the energy sector. As the sector. in the energy decisions and dispatching on investment impinges progressively thereby allowances 2 , short-term In the rising gas prices deteriorate the competitiveness of gas vis-à-vis coal, since IEA (2009, 477) posits, “clear signals for carbon prices coming from the EU Emissions Trading System can […] improve the position of […] improve can System the EU Emissions Trading from prices coming carbon signals for (2009, 477) posits, “clear IEA CO of around twice the amount produces generation since coal-fired coal, versus gas additional information on this issue in the “climate policy” “climate section. on this issue in the additional information The gas price is generally indexed to the development of the oil price. This is reflected, most significantly, in gas purchases based on gas purchases in significantly, most of the oil price. This is reflected, the development to indexed price is generally The gas regions in However, oil price. average to the relative gas traded the price of internationally which predetermine contracts, long-term demand global gas diminishing. Since 2008, slackening is gradually this close oil/gas-linkage evolved, have spot markets gas where to gas prices caused have gas in the US, and unconventional particularly LNG infrastructure supply capacity, alongside increased (2010). WEO of oil (IEA to that compared low relatively remain p. 34. 9/2009, p. 30-34, here A. (2006). Honoré, secondary energy carriers and may be generated by various primary energy sources. sources. primary energy various by be generated and may carriers energy secondary M. (2007). S.; Yücel, Brown, al. (2010). et U. Fahl, (2009). WEO IEA Programme; Gas Research Natural lower to due power sector fuel in the attractive an remains gas coal, higher than those of prices being significantly of gas In spite A. (Honoré, flexible dispatch more efficiencies and conversion higher plants, coal-fired to compared plants of CCGT cost investment p. 28). demand in Europe, gas natural (2006). Future 2009, p. 16. 2030 - update to trends EU Commission (2010). EU Energy The price of CO European Commission (2008). European 36 38 35 37 39 40 41 34 Generally, high Generally, (oil-indexed In the medium or long term electricity supply infrastructure. those based on hard coal, lignite and nuclear power, are less vulnerable Consequently, at to timesfuel ofprice high fluctuations. gas pricesrelative to coal, the electricity. capacityto dispatch is which type of plant determine, considerations as cost reduced, utilization CCGTof plants is natural natural gas in installed power generation ascapacity, it may induce more investment incoal-fired or turbines. types and less in gas other plant Additionally, the level CO of marginal marginal cost and hence fuel choice in power generation. while power generation and industry capabilities. show higher elasticity a as As previously both elaborated, result absolute and relative pricebetween fossil differences fuelsare crucial of fuel-switching their competes gas natural that regard in this note to interesting is It competition. inter-fuel assessing when with different fuels andenergy carriers depending natural respective the on gas-fired sector. plants generation, power In are primarily competing power plants. In the coal-firedindustrial, with residential and services sectors, on the other hand, naturalgas faces and somein with electricity competition cases with nuclear in the power sector: firstly, they influence short term marginalcost determine the actual power dispatch of of electricity from individual generation power they plants; are secondly, a crucial and thus are - vital though - prices However, capacity. generation power in investment long-term of determinant not the only determinants in this context. Other factors defining therelative financial attractiveness cost, of investment/operating/maintenance gas vis-à-vis capacity factors, other fuels (plant efficiency, relevant. are similarly life) lead times and plant construction below. are illustrated as investigation trajectories price gas under and oil projections different the assumptions, the above-stated the to of some quantify inherent to order In ratios price coal to gas expected as well sector. sector. generation power of costs marginal total of two-thirds roughly for account fuel) (notably costs variable in Combined Cycle Gas Turbines (CCGT). use of alternative fuels becomes more economically viable. 20 Europe´s Energy Future efficiency energy (RES), sources energy renewable of promotion the referringlegislation to on be will focus The following section aims to illustrate the potential effects of EU energy legislationthe markets, onenergy natural on gas demand. policies European of impact strong the Acknowledging Treaty(2009). Lisbon the adoptionwith of measures policy various the and formal codificationan EUEnergyof in the Policy decade past the over changed gradually situation the existent, from far was policy energy common a 1990s the in While years. recent in evolution impressive an quite undergone has Policy Energy EU Energy policy Table 1:Fossil fuelpriceassumption in various scenarios main gas consuming sectors in the EU. All of these sectors will be affected by the EU’s renewable EU’s legislation the efficiency by energy affected be and will energy sectors these of All EU. the in sectors consuming gas main the are sectors generation power and industrial commercial, residential, the discussed, previously As a role. play also will abatementtechnologies emission of viability economic the and measures policy climate extentaffectedfossilbe individual will fuels energyby however, policies, After seen. all, remains be to consumption. electricity To what and in gas to cuts lead gradually will policies efficiency ambitious by effect,term.In tomedium RES short of complemented the the expansion in become visible will hand, sector,power the other on the renewableon policies energy of impact The term. long the in occur to expected is only market heat giventhe in the a transformation improvements, However, gas consumption. efficiency of progress sluggish commercial and residential in cuts considerable imply may systems heating sound environmentally towards heat a shift the and to buildings regard of efficiency improvedWith market, gas. natural of role the challenge to likely solar, biomass, is wind,power hydro of and geothermal penetration market strong anticipated the sector, power the in Especially sources inpower generation andheating. of energy renewable use the cogeneration and of promotion the labeling, product ecological lighting, and office inhousehold improvements efficiency buildings, of insulation thermal better from savings energy,notably fossilof promotesand fuels, alternativeof use the energy sources. Key factors include IEA Current Policies 2010 IEA Reference 2008 EU Reference 2010 IEA 4502010 IEA 4502009 IEA Reference 2009 EIA Reference 2010 IEA New Policies 2010 EU Baseline2009 EU Baseline2007 43 42 A list ofrelevant policy measures can befound in“EUEnergy trends to 2030-update 2009”, p.17. atservices the sameenergy input”. Available onlineat: http://www.iea.org/efficiency/whatisee.asp (last accessed:02.02.2011). Energy efficiency asusedinthis report, is defined according tothe IEA: “Something is more energy efficient ifit delivers more 42 andenergy savings. **** *** *** * *** *** ** *** **** **** Oil price($/boe) 2020 108 110 100 110 90 99 90 88 88 61 43 , which targets reductions in the overall consumption of consumption overall the in reductions targets which , 2030 110 106 106 124 130 115 122 90 90 63 2020 Gas price n.a. *2005prices;**2007***2008****2009prices 67 62 62 70 70 74 62 64 46 42 ($/boe) 2030 n.a. 75 77 77 81 81 82 63 64 48 Gas to coal priceratio 2030 n.a. 3.5 2.6 2.6 3.5 3.6 3.6 4.7 4.8 3.2 43 Europe´s Energy Future 21 CHP plants for cities and industries cities and industries for CHP plants 45 , In: Energiemarkt Tagesfragen 3/2008, p. 47). Tagesfragen , In: Energiemarkt , p. 29. on the one hand and nuclear energy as a low- a as energy nuclear and hand one the on 49 . Due to the low environmental impact and high conversion 47 . Available at: http://www.euractiv.com/en/energy/europe-switches-gas-linksdossier-259905 http://www.euractiv.com/en/energy/europe-switches-gas-linksdossier-259905 at: . Available For the EU, the latterwould require acompletion of theinternal gas /toe) of hard coal and lignite amount to approximately 4.00 and 4.70 respectively, whereas that of that whereas 4.00 and 4.70 respectively, approximately to amount and lignite coal of hard /toe) , an expansion of Combined Heat and Power (CHP) technologies may 2 44 48 EU Energy trends to 2030 - update 2009 2030 - update trends to EU Energy , the EIA (2010) and the EU (2010) expect this technology to regain significance in 46 Europe switches to gas to switches Europe emission factors (in tCO emission factors 2 Easing the natural gas crisis: Reducing natural gas prices through increased deployment if through increased deployment natural gas prices the natural gas crisis: Reducing M. (2005). Easing M.; St. Clair, R.; Bolinger, Wiser, p. 3. Laboratory, National Berkeley . Lawrence energy and energy efficiency renewable Commission (2010). European Deutscher Energiemarkt 2007 H. (2008). Deutscher Energiemarkt is only 2.37 (Schiffer, gas natural , Siemens Power Generation, n. pag.). Generation, , Siemens Power and the environment for the economy – beneficial The CO (last accessed: 03.02.2011). (last and heat of fuel […], fuel prices, power availability the like “the boundary conditions investments As with other infrastructural H. (2005). (Dichtl, cogeneration for also technology”, generation the power demand curve define Due to technical constraints, nuclear power plants are not able to flexibly adapt to intermittent RES supply. to intermittent adapt flexibly not able to are plants nuclear power constraints, technical Due to (2010): Euractiv 44 45 49 48 46 47 possibly trigger gas demand. For example, this could translate into an increase in gas-based district heating. A brief account of the scenarios’ policy section. climate energy subsequent policy assumptions will provided be at the end of the policy Climate The impact of EU climate policy on natural gas demand is best on illustrated the basis of the EU ETS, generation power electric as carbon pricing in has on repercussions strong demand it for fossil is fuels. gas important Yet, to note that natural of use the on impact stronger significantly a has trading emission than it does on industry and the residential/commercial sectors. coal/lignite hard and gas natural between competition In electric power generation, the efficiencies CCGT of plants market, market, accompanied by larger volumes of gas being traded at competition price European intercontinental LNG-driven of spot sort some to subject markets. market internal In functioning well effect, a would demand-cuts translate into lower spot gas prices, reduce variable costs of plantsgas-fired and generation. power in future factors their load thus stimulate At the same time, owing to the chemical CCGT plants, the characteristicsdecarbonisation of the EU maysystem energy be seen as anopportunity for natural of gas the technologicaland features of gas, rather than a risk. Increasing shares of RES in the electricity generation mixwill require flexible conventionalpower plants that are energy able supply. Gas-fired plants to meet these coperequirements due withto their rising inherent flexibility volumes and responsiveness quick to balancing intermittent of needs in the renewable power system. Unlike coal-fired plants,gas could take over mix. energy EU future fuel in the of such a complementary the role The future role of nuclear energy as a low emission technology, which will political decisions, isprimarily also akey be determinant of investment inshaped powergeneration technologies by such as in RES of shares high with incompatibility technical alleged energy’s nuclear despite Surprisingly, CCGT. power generation A decline in gas demand is likely to cause natural gas prices to fall, provided that price formation is based on market principles. Europe, Europe, whereas the IEA (2009) considers the role of nuclear power to Obviously, diminish gradually. the prospects for individual power generation modes future for nuclear arepower in Europe, it will evaluated increase the competitivepressure ondifferently. natural gas in power Yet, if there gas import prices. of rising in the light specifically generation, is a theAlternatively, promotion of cogeneration thein power sectormay scale naturalup gas demand, provided that sufficient gas available is total energy moderate at produced in prices.this segment currently Gas makes up 40% of the 22 Europe´s Energy Future At the same time, high CO high time, same the At plants inthefuture, provided that gas pricesare relatively moderate. for electricityandheat production. an adequate reduction of the total volume of allowances under the EU ETS would cause emission cause would ETS EU certificates to remain scarce, the andthusensure stable orsurging CO under allowances of volume total the of reduction adequate an hypothetical, is this While fall. fact in generation would power intensive carbon of cost sector,the as attempts illustrateto interdependencies between CO Referring back to the previous section on energy policy instruments, it seems necessary to seemsnecessary it instruments, CO and hand policy one the on energy policies climate and on RES between link section a is there previousthat acknowledge the to back Referring ehoois A eut h ead o msin loacsi teE T s e odcie and decline to these zero-emission set is of CO ETS are EU so the the expansion in allowances emission may for foster demand the result,sector a power As technologies. the in RES of schemes incentive promotion of the preservation for the and RES for access grid privileged Furthermore, carbon emissions. their alleviate to ETS EU the by covered generators power and consumers industrial induce developments on the other. As the EU 2010 Reference Scenario shows, ambitious climate policies may out plans, emission technology on the other is severely influenced by the price of CO of price the by influenced severely is other the on technology emission In theory,In thatCOassumed “high is it even to gas. nuclear power or Carbon Capture and Storage-based fossil fuel combustion a cost-effective alternative Carbon Capture and Storage (CCS). investment in CCS technology, which reduces emissions of coal-fired plants below those of gas without gas […]which needto includeCO and coal between prices relative “projected on depend primarily decisions investment sector power of high CO high of competitive disadvantagea at times it in vis-à-visplaces gas thatcoal intensityof carbon higher the is and GHGemissionstargets willbeattained by 2020. EU’s RES the that assumes and 2009 December and April between adopted been has that legislation adopted by then. In addition to these policy assumptions, the EU 2010 2009 EU successive The 2006. December until level national the at implemented been havethat measures the following report, this in consideration differences under can be discerned: The EU Baseline 2007 scenarios takes into account energy all EU energy and climate policy individual the to respect With Scenario assumptions 56 55 54 53 52 51 50 Honoré, (2006). A. Chancen undRisiken einererweiterten Gasstrategie fürdieeuropäischeEnergieversorgung. SWP StudieS32,November 2008,p.10. European Commission(2010). Honoré, (2006). A. Sweden, Italy, Belgium,Germany. Gas pricevolatility may easilyoffset competitive gains fromhigh CO Honoré, (2006). A. have asignificant impactoninvestment decisionsinpower technologies. Thisaspect,however, willnotbe covered inthis report. One must notforget that apartfrom carbon prices,thetotal amount ofallowances aswell asthemodeofallocation/auctioning,

Baseline covers policies implemented in the member states until April 2009 and some policies some and 2009 April until states member the in implemented policies covers Baseline 53 2 prices. Paradoxically, this correlation may have unintended repercussions on the power the on repercussions unintended have may correlation Paradoxically,this prices. 2 which will curb the construction of new gas-fired plants. prices. This circumstance is expected to generate an increase in the load factor of gas of factor load the in increase an generate to expected is circumstance This prices. 52 Several governments have recently dissociated themselves from previous nuclear phase- Future ofnaturalgasinEurope, p.28. Future ofnaturalgasinEurope, p.33. Future ofnaturalgasinEurope, p.29. EUEnergy Trends to 2030-update 2009 2 loac pie my edr te lweiso tcnlge sc as such technologies low-emission other render may prices allowance 2 emissionprices” 55 50 This could critically determine future fossil fuel choices given that 2 prices tendprices to favour gas lowCO and 56 . 2 allowance prices and the use of individual fuels individual of use the allowanceand prices 2 prices. , p.29;Hobohm,J. (2008). 2 prices. 54

Reference scenario encompasses Also, high CO 2 prices toprices favour coal” Mehr Erdgas fürdenKlimaschutz? 2 . Therefore, this section this Therefore, . 2 prices may induce 2 price 51 . It . Europe´s Energy Future 23 per kWh produced than 2 Scenario takes into account

