OIL AND GAS ALTERNATIVES RUSSIA IS NO LONGER — SO THE MAIDAN GOES TO MOSCOW

This year in Europe the trend was formed. As the political confrontation with Russia worsened, European countries suddenly made an unpleasant discovery for themselves. Their economies were highly dependent on Russian exports and imports. First of all, in terms of energy. In total, Europe consumes about 480 billion cubic meters of gas per year. Of these, a third (about 137 billion cubic meters) produces itself, another third (150 billion cubic meters) buys from Russia, the rest gets from other regions (Africa, both America and the middle East). The issue of increasing energy independence from Russia was put on the agenda.

That’s when everyone looked at Norway

Why Norway? Because of the 27 EU oil and gas producing countries are only three: the UK, the Netherlands and Norway. 137 billion cubic meters per year are produced by their efforts. At the same time, the peak of production in the UK and the Netherlands has already been passed. Reserves are depleted, volumes are declining, and this trend will not be overcome. So all hopes today are placed only on Norway. And the hopes are very high and very long-term.

For example, the whole Baltic States intends in the coming years to completely abandon Russian gas and switch to Norwegian. Finland has similar, though not so radical, plans. Again, the Norwegians are counting on Brussels. In all its forecasts, the European Union believes that the expansion of production in the Norwegian sector of the continental shelf will be able to compensate for the devastation of British and Dutch energy stores. Even Ukraine has recently announced its plans to switch to Norwegian gas.

With these hopes at the beginning of this year everything was fine

Well, not to say perfect, but generally positive. Norway produces not only gas, but also oil at its fields. More precisely, it all started with oil, which in 2000 was produced 1.13 billion barrels, while gas — only 47.3 billion cubic meters. m. Over time, the volume of oil production fell, but the Directorate of oil (a division of the Ministry of oil and energy of Norway) gave soothing forecasts. Yes, oil production is declining. In 2011, it was produced in the country for only 664 million barrels, i.e. almost half. But at the same time the volume of gas production increases! With 47.3 billion cubic meters. m in 2000 — up to 106 billion cubic meters in 2011. One easily compensates for the other. Gas will replace oil and become for many years a growing source of national income.

In a sense, it was. Oil production is projected to fall and by 2014 reached 595 million barrels. Against the General background of the total European oil consumption of 5.3 billion barrels, this amounted to only 10% and, as it were, brought oil out of the public’s attention. What is there to look at it, if it is so clear that 90% of oil is still imported into the EU? At the same time, Russia’s share in imports is insignificant — only 480-500 million barrels. But the confirmed growth in gas production (up to 112 billion cubic meters. m in 2014) not only formed a blissful perception of the picture, but also created in some countries a Frank illusion that Norwegian gas will be enough for everyone. This gave rise to all the euphoria, in particular in Lithuania and Latvia, which formed the current trend.
Then — as in a fairy tale: “And then came the do’er”. In 2014, oil prices collapsed, revealing a number of serious points previously hidden behind beautiful forecast charts. First, it turned out that the main Norwegian deposits have already been developed to a large extent. There are no recent figures for the current year, but conclusions can be drawn about their possible significance — based on data on changes in reserves in the main production areas from the date of their development to 2003.
Area “Ekofisk”. At the beginning of production in 1971, its proven reserves amounted to 669 million cubic meters of oil equivalent (ad). By the end of 2003, there were only 216 million cubic meters of reserves. e. For 30 years of operation, 67.7% of the resource was developed.
District “Statfjord”. Start of production — 1979. Explored reserves — 647 million cubic meters. m ad. In 2003 there the left has only 51 million cubic meters of BC In 24 years produced 92.1% of the resource.
Area “Gullfaks”. Start of production — 1986. Explored reserves — 361 million cubic meters. m ad In 2003-m there were only 43 million cubic meters. m ad Over 17 years developed 88% of the resource.
District “Oseberg”. Start of production — 1988. Explored reserves — 438 million cubic meters. m ad In 2003-m margin was already only 125 million cubic meters. m ad Over the years produced 15 73,1% of the resource.
In 1995, Norway began development of the largest field found on the Norwegian part of the shelf — the Troll area. Its explored reserves amounted to 1612 million cubic meters. m ad In 2003-m there they were only 1,355 million cubic meters of BC on the one hand, as would many more. But on the other… in just 8 years already pumped 15.9%.

