Europe’s hydrocarbon industry now sits in a precarious position as to the future of its energy supplies. Currently Europe’s energy needs are reliant upon Russia’s natural gas, accounting for 45% of total external supplies, and Middle Eastern oil, comprising 40% of the region’s imports. Although this places the region in a relatively favourable position at present, going forward a European Commission Green Paper has predicted an increased dependence upon external sources of as much as 70% of total supplies over the forthcoming decade.
The energy security question
The European energy security question is likely to become a key issue over the forthcoming two years, with each member state due to submit its first risk assessment of the security of gas supply in September 2010, from which a clear ‘Preventative Action Plan and Emergency Plan’ for each member is expected to be issued during the following year. The security question itself arises from two factors: firstly, the security of the source; and secondly, the associated transit risk of bringing the supplies to the consumer. Current examples of these concerns are clearly illustrated in the development of Europe’s new pipeline routes.
Much interest has arisen out of the forthcoming rival giant pipeline projects, least of all as a result of financial concerns that have beset their planning phases. However, with the IEA forecasting an increase in global gas demand from the 3 trillion m3 seen in 2007 to 4.3 trillion m3 by 2030, it can be comfortably argued that over the longer term the Gazprom led South Stream and Nord Stream developments should be seen as necessary additions, rather than competitors, to the EU endorsed Nabucco line.
Following a lack of robust supply agreements, concerns have arisen as to the security of the energy sources. Although supplies from Iraq and Azerbaijan appear robust, in the longer term Iran, holding the world’s second largest reserves of natural gas after Russia, will need to be considered as a supply source, bringing with it obvious security implications.
Over the 2010 - 2015 period, Infield Systems estimates Gazprom’s capital expenditure on European projects to reach some US$ 6.172 billion. Combined with forecast expenditure on its joint venture with Wintershall, the operator is set to become the region’s biggest spender over the forthcoming five years. The giant Shtokman project is undoubtedly one of the most high profile projects forecast to take place over this period. Once completed, currently scheduled for 2014, the Barents Sea development is forecasted to produce in the order of 8.7 billion ft3/d, and also become a new centre for LNG production in the region.
Whilst other key industry players including Statoil and BP aim to reduce spending over the medium term in an attempt to offset the financial losses experienced over the previous year, Gazprom has remained attached to its ambitious plans of holding 25% of the global LNG market by 2030.
Across the Barents Sea and NWECS region, increased E&P activity from Norwegian operators is being witnessed, particularly in the challenging deepwaters. Following the development of Ormen Lange and Snohvit, Norway surpassed Canada to become the world’s second largest exporter of natural gas after Russia. Norway is well set to be placed as the most secure energy source in the European region over the forthcoming decade. With only 38% of total resources of the Norwegian Continental Shelf having been explored, future production is set to become increasingly dependent upon undiscovered resources.
Across the North Atlantic to the northwest of the NWECS region, enormous interest has been witnessed in the licensing of the Baffin Bay area; an area of 151 000 km2 and covering 14 blocks off Northwest Greenland. Going forward, with the waters off Greenland estimated to hold up to 31 billion bbls of oil equivalent according to a recent US survey, increased interest is expected from both Europe’s and North America’s key industry players.
With rising global energy demands, depleting internal reserves and a need to maintain energy security, several key industry players are now looking to diversify activities into alternative energy sources. Statoil’s HyWind pilot, is the world’s first full scale floating wind turbine and began production north of Stavanger in September 2009. Certainly wind power generation has attracted the greatest government and operator interest within the European region, with key markets including Germany, Spain and Denmark. However, the effect of the global financial crisis has also caused operators to scale back investments into the research and development and the economic viability, and profitability, of renewable energy sources remains remote.
Over the forthcoming decade the European region will undoubtedly witness a momentous change within the energy sector, increasingly determined by government policies on climate change, security and the need to offset the dwindling production rates of the North Sea. Whilst this may appear a daunting prospect, to say the least, with the region’s operators and contractors displaying some of the highest levels of expertise and technological know-how the industry has to offer, Europe sits in a strong position to overcome such increasingly global challenges as deepwater and harsh climates, whilst also becoming a driving force in the development of economically efficient alternative energies.
Catarina Podevyn, Infield Systems
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