Policies

New

2010 Under certain circumstances, however, it is also

57 IEA prices, CCS would, in fact, increase the competitiveness of coal of competitiveness the increase in fact, CCS would, prices, 2 emissions and investment decisions in the future. Some considerations regarding 2 Moreover, it is worth noting, that in long-term,the CCS processes may integrated be also International Energy Agency (2010). Projected Costs of Generating Electricity, 2010 edition, OECD/IEA 2010: Paris. 2010: OECD/IEA 2010 edition, Electricity, of Generating Costs (2010). Projected Agency Energy International coal- to compared when plants power of gas-fired in the case and stored transported be captured, to hence be less CO2 would There plants. fired 58 In both the 2009 Reference and 450 Scenarios implemented the until IEA includes 2008, energy while and climate excluding policies implementation policy measures.By contrast, the targets and intentions any not backed by policy commitments made by mid-2010, even where they are not yet backed by implementation by implementation policy made commitments by not they backed mid-2010, are where yet even measures. More specifically, this scenario assumes a 25%reduction in GHG emission by 2020. By comparison, the IEA 2010 450 Scenario expects cuts of period. as Apart much from that, as this 30% case broadly in corresponds to the the respective policy assumptionsstipulated in the 2009 450 Scenario. As far as Policies the “Current term the with Scenario” IEA “Reference term used 2010 previously the replaced has 2010 business-as-usual case is concerned, the WEO Scenario”. The latter incorporates measuresadopted absent. are or full implementation adoption formal where by or policy targets commitments June 2010 and does not cover any The EIA policy assumptionsare fairly vague, butthey accountfor adopted until energy 2009 across OECD Europe. It is assumed and that not all of will REStargets the be EU’s climate policies generation power future the of share considerable a up make will power renewable that but met, in interest renewed the account into take projections 2009, this the to IEO year’s mix. In contrast nuclear energy. established its Eurogas Base Case scenario on the basis of policies in place until spring 2010 and more a reflects Case Environmental The energy. nuclear regarding outlook business-as-usual a on gas. natural policy towards favourable 57 58 vis-à-vis vis-à-vis gas by offsetting structuraladvantages natural of gas such carbon investment low as intensity lower and costs, high operationalflexibility. conceivable that gas-fired power plants could be equipped with CCS. This, of course, requires relatively relatively requires course, of This, CCS. with equipped be could plants power gas-fired that conceivable low gas prices, the technical in breakthrough CCS, coupled with a change in public acceptance of this technology. If all this were to be met, gas+CCS could possibly be cost-competitive with coal+CCS in power production, not least dueto thefact thatgas emits 50-60% lessCO Technology demand, energy European influencing factor key another is technologies sector energy of evolution The fuel choices, CO technologies technologies have already been dealt with in previous this paragraphs. Therefore, section offers only a brief overview of potentialtechnologies Technologyaffectinginvestment demand-side trajectories. Accordingly, investment. capital returns on projected and economic behaviour rational is a function of decisions and influence investment will inform circumstances determined andpolitically economically model. market energy of each expectations technology Among the most prominent technological innovations is theeffect on naturalgas demandusewould be ofconsiderable, provided that CCS economic parameters in allowfor generation. power Its its commercial deployment. Based on the assumption of arelatively low coal price(compared to gas CO moderate least and at levels) price into into industry processes for emission abatement purposes, in both ETS and non-ETS sectors. The EU expects CCS to be commercially available post-2020. Therefore, in a become to both CCS estimates IEA The portfolio. the technology the in listed is CCS Scenarios, IEA Reference 2010 2009 Baseline and coal. 24 Europe´s Energy Future mentioned variables. previously the of that than lower much is demand gas on variable this of impact the that assumed is Moreover, forecast. it and quantify to difficult most the this far by in is presentedchapter,development technological demand gas natural of drivers all among that note to important seems it Overall, natural gas vis-a-vis otherfuels. of cost-competitiveness the improve or maintain and effects dampening price afore-mentioned the imply would supplies gas Additional supplies. gas of availability global the in shifts substantial trigger EU may the outside production unconventional gas that mentioning worth nevertheless is it context, environmental stringencyof states. member this the in In on legislation and basis economicallyviable an on resources those exploit to able technologies of availability the on depend will much fields, gas conventional than reach to harder much and formations geological lower in located ortight are deposits gas shale that inmind bearing However, competitiveness. cross-sectoral its commodity, increasing the thereby for prices market spot reduce would supplies gas additional that noting worth is it consumption, gas on prices to thepotential gas of impact the reference on elaborations previousmarket.gasWith to as European the of structure the change - extent certain hopes a to - may EU the raised inside gas tight and shale of has in Europe extraction gas viable a commercially fact, In supplies. gas domestic EU to resources these of contribution unconventional of exploration the Finally, the variability ofrenewables inthecoming years. that, sophisticated of top On technologies. with cope to may help grids smart as well as forecasting mechanisms response balancing demand technologies, alternative become thus and shortages supply outimmediate RES of tobalancing contribute may instance, for facilities, storage electricity or hydropowerplants pumped large of expansion The RES. of supply the in inconsistencies with dealing of other ways there are time, same the use. At their and investmentfired-plants gasfuturetemper in As mentioned above, gas could excellently perform this task, although high and volatile gas prices may required. are supply energy intermittent to responding flexibly of capable fuels complementary RES, consumption energy final total depend on the policy assumptions underlying each scenario. Assuming a strong and market penetrationgeneration of power in RES of share future the for prospects The cases. TheEIAdoesnotelaborate ontheprospects ofCCSintheEU. Reference the market penetration in limited only projects but Scenarios, 450 its in technology crucial and fast paceoftechnological innovation (450 Scenario). Scenario) intermediatePolicies(NewScenario), (CurrentPolicies slow a between namely made, was As for theIEA 2010projections, onlya vague distinction in termsof technological assumptions strong market penetration of this technology alongside increasing use of second generation biofuels. a project scenarios 450 IEA the Only system.Europe’senergy impact marginally only to CCS expect Except for the IEA 2009 and 2010 450 cases, all other IEA scenarios under consideration in this report role post-2020. the over technology available an 2010 Reference and as Baseline 2009 a moderate play the projections to projection CCS period, predict CCS include not does Baseline 2007 the While technologies. strongrenewablerolea ofenergyEU’s assume casesthreethe farall as areconcerned,As scenarios Scenario assumptions 59 IEA (2010). WEO , p.327. 59 Europe´s Energy Future 25 + + ++ Technology + ++ ++ Climate policy Climate + ++ +++ 60 Energy Policy Energy + ++ +++ Fossil fuel prices Fossil + +++ +++ GDP growth EU primary energy and gas demand scenarios to 2030 to scenarios demand gas and EU primary energy The symbol “+” only indicates the estimated strength of the effect, but does not per se imply an increase of gas demand. of but does not per se imply an increase effect, of the strength the estimated “+” only indicates The symbol 60 Power generation Power Industry Residential/ Commercial With a view to the previously presented driving factors of natural gas demand and the basic assumptions assumptions basic the and demand gas natural of factors driving presented previously the to view a With IEA, EU, the of findings main the compare and highlight to seeks section this scenario, each underlying EIA and energy A demand Eurogas of proper forecasts. understanding the the data requires reader to acknowledge that considerable uncertainties are associated withkey energy macroeconomic market, studies. the underlying and policy assumptions 3.3 Concluding remarks Concluding demand the impact significantly factors certain that highlighted have elaborations previous the sum, In above, identified been have that factors dampening respectively, driving or, Of the five gas. natural for one may distinguish GDP growth and fuel price developments asbaring the weightstrongest overall. vary items three other The consumption. gas industry and generation power for true specifically is This gas demand. on sectoral their effect regarding markedly more economic to output,absolute relative consumption energy determines structurally While GDP growth and relative fuel prices decisively inform short-term dispatching of electricityby plant type and long- term investment decisions in generationcapacity. Energy and climate policy decisions, on the other hand, have gained significant leverage inaffecting cost structures, thereby influencing demand gas in power generation as generation of choice the well regards as notably sector, power the on influence significant a exert decisions as in industrial,the residential technology and servicesand the overall fuel mix. sectors.As to the Energy policy sectors covered by the EU ETS, tighteningthe of Europe’s emissionsintroduction and trading scheme already has andwill continue to trigger changes in energy consumption andtechnology choices. residential The servicesand experience sectors less are to intrusive predicted repercussions by climate policies, but are, in by turn, energy efficiency more and renewable directly energy policy affected measures. In addition, technology is important an the much factor regarding future uncertainty remains energy as mix. to However, which technologies will by deployed 2020 be or commercially 2030. If CCS is viable to become economically in the future, sector. the use of individual fuels, particularly in the power redefine this will certainly by sector gas demand natural influencing 2: Factors Table 26 Europe´s Energy Future energy demandto around 1,807 to 1,781Mtoe. of decline slight a or stagnation a indicaterespectively; hand, other 2030, the on scenarios, published in recentlymore the Mtoe 1,900 and 2,000 about to period, projection the over steadily increase to needs energy EU’s the estimate data, pre-crisis of basis the on compiled been have which cases, ReferenceIEA2008 and 2007 Baseline EU The demand: energy primary rateson growth economic of impact strong expected the confirms clearly 6 Figure projections, post-crisis and pre- the Comparing Projected energy EUprimary demandto 2030 Table 3:Overview ofbasicscenarioassumptions 66 65 64 63 62 61 EU Base2009 EU Base2007 IEA 4502010 IEA 4502009 IEA Ref 2009 IEA Ref 2008 IEA New Pol EU Ref 2010 IEA CurPol Converted from $105/tCO Converted from $37/tCO This impliesallcurrently available categories oftechnologies. Converted from $45/tCO Converted from $65/tCO Converted from $54/tCO 2030 2010 2010 GDP growth until 2030 p.a. in% 1.95 1.95 1.5 1.8 1.6 1.6 1.6 2.2 1.5 2 2 2 2 (2009dollars) at anaverage exchange rate of0.719. (2009dollars) at anaverage exchange rate of0.719. (2008dollars) at anaverage exchange rate of0.683. (2008dollars) at anaverage exchange rate of0.683. 2 (2009dollars) at anaverage exchange rate of0.719. Oil Price $/bbl 62.8 115 122 110 130 106 106 90 90 Plus 20%RES 2020 Implemented until Implemented until Implemented until Implemented until April ’09/nuclear ’10 /plus20%RES / nuclearrecovery Adopted until mid Adopted until mid Adopted until Dec in 2020/nuclear consistent with consistent with ’10, notargets Energy Policy climate goals climate goals New policies New policies recovery recovery mid ‘09 mid ‘08 Dec ‘06 ’09 / Implemented by Dec 30% GHGreductions 25% GHGreductions April ’09+Adopted See energy policy see energy policy see energy policy see energy policy ( Implemented by Implemented by 20% GHGtarget CO April ‘09/(39) Climate Policy by Dec‘09/ 2 ‘06 (24) to 2020 to 2020 pricein€/t) (44) (37) (27) (76) (33) (19) 63 68 67 65 64 Strong RES +CHP/ Slow paceoftech Limited CCSpost- Fast paceoftech Limited CCSpost limited nuclear/ abatement/CCS strong biofuels development efficiency/ efficiency/CCS development development Intermediate Strong RES + Strong RES + Strong CCS/ pace oftech Technology no CCS 2020 2020 CO 66 2

Europe´s Energy Future 27 Interestingly, the EU andInterestingly, IEA 2009 “business-as-usual” scenarios predict a similar level of demandfor pick to demand energy forecasts Scenario Baseline EU The trajectories. different displaying while 2030, up slightly between 2010 and 2020 and to decline between 2020 and 2030. Meanwhile, the IEA 2009 case projects This primary may Reference partiallyenergy demand be explained to develop reversely. by differences in economic parameters andfossil fuel price assumptions as well as technologies. of certain penetration byto the market relating expectations The EU 2010 Reference Scenario (which makes the same macroeconomic assumptions asBaseline case, EUbut 2009 features significantlystricter energy and climate policies) projects primary energy consumptionto start falling from 2015 onwards,reaching a demand level that is 3% the in Baseline 2030 forecast (1,750 Mtoe). A belowsimilar view is shared by the that2010 IEA and Current New of Policies Scenarios. The former predicts demand to stagnate at approximately 1,750 Mtoe until 2020 andto annually to marginally about rise 1,800 thereafter, Mtoe in 2030. TheIEA 2010 New Policies on Scenario, the energy demand other to hand, level out forecasts at 1,720 the for next two decades. and energy renewable that show scenarios 2010 and 2009 IEA and EU the of examples four the sum, In energy efficiency measures alongside binding GHG reductiontargets, which are assumed become to relevant factors in the coming years, evoke a dampening effect on thedemand. EU’s future primary energy The 2009 and 2010 IEA 450 Scenarios imply scenarios under and the investigation hence display thetrajectory with most thelowest energy demand levels stringent climate policy assumptions of all until 2030. Bothforecast asteady deterioration of demanduntil 2020, tolevel a merelyof 1,670 to 1,690 Mtoe. While the 2009 Scenario subsequently expects demand to 1,680 slightly Mtoe, the pick 2010 case up assumes the to downward trend roughly to continue, with demandfalling to 1,660 Mtoe by 2030. Both IEA 450 cases project a decline in EU total primary energy demand of more than period. the projection 4% over Overall, all of the most recent projections (regardless of individual model assumptions) suggest that EU primary energy demand will level out at around 1,700 to 1,800 Mtoe per year over the next two decades. Only the scenarios published prior to the economic recession higher. substantially expect these figures to be Figure 6: EU primary energy demand 6: EU primary energy Figure 28 Europe´s Energy Future Figure 7:OECD Europe energy primary demand Similar to the EIA, the IEA the EIA, the to Similar an upward trend, withconsumption rising to nearly2,300Mtoe intheHighGrowth Scenario. trajectories suggest EIA all period, projection the of half second the In 2020. in Mtoe 2,100 and 2,000 between range to demand energy Europe’s primary OECD of levels absolute projects EIA the sum, In projection period,whereas low economic growth seems to curbdemand. is This cases.the over demand Growthin strongest surge the implies Low Scenario Growth High the and that fact the by Price supported Oil High the for except scenarios all in steadily rising with consumption, demand energy primary on impact visible a has growth economic that suggests 7 Figure macroeconomic andfuelpriceassumptions determine energy demandprojections. IEA data. Nonetheless, the variation among the five EIA scenarios EIA five the among variation the Nonetheless, data. IEA and EU alongside compared be cannot forecasts market energy their Europe), OECD to refers (data 2010 Outlook Energy EIA’s International the of granulation geographical dissimilar the of result a As Projected OECD Europe energy primary demandto 2030 What the graph illustrates is, that the projected demand curves essentially form two groups, pointing groups, two essentially form curves projecteddemand the illustratesgraphthat the is, What Figure 8 displays natural gas demand forecasts up to the year 2030 provided by the EU, IEA and Eurogas. Projected natural gas EUprimary demandto 2030 more significantly energy consumption than fluctuating fuelprices. affect does indeed growth economic that indicate findings forecasts,the 2010 EIA the with line In demand. energy primary world on prices fuel fossil and rates 68 67 IEA (2009).WEO, p.659-663. Reference case, highandlow Growth scenarios, highandlow OilPricescenarios. 68 conducted a sensitivity analysis to test the impact of varying GDP growth GDP varying of impact the test to analysis sensitivity a conducted 67 further indicates to what extent what to indicates further Europe´s Energy Future 29 in 2030, respectively. 69 . By contrast, the EU 2009 Baseline - to the detriment of natural gas 70 , p. 365. The IEA converts Mtoe to bcm at factor 1.21; IEP conversion of EU and other data from Mtoe in bcm at factor 1.205. factor in bcm at Mtoe from of EU and other data 1.21; IEP conversion factor bcm at to Mtoe converts The IEA (2009). WEO IEA 69 70 The EU 2007 Baseline and IEA projecting 2008 gas demand to Reference rise cases significantly, to as rank much as among 620 and the 680 bcm most optimistic outlooks, in opposite directions. A number of forecasts, some of which draw on pre-crisis data, indicate a steady steady a indicate data, pre-crisis on draw which of some forecasts, of number A directions. opposite in Onfromor gasconsumption, 2015 theonwards. swift in notably increase other hand, group seconda of trajectories, particularlythose that imply ambitiousRES and climate extents. varying albeit to policies, dwindle markedly, to expectin Europe demand natural gas It is important to note that these scenarios are based on fairly optimistic macroeconomic estimates and do not take into account the impact of the recent economic crisis. Similar optimismas to future EU gas demand is reflected in the Eurogas 2010 Scenarios, bothof of gas whichdemand for predict2030. fairly More specifically, the high Eurogas 2010 levels Base Casefollows a moderate upward which trajectory, flattenstowards the end of theprojection period, reaching slightlymore than 600 to rise by consumption on gas case, the other bcm hand, natural by 2030. projects The Environmental astonishing 22% over the next 20 years, with the sharpest growth of 9% set to occur between 2015 2030. of 650 bcm by demand levels to this amounts and 2020. In total, Meanwhile, the fairly steep and linear increase of gas demand after 2015forecast by theReference Scenario IEAseems 2009 puzzling. As illustrated in Tables 1 and 3, the price, policy and assumptions underlying economic the IEA scenario arefairly moderate and prudentcompared to the EU 2009 Scenario projects gas Baseline Reference demand Scenario. to reach Nevertheless, a the level IEA’s of 620 bcm in 2030, which is roughly 15% (90 bcm) higher than the EU 2009 Baseline estimate bcm The offor the main same reason for this year. 530 vast gap between the two scenarios are inconsistent technology expectations. In the 2009Reference case, the IEAcasts doubt asto the quick and large- scale commercialization of low-carbontechnologies in the EU, particularly inpower generation. This has strong repercussions on projected gas use in the power which sector, is perceived as the “single largest driver of gas demand” Figure 8: EU primary natural gas demand gas 8: EU primary natural Figure 30 Europe´s Energy Future in 2030.TheLow Growth scenario, ontheotherhand,presents by far thelowest demandcurve. Growth case displays the steepest of all EIA trajectories, with demand projected to amount to 643 bcm Accordingly,interdependencegasgrowthdemand. economicclose and very display of a also High the 3.2. They in chapter stipulated assumptions theoretical the affirm further trajectories EIA the EU-27, the for shown those to comparable hardly are which figures, absolute from Aside bcm. 649 and 570 pace of demand growth varies considerably, the EIA’s figures for gas demand in 2030 to range between illustratedAs projects2010 EIA OECDFigurethe natural in 9, the casesSince togasall rise. in demand Projected OECD Europe natural gas demand significantly inthepower sector. ewe 40 n 60 c i 2030 in bcm 650 and 470 between ranging consumption of level likely a suggest projections demand gas natural presented the Overall, period, to around 480 bcmin2030. projection entire the over demand gas in decline constant a predicts the case in 2010 forecastedtrajectory,the 2009 was 2020 and 2015 between demand gas of recovery slight a 450 Whereas 2009 Scenario. IEA the to compared bcm 30 of consumption gas natural of reduction further a implies it as Scenario, 450 2010 IEA however, the moderately is striking, is to What 2030. and by bcm 2015 thereafter, 590 augment to until bcm 540 at stagnate to demand lower projects it a slightly terms, absolute thus predicts In and curve. assumptions policy ambitious more Scenario, features Policies hand, New other The the case. on Reference 2009 IEA the to similar scenario “business-as-usual” a resembles 2030, by bcm 630 to climb to demand gas assumes former,which The Scenario. Policies New the and Scenario PoliciesCurrent the scenarios, of types new two comprised it but demand, gas The recent WEO 2010 did not differ much from the WEO 2009 in terms of the general prospects for EU onwards, thenegative trend is forecast to become lessmarked. 2020 From objectives. 2020” to “20-20-20 its meet to EU the by undertaken efforts additional from will suffer demand period gas time respective the expectation in the that to due maybe This 2020. to 2015 from period the in occur to expected is 5%, Interestingly, of cut, bcm. 470 demand sharpest the to down 2030 projected for demand gas the pushing period, respective the over bcm 70 of decline a to corresponds this terms, absolute to In 14%. scenarios roughly by but 2030, and 2010 between continuously 2010, plunge all until slightly of increase to trajectory forecasted was demand consumption gas gas EU report. natural this lowestin contained the provides case Reference 2010 EU The carbon technologies seemto critically affect natural gasdemandinthe EU. vary assumptions scenario EU and technologicalparameters,of marketterms markedlydegreeof in or penetrationzero-the low only IEA of the As 2030. by mix generation EU the in recoveryenergy a nuclear as of well as CCS and RES as such technologies low-carbon of presence strong a assumes - mix, alongside high CO high alongside mix, energy European the in power nuclear and energy renewable of shares high that suggest scenarios presented Moreover,the demand. gas natural future EU’s the determining factors key become will action policy climate and energy as well as technologies low-carbon of deployment market growth, bcm and 590 of above; or to one level of less than 530 consumption bcm. In line with a2030 the theoretical assumptionsto stated above, economic either directions: two essentially in point projections 71 Thisexcludes theIEA 2008Reference Scenarioestimates. 2 prices, will cause tremendous cuts in gas demand across sectors, but most but sectors, across demand gas in cuts tremendous cause will prices, 71 I i iprat o mhsz ta fo 22 owrs the onwards 2020 from that emphasize to important is It . Europe´s Energy Future 31 and 2 Figure 9: OECD Europe natural gas demand gas natural Europe 9: OECD Figure oil prices predict gas demand an to path, take adverse namely a decline to 530 - 470 bcm per year by 470 between range and thangas more to demand 650 bcm predict in forecasts existing 2030. Overall, 2030. Simply put, the uncertainty associated with the future evolution of EUgas demand amountsto as much as 180 bcm. In spite of the unclear picture concerning the EU’s future natural gas demand, policy and in GDP climate growth in demand Asia growth will turn factor. out an become to important Asia, and China in willparticular, have significant consequences regarding theavailability of gas, also markets. gas European for Concluding remarks Concluding findings: three essentially in synthesized be may side demand the at looking by learned have we What First, there remains ambiguity regarding EU gas demand between 2010 and 2030. Particularly those scenarios assuming optimistic economic growth, limited progress regards with of low-carbon to technologies deployment the and relatively loose climate policies,forecast consistently over the next two EU decades, to around gas 590 - 650 demandbcm in 2030. to grow On the other hand, those scenarios featuring ambitious RES policies, arecovery of nuclear and energy, relatively high CO While the EIA Reference case again ranks third among the five trajectories, the High Oil among Pricethird the Scenario trajectories, five ranks again case While the EIA Reference prices oil high expects fact in (2010) EIA the EU, the to Contrary shape. curve surprising rather a shows this is based on the assumption dampen it. Paradoxically, than to demand rather gas natural trigger to such resources other of benefit the to fuels fossil liquid for demand reduce would prices oil higher that competes hardly today gas that mind in bearing However, energies. renewable and gas natural coal, as substitute actually can gas sectors which in and extent what to disputable remains it Europe, in oil with high oil prices. of (consistently) oil in the event similar fairly a in evolve to demand gas natural Europe’s OECD estimate scenarios 2010 EIA the Overall, untilway 2020,to between 570 and 610 in bcm.By the contrast, second half of the projection period 640 bcm in 2030. of 570 to an array covering dispersed, more slightly are trajectories 32 Europe´s Energy Future or new conventional and unconventional gas discoveries. EU gas production is hence projected to be projected is hence production gas EU discoveries. unconventional gas conventional and new or fields increasingrecovery existing at rates by offset be to expected not is trend this and depleting are Resources path. decline steady a on is gas natural of production EU’s the 10, Figure in illustrated As import requirements upto theyear 2030willbesubjectto analysis. gas itself. EU Subsequently, EU of forecasts the from originating supply natural gas of evolution likely the outline briefly will section this Therefore, needs. import potential for indicator an as production domestic account into take to critical is it demand, gas natural EU’sfuture the analyzed having After Projected domestic gas production inthe EU 4.1 the analysis inorder to highlight certain prioritized producer regions andtransport corridors. political stability, economic viability and reliability of supply will - to a certain extent - be considered in related issues to addition, In 2030. EU’s until the needs meeting contributemay naturalto import gas that facilities LNG and links pipeline additional planned as well as infrastructure, existing of accounttake also it will basis; country-specific and a regional on suppliers likelyexternal of and capacities resources production potential reserves, gas natural proven on data cover only not will chapter this doing, so In potential. supply gasfutureregard EU’s their with tothe neighbourhood in countries and regions different to attention devotes analysis chapter,the this of part second the In requirements. bloc’simport future the gas highlight basis, this on and, period projection the throughout production domestic by covered be will demand gas EU extent what to examine will chapter this with, Tobegin countries andregions isgenerated. statistical information from awide range of sources, a broad view on the supply potential ofindividual By gathering EU. the outside and inside production gas future the on perspectives offer will chapter this demand, gas natural projected and current EU´s the of analysis in-depth the to Complementary 4 Figure 10:EUnatural gas production EU natural gas production and importrequirements Natural gas supply forecasts

