The European situation is not really stable

In the post earlier in the week, I had tried to point out that the UK was discovering that having a Plan B (to switch to oil when gas ran a bit short) would give problems if nobody had checked first to ensure that there would be enough oil available.

The Scotsman carries this concern forward into the New Year.  Until now the UK has had a declining production, but one that exceeded UK demand, however;

The IEA sees UK oil demand for 2007 of more than 1.8m barrels per day, which it expects North Sea production will only be able to match for the first three months of the year.

Output is projected to fall to 1.65m barrels per day between March and June, and to 1.55m barrels per day between July and September, before rebounding slightly to 1.66m barrels per day in the last three months.

The government's more optimistic forecasts do not see the UK becoming a net importer until 2010.

The difference in projections is likely to be determined, to the customer's cost, later this summer.
(IEA spokesman David) Fyfe said production may creep back above demand thanks to the Buzzard field coming on stream. But any recovery is not likely to be prolonged.

The news will also come as a shock to UK oil producers who share the government's optimistic forecast.

A spokeswoman for the UK Offshore Operators Association, which represents North Sea producers said: "We believe we will be self-sufficient in oil until the end of the decade, although we are in the process of updating our figures."

Part of the likely "fly in the ointment" is that the balance was presumed to exist because the gas market could take care of itself.  However if there is a concern in the gas market that causes customers to switch over to oil, as appears to be the current situation, then the projections for demand may be an underestimate, with a more rapid deterioration in the situation than is currently predicted. Bear in mind that the threat to gas supply may not even be actual, but if it  is a perception that causes movement, then that will suffice.

And while that story will continue to unfold in the next couple of months, and maybe longer, the Russian:Ukrainian gas crisis appears to have wound down for now. Jerome a Paris via Energy Bulletin has given a comprehensive review of how that whole situation has evolved, and the interaction of corruption with the passage of gas around that part of the world.  As he points out, the fact that Ukraine was considered by many to be part of Russia for so long, has made this current spat that much more difficult for those participating, for the reasons that he discusses. The series of posts on this topic is very well worth reading.

Seems like Richard Rainwater, one of the most skilled generalist investors in the world, "gets" peak oil. Rainwater worked for Goldman Sachs, helped make the Basses of Texas much richer, and then went out on his own and became a billionaire in his own right. Here's the link to a short profile on his venture into oil as an investment thesis.
in the original Fortune piece, Rainwater was nice enough to say that TOD was one of his resources...and the links were down the right hand side of the piece, but those are gone with the archiving...

still very nice of him to mention us though...

'Twas nice of RR, true, but may I be so bold to suggest that he diverts a proportion of his money to one or both of:
  • waking people up to PO
  • investing in sustainable communities

I have some bad news for you, RR, not only can't you take it with you, the wicked turns of economic reality may well evaporate most or all of its value sooner than you would wish. Best enjoy it while you can and exchange it for things that have utility and intrisic value while you can.
Now that the situation with Ukraine is settled they are moving on to Bulgaria.
Bulgaria in Russia gas supply row

Bulgaria says it has become embroiled in a tussle with Russia over the price it pays for its gas imports.
Energy minister Rumen Ovcharov said Bulgaria was refusing demands to change its gas supply contracts with Russian state-run energy firm Gazprom.
"The Russian side demanded that we renegotiate the scheme of payment for transiting Russian gas through Bulgaria to Turkey, Greece and Macedonia," Mr Ovcharov told Bulgaria's bTV television.
"We will answer that this offer is unacceptable," Mr Ovcharov said. "There are no review possibility clauses in our contract signed in 1998 to run until 2010."

Yes, I was amused by the Bulgarian development, too. Will be interesting to see how it develops and what that tells us of the meaning of 'law' in Russia etc, still a bit of a vague concept I would say. I doubt it has anything to do with recent steps in bulgaria joining the EU ;)

On the wider topic (European situation) I think this is positive. I have no doubt that EU countries and the Commission will now be looking to security of energy supplies, and that that will lead them to some pretty inevitable conclusions. They will, relatively soon in their context, say that PO is here or nearing and begin to formulate structures and policies to deal with it. Events may overtake those ponderous processes, however.

Agric, i tend to think that the UK will be the first to stand up and say to the people: we have a problem.   Malcolm Wicks MP on 19Dec05 has made an Energy Review... of UK challenges, he also mentions that:

But things have changed since we set out our energy policies in 2003.

Our own gas output has declined faster than anticipated and we have moved to being a net gas importer - earlier than envisaged.

We will rely on gas imports for both heating and electricity supply. Significantly by 2020 we may be importing over 80% of our annual gas requirements ? last year it was around 10%. These are likely to be sourced from a variety of countries, most of them developing and OPEC countries although Norway will play a key role. Russia will be a substantial provider to the EU, including the UK.

