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.

THE OIL AND GAS RESERVES IN NORWAY

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”.
THE COUP – ENABLING TECHNOLOGIES AND CHALLENGES

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.

A COLOR REVOLUTION IN RUSSIA: SCENARIOS AND RESPONSES

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.

The post OIL AND GAS ALTERNATIVES RUSSIA IS NO LONGER — SO THE MAIDAN GOES TO MOSCOW first appeared on Global Policy.

On October 17, 2018, news agencies reported that the Polish state-owned company PGNiG and the American company Venture Global LNG had signed an agreement on the annual supply of two million tons of American liquefied natural gas for twenty years. PGNiG CEO Peter Vozhnyak marked this result as a huge strategic victory of Warsaw in the international market. In particular, calling it a proof of Poland’s ability to completely free itself from gas dependence on Russia. In addition, according to him, the Americans offered conditions “twenty-something percent cheaper than the conditions of Gazprom.”

The result looks like a miracle that violates not only the principles of the market economy, but also directly contradicts the elementary economic geography. Pipeline gas from a close source was a third more expensive than liquefied gas from overseas? Calculator with this agree resolutely refuses, and as show gradually emerging new details, not without reason.

Under the terms of the agreement, the us side undertook to ship about 25 gas tankers per year on a Free on Board (FOB) basis from its two Calcasieu Pass and Plaquemines plants on the coast of Louisiana. Based on the prices of 2018, for one million British thermal units (a universal value that leads to a common denominator of any fossil fuel that can burn with the release of heat) there take 6.46 dollars. The terms of the contract mean that the Polish gas becomes immediately, as soon as it is pumped from the coastal storage to the ship’s tanks, crosses, so to speak, the ship’s handrails.

Then there are the freight costs of the vessel, crossing the ocean to the port of destination, port and other fees, services of the crew, insurance and regasification (i.e., conversion of product back to the ordinary gas), which (attention!) does not assume the seller and the buyer. The American companies with the sale of LNG in Europe did not come out because with all of the above its total cost (!) at the European terminal, it did not fall below $ 7.63 per MBTU, while the average market price of gas in the European market fluctuated between $ 6.7 and $ 7.5.

Although there were three terrible weeks last winter, when there was a large deficit with gas and spot prices jumped to 11.1 dollars in the short term, during which the Americans even managed to sell as many as three tankers, in General, the EU gas market is quite stable and predictable.

If we consider more familiar measures “per thousand cubic meters”, the gas there costs an average of 220-230 dollars. Russian or Norwegian. Qatar – up to 260 dollars, but it is not in Europe, because the middle East prefers to work with Asia, where the same thousand cubes reaches 370 dollars. Us LNG is coming out about 275 – 285 dollars.

That is, about any 20% cheaper than Gazprom’s gas and there can be no question. Given the absence of Warsaw’s own gas transport ships, as well as the possibility of obtaining any decidedly huge discounts on freight, it is difficult to think of what the poles could so decisively save money that the deal was so profitable. So, lying? As if Yes, but strictly speaking, no. Simply, as usual, say not the whole truth.

To begin with, there is no firm contract with PGNiG at the moment. And can not be due to the absence in nature of the plants themselves. Applications for a construction permit Calcasieu Pass and Plaquemines formally filed, but to this day are in limbo due to the lack of them even an elementary investment decision. Translated into Russian, in addition to the name of these projects no longer have any clear parameters. Including production facilities.

Under US law, in such conditions, no firm contracts can be concluded

However, Venture Global LNG does not violate anything. Just as Peter, Wozniak some rushed to call the result of contracts. In fact, the parties have signed a non-binding Protocol of intent to no effect. Yes, 2 million tons of LNG are present in it, but not today, but from the moment when the construction of plants is completed, theoretically in 2022 (Calcasieu Pass will supply 1 million tons per year) and in 2023 (Plaquemines, also for 1 million tons). Accordingly, any prices stated there are absolutely speculative. Moreover, the specific figures are not disclosed by the parties.