Europe´s Energy Future 33

, ; 80 74 81 In: . Compared to the 82 , as an OECD European 73 . . While Norway 72

tcm, of which 45% are shale gas, 33% tight gas 76 Europas Gasmärkte im Wandel: Welche Rolle spielt unkonventionelles Gas? spielt unkonventionelles Rolle Welche im Wandel: Gasmärkte Europas . Shale gas is expected to be found in seven EU member states, namely To this date, each of these factors requires further investigation.The 79 77 78 EU energy and transport. Trends to 2030 - update 2007 2030 - update to EU energy and transport. Trends 2, issue 4: Volume Energy. for Observatory . Market Gas Markets on European Report Quarterly 2, issue 4: Volume Energy. for Observatory . Market Gas Markets on European Report Quarterly Prospects for unconventional gas in Europe, p. 11. gas in unconventional Prospects for , October 2010. , October 2035 to supply and demand Outlooks Long-term . . . E.on presentation, February 5th 2010, p. 9. Europe. E.on presentation, gas in unconventional Prospects for Europe, p. 12. gas in unconventional Prospects for predicts, to as little as 18 bcm in the Netherlands and 15bcm in the UK. and Netherlands as little as 18 bcm in the to predicts, 75 To illustrate the issue of environmental concerns, it seems important to note that in the US, the technology of hydraulic fracturing fracturing of hydraulic technology in the US, the that note to it seems important concerns, the issue of environmental illustrate To under supervision it is no longer of the US Environmental meaning that Act”, Drinking Water the “Safe from has been exempted subject to become expected are not apply and regulations strict environmental on the other hand, In the EU, Agency. Protection A. (2010). (Behrens, in the future relaxation European Commission (2008). European Commission (2010). European IEA (2009). WEOIEA 2009 - December 2009, p.21. October A. (2010). Korn, Commission (2010). European 2009 - December 2009, p. 21. October A. (2010). Korn, Norway is no EU member, but its second largest supplier of natural gas. supplier of natural largest but its second is no EU member, Norway thereafter. fall slightly bcm in 2025 and at 129 to peak production gas natural Norway’s Scenario projects 2009 Reference IEA IHS CERA (2010). IEA (2009). WEO IEA Energiewirtschaftliche Tagesfragen, 11/2010, p. 11). 11/2010, Tagesfragen, Energiewirtschaftliche A. (2010). See Korn, 72 77 76 78 79 80 73 74 75 82 81 Germany, Poland, Sweden, France, Austria, Hungary and the UK. Hungary Austria, France, Sweden, Poland, Germany, unconventional not or Whether stage. early an at still is energy of source new this of development The as such factors on depends production energy domestic future EU’s the in role significant a play will gas access, geology, concerns, environmental public acceptance, availability of the necessary technology, and economic profitability. Bearing these factors in mind, the Cambridge Energy Research Associates (CERA) predict that Europe’s Europe’s that predict (CERA) Associates Research Energy Cambridge the mind, in factors these Bearing onwards 2020 from year per bcm 15 to 10 than more no reach will gas unconventional of production Commission’s Commission’s Directorate-General for Energy has therefore stated that “it sufficientbefore data is available may todraw conclusions on theproportion take of the resources that several can be years usable reserves” turned into The current state of knowledge suggests that successful in Europe than it the has been in North America. Not production only resources about are Europe’s seven ofunconventional gas timeswill smaller than those be less of North America; there is also a significant lack of isresources assumedtoto access be more knowledge concerning Moreover, gasatstage. this the geology of unconventional weight. carry more concerns environmental density is high and as population in Europe problematic EU’s future EU’s natural gas demand, the expected yield from indigenous gasunconventional resources is marginal. As mentioned above,gas natural demand trajectories suggest a likely level of consumption between 470 and 650 bcm in 2030. In the short- to mid-term, the exploitation of gas unconventional However, the However, decline in EU conventionalgas productionmay, at least temporarily, be compensated for by hitherto untouched resources of unconventional gas. The resources IEA of estimates that unconventional Europe’s gas total amount 35 to roughly roughly 60% lower in 2030 compared to its peak in 2001 supplier, is expected supplier, to expand its natural gas production from 92 bcm in 2007to 129 bcm in 2025 this will not suffice to balance out the considerable cuts inproduction in the Netherlands and United Kingdom (UK), the two major EU’s internal gas suppliers. Additionalgas supplies from outside the EU will therefore become crucial for the EU’s security of gas supply in the mid to long term. to According the IEA 2009 Reference scenario, current Dutch and British will by plummet gas rates of steadily, -2.5% p.a. production and -6% p. untila., 2030.respectively, By the of end of the 102 and 74 bcm projection period, net production of thetwo countries will amountto only43 andor, 19 as bcm, IHS CERA similarly, the similarly, IEA expects productionto attain levela of 15 bcm per year by 2030 and 22% coalbed methane. 34 Europe´s Energy Future Figure 11:EUnet natural gas imports scenarios isdeemednecessary. EU’s Therefore,projectionthe period. the of end import moreatthe thorough of a needs comparison meet to necessary be may year per bcm 170 than more of imports supplementaryyears, coming the in growth demand Alternatively, gas 2030. high in required assuming be will bcm) (approx.350 levels import net 2009 to compared more or bcm 20 of imports gas additional bcm, 470 least at of demand a gas and 2030, in less or bcm 100 around at out bottom to set production With all. at surprising not are forecasts these production, and demand gas primary EU respective the of function a are imports As 2030. until continuously rise will EU’simports the gasthat suggest trajectoriesdisplayedbelow All gas from domestic imported be third countries. Figure 11provides projected anoverview ofpossibleEUimportscenariosupto theyear to 2030. need a will gas and of amounts 2030 increasing 2030, in in bcm bcm 100 than 650 less of to production 470 of demand gas natural projected a Given additional gas needs to beprocured by theEUinmid to long term. extent what to clarify shall forecasts import at massivevolumes look closer demand, A required. be total will projected imports gas naturalthe EU’s of meeting to one quarter than less contributing gassupply Europe’s risks to production internal with period, projection immense the of end the towards Particularly pose future. the in security will gas production EU of deterioration described The Projected EUnatural gas importrequirements reaching only70bcmin2030. severely, more contract estimates to production even Case Base Eurogas 2010 The decades. two next to expected bottom production, out at 80 to 100 bcm in 2030.gas This corresponds to adomestic rate of decline of as muchEU as 50% over the of decline linear and sharp a display mostly 2010, in bcm 200 approximately of a level at starting scenarios, the below, illustrated As trajectories. production identical fairly investigation predict under scenarios the projections, demand tocontrast In reserves. conventional gas account into be take only 10 to Figure in presented trajectories yet production the are delivered, EU the in resources gas unconventional of exploitation future the on data reliable As resources willthushardly helpto reduce theEU’s importneeds. Europe´s Energy Future 35 forecast import requirements to increase markedly, to import increase markedly, requirements forecast 84 and import projected levels, the EU 2009 Baseline and the IEA 2009 450 a Scenario forecast 83 Referring to 2005, 2007 and 2005 levels, respectively. 2005, 2007 and 2005 levels, to Referring with due care. should be considered data, on pre-crisis which draws Scenario, 2008 Reference The IEA 83 84 Concluding remarks Concluding than more by decrease to production gas EU for trend unambiguous an reveal figures these up, sum To period. projection the of end the at bcm 100 than less to today bcm 200 from terms, absolute in or, 50% As this negative trend is dueto the depletion of gas fields Europe,in EU import needs will inevitably augment. Meanwhile, the evolution of domestic gas demand willdetermine the pace of gas import In growth. absolute terms, EU and IEA scenarios rise in gas imports of as much as 40%, and the EU 2010 Scenario Reference of about 25% until 2030. This illustrates that, regardless of the exact development of EU gas demand, natural gas imports are decades. two the upcoming 90% over of 25% to rates by surge to likely The IEA 2008 Reference Scenario evolution extreme projects most the reflects case This 2030. in bcm 580 the of volumes reaching period, projection steepest increase in natural gas imports over of domestic demandrelative to the production as projectsit annualan consumption around of 650 bcm in 2030 and a thecollapse of EUdomestic to production 2007 70 Similarly, Baseline curve - 80 bcm/y. forecasts a rapid average import growth of 3.9% p.a. between 2005 and 2015. In contrast to the IEA rest the for and thereafter p.a. 1.4% to down slow to growth expects it however, case, Reference 2008 of the projection period,with estimated imports of520 bcm in 2030. In sum, thetrajectories would respectively. to 2005, compared by 2030 gas imports additional 90% or 70% of around require Although pre-crisis forecasts generally differ markedly from Reference Scenario more predicts a recent level of forecasts,natural gas imports to the EU the in 2030 that IEA 2009 is almost identical to the EU 2007 Baseline case. Contrary to the latter, ittakes intothe account economic thecrisis and dampening therefore projects only effect limited of import growth until 2015. this Subsequently, situation isexpectedto change,with gas imports setto pick up sharplyto 516 bcm in 2030. Similarly, in the but near to term, imports rise only to moderately gas Scenario expects 2010 Policy the New IEA by 2030. 500 bcm volumes of above reaching import 2020 onwards, from rise swiftly The three residual scenarios (EU 2009 Baseline, IEA 2009 450, EU 2010 Reference) display the most moderate of all import projections. Although based on dissimilar model assumptions, each of these cases generally estimates gas to play a subordinate role inpresent the EU’s future energy mix. Comparing to levels of 370 to 580 bcm by 2030. As a result, the EU’s gas import dependence is likely to reach more more reach to likely is dependence import gas EU’s the result, a As 2030. by bcm 580 to 370 of levels to than 80%. Overall, estimatesreveal that,even in theevent of a sharp decline ingas demand across the EU, its imports will continueto rise. In orderto meet theserequirements by supplies, sufficientexternal producing countries need clear political commitments by the states concerning the future EU gas consumption.and individual If this member fails to investments appear, in projects ableto forward. go to struggle will potentially supply the EU with gas 36 Europe´s Energy Future accounting for 28 to 30 and 25 tcm, respectively. By comparison, Norway, the EU’s second largest the EU’s Norway, natural gas supplier, Bycomparison, heldreserves ofslightly more than2tcm in2009. respectively. 25 tcm, and 30 to list, 28 this in for third accounting and second rank Qatar and Iran 2009. in tcm 48 to 44 some world, the in reserves Statistics planned transport infrastructure. Proven natural gas reserves willbediscussedinthefollowing. and available as well as capacity export and production projected and present reserves, gas natural extract projections: fromhistoricaltoseeks dataproven information aspects and three so,it on doing In suppliers. future external gas potential bloc’sand currentthe major on only focus will analysis side As some of the regions displayed above are far too distant to serve as EU suppliers, the following supply- Table 5:Globalproved reserves andrecoverable resources ofnatural gas fairly reliable data. organizations three consistent, suggesting are rather the by estimates compiled reserve resourceand match,the definitions regional where However, complicated. are resources, recoverable ultimately notably for direct comparisons, that so studies, different their slightly granulations in use regional EIA and BP interesting that IEA, region, note is to It Europe. OECD as Asia-Pacific well as America Latin America, North Africa, the Eurasia, of parts large and Europe Eastern as such reserves, gas of volumes small relatively or medium-sized for accounting regionssecondly, and Russia; and countries Eastern firstly, proven of bulk endowed the those with recoverable natural of deposits Middle the namely gas, ofproven Data regions: world.global essentiallytypes the on reserves two distinction of in suggests a question, 5displaysTable as evidence likely the to long-term potential supply gas individual of regions sufficient amounts of natural with EU aAs throughout gas the period. first projection tothis approach the supply to able be will countries which is question the requirements, import rising of light the In 4.2 Regions Former Soviet Union Middle East Asia-Pacific Russia E. Europe/Eurasia Africa North America Latin America OECD Europe 86 85 accessed: 07.02.2011). Statistics database. TheEIA database is available online at: http://tonto.eia.doe.gov/cfapps/ipdbproject/IEDIndex3.cfm (last The subsequent elaborations refer to data obtained from BPStatistical Review of WorldEnergy 2010andEIA International Energy For definitions of regionaland country grouping see The global distributionofresources and proven reserves 87 86

reveal that the EU’s major gas supplier, Russia, possesses the largest proved natural gas natural proved largest the possesses Russia, supplier, gas major EU’s the that reveal Proved reserves (tcm) end-2007 IEA ’08 53.8 73.2 15.2 14.6 n.a. n.a. 7.7 6.2 8 end-2008 IEA ‘09 Sources: Author´sillustration basedonIEA 2008, 2009;BP2009,2010andEIA2009; 54.9 75.2 15.2 14.7 n.a. n.a. 9.5 7.5 5.4 WEO available data onproven reserves doesnotcover unconventional gas reserves. 2010,p.708ff. end-2008 43.3 75.8 14.7 n.a. n.a. n.a. 9.2 7.3 BP 16 end-2009 44.4 76.2 16.2 14.8 n.a. n.a. n.a. 9.2 8.1 BP resources (tcm) Ultimately recoverable end-2007 IEA ‘08 132.2 134.8 29.9 33.9 62.5 24.5 25.5 n.a. n.a. end-2008 IEA ‘09 151.8 134.8 33.9 29.9 68.8 24.5 n.a. n.a. 27