Since then, Norway has increased production at a rapid pace

So even stocks of “Troll” to the present time left is clearly much less than if we assume just a linear relationship. Some experts say that there are no more than 6-8 years of production. Similarly, other deposits have become scarce. And some of them, such as, for example, the area “Frigg”, fully developed.
The second important point is the fact that since the end of the last century no really large energy deposits have been found in the North and Barents seas (not only on the Norwegian shelf). We cannot say that oil and gas have run out there. Proven reserves in Norway alone are estimated at about 3.7 billion cubic meters. m. e. in already exploited fields. However, the new, still undeveloped, was found only 676 million cubic meters With an average stock size of one area is no more than 32 million cubic meters. This is-if you count statistically, dividing the total number by the number of areas “in pieces” (there are only 21). And if you look at the real picture, in 13 districts proven reserves do not exceed 10 million cubic meters including 9 districts — do not exceed 5 million cubic meters.
Translated into simple Russian, this means that, as before, once invested in the arrangement of the production area, and then only download and download, will not work. It stocks like “Troll” can be had in a wide range of play figures of cost of production of a barrel. In the end, the cost is permissible to designate at least three pennies. As a result, only the calendar date of achievement of self-sufficiency of the project and the beginning of its net profit will be postponed. With small deposits such jokes can not be turned.

This is what the fallen oil prices revealed

The tale ended. As the Norwegians say — “Snipp, snapp snute, så er eventyret ute” (that’s the end of the tale, and who listened — well done). The exhaustion of old fields is the inevitable consequence. Subsidence of soils. The destruction of the wells. The pressure drop in the layers. This requires accelerating the transition from extensive to intensive production technologies. For example, if initially the oil and gas themselves beaten out of the hole under pressure, now they need to push. In particular, the method of pumping water into the layers. It came to the point that one cubic meter of oil produced consumes up to 5 cubic meters of water, and one cube of gas — up to 16 cubes of water. It’s expenses. And the costs are constantly increasing. Water driven into chalk bags destroys the walls of deposits. This periodically leads to environmental disasters. The last time due to the destruction of the reservoir in the sea was thrown more than 126 thousand tons of crude oil. We often have to repeat exploration. Carry out repair work. And then to drill new wells in the already seemingly old field. As a result, spending more and more money.
As the Director General of the Oil Directorate of Norway, Bente Niland, said in August this year, the country plans to radically reduce costs in the oil and gas sector. “It’s about financial discipline.” The Director is even possible to understand. In ten years, from 2004 to 2014, annual exploration and production costs increased from 70 billion to 230 billion NOK. I. e. three times. And this despite the fact that 2014 is called the peak in terms of investment in the industry. Already in 2015, this figure is planned in the amount of 182 billion kroons, which corresponds to the level of 2012. This is confirmed by the statements of a number of major Norwegian oil and gas companies — like Statoil — on a fundamental revision of their investment plans for the next 5-7 years. Your negative contribution to this reform, the growing technical problems in the fields of “Valhall”, “Move”, “Ula” and “Tambar”, where the company operates BP. And in the Statoil stations “Njord”, “Asgard” and “Troy” things are not better.
It will be very interesting to read the next analytical report of the Oil Directorate, which Norway will publish in January 2015. Especially the section that deals with forecasts. I think there will be a lot of unexpected and interesting. However, most likely, he will confirm the conclusions already made by analysts.

