Will rival gas lines meet part way?

Russell McCulley, Jennifer Pallanich
Thursday, May 20, 2010

Two competing gas transportation projects in southern Europe could be combined to increase the future security of European gas supply, Eni chief executive Paolo Scaroni told CeraWeek attendees in Houston in March. According to Scaroni, combining at least a portion of rival projects South Stream and Nabucco could cut costs and boost their economic viability.

‘The two projects can become one in a portion of the track from Bulgaria up to Austria,’ he explained. ‘This will save a lot of capital investment. It will also be more efficient in operational costs, and will increase the profitability of this project, increasing the security of supply into Europe.’

Eni is a partner with Gazprom in the South Stream pipeline, which will run under the Black Sea from the Beregovaya compressor station on the Russian coast to Bulgaria.

Construction on the Nabucco pipeline is scheduled to begin in 2011. The line, which will connect Turkey with Austria via Bulgaria, Romania and Hungary, is designed to help reduce Europe’s dependence on Russian gas.

Natural gas demand in Europe and the Pacific region will grow dramatically, despite a drop in demand last year, Scaroni said. ‘We expect the market to go back to the levels of 2008 by 2012,’ which would represent a 50bcm increase in demand. Pacific region demand will increase another 50bcm by 2020, while China and India will require another 60bcm in the same period and European demand will grow by 180bcm, he said.

Scaroni noted that, aside from a handful of former Soviet block nations, Europe is less dependent on Russian gas than it was 20 years ago. In 1990, he said, the continent imported about 90% of its gas from Russia, while today it imports about 40%.

European nations should further diversify their natural gas sources to reduce the risk of shortages, he said, an effort that could include some collaboration between the South Stream and Nabucco projects. ‘One major problem with security and supply is in the hands of the European Union,’ he added.

The ‘gift’ of gas
Natural gas could potentially meet a number of the world’s energy challenges by 2050, ConocoPhillips CEO James Mulva told the CeraWeek gathering.

‘If oil is “The Prize”, then natural gas is “The Gift”, nature’s gift to the people of the world,’ he said. By 2050, he noted, the world will be populated by 35% more people – 9.2 billion people in total, all of whom will need energy. By then, ‘the idea that all forms of energy are needed will long be accepted’.

Currently, Mulva said, the world uses 107tcf/yr of gas. Proven conventional reserves are 6500tcf, which is a six-decade supply. Throwing undeveloped conventional resources into the mix means potentially more than a century of supply. Add unconventional gas, and that resource base comes out to 38,000tcf, or several centuries of supply.

Harvesting those reserves, however, will face two challenges: governments finding the ‘political will to address long-term energy needs pragmatically’ and overcoming ‘the opposition of the hydrocarbon deniers’ who Mulva defined as ‘wellintentioned people who support renewables at any cost and oppose hydrocarbons at any consequence’.

Mulva later said it would be best not to have EPA mandates but rather standards for clean energy. ‘Just set the standards and let competition take place. Don’t mandate how things need to be done,’ he said. By setting standards that must be met, energy sources can all compete, he added.

Another of CeraWeek’s keynote speakers, Statoil CEO Helge Lund, was also vocal in his support of gas as the natural tonic for some of the world’s future energy supply ills. ‘Dealing with climate change, I’m constantly surprised by the tendency to focus on the most expensive and difficult measures,’ he said. The world had been involved in a very complicated debate over the last three to four years over energy and climate change, with the result that gas had lost ground, observed Lund. ‘Gas resources are plentiful and flexible,’ he said. ‘It remains a mystery to me, and to others, why decision-makers remain somewhat reluctant to exploit the benefits of gas.’ In short, gas is available, affordable, deals with the climate issue and creates jobs. In addition, ‘It’s American, and it’s plentiful.’ It was time, he added, to move from talk to action.

Lund said he sees great potential for natural gas in North America, pointing out that Statoil has invested heavily in obtaining access to acreage in the Gulf of Mexico, including interests in deepwater developments such as St Malo, and the onshore US.

Statoil is also involved in renewables efforts, with its 50% holding in one UK offshore wind farm development and its involvement in technology pilots relating to the installation of wind turbines on floating structures in deeper waters, notably the pioneering Hywind development off Norway. The company right now has ‘limited exposure and engagement’ to offshore wind, Lund said.

Offshore wind faces two main challenges – cost and intermittent wind, Lund added. A more efficient supply chain is necessary, he said. And on the question of wind reliability, Lund had this to say: ‘I don’t think that has been discussed enough.’ OE

Categories: Pipelines Russia Europe

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