Europe´s Energy Future 37 . Given its 88 , Market Observatory for Energy, May 2010. May Energy, for Observatory , Market file Qatar Country Qatar, in is contrast, already an important LNG Qatar, supplier to the EU. In 2009, the UK (5.7 87 Sources: Author’s illustration based on BP 2010 Statistical Review of World Energy and EIA International Energy Statistics. Energy International and EIA Energy World of Review based on BP 2010 Statistical illustration Author’s Sources: . Available online at: http://www.euractiv.com/en/energy/turkey- online at: . Available Nabucco gas supply deals for key brokers (2010). Turkey Euractiv accessed: 03.02.2011). (last brokers-key-gas-supply-deals-nabucco-news-494988 Commission (2010). European 87 88 Besides this, Figure 12 highlights the fact that certain other countries, notably in the Caspian and Central Central Caspian and in the notably countries, other certain that fact the 12 highlights Figure this, Besides Asian, but also in the Middle East, may become relevant natural future. gas Certainly most striking volumesare the recoverable ofgas estimated natural suppliers inFor Iran. political to the EU in the near reasons, it however, is rather unlikely that Iranian gas will be an optionfor the future. EU Similarly, in the the chances foreseeable of Iraqi pipeline gas being delivered to Europe is fairly the short-term. small, at least in Northern Northern Africa is another crucial supply considerable amounts of region natural gas for reserves, equivalent to Europe. 4.5 tcm, Particularly and its Algeria, neighbours Libya, Egypt with whichand roughly 1.7 controls and 1.5 tcm, respectively, substantially tcm. add 5.5 to 5 of reserves control to estimated is to supplier, African remote therelatively a as Nigeria, region. resource-richness of the vast vast reserves of natural gas (25 tcm), one may speculate as to the possibility of enhanced imports natural in gas the future. Also, the littoralstates of the Caspian Basin - particularlyAzerbaijan, Kazakhstan and - Turkmenistan bear a considerable potential with a viewto securing future Europe’s gas supplies.respectively, tcm, 2.4 to 1.8 and tcm 1.3 to 0.85 of reserves proven hold Kazakhstan and Azerbaijan While tcm. to 8.1 of 7.5 reserves with estimated far, by volumes these exceeds Turkmenistan While Europe’s natural gas reserves are diminishing, the continent is surroundedby countries are, that in quantitative terms, capable sufficient of establishment the on meeting of depend will future near the in EU the for its accessible be will potentials future gas import needs. Whether these supply productioncapacities andtransport infrastructure. For onenow, may note that the well-established exporters of natural gas to the EU hold substantial, albeitstrongly varying, shares of gas global reserves. proven As previously stated, Russia ranks first in terms Norway proven of and Algeria, on reservesgas the other inhand, feature the world; considerably smaller deposits. Bearing in it is these potential individual countries’ supply, mind energy external Europe’s the and need diversify secure to determine will that years coming the in links infrastructural and capacities export (additional) create to EU. with the relations for closer energy their attractiveness bcm), bcm), Belgium (5.6 bcm) and Spain (4.6 bcm) imported significant amounts of Qatari LNG Figure 12: Proven natural gas reserves of current and potential future EU suppliers future and potential current of reserves gas natural 12: Proven Figure 38 Europe´s Energy Future might beinterested incooperating withNorway andother foreign partners in thismatter. and fields gas offshore develop to required technology the lacking is hand, other the on Russia, Sea. enable Norwegian the in might reserves declining compensation for a resourcesas accessible it newly use Norwayto and exploration offshore to up opened be to region the for allows now agreement An in September Arctic 2010. border potentially the settled been resource-rich finally Barents has Sea in border-delineation the over Norway and Russia between dispute long-lasting the that mention to As far as the political framework for the exploration andextraction of Arctic gas is concerned, it iscrucial Eurasia BasinandtheEast Barents Basin,whichare partlyattributed to Russiaandpartly to Norway. comparatively a hold to assumed is small contingent of 1.7 tcm. - However, resources a considerable amount ofArctic 9.5 tcm is expected to be to found in the access with EU the to supplier important for alone accounts Basin WestSiberian the northern almost 39% of the of Arctic’s undiscovered gas resources, according part to USGS estimates. Norway offshore - another The Russia. in located be to The bulk of undiscovered gas resources - an estimated 23.3 tcm out of the total 47.2 tcm - are assumed of theworld’s largest areas for thefuture production ofnatural gas. on the other hand, have not yet been explored extensively, but, at least potentially, they constitute one fields containingby2007, natural 32.2 of tcm developed. Arctic been The had gas continental shelves, chance that natural gas in the Arctic amounts to 84.6 tcm. 84.6 to amounts Arctic the in gas natural that 5% chance a and tcm, 43.8 than more being there of chance 50% a region, this in found be can gas natural of tcm 21.8 than more that chance a 95% is there that specifically, states More it Circle. Arctic the of world’s the located of north undiscovered be may 30% investigated. that gas roughly USGS found The Resource quantitatively were which of ‘Circum-Arctic 48 Units, Assessment 69 into subdivided Arctic was the areas, individual entitled region the Survey (USGS) of studydifferentiates of that sedimentarymap composition the new between U.S. Geological a Employing Appraisal’(CARA). probability the based, potential, geologically gas resource a and compiled oil Arctic’s the assess to order In improve.means technological and valuablea as seen option development,for as explorationin other opportunities regions declining are increasingly nevertheless is It concerned. are resources gas natural as far as assess to difficult is that a region is Circle, Arctic the of north located region hemisphere Northern the as defined Arctic, The Arctic Natural GasPotential of Arctic gas to European markets. thevolumesof on depends actually recoverable reserves Yet,this and on practical issues regardingsupplies. the cost of exploitation gas and the delivery European to traditional alternative attractive an unconventional gas in Europe, the huge resources assumed to be found in the high north may become the Arctic, needs to be examined. Although less salient in public debates than the recent discoveries of namely gas, natural of source proximategeographically however,another issue, this tackling Before tcm. 47.2 to amount Technically USGS the Recoverable, according to Resources” Conventional Gas Natural 92 91 90 89 93 92 Bird, K.J. et al.(2008). Gautier et al.(2009). Gautier, D. L. et al.(2009). 2010, p.4. Gautier, D. L.;Klett, R.(2010). T. 1178. Bird et al.(2008). Factsheet 2008-3049,p.4. To compare: theworld’s annualgas consumption currently stands at 3.1 tcm. Circum-Arctic resource appraisal Assessment ofundiscovered oilandgasintheArctic Circum-Arctic resource appraisal:estimates ofundiscovered oilandgasnorthoftheArcticCircle Assessment ofundiscovered oilandgasintheArctic U.S. Geological -OilandGasResource. Survey Assessment oftheRussianArctic 89 The exploration of Arctic onshore areas is already underway and, already is onshore exploration Arctic areas The of , p.4;Gautier et al.(2009).A , p.1178. 91 . In:Science,Volume 324,p.1175/1176. “Arctic Mean Estimated Undiscovered Estimated Mean “Arctic ssessment ofundiscovered oilandgasintheArctic 90 . FinalReport, July . USGS , p. 93

Europe´s Energy Future 39

(November 2010), (November 96 Country Analysis Briefs Russia Analysis Briefs Country

. Accordingly, gascontribution to toArctic is a make unlikely noteworthy . Accordingly, 94 . Steady gas supplies to the EU primarily depend on the maintenance of production sufficient Russia, Norway and the Arctic and Norway Russia, Production and export capacity forecasts for selected countries and countries for selected capacity forecasts and export Production 95 . Available online at: http://www.euractiv.com/en/energy/norway-russia- online at: . Available Russia seal Arctic border accord (2010). Norway, Euractiv accessed: 10.12.2010). (last seal-arctic-border-accord-news-497585 2004/67/EU Council Directive repealing gas supply and security of to safeguard concerning measures (EU) No. 994/2010 Regulation 2 December 2010. force into entered EIA (2010): updated the recently to ; According Energy Statistics EIA. International production even stood at 546 bcm in 2009. stood even production at meters to cubic feet from cubic converted capacities has been and transport production reserves, on proved All EIA data Note: 0.0283. factor 94 95 96 and export capacities on the part of supplier countries. As far as Russia, the world’s largest exporter of exporter largest world’s the Russia, as far As countries. supplier of part the on capacities export and natural gas, is concerned, projections of futureexploration, production and export capabilities seem to Influctuate significantly. 2008, the country shipped roughly 243 bcm of gas to foreign consumers, conveying the impression of a flourishing this Russiangas figure However, industry. masks a de facto to 583 bcm in 2009. 662 bcm in 2008 decline from production overall the EU’s gas supply before 2030. supply before gas the EU’s The previous elaborations have the illustrated resource potential of individual countries and regions. In additionto offeringpromising data on the EU’straditional suppliers Russia, Algeria,Norway, the analysis has highlighted other regions such as the Caspian Basin, Central Asia and the Middle East as being potentiallyrelevant for securingexternal Europe’s gas supplies in the future. Whether andto in the Europe medium to gas be will natural able deliver in to suppliers fact individual gas extent what section. in the subsequent will be the subject of analysis long-term, to 4.3.1 Russia Russia has been a reliable energy supplier Europe for more than to Western three decades. Certainly, transit the and Gazprom company gas Russian the between disputes political of occurrence regular the In disruptions. supply gas pipeline to vulnerability Europe’s unveiled has Belarus and Ukraine countries view of the risks of third countries being able to jeopardize the security EU’s of a gas supply, political debate has evolved, which culminated in the recent adoption of a security ofgas supplyregulation in the EU In order to gain insight into how much natural gas will actually the be following section will compare andavailable production different interpret capacity scenariosfor for potential exports to the EU, suppliers up to the year 2030 and examine their technical and viability economic the on exsitingconsiderations by complemented be will analysis and The facilities. planned transportgas infrastructure instability. of political as on the risks as well projects of infrastructure feasibility 4.3 regions The Arctic certainly has potential the of becoming continental Europe.significant a However, current estimates source of naturalof amountthe will resources undiscovered estimated the which to notably for extent the gas, of Moreover, Arctic uncertainty. great to subject natural gas are resources in fact be exploitable depends, first andforemost, ontechnological and economicfactors. Relieving the Arctic’s gas resources is expected to be both is the opened region before years “it that take would difficult recently just has stated prime minister Norway’s expensive. and Against background, this up oil for and gas activities” 40 Europe´s Energy Future in phase I and 70 bcm when the project is completed.projectis the when bcm 70 and I phase in in cooperation with the French and Norwegian companies Total and Statoil. It is set to produce 24 bcm attracted the attention of Russia’s Gazprom subsidiary Neft Shelf. The field is currently being developed has 3.9 tcm, of estimated reserves extractable with field, Shtokman the specifically where Sea, Arctic that are currently delivering thebulkofRussiangas. fields gas big three mentioned previously the at declines production offset to expected is wells new presented scenarios project alikely range ofgas production inRussiaof580 to 790bcmin2030. the Overall, activities. upstream in investment on prices gas lower and demand energy lower growth, GDP lower effect of dampening illustrates graph assumed the the figures, similar quiteprovide models its total exports in 2009 (179 bcm) (179 2009 in exportstotal its Of Gazexport. subsidiary its specifically, more or,Gazprom on rests solely consumers foreign to gas country, but also holds all rights to market these products. these market to rights all holds also country,but state- the by dominated the in upstream is out almostall commands carried activities companyonly owned not Gazprom,which industry gas Russian the sector, the of structure general the Regarding notably in the period 2020 to 2030. Particulary the EIA scenarios diverge very little, each starting at starting 2030 each in bcm 760 to 730 level of expecting a and 2008 in bcm little, roughly650 very diverge scenarios EIA the Particulary 2030. to 2020 period the in notably Strikingly, quite a large number of scenarios project a similar evolution of Russian natural gas production, Scenario by the endoftheprojection period, namely770bcm. Reference 2008 IEA the projected by levels the almost forecastedreach is to in production bcm Russian 2008, 662 at Starting production. gas Russian of picture optimistic more a draws prices, gas and oil high fairly and growtheconomic stablefeatures which Scenario, Policies New 2010 IEA The 2030. in picks up slightly, but plunges from 2020 onwards, reaching the lowest level of all scenarios of 580 bcm Subsequently, 2015. production until Russian gas curve of reduction marginal the a assumes demand, fuel fossil lower a and decarbonisation to view a with case, 450 2009 levels IEA contrast,the Bypost-2015. production rising and significantly years Referencescenario five IEAfirst 2009 the The in levels 2030. production stagnating bcmin displays 790 to around trend upward case, a constant Reference 2008 IEA indicating marketconditions. in the and is shown production gas political Russian under of certain trajectory optimistic most The gas production natural Russian of evolution likely the address now will analysis the mind, in developments current of evidence empirical this Bearing 2004. since year per bcm 100 of capacity a at operated has Circle, Arctic the of south just region resource-rich this in situated also is projected to start at 8 bcm in 2011 and to deliver up to 360 is bcm by Peninsula 2030. the Yamal The on Zapolyarnoye production field, gas which Gazprom, to According tcm. 4.9 of volumes featuring field, Bovanenkovskoyelarge the in situated are which of many reserves, expected preliminarily of tcm 16 been launched in recent years. The Yamal region has nearly 22 tcm of proved gas reserves and a further haveBarentsSea Yamalthe gradually,the in on and Peninsulathose upstreamincluding projectsnew three the most profitable from fields resources Yamburg, Urengoy andgathering Medvezh’he.production, Yet, asgas these fields’ outputnatural diminishes country’s the of bulk the for accounts Siberia Independent States (CIS). European markets. Much of its residual exports were destined for customers in the Commonwealth of 103 102 101 100 99 98 97

For theperiod2008to 2010 detailed data isonlyavailable for theEIA2010Reference scenario. EIA (2010).Country Analysisbriefs Russia InternationalEIA. Energy Statistics. The Economist Intelligence UnitLimited (2010).Industry Report: Energy. Russia International Energy Agency (2008).WEO 2008,p.314;EIA(2010).Country AnalysisBriefs Russia Gazprom. 15.12.2010). Gazprom. Shtokman. Available onlineat: http://www.gazprom.com/production/projects/deposits/shp/ (last accessed:15.12.2010). Yamal Megaproject 102 . Available onlineat: http://www.gazprom.com/production/projects/mega-yamal/ (last accessed: 101 97 (basedondata provided by Eastern BlocResearch 2010). usas osdrbe a dpst frhroe xed o the to extend furthermore deposits gas considerable Russia’s , Russia shipped approximately 129 bcm to Western and EasternWesterntoand bcm approximately129 shipped Russia , 99

98 Projected additional productionsourced Projectedfrom additional 100 In addition, the right to export natural export to right the addition, In , p.14. 103 . Despite the factmostthatDespitethe . . Europe´s Energy Future 41

106 net . Governance europeenne et et europeenne . Governance - some uncertainty remains as to 104 . Available online at: http://www.gazprom.com/production/projects/pipelines/yamal_evropa/ (last (last http://www.gazprom.com/production/projects/pipelines/yamal_evropa/ online at: . Available Yamal-Europe Northern Lights, which runs alongside and Yamal-Europe establishes a parallel link to 105 , Reference case, p. 43. case, Energy Outlook 2010, Reference EIA (2010). International 2010: Gazprom accessed: 07.02.2011). and planned infrastructure An Overview of existing Europe. Nies, S. (2008): Oil and Gas Delivery to Ifri: Brussels, p. 65. de l’energie. geopolitique

104 105 106 An additional crucialfactor determining Russia’sgas export potential to the EU isthe presence of an adequate pipeline to system link up Russian productionfacilities with the European Currently, market. seven lines, transmission major nine of consisting system pipeline gas natural large a operates Gazprom of which are meant for exports. Among those carrying gas to Western and Eastern European markets are the I Yamal-Europe pipeline, with a capacity of 33 bcm/y, which traverses Russia, Belarus, Poland and Germany; exports will increase from 209 bcm in 2008 to 269 bcm in 2030. In the light of the mentioned production production mentioned the of light the In 2030. in bcm 269 to 2008 in bcm 209 from increase will exports and itconsumptionseems estimates, however, possible that Russian export capacityreaches its limits during the projection period. This may avoided be if the the most country’s productionoptimistic scenariospresented evolves above, to according climbing toaround 750 bcm by 2030,continuesto import increasingvolumes and, ofrelatively cheap gasnatural from if Caspian and Central Asian Russia suppliers to reconcile its domestic energy needs with risingconsumption. gas exports its domestic reducing structurally by requirements rising export its meet could Europe.to Alternatively, Russia Minsk, Minsk, Belarus, featuring an annual capacity of 14 to 25 bcm per year; the Soyuz pipeline, delivering some 30 bcm/y to Europe Western via Ukraine; and finally the northern part of the Brotherhood line, Germany. to Austria and Republic Czech the Slovakia, Ukraine, via bcm/y 30 roughly transports which Aside from the pipelines linking Russian consumers, a European Western gas fields numberto of other countries and Turkey notably neighbours, eastern south and southern Russia’s to deliveries ensure lines in the Caucasus and Central Asia. The Blue Stream (off-shore) pipeline is one of these links, delivering around 10 bcm of gas natural across the Black in Sea 2009. to Once Turkey completed it is designed to Russia’s future gas export potential. According to the IEA 2010 New Policies Scenario, the country’s country’s the Scenario, Policies New 2010 IEA the to According potential. export gas future Russia’s When When contrasting these projections withestimates of Russiandomestic consumptiongas projected - to rise from 470 bcm in 2015 to slightly less than 500 bcm in 2030 Figure 13: Russia - natural gas production gas 13: Russia - natural Figure 42 Europe´s Energy Future aiiis o rne n Gray nml Fapp (0 c/) Erpp I n I (40bcm/y)and II (13 Vesterled i.e. Iand UK, the to interconnections includes Europipe network Moreover,the bcm/y), bcm/y). (16 (20 Norpipe Franpipe namely Germany, and France to facilities gasoperator,pipeline linksdirectly upstreamadministersconnecting Norwegian pipeline of number a state-ownedNorway’s Gassco, EU. the to exports gas Norwegian all almost allocates that place in is network pipeline diversified markets,a consumer toexported be Norway’sfortoordernaturalgas In 2009 of end the at bcm 970.6 of recoverable held reserves It output. country’s entire gas the of one-third roughly accounts Sea, for Norway’s North largest the gasfield single southwesternof the part locatedTroll, in bcm for domestic consumption. 4 roughly of amount marginal a leaving bcm, 99 approximatelyexported Norway volumes, these Of output steady growth in a previous Showing years, the Russia. Scandinavian behind country’s rankingproduction amountedcases toboth roughly 103in bcmworld, in 2009. the in gas natural of exporter largest second the time, same the at and, EU the to supplier gas naturallargest second the is Norway Norway will hinge onsufficient investment, (foreign) technical expertise as wellas fuel price developments. consumption gas domestic Russia´s in rises projected meet to and fields current of maturation the for compensate to time due in developed be fact in will deposits gashuge these EasternWhetherEurope. and Western towards geared is that infrastructure transport diversified fairly a already and Peninsula Yamal on the and Sea Barents in the reserves gas natural sufficient holds theoretically Russia Overall, 2013. by bcm 55 of capacity full its reach to and bcm 27.5 of capacity initial an and with 2011 of Russia end the by operational connect partly become to to designed scheduled is is It Poland. which and Belarus Ukraine, pipeline, countries transit traditional bypassing Stream Germany,thereby Nord Germany the and Poland Second, to Belarus. gas additional via of directly bcm/y 30 approximately carry to set is which pipeline, II pipeline projects are currently at a planning stage or other already threeunder construction.Europe, Western First, theto Russia Yamal-Europe from deliveries gas diversifying and expanding to regard With deliver asmuch16bcmperyear. cutting across SerbiaandHungarynorthwestwards, orsouthwestwards through Greece andAlbania. turn either to planned far,is thus Stream, South of component onshore The coast. compressor Russian connecting the stationSea, kilometers Black Berengoyathe under Bulgarian the to 900 some run to meant is section offshore bcm/y.Its 63 of capacity design a featuring Stream, South with international partners suchasExxonMobile, Connoco Phillips, Total, ShellandEni. cooperation in fields of number considerable a operates company the shelf, continental Norwegian since 2007 also in the Barents Sea. While Statoil undoubtedly dominates the upstream business on the have managed to develop a large number of alternative fields in the North Sea, the Norwegian Sea and year. after year proceeds However, Statoil deposits specifically large and Norway these maturation of Ormen Lange in the Norwegian Sea (estimated production of 22 bcm in 2010) and Asgard (annual Asgard and 2010) production in of 11 to 12 bcm bcm), currently make 22 up 60% of Norway´s of total production gas production (estimated Sea Norwegian the in Lange Ormen 113 112 111 110 109 108 107

