The Future of Natural Gas in the European Market - Essay Example

COLLEGE LONDON UCL ENERGY INSTITUTE PhD Research Proposal The future of Natural Gas in the European Market Naima Boutarfa BSc MSc Energy, Trade and Finance 2009-2010 Outline THE FUTURE OF NATURAL GAS IN THE EUROPEAN MARKET 1.0 INTRODUCTION In the world today, energy availability has become a pressing issue with experts having different views concerning the world’s energy situation. In Europe, products made from natural gas are used to produce energy for running machines and for heating built environments. Data gathered from certain quarters predict that there shall be a massive growth in fossil fuel consumption including natural gas over the same period. In their analysis, Time for Change (n.d.) and a number of other organizations have predicted that there will be a steady rise in the use of both fossil fuels and renewable sources for at least the next 20 years. This research seeks to establish the Europe’s energy situation currently and will predict future consumptions and trends based on primary and secondary data collected from various sources. Aims and Objectives Main Objective The main aim of this research is to determine the future energy demand for non-renewable sources vis-à-vis renewable energy sources with greater focus on Natural Gas. Specific Objectives 1. To find out the history of the production of natural gas supplies to Europe 2. To determine the average natural gas demand and consumption in Europe 3. To predict the future of natural gas supply from North Africa in the European market 4. To determine the future of renewable sources of energy in Europe Scope and Limitations Considering the complex and extensive nature of the energy market, this research will be biased towards the natural gas market in the world. The Mediterranean basin will be one of the main focal points in the production and supply of natural gas while numerous other regions will be considered during the study. 2.0 LITERATURE REVIEW Globally, the energy sector has been characterised by a continuously growing number of markets and demand which has resulted in almost unpredictable price swings in the energy sector. It has also been noted that supplies that are established close to historic markets have also been on the decline with supply bottlenecks becoming a more common feature (Campbell, 2000). Europe’s Natural Gas Demand and Supply According to statistics, Europe’s natural gas consumption over the last forty years has increased about 19 times (Euan, 2008). This significant and rapid growth in consumption has been fuelled by the growth in natural gas production in North Africa as well as in the North Sea (Ronald, 2002). All European nations with the exception of Netherlands and Norway rely greatly on imported natural gas. Italy for example produces about 11 BCM (British Cubic Meters) of gas annually against its consumption of 77BCM (Euan, 2008) which means it has always has to import close to 66BCM of gas. The Europe’s gas production reached its peak in 2001 and has since been declining at approximately 8.5 percent per year (Euan, 2008). While in the past, Europe was an exporter of petroleum, today it has become an importer with the level of imports growing increasingly. In 2006 alone, for example, Europe imported 115 billion cubic meters of gas from Russia. A report released by the Energy Information Administration (2004) noted that the total demand for Liquefied Petroleum Gas (LPG) in Central and Western Europe including Hungary, Poland, Czech, Romania and the Slovak republics between 1990 and 1995 was 25.2 million tonnes with an average yearly growth rate of 3.3%. Europe, in 2006, captured an LNG (Liquefied Natural Gas) market share of 25 % which was equivalent to 211 BCM. This logically means that there is a considerable strain in the UK natural gas market today. Generally, Europe consumes 32% of the world’s total oil production Natural Gas Supplies from North Africa The first oil fields to be exploited in North Africa were Algeria’s Zeft oil field and Egypt’s Gemsa oil fields. These were discovered in the period between 1907 and 1910 (Thomas, MacGregor & Nick, 2003). Later other notable oil discoveries such as in Attahadi (Lybia) and Hassi Messaoud (Algeria) were made. The Mediterranean basin has been an important place in the production of petroleum and natural gas that is mined in North Africa. According to statistics, more than 379 Tcf of gas and over 101 billion barrels of liquid petroleum have been discovered, to date in North Africa. Europe has been linked to North African countries such as Algeria, Libya and Egypt by pipeline to boost its natural gas supplies. Climate Change and the Use of Carbon Capture Storage There is consensus among many scholars and professionals that global