Peak oil and gas production in Norway passed

There are still reserves, and they are quite a lot. Until 2020-2021 will be enough. However, even in this case, the total production will decline. But slowly. Drastic changes will come after this milestone. However, Europe is already becoming increasingly sensitive to fluctuations in world energy prices.
And, curiously, very sensitive bi-directional. It needs low gas prices and high oil prices at the same time. High, as it turns out, it means not less than 60-62 dollars per barrel. Otherwise the entire industry of oil and gas production at least one-third of sags on the costs. A low gas prices — this means no more than 450-500 dollars per thousand cubic meters. That is, the Qatari bar of $ 600-630 per thousand cubic meters is completely unacceptable.
Another important point is the structure of Norwegian energy exports. In particular, the picture for gas (as a percentage of total exports) is as follows: in Germany — 42.4%; in France — 21.3%; in the Netherlands — 9.7%; in Belgium — 8.3%; in Italy — 6.7%; in the Czech Republic — 3.9%; in Spain — 3.7%; in all other countries — 4.0%. It is easy to understand that for the supply of, say, to Ukraine, in Norway there is simply no gas. The question is not even in the absence of transport infrastructure in Europe or money to pay for it in Ukraine itself. There is no excess gas. The word really.
And in the medium term it will become even smaller from year to year. I can hardly be mistaken if I say that the first to fly out of the list of buyers will be those “other countries”, the list of which includes, by the way, all three Baltic States. When there, according to the plans of Lithuania, should come its gas independence from Russia in 2021? I think the Baltic States with these projects is clearly not going well. And not because of the machinations of Gazprom.

In fact, the picture is as follows. In the future, by 2021, i.e. in 7 years, Europe will begin to form a new gas deficit in the amount of up to one third of the total annual demand. And not anyhow, and gas is cheap. I. e. such which anybody, except Russia, can’t deliver. Apparently, this is the missing reason that pushed the United States to implement the project “Ukraine, version of Maidan 2.0”.
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Europe understands this prospect

After 7 years, Russia’s share in European gas consumption is likely to reach 50%. That is why Brussels has already begun to form a new system of European gas purchases. Its main goal is to form a single European gas buyer from individual countries, with which Gazprom will have to deal in Europe. And not with each individual country, as today. On the one hand, this should increase the overall political stability of the EU. On the other hand, it will allow to equalize gas prices for all EU countries and reduce their total value. For today, each country concludes its contract with Russia individually. Because Macedonia 1 thousand cubic meters buys 564,3 dollar, Poland — for 525,5, Bosnia — for 515, Czech Republic — for 503, Bulgaria 501, Greece — for 427, UK — for 313, France — for 393, Germany — for 379.
However, regardless of how Brussels will succeed, for the United States, this scenario means the collapse of the idea of Trans-Atlantic trade Union. Washington will not be able to offer energy prices below Russian ones. From words at all. In this case, no matter how Europeans rested on their traditional Eurocentric views of the world, with 50-60% dependence on Russian gas, the acceleration of the drift of the whole of Europe towards Moscow is inevitable. To stop it is like trying to stop the rotation of the Earth. And the natural consequence of this rapprochement will be the expansion of mutual trade, and hence the strengthening of all sorts of different “not only economic” ties. Hence — the inevitable separation of Europe from the United States. Separation, which will lead to the complete loss of America any influence on the entire Euro-Asian continent. For the US, this actually means a global geopolitical funeral.

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To stop the scenario, America can only total destruction of Russia in order to take control of our oil and gas fields. Or, alternatively, the creation in Russia of such a level of instability that it, as in Ukraine, led to the destruction of infrastructure and turned into an irreplaceable reduction in the volume of supplies. Then Europe will have nowhere to go. This explains the entire American strategy, as well as the sharp inflation of the pace of the us-Russian confrontation.
The USA simply has no time left. There are only 7 years left till the turn. The countdown is already underway. So in the next year in Russia we should expect the most desperate attempts to organize a Maidan in Moscow.