Ibid. com/en/OurOperations/ExplorationProd/ncs/Pages/default.aspx (last accessed:10.01.2011). EIA (2010).Country; seealsoStatoil. analysisbriefs Norway The Economist Intelligence UnitLimited (2010).Industry Report: Energy. Norway, InternationalEIA. Energy Statistics. South Stream website. Available online:http://south-stream.info/?L=1 (last accessed:07.02.2011). EIA (2010).Country AnalysisBriefs Russia Gazprom. 111 Blue Stream.Available onlineat: http://www.gazprom.com/production/projects/pipelines/bs/ (last accessed:07.02.2011). and is projected to produce 31 bcm in 2010. The three largest gas fields, namely namely Troll,fields, gaslargest three The 2010. in bcm 31 produce to projected is and 110 108 . 107 A third planned link, and probably the most controversial one is is one controversial most the probably and link, planned third A Norwegian continentalNorwegian shelf March 2010,p.14. . Available online at: http://www.statoil. 109 112 113 . Of course, the Europe´s Energy Future 43

As 114 115 116 Country Analysis Briefs Norway Analysis Briefs . EIA (2010). Country Unit 2010. Norway, p. 14). Intelligence Economist of 155 bcm (The reserves recoverable field held the end of 2009 the Snohvit At Norway Analysis Briefs . EIA (2010). Country

114 115 116 Putting the afore-mentioned supply capacities in a longer-term perspective, Norwegian the outlookfor supply capacitiesafore-mentioned Putting the inlonger-term a gas production isfairly positive. As Figure 14 shows, theIEA 2008 and 2009Reference Scenarios both predict a substantial increase in productiongas productionlevels until afterwards, reaching 2025, approximately to 129 trajectory bcm, and 126 until marginally declining 2015, bcm thein 2030. IEA showing While 2009in Scenario 450 2020 forecasts and a similar to Norwegian drop considerably productionin the second half to peak already of 2030. As the with the projection previous scenarios, period,this sharp to decline may a be attributedto mere the underlying 96 scenario bcm in expansion of only a moderate Policies Scenario anticipates 2010 New the IEA contrast, By assumptions. production until 2015 andprojects from 104 consistenta surge bcm thereafter, in 2015 to 120 bcm at period. end of the projection the all suggest Overall, a trajectories four fairly similar evolution of capacities production thein Norwegian gas industry. In fact, the absolute differencebetween the stable rather a most indicate trajectories the words, other In bcm. 30 as little as pessimisticto amounts 2030 for forecast andthe optimistic most development of production, likelyto peak around 2020 or 2025development on the depends largely and potential production to Norway’s that slightlyreveal figures these decrease afterwards. Moreover, and exploitation of newgas fields on the Norwegian continental shelf, in the high north and/or in the of exporter role as a major Norway’s expected, Sea. If these tofieldsbe yield little, which is not Barents bcm/y) and Langeled (25 bcm/y), and to Belgium through Zeepipe I, IIA and IIB (total of 68 bcm/y). of 68 I, IIA and IIB (total Zeepipe through Belgium bcm/y), and to (25 Langeled bcm/y) and the Melkoya terminal is currently operatingat full planscapacity, have been unveiledto expand this project and to source additional gas from the nearby roughly from Askeladd markedly, grown - Spanish,to has and French recently UK importers primarly contracted Norwegianfield. LNG production - 3 bcm in 2009. above 2 bcm in 2008 to Since 2007, Norway also commands a large-scale LNG liquification and export terminal at Melkoya, which is connected via pipeline to the Snohvit field, the first Norwegian venture in the Artic. Figure 14: Norway - natural gas production gas - natural 14: Norway Figure 44 Europe´s Energy Future 0.1 bcm in 2009 and are expected to produce roughly the same amount in 2030. than more no produced have They resources. gas marginal only hold combined, when even countries, primarily directed at Russia, with future plans revolving around gas sales to China. The remaining Caspian going forward ornot. investments to comes it when importance utmost of be also will EU the in commitments commercial and Political – region. Vesterålen Lofoten the for case the notably is This production. and exploration on political for areas new of depends up opening the much concerning Parliament and very government Norwegian 2020 the by decisions beyond Norway in production gas of level the Nevertheless, that are best placed to maintain transport links to Europe. to links transport maintain to placed countries best are the that also are they decades; few next the over exporters and producers main region’s the be states” in the Caspian region. Caspian the supplier in states” individual potential “key the are Turkmenistan and Azerbaijan concerned, is EU the as far As 2011, January in Sea Barents the and Sea Norwegian the Sea, North the explorationnew in production licenses acreage and naturalgas may long-term.the in diminish Taking into account, however, that Statoil awardedbeen has Azerbaijan’s largest gas field is the aforementioned Shah Deniz field, which contains roughly 1 tcm gas.natural of roughly contains which field, Deniz Shah aforementioned the is field gas largestAzerbaijan’s In 2009, theregion’sreserves. total gas production ofamountedgas to 159bcm. natural proven of total world the of tcm) (13 7% holds Uzbekistan, and Turkmenistan Tajikistan, Republic, Kyrgyz Kazakhstan, Georgia, Azerbaijan, Armenia, comprising region, Caspian The 4.3.2 By 2009, as domestic gas consumption amounted to 10.6 bcm, 5.9 bcm were available for exports. European markets were for themain recipients. available were bcm 5.9 bcm, 10.6 to amounted consumption gas domestic as 2009, By gas. Russian of importer an been had country the that, to Prior 2007. in gasnatural of exporter net a into Azerbaijan turned which field, very that of start-up the was It field. condensate and gas natural Deniz Shah the from emanated which of one-third than more bcm, 16.5 at stood 2009 in production AccordingBP,to data,IEAAzerbaijan’s and EIA Gas tcm. 1.4 proventoroughly 0.9 toreservesamount Azerbaijan shall therefore beconfined to taking acloserlook at Azerbaijan and Turkmenistan. o ae n upt f bu 6 bm n 2030 in bcm 69 about expected is of and output 2009 in an bcm have 66 as to much as produced has Uzbekistan China. and Russia to gas its of 2030 in bcm 61 estimated an and 2009 in gas of bcm 36 producing Kazakhstan, period. projection the in gas of amount significant any with Europe supply to unlikely are and east the towards geared more been traditionally 117 125 124 123 122 121 120 119 118

Statoil (2011). en/NewsAndMedia/News/2011/Pages/19Jan:TFO.aspx (last accessed:25.01.2011). sectiongenericarticle.do?categoryId=9006668&contentId=7015092 (last accessed:02.02.2011). BP (2010).ShahDeniz.Oneoftheworld’s largest gas-condensate fields.Available online at: http://www.bp.com/ EIA (2010).Country AnalysisBriefs Azerbaijan IEA (2010).WEO Ibid. According to theIEA (2010)New Policies Scenario. IEA (2010).WEO network European Commission(2010). IEA (2010).WEO The Caspian BasinandCentral Asia , COM (2010)677final,p.32. 125 121 New exploration acreage for Statoil Its development is undertaken by a consortium consisting of Statoil and the and Statoil and of BP, consisting consortium a undertakenby is development Its , p.525. . , p.524-525. , may be one of the largestthe of mayone gas, beexpected producers is region,but toexportthe most of 117 the prospects for the country’s future natural gas production seem promising. seem production gas natural future country’s the for prospects the Energy Infrastructure priorities for 2020andbeyond -Ablueprint for anintegrated European energy 119 Not only are these two countries (along with Kazakhstan) expected to expectedKazakhstan) with (along countries two these are only Not ; EIA. International; EIA. Energy Statistics; IEA (2010). WEO . Press release published19.01.2011.Available onlineat: http://www.statoil.com/ 124 122 Hwvr a i te ae f aahtn eprs are exports Kazakhstan, of case the in as However, . 120 Meanwhile, other Caspian countries have countries Caspian other Meanwhile, 118 , p.527. 123 The following section Europe´s Energy Future 45 128 , which is 129 Potential future transport routes routes transport future Potential 130 , March 2010, p. 14) , March 127 Furthermore, exploration is underwayat the Absheron field . . . 126 , p. 530. , p. 527. IEA (2010). WEO IEA Azerbaijan Analysis Briefs EIA (2010). Country Country Analysis Briefs Azerbaijan Analysis Briefs EIA (2010). Country (2010). WEOIEA Azerbaijan Analysis Briefs EIA (2010). Country Economist (The Turkey to Gas Pipeline the South Caucasus gas through exporting has been Since 2007, the Shah Deniz consortium Azerbaijan Energy. Report: 2010. Industry Unit Limited Intelligence 131

130 131 126 127 128 129 to to Europe may run through the Black Sea and the Eastern exports Mediterranean. gas Azerbaijan furthermore via the Gazi-Magomed-Mozdok pipeline to Russia and Iran. via the Baku-Astara pipeline to undoubtedly undoubtedly the ‘key transit state’ for exports from Azerbaijan to Europe. This pipeline, per gas owned of bcm 8 and about transport to capacity the has currently consortium, Deniz Shah the by operated and be year 20 to around may expanded bcm in the coming years. and drilling has been proposed at Nakhichevan. at proposed and drilling has been Agreements on gas trade with Europe will allow for a considerable expansion in production and export to export and production in expansion considerable a for allow will Europe with trade gas on Agreements the IEA production, gas Azerbaijani scenarios for in commence the mid-2010s. Out available of the three (Figure period projection the over production in increase highest the predicts Scenario Policies New 2010 15). While it resembles the other two scenarios in projecting a modest increase in production to about 2015 between production in steeper increase projects froma them it in that 20 2015,bcm ituntil differs and 2020. According to the IEA 2010 New Policies Scenario, the start of Phase II of the development of Reference 2009 IEA the comparison, By 2020. by bcm 36 to production total raise will 2017 in Deniz Shah and 450 Scenarios only expect an increase to 33 bcm and 31 bcm, Each respectively. of projects the that, throughout the scenarios 2020s, the output output However, increases projected steadily. for 2030 varies, amountingto 49 bcm in the IEA 2010New Policies Scenario, 43 bcm in the IEA 2009 Reference 2009 450 Scenario. IEA and 34 bcm in the Scenario, In 2009, the bulk of Azeri exports went via the South Caucasus Pipeline to Turkey Azerbaijan’s gas Azerbaijan’s industry is dominated by the state-owned State Oil Company of Azerbaijan Republic (SOCAR). One of the distribution, and SOCAR storage, especially domestically. Another subsidiaries, SOCAR subsidiary, Azneft, Azerigaz, is in charge handles of the exploration, development natural and production of gas gasfrom older, SOCAR-owned processing, onshore and offshore transport, natural gas fields. Every international consortium seeking develop to SOCAR. The most prominent consortiuminternational currently active Azerbaijanin is AIOC(Azerbaijan in Azerbaijan gas must involve International Operating Company), as itproduces most of the country’s output. AIOC is made up of 10 petroleum companies, each of which has concluded extraction in the Azerbaijan, leader of investor which the is foreign consortium the largest agreements those companies BP, are with Azerbaijan. Among and the technical operator of Shah Deniz, Chevron, Statoil, Turkiye Petrolleri, ExxonMobil, and SOCAR. gas field. Shah Deniz as the well as fields the ACG of development in the involved AIOC has been operators, operators, SOCAR, LUKoil, Total, OIEC (Iran) and Gas TPAO (Turkey). production began in early 2007 and has increased rapidly since then, reaching 3.1 bcm in 2008 and I about production7.1 isexpected bcm to in peakat 2009. 8.6 Phase bcm in2010. Phase II is estimatedof to19.8 reachbcm, but its peaka completion had capacity to bepostponed to 2016 dueto difficulties reachingin Guneshli the in resources gas transit a significant also are there Deniz, Shah from Aside Turkey. with agreement field, which is part of the ACG associated gas oil for domestic and use only. gas system.field However, this is field providing currently 46 Europe´s Energy Future Figure 15:Azerbaijan -natural gas production h ky upy ore o ec o tee rjcs s hs I o te eeomn o Sa Deniz. Shah of development the of II Phase is projects these of each for source supply key The Greece-Italy. plans support for a Trans-Adriatic E.on, Pipeline. Still others, notably and Edision Spa and DEPA, advocateAG an Interconnector Laufenburg Elektrizitätsgesellschaft Statoil, including Others, EU. the by backed also is which pipeline, Nabucco km 3000 long-discussed OMV,thefor procureand supplies to trying are exports. Three new major European pipeline projects are currently being discussed, all of which are trying to trying are which Europe.forsoutheastmarkets Azerisupplies in secure of all discussed, being currently are projects pipeline European major new Three depends onactualproduction rates andthe outcome ofongoing negotiations. Europe reach will volumes export these how and However,whether 2030. in bcm 35 about to 2009 in While domestic gas consumption is set to increase over the projection period to roughly 14.5 bcm in bcm 14.5 2030 to roughly period projection the over increase to set is consumption gas domestic While The EU was able to take an important step forward in January 2011, when European Commission Commission European when 2011, January in forward step Southern the ‘Joint on Declaration the signed Azerbaijan’sAliyev and Ilham importantBarrosoPresidentPresident an take to able was EU The Europe” Central to and Italy to both outlets with Nabucco, than pipeline smaller a of construction eventual the recently, of thepossibility More options. combining discussing Nabucco with the other European pipeline projects. The result of these discussions “might be have started competing companies and as several EU regarded the been of representatives however, long have projects three the Consequently, projects redundant. EU’s pipeline the make to potential the has out, carried if project, pipeline Stream South whose Russia, 137 136 135 134 133 132

132 azeri-gas-deal-visa-facilitation-news-501255 (last accessed:22.01.2011). Euractiv (2011).Barrosotops Azeri gasdealwithvisafacilitation Torello. (2010). A. EIA (2010).Country AnalysisBriefs Azerbaijan IEA (2010).WEO IEA (2010).WEO According to theIEA 2010New Policies Scenario. , gas production is estimated to increase even faster, thereby making more gas available for gas available more making thereby even faster, to increase estimated is production gas , 133 136 In the IEA 2010 NewPoliciesIEAthe2010 In Scenario, Azeri netexports are projected toincrease frombcm 8 . Another possibility not to be disregarded is that the gas produced in phase II might be sold to , p.529. , p.482and526-527. Sale ofgasfieldwill test EU’s pipeline strategy. In:TheWall Street Journalonline,24December2010. 137 . . Available online at: http://euractiv.com/en/energy/barroso-tops- 134 Some West European companies, such as RWE RWE as Westsuch Some companies,European 135

Europe´s Energy Future 47

145 . Azerbaijan is in fact already However, as However, yet there are no 140 144 139 . . Despite this, has Turkmenistan retained its position as 143 142 , signed in Baku, 13 January 2011. , signed in Baku, . 141 , p. 528. , p. 534 and 541. , , which states that the common aim is “to see the Southern Corridor established and WEO 138 . Available online at: http://www.euractiv.com/en/energy/ online at: . Available race The great pipeline southern gas corridor. EurActiv (2010). Europe’s accessed: 25.01.2011). (last europes-southern-gas-corridor-great-pipeline-race-linksdossier-498558 Joint Declaration on the Southern Gas Corridor Joint gas deal with visa facilitation Azeri (2011). Barroso tops Euractiv Declaration on the Southern Gas Corridor Joint gas deal with visa facilitation Azeri (2011). Barroso tops Euractiv (2010). WEOIEA . Energy Statistics EIA. International (2010), IEA