It reads like any companys annual report, (without the finances) but says: basically we have some good news, and oh yeah, we have some bad news.

source right here

Your comments on the rule of law in Russia are probably appropriate for laws within the country, but in terms of foreign policy there are no laws.  There is only a hegemonic system created by the western powers, and the pretense of law.  The Russians problem is mostly that they lack subtlety, but then the US can hardly be called subtle of late either.  I think the EU is the only ones clinging to that "quaint" notion.  The resource is in Russian territory, and they can use it as they see fit, and we have to deal with it because we don't have that much leverage over them.  It's something we're not used to, but we're going to be learning a lot more about it.  We can only take the energy of those who can be overcome by our militaries, and even then we can be stopped if they align with one of the other powers.  

So the world will be carved up into competing empires of large economic & military powers associated with major energy producers.  And it is not clear the US and/or the EU will be the big dogs.  Russia may in fact be in an excellent position.  It may put a lot of strain on the EU, as different members might make different choices about who they align with.  

I guess you are saying: welcome back the 'Great Game', Twilight, though perhaps the truth is it never ended, was just taking a time out.

The stacks held by the players have changed since we last looked, the US stack looks lower, Russian and Chinese higher. The US player has been gambling a bit much lately while the others have been more cautious, biding time, accumulating.

Sometimes weakness is strength: the EU is no threat, it would not (of its own volition) attack foreign nations, so is worth preserving as a market.

For Russia and China there is one clear enemy: USA. One might think they could be mutual enemies but they know they can achieve mutually acceptable compromises while they feel that the US will always try to exploit and subjugate them, as it has all others these last 100 years.

Ultimately the US empire of exploitation, manipulation and economic dominance will fall. For certain within 20 years, probably within 10 years. The question is how it falls, with grace or in a bloody thrash.

Does this mean that Russia is having difficulties meeting its committments?  They certainly know the terms of their agreements.  Is there some underlying problem that is not being addressed?
I dont think supply is an issue for Russia (largest gas reserves in the world). What we are seeing is Russia flexing her muscles, Russia's power will only grow given time. If anything good comes out of this it might help move the EU faster towards green and sustainable policy (Which i have hope will really begin to gather pace soon).

Also bare in mind Russia is essentially a European country and Europe is its largest and richest customer. Russia might be behaving badly but it knows where its home really is. I would much rather have a large producer like Russia behaving a little badly but sitting on my backdoor when PO hits. Than be in the US which has fair less options when it comes to gas.

This was more a psychological move by the Russians not a real attempt to exercise pressure. They are preparing the ground for negotiating better terms for them when our current agreement with GazProm expires in 2008 if I recall correctly. Russia used the momentum of their victory in Ukraine and of course this was quickly presented as another example of how the bad Russian bear blackmails European countries via energy. For the naive free-market believers this can sell, but here in TOD I think we should be viewing the things at a slightly deeper level. Energy has always been in the center of the great blackmailing/influence game called politics. There are not good and bad guys here, there are just weak and strong ones.
Forgive me if this has been discussed before, but just how far can natgas be sent down a pipeline before the ERoEI=1?  1,000 miles, 2,000 miles, 3,000 miles?  At what distance does LNG shipping, if possible, become a better ERoEI proposition than a pipeline, or is it never competitive [my guess]? Should the UK never import Russian Gas because the ERoEI would be negative after moving such a great distance?

It seems to me, that as time marches on, the closer you live to a natgas souce, the better off you will be.  This spiderweb of natgas tubes will inevitably shrink as natgas volumes and pressures drop.

Bob Shaw in Phx,AZ  Are Humans Smarter than Yeast?

As usual, hard data on EROEI is tough to come by for any energy supply process.  A commentor at
said that liquification consumed 25-30% of the original gas volume, tanker shipping consumed less than 1% and regasification consumed 0-10% (depending on whether free waste heat was available at the receiving end).  The commenter did not provide any references, however.  

I would have to believe that even very long natural gas pipeline transport would never come close to consuming the kind of energy needed for the LNG supply train.  

You can make a bigger diameter pipe to reduce viscosity. Or run two pipes at half throughput.
I have read other places that the transport energy is much higher than 1%.  I can't find a link, but 1% just sounds too low.

LNG is Natural Gas compressed to a ratio of about 600-to-1 volume-wise, for transporting. This second EIA page says," Shipping accounts for 10 to 30 percent of the delivered value of LNG (depending on the distance from the reserves to the market)." I'm not sure if the liquification/gasification process on either end is include in that. I would assume it is as part of the larger %30 number.

It is not hard to figure these things out however. an hour on google will provide you with a wealth of information about the different components of the LNG delivery system.

You cannot of course burn LNG, you need to first regasify it into regular NG. Once it is in gaseous form it is the same commodity on the consumer end and it is this consumer price that matters. You will see slightly different prices for LNG vs NG at the wholesale level in different parts of the world, but this probably has more to do with the fact that the two are selling in two different markets - one buyer may not have the ability to regasify the product and therefore would not be in the market for LNG.

It looks like NG has spiked to a worldwide average of about $9-10 per 1000 cubic feet. This is still, in my estimation, low. NG follows the basic course of crude oil prices on a BTU-basis. As we see oil move to $100+, $20 for NG is going to be the norm.

As this price goes up, producers will do what it takes to move the product to market.

At higher prices the costs of shipping/deliver/processing as e percentage of the total cost obviously goes down.