However, the curiosity of the transaction does not end there. Legally, PGNiG is a strictly state-owned company, but this does not mean a strict obligation to supply the purchased gas strictly only to cover the country’s own needs. As mentioned in the sources, and even confirmed by Mr. Vozhnyak, the agreement allows the buyer to determine the future of the goods.

That opens three options development events. The first is netting. Poles can supply this gas, for example, under Norwegian obligations to South America in exchange for the shipment of Norwegian gas to Poland. The parties significantly save on logistics costs. Theoretically possible, but almost utopian. Such transactions are carried out on a parity basis, which means that instead of 270 Warsaw can get gas for 250, but not for 190, as under the current contract with Gazprom.

The second-commercial. American LNG will not go to any Europe at all, but will be immediately directed to the Asian market, where its sale is economically profitable.

The third option implies that no practical action is envisaged at all. Simply both sides pursue their own goals.

The poles need history as a possible lever of pressure on Gazprom in order to get additional discounts on the contract after 2022. Otherwise, hydrocarbons will have to be bought from Germany. And it will be the same Russian gas, but also with an additional German cheat. And so you can try to pretend that there is a workaround. At least make an appearance.
The position of Venture Global is a little better

The trade war with China brought the matter to the complete refusal of China from gas purchases from the United States. This closes 2/3 of the Asian market. In Europe, the product is uncompetitive. The fate of South America is unclear. That makes it unpredictable prospects with sales as a whole. And since according to the American scheme, the owners of LNG plants themselves do not trade anything, only providing a liquefaction service, investors still do not understand – who will buy the services of new plants? And if no one, then why build them at all?

The presence of a” contract with the poles ” allows you to sell the appearance of cool business to American banks, which still have a lot of cheap dollars to invest in the project. But the quantitative tightening (QT) program launched by the fed is gradually closing the window of opportunity. In fact, if a large and long-term customer is not found within the next year, even those 78 million tons of LNG capacities that are already under construction in the US and will be completed by the end of 2019 will be clearly excessive.

And everyone is happy. And the American and the Polish side with a satisfied smile, and the mysterious phrases of the report on achieving strategic success. Venture Global shows that now in the United States for a number of reasons formed a significant surplus of shale gas, a fair share of which is simply burned, and up to half of the volume sold at large discounts from the market, reaching just those 30%.

What is being done is due to the shortage of gas transportation capacity for the delivery of gas to the plants – remains behind the scenes. The poles believe that the plants in Louisiana will be built in four years, and the sea of cheap gas in the US will remain, thereby ensuring the “realism” of the final price by 20-30% below the current Gazprom, that is somewhere at the level of 135-145 dollars per thousand cubic meters. And there are no practical risks, because the agreement of intent has no force of the contract.

Scam, you say? No, it’s just business. For all its conditionality, Poland already now has the opportunity to claim any bonuses from the United States for such a clear public support for American global plans. And it helps to increase the volume of exports. And in reducing the negative foreign trade balance. And the expansion of Gazprom in Europe strongly reflects. And allied loyalty demonstrates. Than not the candidate for a medal! However, better money. Or a military base, the placement of which the poles have been tearfully begging the Pentagon and the White house for many years.

All of it promises quite a tangible money in exchange for virtually nothing. And for reputation can be not worry. Over the past five years, the poles have made about a dozen such victorious relations. One more, one less. Who cares! And by 2022, as the famous Khoja Nasreddin used to say, either the donkey will die, or the padishah. But now the sensation rose noble, and Poland in it pretends to be a triumphant.

Of course, in Moscow, these clownish passes see and laugh quietly into his mustache. How would say the late Viktor Stepanovich, “there were no more such slides, chatby us to push.” That’s true

The post WARSAW SHARPS AGAINST THE RUSSIAN GAS OF THE KREMLIN first appeared on Global Policy.