145 138 139 140 141 142 143 144 transport links between Turkmenistan and the EU and none of Turkmenistan’s gas is exported to the EU. the to exported is gas Turkmenistan’s of none and EU the and Turkmenistan between links transport Turkmenistan’s main existing gas fields are Shatlyk and Dauletabad, but their output is in decline. The bulk The decline. in is output their but Dauletabad, and Shatlyk are fields gas existing main Turkmenistan’s of remaining gas Turkmenistan’s resources are located in the onshore South fieldYolotan in southeast Turkmenistan, discovered in 2006. The IEA expects firstgas from SouthYolotan in 2013,reaching 30 operational as soon as possible andto establish theRepublic of Azerbaijan as a substantial contributor of list its diversify to Azerbaijan enables declaration The Corridor”. Gas Southern the - of enabler and - to clients, while allowing the EU to diversify its sources of It supply. is expected to bring 10 bcm of gas per eventually. EU, to the field II the Shah Deniz from year the region’s biggest gas-exporter. While most exports go to Russia, and increasingly China, the possibility Russia, and increasingly to go exports While most gas-exporter. biggest the region’s of transportinggas fromTurkmenistan to Europe is widely discussed. Turkmenistan Turkmenistan having 7.5 to 8.1 Turkmenistan, tcm of reserves proven at its disposal, is the gas largest holderresource in the Caspian region and one of the export CAC major the on explosion region’s an following - 2009 in bcm 38 about to 2008 in bcm 71 largest from - sharply gas producers. However, production has fallen pipeline and the overall economic downturn. It is difficult to tell at thisstage which one of these three seems projects to is be is however, clear, most that there likelyis toonly be room for realised. one What of them, at least in the period to Besides 2025. these pipeline projects, the possibility of bringing gas directly across the Black Sea by pipeline or in the form of liquefied orcompressed naturalgas to Romania or Bulgaria Whatever transport route ends up is being implemented, it alsois safe gas, to potentially say that being“Azerbaijani discussed. gas for corridor new a up open to set is East, Middle and Caspian the from gas of sources other by joined years”. few next the over Europe supply to While no specification is made with regard to the companies thatare tobe commissioned todevelop and transport the gas, the partiesto the declarationurge “a swift allocation process gas resources at the for Shah Deniz available the II Project and other fields in Azerbaijan” Gas Corridor’ negotiating with the Nabucco consortium, the representatives of the Interconnector Greece-Italy and the Greece-Italy Interconnector the of representatives the consortium, Nabucco the with negotiating ofrepresentatives Trans the Adriatic Pipeline. The outcome of these negotiations willdetermine which one of the pipeline projects under discussion will eventually form the Southern Gas Corridor (although bidders). several gas among splits the Azerbaijan that is a chance still there In this context, it is worth noting that thenot sufficient 10 tobcm fill of the Nabucco gas pipeline,that which will is supposed be available made have to Interconnector Greece-Italy and a final the capacity to Trans Adriatic EU are the of Pipeline, bcm. 31 on The the other hand,each happena to planned have capacity of exactly 10 bcm. However, the additionalvolumes from Nabucco othercountries in theforTurkmenistan, region.example, consortium is currently engaged might be able procure to EU. the with in negotiations 48 Europe´s Energy Future Figure 16:Turkmenistan -natural gas production China has managed to put a new long-distance pipeline to Turkmenistan into action. It is questionable is It action. Turkmenistaninto to pipeline long-distance new a put to managed has China downgastothe buying those to infrastructuresetthe up country.thethat outside needed is far,So only infrastructure.of lack Turkmenistan’sAs government country’sinsiststhe selling on gas atborder, its is it The second issue concerns persisting difficulties with gaining access tomajor technology. export markets causedby a and expertise their in bringing from and investing from companies international prevents This to Turkmengas. assigned automatically are projects onshore all wherebyinvestment, upstream on below well what would bepossible given the country’s being resource base. The first export issue concerns and Turkmenistan’sproduction policy of levels future to lead might that issues main two are there South development the the due of to projection mainly the period, of end atthe However,Yolotan field. bcm 85 to and 2015 in bcm 55 to 2009 in bcm 17 from increase estimates,exports net IEA toAccording production levels to reach nomore than90bcm by theendof projection period. slowersecond,and,pace that there productionin declinea be will between estimates It 2030. and 2025 a at grow will production that first, assumes, it that in significantly deviates Scenario 450 2009 IEA the IEA 2009 Reference Scenario is remarkably similar, predicting production to reach 118 bcm by 2030. Only The 2030. in bcm 119 and 2025 in bcm 110 over 2015, constantly,in rises bcm output 16),85 (Figureto Scenario Policies New 2010 IEA the to According 2010s. the of half first the within 2008-levels to back Turkmenistan’soverall get naturaland production of 2009 is expected in to gas recover decline from the small amount ofresources, whichmakes them lessattractive. comparatively a contain they but companies, international of investment the to open are hand, other the on developments, Offshore basis. contractual a on assistance providing to confined are companies international and while developments, onshore all LG on Korea’sa monopoly Turkmengaz. has Turkmengazeffectively South Gas, & Oil Gulf state-ownedcompanythe of hands the However, and in CNPC. is and managementoverallproject Hyundai, Petrofac companies Emirates-based Arab United the to contracts awarded authorities country’s the Yolotan, South at development field of phase first the For 2035. of end the by year per bcm 90 as much as be to up consideredprofitable, go might production levels will phase development third a that Provided 2025. by year per bcm 60 and 2020 by year per bcm 146

IEA (2010). WEO , p.536-537. 146 Europe´s Energy Future 49

156

147 , p. 709). WEO Over the projection period, 155 to 130 bcm (IEA 2009 450 Scenario) 450 2009 (IEA bcm 130 to 153 , p. 12. 157

151 . Energy Statistics ; EIA. International 149 150 holds 75 tcm, or 41% of the world of reserves of In gas. total, proven natural 2008, 154 , p. 485. , p. 526. 152 In March 2010, RWE suggested that it expected Turkmenistan to agree to supplying 10 to bcm agree to Turkmenistan it expected that suggested 2010, RWE In March 148 The Middle East IEA (2009). WEOIEA Ibid., p. 485-486. Ibid., p. 495. Saudi Arabia Analysis Briefs EIA (2010). Country Energy Statistics. EIA. International Ibid., p. 526 and 535. Ibid., p. 536-541. Azerbaijan Energy. Report: (2010). Industry Unit Limited Intelligence The Economist (2010). WEOIEA Ibid., p. 542. the Republic, Arab Syrian Saudi Arabia, Lebanon, Oman, Qatar, Kuwait, Jordan, Israel, Iraq, of Iran, the Islamic Republic Bahrain, 2010, (IEA and Iraq Saudi Arabia between zone the neutral it includes and Yemen; Emirates Arab United

153 154 155 156 157 147 148 149 150 151 152 of gas per year to the Nabucco project from 2015 onwards. However, there are doubts over how Turkmen Turkmen how over doubts are there However, onwards. 2015 from project Nabucco the to year per gas of Pipeline Caucasus South The begin. to meant is Nabucco where Turkey, to delivered be to supposed is gas is an option, but it it does might the notcapacityto notcarry have additionalvolumes gas of and, far, so Turkmenistan. to all the way go even domestic gas demand is expected to more than double from 78 bcm in 2009 to about 150 bcm in 2030. in bcm 150 about to 2009 in bcm 78 from double than more to expected is demand gas domestic By comparison, production is expected to rise from 78 bcm in 2009 in bcm 78 from rise to expected is production comparison, By the region’s total production of natural gas amounted to 379 bcm. gas amounted of natural production total the region’s Aside from Qatar and Iran, only to Saudi serve as important supplierstogas however, significantreserves. proven the They EU. are unlikely, Arabia, the United Arab Emirates (UAE) production and gas Saudi but the country’s reserves, gas Arabia of proven 7.9 tcm 7.5 to holds an impressive Iraq possess is insufficient cover to growing domestic demand, let alone exports. From From a European perspective, Qatar and Iran seemto be the MiddleEast’s most promosing supplier states. They share the largest gas world’s field (North Field/SouthPars) and hold about two-thirds of to and be Furthermore, Qatar are expected reserves. gas Iran the the main Middle contributors East’s to the increase in gas production andexports that isassumed to occur in the period. projection MiddleEast over the 4.3.3 The Middle East Gas from Turkmenistan´s onshore fields is unlikely to be exported to the EU. However, the IEA assumes the IEA However, to the EU. exported to be is unlikely fields onshore Turkmenistan´s from Gas gas, which in is the developed Caspian Sea and doesoffshore not up 10 that to bcm of Turkmenistan’s yet have an obvious route to market, will eventually be provided for exports to and Turkey the EU. part of the 2010s. in the latter start might Transports Several Several suggestions have been made on howto Turkmen transportgas westward across or around the Caspian Sea, thereby Turkmenistanconnectingto theexisting transport links to Europe. These include, first, a sub-seapipeline shore from Turkmenistan production platforms to to the existing Azerbaijani second, shore; offshoreinfrastructure (whichmight be a mid-Caspianinterconnector politically difficult offshore tying implement); to third, exporting natural by gas tanker technically unproven); and across fourth, the Caspian expanding exports (which is to Iran or, respectively, creating newa connection around pipeline the southern Caspian through Iran (the latter possibility being currently disregarded reasons). political for whether European customers will be able or willing to commit to an investment of this scale. of an investment to commit willing to or able will be customers European whether The The idea of transporting gas from Turkmenistandiscussed. through Southern a Corridor to Europe is widely 50 Europe´s Energy Future construction of LNG export facilities. export LNG of construction possible the and Europe, then and Turkey to field AkkasIraq’s from transported be to gas for allow would which (AGP), Pipeline Gas Arabproposed the is thereNabucco, from Aside 2015. by Europe to Prime Ministerwent al-Malikie Nouri faras toas suggest that Iraq could exportingbe per bcm 15 year 2009, In Europe. Turkeyto through pipeline Nabucco proposed the as such routes export in interest and an unstable regulatoryissues regime discourage foreignsecurity investment.Moreover,persistent Nevertheless, markets. Iraq has expressed to an transported and processed be to gas the for allow supplier to theEU. noteworthy a become any point at Iraq will whether uncertain Iraqoverall makes highly in situation it The question. into plans Minister’s Prime the putting thereby 2030, by bcm 52 and 2015 by bcm 13 as well as of Gas-to-Liquids (GTL). Gas-to-Liquids of as well as world’sthe currentlynet-exporteris and a mid-1990s largestnaturalLNG the of gasproducerof since the Pearl GTL project. and about to start production, namely the Qatargas 3, Qatargas 4 and RasGas 3 LNG projects as well as 2, and RasGas 1 and 2) and the Dolphin regional pipeline project. Further projects are near completion orderto cover two projects LNG domestic supplies major Meanwhile, also demand. it (Qatargas and 1 Of Qatar’s proven reserves, 99% is located in the North Field. To begin with, the field was developed in rapidly over the previous two decades, reaching 77 bcm in 2008 and 89 bcm in 2009. Qatar holds proven gas reserves of about 25 to 26 tcm and the country’s gas production has increased Qatar two asthemost likely future suppliers to theEU. latter the on concentrate therefore will section following The tcm. 55 of reserves proven combined 3 Iran’sand Qatar about to or tcm to 75 of total amount East Middle the only to compared Eastamount marginal a Middle is which tcm, the of countries eight remaining the of reserves proven The are expected to risebutslowly,from 2008 toin bcm 51 53bcmin2015and712030 to difficult equally it find As levels production exports. and tcm, demand domestic gas rising 6.5 both cover to sufficient volumes produce to 6.1 about of reserves proven with UAE, The exports. for left be will nothing virtually that and domestically consumed be will period projection the over Arabia Saudi in produced gas all that assumes Accordingly,IEA 2030. the in Refenrence Scenario) 2009 (IEA bcm 149 or 2009. in bcm 1.2 future and 2008 in possible bcm 2 to for amounted only production estimations tcm, 3.2 of that reserves gas natural proven is issue holds biggest Iraq uncertainty. While of the amount great a hand, with associated are volumes other export and production the on Iraq, of case the In South Korea, Japan,India,Spain,Belgiumand the UK. recipientsmain QatariThe exportswasof wereLNG. LNG which amounted roughly of bcm, to70% 68 projection period. the throughout gas of importer net a remain to expectedReference country2009is IEA thecase, to 166 165 164 163 162 161 160 159 158

IEA (2009). WEO EIA (2010).Country AnalysisBriefs Qatar International; EIA. Energy Statistics. The Economist Intelligence UnitLimited (2010).Industry Report: Energy. Qatar , April2010,p.13. IEA (2009).WEO IEA (2010).WEO EIA (2010).Country analysisbriefs Iraq. InternationalEIA. Energy Statistics; seealsoIEA (2010).WEO, p.191. IEA (2009).WEO According to theIEA 2009450Scenario, outputisto reach only61bcmin2030. 160 About 40% of the gas produced that year was flared as there is no infrastructure that would infrastructure that no is there as flared was year that produced gas the of 40% About , p.487. , p.191. , New Policies Scenario, p.191. , p.495-496. 159 162

166 The rapid development of the North Field was only curtailed in 2005, when the 164 By 2009, as domestic gas demand stood at 21 bcm, the country‘s the bcm, 21 at stood demand domestic gas as 2009, By 161 However, the IEA expects production to reach no more than more no reach to production expects IEA However,the 165 163 Qatar has been 158 ,according Europe´s Energy Future 51 ) 170 169 167 . Available online at: http://www.exxonmobil.com/Corporate/energy_project_qatar. online at: . Available Qatar in Petroleum, cooperation with ExxonMobil, is actively seeking to 168 Qatar - North Field. Brochure Qatar , p. 12. Unit (2010). Qatar Intelligence The Economist . Qatar analysis briefs EIA (2010). Country (2008). ExxonMobil accessed: 03.02.2011). (last aspx , p. 10. Unit (2010). Qatar Intelligence The Economist

167 168 169 170 gain terminalaccess by gain a developing to inLNG European new the markets onshore LNG regasification Italy. of coast north-eastern terminal off the offshore first as the world’s UK as well As Figure 17 illustrates, the available scenarios all assume Qatar’s gas production to increase constantly constantly increase to production gas Qatar’s assume all scenarios available the illustrates, 17 Figure As terms in significantly diverge they however, moratorium, the to Due period. projection the throughout production in rise lower much a estimates IEA the that is striking is What rates. growth predicted the of than the EIA in each of its scenarios. The IEA 2009 450 assuming Scenario growth, the projects lowest gas productionto reach no more than 190 bcmby 2030. The highestrate of growth is predictedby the EIA 2010 Scenario, Reference the EIA 2010 High Growth Scenario and the EIA 2010 Low Oil Price period. by the end of the projection reach 260 bcm to of which assume production all three Scenario, While both demand (expected to grow by an average of 9.4% annually between 2010 and 2020 Figure 17: Qatar - natural gas production gas - natural 17: Qatar Figure Qatar’s Qatar’s gas industry is dominated manages upstream production and plays a significant role inprojects.downstream by In addition,Qatar the state-owned company collaborates with Qatar large international oil companies Petroleum such as (QP), ExxonMobil, Shell, andTotal which in orderto obtain the necessary technology and expertise. The LNG sector is mainly in the hands of Qatar LNG Company (Qatargas) and Ras Laffan LNG Company they (RasGas).Together, have 11 trains available and a total LNG liquefactioncapacity of 76 bcm/y. Several of these trains areexplicitly supply intendedEuropean markets. to Qatari government placed a moratorium on additional projects with the aim to find optimised ways of ways optimised find to aim the with projects additional on moratorium a placed government Qatari gas development pressing before ahead. As the moratorium did not affect projects already approved or the underway, growth in productionvolumes continues. A further expansion in theproduction of in 2013. is lifted the moratorium after LNG is possible and production are setto rise throughout the projection period, it is difficult predict to exact export before exploration will base furtherresource to through seek its that Qatar increase It figures. is likely 52 Europe´s Energy Future including theVaravi, Shanol,andHomafields,as well asinthe Persian GulfSalman gas field. which is estimated to contain reserves of 1.4 tcm. Further exploration is underway in the Fars province from Turkmenistan. of gas. In 2008, with domestic consumption standing at 119 bcm, Iran had to import additional volumes importer a net significantly, been up routinely has gone However, also Iran 2009. has consumption as production has risen steeply over the last two decades, amounting to 116 bcm in 2008Kangan-Nar. and 131 bcm Gas in and Kish, Pars, North and South after are disposal, fields gas its natural largest country’sat The reserves Russia. gas natural largest second world’s the has Iran tcm, 29 roughly With Iran Europe to throughout theprojection period. supplier important itcan an as position its under construction, extend and consolidate will ones currently Qatar that the expected be including resources facilities, massive transport its sophisticated Given now. the years of and couple a for gas with Europe supplying been has Qatar to expected is country the consolidate as itspositionasthe world’s biggest LNG LNG, exporter. of form the in sold be will gas Most period. projection the over significantly rise to levels production expects scenarios the of each all, After export. for available be of the petrochemical sector will raise the demand for gas. Thus, Iran is likely to continue using the using continue to likely is Iran Thus, gas. for demand the raise will sector petrochemical the of growth expected Moreover, the dependencies. import reducing of thenext means a as transportation in gas throughout of use the annually extend to seek 7 percent authorities Iranian the and subsidised an estimated heavily are sales by Domestic decade. consumption, gas domestic of growth continued the is this for reason One increase. to expected not however, are capacities, Iran’sexport period. projection the throughout constantly grow will production gasIran’s that scenarios, assume other nevertheless they the with Along 2030. for production of levels lower significantly forecast Scenario IEAthe NewPolicies2010 and IEAScenario the 450 2009 Only Scenario. Price Oil High 2010 EIA the in levels of similar fairly predict 18) (Figure production for the year 2030, production ranging from 246 bcm in the EIA 2010 Low Oil Price gas Scenario to 277 bcm future Iran’s for scenarios available The Qatar. neighbouring in those with compete to unable are projects LNG country’s the is, it As potential. LNG has therefore been trying to find new international partners, as their expertise is needed to tap the full Iran governments. home their by condemned cases many in is Iran in operating because and climate international oil companies that used to be active in Iran have left the country due to poor investment Many companies.several between shared is developmentDownstream development. LNG upstream most significant Its (NIGC). Company Gas subsidiary,Company(PAGC),ParsGas the & Oil Pars responsibleforSouth is the projectmanagesand Iranian National the by dominated is industry gas Iran’s whichis Qatar), Field in North (called reserves. gasnatural of field tcm 13 to Pars 12 hold to South assumed the offshore is Iran in field gas biggest The demand. attempting increase to natural that gas the and country’s exports meeting domestic on be will priority 176 175 174 173 172 171

The Economist Intelligence Unit(2010).Iran,p.9. EIA (2010).Country AnalysisBriefs Iran. It hasbeendividedupfor development in25phases,ten ofwhichare currently online(EIA(2010). The Economist Intelligence UnitLimited (2010).Industry Report: Energy. Iran, March 2010,p.16. InternationalEIA. Energy Statistics; EIA(2010).Country AnalysisBriefs Iran;seealsoIEA (2009).WEO, p.491. IEA (2009).WEO 176 171 Nevertheless, it can be expected that significant volumes of Qatari gas will continue to continue will gas Qatari of volumes significant that expected be can it Nevertheless, , p.488. 172 Theonlygas that isactuallyexported istransported viapipelineto Turkey. 174 Another large field is the offshore Kish field, Kish offshore the is field large Another Country AnalysisBriefs Iran). 175 173 Europe´s Energy Future 53

177 178 , p. 491. North Africa and NigeriaNorth Africa and IEA (2009). WEOIEA Ibid., p. 494.