warming and climate change are serious issues that face the world today. Given that natural gas is a major contributor to greenhouse gases; its production is greatly affected by policies that touch on environmental pollution and conservation. The European Union through its energy policy is determined to limit the rise in global temperatures to 20C compared to those of the pre-industrial error. In order to achieve this goal, a number of measures will be taken as prescribed by the Union. Among these is the adoption of alternative renewable sources of energy, changing business practices, use of fuel efficient machines, and encouraging individual lifestyle change among other ways. Noting the contribution of fossil fuels in global warming, Carbon capture and storage (CCS) has been adopted as a way of mitigating the effects of their production (MCkinssey, 2008). CCS is founded on the principle of targeting large point sources of carbon dioxide and capturing the enormous amounts of gas they produce and storing it by different means away from the atmosphere. Using CCS on modern power plants can help in reducing carbon dioxide emissions to the environment by between 80 and 90 percent compared to those plants that do not use the system or technology (MCkinssey, 2008). However, capturing and compressing carbon dioxide involves the expenditure of so much energy which in effect increases the fuel consumption of coal fired plants by between 25 and 40 percent. This has caused great concerns over the use of CCS systems to reduce the emission of carbon dioxide in the air (MCkinssey, 2008). Yet again, the storage schemes of the CCS systems may not be permanent and their safety is not guaranteed. In addition to the above limitations of CCS, there is the aspect of cost. It is claimed by some quarters that the amount of finance spent on CCS could double the cost of a plant and thereby divert necessary resources from solutions to global warning and climate change. Unconventional Gas in the United States According to Gail Tverberg (2008), natural gas production in the United States remained flat for quite some time. This has been attributed to the rise in production of unconventional gas which has been encouraged by the Internal Revenue Code’s Article 29. The main forms of unconventional gas include shale, tight gas and coal bed methane gas. In the recent years, the production of all the three forms has continued to rise with tight gas taking the largest share in terms of production volume. Statistics have shown that the demand for natural gas in the United States of America will continue to rise beyond both unconventional and conventional supplies. In the United States, tight gas, shale gas and coal bed methane resources are distributed widely by geographical location. The growth in production of unconventional natural gas will greatly depend on land access, technology and price according to Gail Tverberg (2008). Popular belief has it that the supply of natural gas is declining in the US and around the globe. As of 2007, nine out of twelve of US’ largest gas fields were used in the production of unconventional gas which accounted for close to 45% of gas supplies in the country (Energydynamics, 2007). Annually, the production of unconventional gas in the nation grows by about 2.4 Tcf since 2000. This growth has more than offset a reduction of 2.0 Tcf from Mexico’s production for the same period. Further, the EIA has predicted that the nation’s unconventional gas production will increase to 50% by 2030 (Energydynamics, 2007). The interest in unconventional natural gas has continued to grow in countries such as Mexico, Egypt, Saudi Arabia Canada, Indonesia, Australia, China, Venezuela, Argentina and Russia. According to research, unconventional gas exists in many places in the United States in huge quantities. Unconventional gas is critical to the supply of energy in the US and will be a vital source of energy in the 21st Century throughout the globe. Natural Gas versus Renewable Energy Sources With rising global demands for energy, there is need for increased effort in the exploitation of natural gas in North Africa (Enerdata, 2008). However, many geologists, geographers and energy experts have noted that the Mediterranean natural gas fields are fast getting depleted which eventually will lead to major energy security problems in many parts of the world - Europe being no exception. With time, the natural gas provinces in the region continue to mature while the field sizes are on the decrease. There have been calls, in view of the rising energy demands as well as the declining supplies, for the development and use of alternative sources of energy and more efficient machines to avert possible energy crises in the future according to Paul (2004). These alternatives have