177 178 Figure 18: Iran - natural gas production gas - natural 18: Iran Figure Nonetheless, Nonetheless, Iran has expressed plans to export up to 35 bcm/y and of other gas to European Turkey markets, either through the planned Nabucco pipeline or via alternativeroutes. Inplans to become order feasible, Iran would for first haveto these improve the investment climate. Furthermore, the development of South Pars needs to be continued and theexisting transport route linking southern Iran with must Turkey be expanded. As it is questionable whether thesesteps will betaken, the IEA expects no more than a slight increase in exports from Iran to and Turkey other period. the projection over European markets In order to draw a picture comprehensive of EU it external natural gas is supply, important to include Nigeria as well as countries African North analysis. the in Sea Mediterranean the of south countries the might play an important role in diversifying Europes gas imports. As illustrated at a number of the African hold countries shares of considerable global reserves and, gas chapter, as proven onset of this a result of their geographic location, are predestined to contribute significantly Europe’sto security of gas Whether supply. or not the major region’s gas producers Algeria, Egypt, Libya and Nigeria will of subject is the needs import rising EU’s to the cater to capacities transport and export sufficient have in this section. analysis 4.3.4 All in all, it is fairly unlikely for Iran to become reserves. a The major main reasons supplier for to this are, the first,EU thefact despite thatits a largemassive reservations political prospects and, third, share to production related gas the uncertainty of second, domestically, Iraniangas isconsumed partners. with European cooperation a closer preventing vast vast majority of the gas produced for domesticconsumption. Additionalpreventing factors Iran from sanctions. and international development gas to delays frequent are a major exporter becoming 54 Europe´s Energy Future about 9bcmperyear. Statoil and BP are the joint operators of the In Salah and In Amenas gas fields, which have an output of expanded to 20bcm in thefuture. maybe it yeargasand per of delivers bcm pipeline 11.5 the Morocco.2005, via Since Spain toAlgeria linking pipeline) Gas Maghreb-Europe also (PDFG, Gasline FarellDuranPedro the and bcm/y; 33.5 of Gasline (EMG, also called Transmed), connecting Algeria to Tunisia and Italy with an upgraded capacity Algeria to Europe - the realization of the project, however, is uncertain. however, is project, via the of Nigeria realization from the gas - Europe transport to eventually Algeria might which phase, planning the in currently is pipeline ehoa n Gsi oil ae cmie cpct o 2 bm e ya. n h cus o planned of course the In year. per capacity expansions until 2013thisfigure is bcm estimated tonearlydouble. 21 of capacity combined a have Touill Gassi and Bethioua Arzew,Algeria’snamely plants,of one-third aroundmakesLNG Four totalexports.up gasLNG Skikda, project, with a design capacity of 4.5 bcm/y, is set to be fully functional in 2013. in functional fully be to set is bcm/y,Touat 4.5 The of term. capacity near design the a with in project, year per gas of byTotal, bcm 1.6 developed deliver is jointly to expected and project Cepsa Timimoun and Sonatrach the addition, In bcm. 2.9 of capacity annual an at Repsol by operated is field Nord Reggane the as such fields new covers which example, for Project, is presently working on a number of projects with the support of foreign investors. The Southwest Gas country the Sonatrach, state-owned by dominated is Algeria in production gasnatural Although tcm. 2.4 of reserves proven holds which R’Mel, Hassi field, large one from mainly gas its extracts Algeria and external gas hub. gasexternal and to pipelines export all fact, In Europe as well as field. LNG export terminals are gaslinked to Hassi R’Mel, making R’Mel it the country’s main internalHassi the to country the of regions other in projects upstream connects which network, pipeline domestic vast a commands Algeriatransport, of terms In of which were transported viapipelinegas bcm and21bcmintheform ofLNG. 32 roughly bcm, 53 about to decreased marginally exports and bcm 81 at stood production one than less this, Of 2008. thirdwas consumed domestically, in the and 58bcm remaining shipped was to foreign markets. bcm 2009, In 86 nearly to amounting neighbours, Mediterranean its of that exceeds significantly production gas total country’s the tcm), 4.5 (roughly continent the on reserves gas largest second the holding from Aside suppliers. gas African Europe’s among out stands Algeria Algeria analysis ofAlgeria’s future supplypotential seemsnecessary. production and export capacities are of utmost relevance to European markets. Therefore, a thorough Algeria’sevolution of The in industry recent the country’s promisinggas and years been has projected has experienced delays in the authorization phase. authorization the in delays experienced has same capacity, the design Algerian Italian transmissiontie the networkwill gas to in features Tuscany. which however, link, This Galsi, 2011. by operational be to set is and Sea Mediterranean the across coast Spanish the to R’Mel Hassi way. connecting under at currently aims capacity,transmission are bcm/y 8 projects a with pipeline Medgaz, additional three Europe to exports up scale to order In 186 185 184 183 182 181 180 179

EIA (2010).Country analysisbriefs Algeria. Ibid. The Economist Intelligence Unit(2010).Algeria,p.12-13. Mott MacDonald(2010). Ibid. The Economist Intelligence UnitLimited (2010).Industry Report: Energy. Algeria EIA (2010).Country AnalysisBriefs Algeria. InternationalEIA. Energy Statistics; EIA(2010).Country AnalysisBriefs Algeria. 182 181 Supplying theEUnaturalgasmarket. FinalReport. November 2010,p.9. Currently, Algerian gas is exported to Europe via two lines: the Enrico Mattei Enrico the lines: two via Europe to exported Currently,is gas Algerian 183

184 ial, nw .0 k TasShrn gas Trans-Saharan km 4.400 new a Finally, , March 2010,p.12. 179 186

185

Aside from pipeline gas, pipeline from Aside 180 On top of that, of top On Europe´s Energy Future 55 According to most According of the scenarios in displayed Figure 19, Algeria to is twice roughly produce likely as much gas in natural 2030 as The it rising especially does trajectories, of today. the 2008 and 2009 IEA moderate of assumption the on that, suggest Scenario, Policies New 2010 IEA the and cases Reference economic growth and regardless of political decisions strengthen its takenposition as a globalgas It supplier. by isstriking the thateven in Algeria EU, the IEA 2009 450 Scenario, which implies reduced substantially gassignificantly consumption will in Europe, Algeria will still expand its production by almost 60% between 2007 and projection period. over the gas production of Algerian stagnation 2030. Only the Mott MacDonald 2010 Low Provided forecasts Case a that the planned transport toremainpotential an gas essential supplier to the infrastructure EU in the future. Not only is its gasproduction set projects will be completed, to it increase tremendously, is Algeria also estimated that itsexport capacity may rise has to as much as 90 bcm the Base Case, on the other hand, 2010 High Case. The moderate Mott MacDonald’s to in 2030, according expects exports to reach a level of 72 bcm in the In same the year. Low Case, domestic consumption to surges 65 bcm export capacity in to a 2030, mere thereby reducing 20 Algeria’s bcm per annum. In sum, Algeria seems to be headed a towards energy prosperous future. With stable economic growth, the country will be capable of providing additional supplies, of approximately 10 bcmto 30 bcm,to Europe until 2030. Thanks existing to and planned very is Algeria Thus, Sea. Mediterranean pipelinethe across volumes these deliver to means the with endowed infrastructure, LNG and Algeria is also gas suppliers. among the EU’s position its prominent defend to likely Egypt Egypt holds the third largest proved natural gas reserves in Africa, after Nigeria andthe second Algeria,producer largest (59 bcm in and2008 and 63 bcm is domestically. in 2009) supplies on the gas continent. Into contrast its total its of two-thirds around consumes it however, Algeria, neighbor western While this deprives foreign consumers of access to a large share of Egyptiangas, thecountry isstill a major gas Over exporter. the past ten years production has increased tremendously, nearly tripling Figure 19: Algeria - natural gas production gas - natural 19: Algeria Figure 56 Europe´s Energy Future Figure 20:Egypt -natural gas production is expected to be limited by Egypt’s surging domestic gas demand and political interference in the in interference political allocation ofEgypt’s gas and reserves. demand gas domestic surging Egypt’s by limited be to expected is exports However,EU.of expansionthe the in supply gas securing tocontribute likely most will gas of projectionthe of This, period. course, beneficial is European for consumers, additional the as volumes gas production, which presently reaches roughly 60 bcm per year, is expected to increase steadily over two LNG facilities are presently in place: an ELNG plant situated in Idku, comprising two trains with trains two comprising Idku, in situated plant ELNG an place: in presently are facilities LNG two markets,remote such to available LNG of amounts Tothese Korea.make South and India Japan, US, the do as role,considerable a play Spain) and France (e.g. consumers EuropeanEgypt’s LNG. of form the consumers in to shipped are 2009) in (approx. bcm Egyptian gas exports 13 of 70% remaining The couldeventuallybcm/y expanded10 capacitybe of toTurkey.design a and bcm/y 3.8 of throughput current a with link This (AGP). Pipeline Gas Arab the by Egypt to connected are which Syria, and Jordan Lebanon, neighbours its are gas pipe Egyptian of recipients Major exports. total in pipeline gas of production sites connectto share(30%) to foreign markets. low the fairly This explains network pipeline small relatively a operates currently Egypt infrastructure, transport to regard With transports for 1.7bcmannually. Israel, to Egypt links physically and AGP the from away branches which pipeline, Arish-Ashkelon the Delta and the Western Desert. Nile the Sea, Mediterranean the in fields from sourced be to continue probably will country’sgas the production.and specific no While data is available size the for individual of share lion the fields, gas of infrastructure as licensing, such activities upstream controls which Corporation, Petroleum General state-owned the by dominated is sector gas Egyptian the that mention to important is it all, of First markets. European reaches it how and originates gas Egyptian where is question the said, being This since 1998,in2009Egyptian exports amounted to almost 20bcm. 192 191 190 189 188 187

MacDonald (2010). The Economist Intelligence UnitLimited (2010).Industry Report: Energy. Egypt, July2010,p.14. MacDonald (2010). InternationalEIA. Energy Statistics; BP(2010).Statistical Review of World Energy. EIA (2010).Country AnalysisBriefs Egypt. InternationalEIA. Energy Statistics; EIA(2010).Country AnalysisBriefs Egypt. Supplying theEUnaturalgasmarket , p.11. Supplying theEUnaturalgasmarket , p.10. 188 192 Egypt holds proven reserves of approximately 1.7 to 2.2 tcm 190

187 191 Furthermore, 189 and its Europe´s Energy Future 57 While the LNG export 193 The Base Case shows an 195

197 . Libya Analysis Briefs Country 194 , IHS. Available online at: http://energy.ihs.com/News/published-articles/ at: online Available IHS. , Libya’s fairly Libya’s low gas production andexport rates may be 199 In order to increase exports to Europe there are plans to scale up 198 Libya - Land of Emerging Opportunities Emerging of Land - Libya , p. 10. Supplying the EU natural gas market , p. 9-12. Supplying the EU natural gas market , p. 12. Supplying the EU natural gas market Given proven natural gas reserves of 1.5 tcm, these relatively lowexport rates seemstriking. , p. 14. Unit (2010). Egypt Intelligence The Economist . Egypt Analysis Briefs EIA (2010). Country MacDonald (2010). MacDonald (2010). . Energy Statistics EIA. International Libya; Briefs Analysis EIA (2010). Country MacDonald (2010). (2007). D. Massaras, accessed: 03.02.2011); EIA (2010). (last articles/libya-land-emerging-opportunities.htm 196

193 194 195 196 197 198 199 Greenstream’s capacity to Greenstream’s 20 bcm in the near future. The remainder of exports is transported in the form of LNG, processed at a single LNG plant in Masra EL the Brega, which Sirte is Basin. fed by From six there, small Libya’s fields entire in LNG production, whichof 0.5 amounted bcm in 2008, is toshipped to theSpain. number small capacity capacity is 16 bcm, only 13 bcm were actually exported in 2009, 6.7 bcm of which were destined for European consumers. all Interestingly, LNGfacilities are operated with the help of foreign investors, and Gaz de France. BG, EGAS including Petronas, The marked increase in Egyptian gas production in recent years is expected to continue, mainly thanks thanks mainly continue, to expected is years recent in production gas Egyptian in increase marked The to offshore fields in the MediterraneanSea. Therefore, allproduction forecasts of Mott MacDonald 2010 draw a rather optimistic picture (Figure 20). The High Caseprojects gas supply to doublefrom current levels to 120 bcm in 2030, causing exports to climb to as much as 60 bcm/y. The Low Case, on the other hand, estimates production to increase but to marginally, no more than70 bcm at the end of the thisprojection period.case Moreover, projects domestic demand to riserather drastically to the point where Egyptian imports of 25 bcm may berequired by 2030. a composite capacity of 9.8 bcm per year and the SEGAS terminal at Diametta, whichbcm produces annually and 6.5 is set to be upgraded by a second train in the near future. As mentioned above,Libya´s exports rose to roughly were delivered 10 by bcm in2009. one single More pipeline, than Greenstream, 90% of exports which from Mellitah runs to beneath Sicily, Italy. the Mediterranean Sea attributedto thefact that, in the past, political prioritieshave favoured the oil industry rather than Libya’s overall gas production has risen sharply, from 6 from bcm in 2003 hastoproduction gas 11 risen bcm sharply, overall in 2005roughly and 16 Libya’s bcm in 2009, which is in line with the ambitioncountry’s to becomean gas important supplier in the great promise gas deposits Libya’s 100, factor exceeds still ratio While the region. reserves-production country’s the of most up making currently fields, prominent most The supplies. gas future for potential Eni- of the part form which fields, Salam es Bahr offshore the and Al-Wafa onshore the are production, since 2005. has been fully operational that Gas Project Libya led West intermediate intermediate trajectory expectinggas production to risesteadily to 92 bcm in 2020 and106 bcm in levels. current at remain to 2030 and exports In view of the positiveoverall trend in the Egyptian gas sector, onemay assume moderate that supply the relatively to Europe of roughly 7 bcm it is important to capacity in consider expansions. domesticEgypt’s However, policies and consumption, 2009 will be augmented according to scheduled will as whether determine the eventually these country factors will become a major or exporter a net in the future. gas of natural importer Libya although Compared to from its far North is African Libya neighbours, a considered minor supplier, gas unimportant for Europe´s energy security. With exports of about 10 bcm per for only annum, 12% of it the total region’s accounted exports in 2009, whereas Algeria accounted for 65% and Egypt for 24%. 58 Europe´s Energy Future Figure 21:Libya -natural gas production Compared to production scenarios, export availability export scenarios, production to Compared 2030, respectively. project afairly Cases in andLow bcm 20 or 27 reach forecastto they supply, Base which gas Libyan of evolution pessimistic 2010 tomoderate MottMacDonald the In contrast, period. projection endof the the by bcm 55 to exceed production anticipating outlook, optimistic more Case even High an 2010 provides MacDonald The 2030. by bcm 47 to expand 41 as much will as to years twenty production next the triple within will gas output current naturalthat assume Libya’sscenarios IEA three 21, All decades. two Figurenext the over massively in displayed scenarios most to According an of result a as least expansion ofgas-fired electricity generation.not unfold, might sector gas the for future prosperous a change, to about is production, as technical limitations could not be overcome without external assistance. without not be overcome could LNG limitations of expansion technical an as impeded have production, sanctions UN time long a for that, of top On business. gas the and 23.2 bcm in 2009, which is less than half of Algeria’sof half than less is which 2009, in domesticbcm As accounted23.2 output. consumption and reserveAfrica,in holder Nigeria´s gasannual production amounted more no 2008 to in bcm 32.8 than largest the being despite that striking is It LNG. of form the in transport, sea through entirely almost has managed to supply large volumes of the commodity to a wide range of consumers across the globe, complicates pipeline deliveries somewhat to location distant geographic export its markets tcm),such as (5.2 those in AfricaEurope. Nevertheless, in Nigeria reserves gas proven largest the holding While The EU’s fourth largest external gas supplier, Nigeria, is located further south on the African continent. Nigeria Libya needsto lower therates ofgas flaringandincrease investment ininfrastructure. and transportproduce additional of volumes order In gas. maketo additional volumes to available to foreign markets, capacities technical limited and demand electricity domestic in rise expected an to 201 200

A functionof total supplyanddomestic consumption. MacDonald (2010). Supplying theEUnaturalgasmarket , p.12. 201 forecasts seem somewhat bleak. This is due is This bleak. somewhat seem forecasts 200 Asthis Europe´s Energy Future 59

206 this 203 The project’s realization, realization, project’s The 207 202 . The date exact depends heavily 205 , March 2010, p. 13. , March . Available online at: http://www.wagpco.com (last accessed: 03.02.2011). (last http://www.wagpco.com online at: . Available . Energy Statistics International The terminal utilizes six trains, with acomposite capacity of more than 30 bcm per 204 208 Country Analysis Briefs Nigeria; EIA. Analysis Briefs EIA (2010). Country Nigeria. Analysis Briefs EIA (2010). Country Nigeria Energy. Report: (2010). Industry Unit Limited Intelligence The Economist Nigeria. Analysis Briefs EIA (2010). Country About the pipeline Gas Pipeline Company. African West Country Analysis Briefs Nigeria. Analysis Briefs EIA (2010). Country Unit (2010). Nigeria, p. 14. Intelligence The Economist

202 203 204 205 206 207 208 Moreover, as Moreover, previously indicated, Nigeria and Algeria are in the process of discussing the feasibility of a Trans Saharan Gas Pipeline, reaching from the Niger Delta on to the Mediterranean the Sea. export Nigeria´s terminal NNPC of and Algeria’s Beni Sonatrach have Saf signed a project. the of development further the Memorandum promote to 2009 in of Understanding year. An year. additional trainfor this plant is scheduledto become operational in 2012. three Moreover, new LNG terminals are expected to commence inoperations 2012 however, however, is complicated by the sheer length Nevertheless, the of prospects gas for Nigeria’s industry have improved considerably in the 2009, when the pipeline as well as oil NNPC and and to by set agreed the up to develop Gazprom called country’s Nigaz a new joint venture the risk of sabotage. sector. gas on potential investment andconstruction delays caused by security threats as well developments. as LNG market Although most of Nigeria’s exports are shipped in supplies gas to the its western neighbours and Benin, Ghana Togo form via the African West Gas of Pipeline. The LNG, since partners. three to all 2010 off branches it where from coast, the along the offshore runs link this of section main country also Its initialexport capacity is 1,7 bcm/y, buteventually itwill reach its designcapacity of 5 bcm/y. Forecasts Forecasts of Nigeria´s natural gas production Intelligence Unit are (2010). Neither of limitedthe previously cited organizations, suchfigures to as the provided IEA, EU,Mott EIA and MacDonald, provides gas Economist The by supplyforecasts Nigeria. for considers the period between Economist The 2009 Intelligance and 2020 and little Unit only information isavaible regarding scenario assumptions. underlying Figure 22 a illustrates clear trend the regarding future development gas of supplies. Nigeria’s Starting at 48 bcm in 2009, the production curve is assumedto risesteadily over the next alternative of lack the to Due bcm. 100 roughly reaching decade. double, than more to By projected is production 2020, scenarios, it however, is difficult toestimate how changes in political economic or conditions would impact on Nigeria’s gas supply. Moreover, the availability of gas exports might be curtailed by the for 12 bcm in 2008, 20.8 bcm were available for exports in the same year. in the same exports for available 20.8 bcm were 12 bcm in 2008, for Most of the country’s gas reserves are situated in the Niger the on impact an has This Delta, infrastructure. needed urgently of where establishment the prevent bunkering security and issues, sabotage oil and gas business and causes the waste of associated gas through gas flaring. political Moreover, thereby apreventing investment, instability foreign deters modernization and expansion of upstream activities. Nevertheless, in 2008 Nigeria supplied 14 bcm of LNG most of markets, to which foreign was shipped to destinations in Europe (9.3 bcm), the US (0.4 bcm),Mexico (2 bcm) and Asia (2 bcm). to Compared the previous year, however, LNG exports went down by 30%. According to the EIA 2010 dramatic plungewas aconsequence oftechnical difficulties obstructingone of country’sthe major LNG processing facilities. The bulk of Nigerian LNG is producedShell, at Corporation, Petroleum National the Nigerian the NNPC, by Nigeriaoperated jointly Island, Bonny Liquifiedon facility Natural Gas and Agip. Total 60 Europe´s Energy Future Figure 22:Nigeria -natural gas production second largest gas supplier, is assumed to experience increasing production rates until 2020 or 2025 or 2020 until rates production increasing experience to assumed supplier, EU’sis gas largest second the Norway, exports. for gas of volumes sufficient of availability the jeopardize could demand domestic in increase expected the development, their in delays are there If Peninsula.Yamal the on and Sea Barents in the fields gas new growth, of development output timely the of on dependent critically however, pace is The rates. production declining currently despite long-term, to mid- the in AccordingEurope’sRussia, tomostscenarios, externalleading natural expandoutput gaswill supplier demand. domestic gas in growth swift and simultaneous a by diminished is gasexportto ability rates,their but production rising experience Others resources. these of potential full the tap to necessary capacities exploration,transport and the production lack but havelargeresourcecountriesbases, Some results. differentiateda analysis current the of likely and future suppliers gas ambiguous yielded has EU the of supply. gas natural of Europe’s Yet, security of terms in optimism for cause a definitely is This region. located are within reach reserves of the gas EU, existing namely in of Russia and bulk the Middle the East, but that also suggest in North Africafindings and in The the Caspian globe. the across distributed firstThe chapter the of part shownhowproven has ultimately and reserves recoverable resources are well as further afield have the potential toas contribute toneighbourhood theimmediate bloc’sEU’s the rising gasin import needscountries in theand future. regions several that shown has chapter This Concluding remarks toEuropean on as well Nigeria’s exports as domestic gas demand. security into rising investment and legal physical, translate the on will hinge primarily capacities will however,markets, additional these not or Whether years. coming the in swiftly production its expand may and reserves gas considerable holds fact, in Nigeria, and even more sointhelongterm. country´s surging domestic gas consumption, which is projected to triple by 2020, to 39bcmor to 2020, by totriple more. is projected which consumption, gas domestic surging country´s 209

Ibid. 209 Therefore, much uncertainty remains as to Nigeria’s likely export potential in the mid-term, the in potential export Nigeria’slikely to as remains uncertainty much Therefore, Europe´s Energy Future 61 and declining rates thereafter. Its role as a major gas supplier may thus be threatened in the long term long the in threatened be thus may supplier gas major a as role Its thereafter. rates declining and too developed are Sea Barents Artic and in the in the shelf, continental fields on the Norwegian if new fields. of other the depletion for compensate to little sluggishly yield too or if they As far as the Caspian region countries are particularly and qualified toserve as Central future gas suppliers to the Asia EU, namelyAzerbaijan and are concerned, the Turkmenistan. While Azerbaijan’s proven analysis reserves are highlighted comparatively small, the that development of two the Shah Deniz field has turned thecountry into a netexporter of naturalgas andof thethis start of project phasein II 2017 is expected to increase Azerbaijan’s exports substantially. Themain to exports is gas Europe Azeri This the lack puzzle current of regarding needs infrastructure. transport concern to be resolved if Europe is to tap the country’s supply potential andtoaddition, Turkmenistan may diversify play its agas noticeable imports. role In with regard to gas Europe’s supply, as it controls huge gas reserves and as it may more than quadruple its exportscause andtoproduction muchmay grow than slower desired. policy investment on upstream exports by 2030. Yet, the country’s rigid production to the offshore EU, to be transported is unlikely facilities onshore Turkmen from While gas and Europe. Turkey to 10 bcm/y of exports provide eventually may contributes and suppliers The Middle anothercountries constitute Eastern gas group ofgas suppliers, two of whichexamined were EU’s the among already is Qatar Iran. and Qatar namely study, this in closer roughly 2% to Europe’s overall gas imports. Moreover, due to its massive natural excellent gas upstream and reserves transport and infrastructure, the country is likely to consolidate or even expand this share in the coming decades. Since gas is infrastructure exported re-gasification solely of availability in the by the determined be will EU form the to of supplier a as LNG, role future Qatar’s however, US the Europe, markets, gas regional major three the in developments price gas by as well as EU the in in reserves gas largest second the holds which Iran, that unlikely rather is it time same the At Asia. and share a large that this are for The main reasons the EU. supplier to a major will gas become the world, and prospects, production to related uncertainty is there that domestically, consumed is gas Iranian of European partners. with cooperation a closer prevent reservations political that Finally, a number of African countries have been subject to analysis in this the chapter, majority which are in located North of Africa. Algeria is expected to or retain even expand its prominent position among EU gas suppliers in the future. Not only does it control massive natural gas has an reserves, elaborate it pipeline and also LNG infrastructure system at its disposal, which is set to be expanded By 2030, further. it may be able to supply around 10 to 30 bcm/y of additionalgas to Europe. Egypt, on the other hand, is the third largest gas reserve holder and in Africa, transport but, due capacities, to it limited production currentlyis While exportingonly Egyptianexports areexpected to rise ina small thecoming years as amount aresult of ofit capacityis important naturalexpansions, to consider the country’s domestic policies and risinggas to the EU. consumption. These factors will eventually determine whether the country becomes a major exporter or a net gas. importer Similar of to Egypt, natural Libya’s current gas production andexports arefairly this Yet, limited. period. projection the According over tremendously increase to may output the however, scenarios, presented will not necessarily be reflected in largervolumes ofgas exports, sincerise sharply domesticand demand transport infrastructure iswill remain set limited. The to largest gas reserve holder in Africa supplier gas external and to gas the far largest fourth EU, Nigeria, from European is relatively situated ratio the of terms in underperforms currently Nigeria Algeria, as such country a to Compared markets. to predicted is production gas Nigeria’s Although potential. resource and volumes production between rising and investment deter may concerns security persisting years, coming the in significantly increase exports. gas in growth the may slow consumptio 62 Europe´s Energy Future supply sideanalysis. range,This important2030. an as in served bcm wide, referencepointalthough of for subsequentthe forecasts, the report concluded that the EU’s different natural the gas demand on is likely Drawing to reach period. a level projection of 470 to 650 the of end the by bcm 530 to 470 to decline to demand RES policies, alongside a recovery of nuclear energy and relatively high CO relatively high and energy nuclear recoveryof a alongside policies, RES ambitious featuring scenarios the contrast, In 2030. by bcm 650 to 600 reaching decades, two next low-carbon technologies, and slack climate policies forecast gas demand to grow consistently over the of deployment limited growth, economic comparison high assuming scenarios Their The forecasts.trends: possible two revealed demand gas natural the analyzed report the background, this Against considered relevant aswell. is assess, to difficult being while technology, of impact The demand. gas of determinants important to be seem extent, asimilar to sectors all affecting policies, climate and energy addition, In sectors. the strongest have impact on gas demand. Their effects to are particularly pronouncedidentified in the power and industrial were developments price fuel and growth GDP EU undertaken. was demand gas influencing factors main the of analysis qualitative a Subsequently, made. assumptions the and employed variables the explaining and listing by and methodology and composition data respective organizations. To make each approach transparent, the report commenced by explaining the scenarios’ up to the year 2030, examining a broad range of scenarios compiled by a number of renowned research package thereforework this has of demand EU sections forecastsgas with major two dealt the of one Future levels of EU import dependence are, to a great extent, a function of domestic demand. The first gas consumption in2008. EU’s the of 15% to 13 covered already which gas, pipeline traditional to alternative an as LNG of use the supports EU the addition, In Africa. North and East Middle the Asia, Central Basin, Caspian the in producers natural gas with relations energy intensify to seeks and Nabucco and Stream Nord as such an attempt In to diversify Algeria. its suppliers and transit and routes, Norway the EU supports a Russia, number of theEUneeds new pipelineparticularly projects - year, countries third from Each gas 2008. of bcmin volumes large import to 550 about to amounted which demand, domestic is insufficient cover production to gas EU time, same the At generation. power in and industries, in sectors, commercial and residential the in importance particular EU of being of Consumption, 25% Energy approximately Inland Gross for accounts currently gas that shown has report the of section first The volumes.required the obtainmay EU the wherefrom so, if and, decades two next the over EU the in natural whether significant play is a to going whole is role a gas as the report underlying question The the projection period. which regions and countries will be able to supply the EU with the required amounts of gas throughout examinedreport the background, this Against imports. on dependent increasingly be will EU the that were analyzed first. Demand forecasts In theanalyzed. next step, been they were have compared with EU production organizations forecasts, whichand other revealed Administration Information Energy U.S. the Agency, Energy International the Commission, European the by compiled scenarios market supply.energyrange and of naturalTowide demand gas EU a developmentof end, future this the on security of gas supply. Subsequently, a sustainedthe two main chapters of this to report have challenges attempted existing to shed light and Europe in consumption gas of features structural on focusing potential its and EU the in evolutiongas overnatural the nextof two decades.role First,current the role ofthe gas inof the EU’soverview currentan energyprovided mix was presented,has report This 5 Conclusion 2 and oil prices, predict gaspredict prices, oil and Europe´s Energy Future 63 The question tofirst be in answered the supply side section, then, concernedextent the whichto the EU will be able to cover such levels of consumption withdomestically produced gas. According to all scenarios compared in this report, EU gas production declinesby more than will production 50% domestic that over suggest the scenarios The fields. next gas two existing of depletion the to due decades at 70 100 to stand bcm in 2030, a thus of share probable covering projected less than 20% of the EU’s countries. third from to be imported have to 580 bcm, will gas, 370 remaining The consumption. gas examining to turned report the requirements, import future EU’s the of estimates reached having After the supply potential of selectedregions andcountries. Russia and the MiddleEast aswell as Africa and North the Caspian Basin control the bulk of agasexisting detailed reserves. analysis However, of consider. to important more often are factors other has that shown suppliers future potential the EU’s capacities transport and production exploration, the lack but bases resource large have countries Some necessary to tap the full potential of thoseresources. Othersexperience rising productionrates, but demand. in domestic growth a simultaneous is diminished by gas export their ability to The country analyses undertaken in this report suggest that Russia will remain the to largest the supplier EU throughout the projection period. Accordingto theIEA net exports will country’s increase from 209 bcm in 2010 2008 to 269 bcm in 2030. is Norway the currently NewPolicies Scenario, the EU’s second largest gas supplier and most of the 99 bcm of gas exported in 2009 went to European Most markets. productionforecasts indicate that thecountry may be ableto deliver an additional 20 to 25 bcm in the second half of Norway willthe onlyprojection period. be However, ableto maintain a high level of exports under the condition that new fields on the Norwegian continental shelf, in the other fields. of for the depletion compensate to Sea yield enough Artic and in the Barents In the Caspian region, two countries have proven to be particularly qualified to serve suppliers as future gas to the EU, namely comparatively Azerbaijan small and resources, Turkmenistan. Azerbaijan, expected is although projection period. endowed increase to The with IEA its 2010 New Policies considerably exports Scenario35 throughout projects bcm Azerbaijan´s by the 2030. European net markets are expected to reach exports to be the other main hand, controls recipients. huge Turkmenistan, gas on reserves and the it may more than quadruple its exports throughout the reach 85exports bcm may netby 2030 period.projection and Thecountry’s about 10 bcmgas of may and Europe. eventually Imports be could make to exported from Azerbaijan and Turkey Turkmenistan gas supplies via the Southern Corridor. its plans of diversifying to the EU’s a major contribution Of the Middle Eastern countries, the most promising future supplier to the EU is The Qatar. country already contributes more than 2% to Europe’s overall gas imports and, gas due reserves to and its massive excellent natural upstream and transport throughout the infrastructure, projection period. this Iran, on the share other hand, might israther unlikelyto well become a major increase gas supplier to the EU despite holding the world’s second largest gas reserves. A large share gas is of consumed productionprospectsdomestically, areIranian uncertain, and political reservations prevent partners. with European closer cooperation Potentially important futuregas supplierscan also befound on the Africancontinent, particularly in the North. Algeria is expected to consolidate or even expand further on its planning also is country the reserves, prominent gas natural positionmassive control it does only Not amongsuppliers. EUgas extending its already elaborate network of pipeline and LNG infrastructure. By 2030, Algeria may be able to supply the EU with an additional 10to 30 bcm ofgas. Itstotal netexportsreach may as much as 72 bcm by the end of tothe period theprojection according MacDonald 2010 Base Case. Egypt, on largest third Africa’s being despite EU the to gas natural of amount small a exports only hand, other the At gas this reserve stage, holder. it is unclear whether the country will become a major exporter or a net importer of natural gas, although the MacDonald 2010 Base Case projects Egypt’s net exports to 64 Europe´s Energy Future hs en si, t s qal iprat o neln ta Erp i srone b audn gas abundant political by signalsfrom theEUare needed. surrounded is Europe that underline to ordertomakeresourcesin forinvestments, but accessible ensure Europenecessary – these and clear important equally is it said, being This to develop new projects. make investment will decisions companies that assumed be it can positive, reasonably be will Europe in consumption gas for prospects and areas new to granted memberis states) access if Only and forward. go to struggle will gas with EU (EU institutions the supply EU to able projects in investments consumption, gas the future the concerning by commitments political clear without relevant. Moreover,most be will regimes tax and areas new decisions. to access on political about decisions countries, depend producing In much very 2020) (beyond production gas of levels future However, when combined, they will be able to that,cover most of the EU’s suggest projected additional import countries requirements. these for forecasts export and production the Moreover, period. projection certainextentEU’sa toarethe Nigeria,likely as naturalserve tosuppliersof gasmain throughoutthe Turkmenistan,Qatar,Azerbaijan,Norway, and Algeria, Russia, that shown have analyses country The much willdependonissuessuchaspolitical stability andinvestment security. However, decades. two next the suppliers over EU Nigeria among position strengthen its to potential 2030, the has before EU the to supplier relevant a become to unlikely is Libya While disposal. their at resources significant have countries both as gas, natural with EU the and supply Libya’s to potential Nigeria’s analyzed report this Furthermore, period. projection the throughout Egypt from gas of amountssignificant anyprocuring way,on count Either not 2030. should in EU bcm the 20 to amount