been categorised into two; renewable energy such as wind, hydroelectricity and solar energy, geothermal energy, biomass and non-renewable energy such as nuclear energy (European Renewable Energy Council, 2004). Of the two, renewable energies have been most preferred as they are known to be cleaner and more sustainable. In 2006, the global consumption of renewable energy sources stood at 18%. Wind power has been used across the world with an installed capacity in excess of 121,000 megawatts and a growth rate of close to 30%. This energy source is commonly used in Europe. Photovoltaic cells are also commonly used for energy production in European countries. Generally, the use of renewable sources is on the rise with desert countries such as Egypt taking steps to harness solar energy. 3.0 METHODOLOGY The research owing to the complex nature of the subject will mainly be done by use of secondary reliable and credible data sources. In particular, journals, books, atlases, government records and official websites will be used. Primary data will also be collected from different areas in North Africa. This will mainly be done in collaboration with other researchers who are based in England and North Africa. The research will focus on European countries as energy consumers and North African countries as petroleum producers. The Mediterranean basin will also be a focal point in the research as it is an important site in the production of natural gas and petroleum. In order to ensure that the research is truly representative, a wide variety of sources shall be consulted and adherence to international research standards shall be maintained. It is expected that the research shall take a period of thirty six months. 4.0 WORK SCHEDULE The research will be conducted in line with the following schedule. Table 1: Work Schedule S/No. Activity Time in Months 1-3 4-6 7-9 10-12 13-15 16-18 19-21 22-24 25-27 28-30 31-33 34-36 1 Preparation of materials 2 Data collection 3 Data Analysis 4 Writing of the final report 5 Presentation 6 Submission of the report 5.0 EXPECTED RESULTS AND CONCLUSION It is expected that the research when successfully completed will clearly reveal the true state of affairs in Europe’s Energy sector with regard to natural gas and renewable sources such as solar, wind, hydrothermal and hydroelectric energy. More specifically, the study will reveal Europe’s natural gas demand and consumption levels. The research will also reveal the nature and future of natural gas supply from North African countries including Egypt and Libya. The study, based on historical facts and through correlation, regression and time series analyses will reveal the future conditions of Europe, North Africa and the Mediterranean basin with regard to natural gas demand and supply. REFERENCES Campbell C. (2000) Peak Oil Presentation, Technical University of Clausthal. Enerdata (2008) Yearbook 2008 - crude oil, retrieved 24 January, 2010 http://www.enerdata.fr/enerdatauk/publications/yearbook/crude_oil.php Energydynamics (2007) The Rise of Unconventional Gas, retrieved 27th March 2010 http://209.85.135.132/search?q=cache:Suef1iJqJNkJ:www.enerdynamics.com/documents/Insider91807_000.pdf+US+unconventional+gas&cd=10&hl=en&ct=clnk&gl=ke&client=firefox-a Energy Information Administration (2004) International Energy Annual 2004, retrieved 24 January, 2010 http://www.eia.doe.gov/pub/international/iealf/tablee2.xls.  Euan M. (2008) European Gas Security: The Future of Natural Gas, The Oil Drum: Europe, retrieved 24 January, 2010 http://www.theoildrum.com/node/3959 European Renewable Energy Council (2004) Renewable energy in Europe: Building markets and capacity, Earthscan Publishing. Thomas A., MacGregor S., Nick R. (2003) “Petroleum Geology of Africa: New Themes and Developing Technologies”, Middle East & North Africa Europa Regional Surveys of the World 2004 Series, Issue 207, Geological Society. Time For change (n.d) Prediction of energy consumption world-wide, retrieved 24 January, 2010 http://timeforchange.org/prediction-of-energy-consumption Tverberg G. (May 2008) US natural gas: the role of unconventional gas, Oil drum http://www.energybulletin.net/node/44389 MCkinssey (2008) CCS - Assessing the Economics, retrieved 27th March, 2010 http://www.mckinsey.com/clientservice/ccsi/pdf/CCS_Assessing_the_Economics.pdf Paul R. (2004) The end of oil: On the edge of a perilous new world, Houghton Mifflin Harcourt Publishing. Ronald A. B. (2002) Chemistry of the environment, Academic Press. SPBA (n.d) North African Petroleum Geological Atlas, retrieved 24 January, 2010 http://209.85.229.132/search?q=cache:UMrDJ72zOoIJ:spba.nitg.tno.nl/jahia/webdav/site/spba/users/spbaAdmin/public/NAPGA/NAPGA%2520Flyer.pdf+north+africa+petroleum+energy+supply&cd=8&hl=en&ct=clnk&gl=ke&client=firefox-a Read More