That Russian-German pipeline that they just broke ground on will be moving 1% of the world's daily usage. Fairly significant. The UK has only two options - oil or gas. There is no hydrogen economy yet - as far as I can see. So if they don't want to import more oil, I think they'll be moving some of that gas from Germany to Holland to the UK.

I think the number is around 1800 miles.
I doubt UK will get any gas from Russia via pipeline and may get some via LNG.
    The EROEI concept does not apply here in piping natural gas. That's because the pipeline can be propeled by utilizing some of the natural gas in the pipe. Therefore, not all of the gas reaches its destiny, only some does. This reduces the total cost of transporting the gas, and hence it is still worthwhile as long as the price is worth it.
    For example, assuming transporting one million cubic meter of gas from Russia to UK costs 9 million cubic meter of gas to propel it. It looks unworthy if you look at EROEI, but that is only the case when the Brits receive one million cubic meter of gas, and have to pay back 9 million cubic meter of gas to Russia as payment. Actually what happens is the Brits pay the Russia price for the one million cubic meter they receive, as well as for the 9 million cubic meter they did not receive, buth in Russian price. As long as the natural gas price in UK is 10 times above the Russian price, it is worth while.
Well, I more or less agree that from a strictly financial standpoint the EROEI concept does not tell the whole story.

A rough analogy could be made regarding the fact that a certain amount of fruits and vegetables spoil on their way to market, but we don't care about how much, because it's only the price at the user's end that's of interest to the user.

However, and this is a BIG however, when you are considering issues of required production and the projected life of fossil fuel reserves, the EROEI is of extreme importance.

If I have to put 5 units of energy into the production/distrubition 'black box' to make 4 units available at the point of use, that's one thing. But if I have to put 10 units of energy into the black box to make the same 4 units available at the point of use, that's something else again - something far less desirable from a depletion standpoint, regardless of what price is attached to that energy.

So, when we see gross production figures of say X million bpd of crude oil or Y million cubic ft of natural gas, we are missing a vital piece of information - and that is: what fraction of X and Y are actually being made available at the point of use?

Would you please reference your sources on this with links if possible?
The energy to pump the gas doesn't have to come from gas; so long as the pipeline compressors are electric, it can come from coal, nuclear or wind.
Excerpt from Scotsman article:  

<<Peter Spencer, chief economist for UK Item Club, which uses the same economic forecasting models as the Treasury, said the shift would be mainly symbolic for the UK economy. He said: "What really matters for the UK economy isn't how much oil production we have, or even oil prices, but interest rates.">>

If one applied this to the world economy, I suppose it wouldn't matter whether the world had oil production or not, since the only thing that matters is interest rates.

There's a good story about rising UK NGas prices in yesterday's Guardian.

And today's NYT as has a fairly realistic piece about the Russians calling the tune and the Europeans paying the piper.

A spokeswoman for the UK Offshore Operators Association, which represents North Sea producers said: "We believe we will be self-sufficient in oil until the end of the decade, although we are in the process of updating our figures."

The reaction elsewhere to depletion?  In the United States, legislation has been drafted requiring "that by 2012, 10 percent of all vehicles sold in the U.S. be hybrid, hybrid-electric plug-in or alternative fuel and biofuel vehicles. That number will rise by 10 percent a year until by 2016 we require that 50 percent of all vehicles sold in the United States be these energy alternative vehicles. We also require that about a quarter of the total federal fleet purchases be advanced diesels, hybrids or plug-in hybrids by 2016, 10 years from now. In fact that 75 percent be those or bio fuels."  
However, China has tighter standards than the United States; and it was recently announced that France intends to run its public transport system on alternative fuels within 20 years.  

"...hybrid, hybrid-electric plug-in or alternative fuel and biofuel vehicles". So, electric cars - fuelled in fact by coal or nuclear. The problem is, you must first substitute the depleting natural gas and get some more uranium. For biofuels you need oil, gas and coal for the agricultural use and refining.

It is easy to say "alternative fuel" if you don't have to show what it means, where to get it in required volume.

Biofuels don't have a future. EROEI is tolerable only if they are produced as side-products with something else. But this means that their volume is limited by the volumes of the primary products. When we a have a real oil crisis it will hit also those primary products, like sugar and there will be less side-products and hence less biofuels available. Biofuels also compete with food production - which will become a big problem with decreasing oil. Biofuels will be relatively expensive even with much higher oil prices because they need a lot of oil and other energy as inputs. And I bet that there will not be money or political will to subsidize them when the crisis is on.

I'm not convinced that biofuels costs have been evaluated correctly, either for energy or economics.  Most studies are either EROEI or cost versus petroleum sources.  You are correct in stating this only works as "side products for something else" but that is where the industry is headed.

The company I work for has business with the ethanol-from- corn producers.  The waste of ethanol production is wet distillers grain.  This material actually has higher food value than the corn that goes into the process.  There is higher oil and protein content per ton than corn.  Granted a ton of corn in, yields less than a ton of distillers grain out.  I don't have details of lost weight through the process but I think it is less than 50% with similar moisture content. Don't forget that the entire kernel is not consumed and yeast are multiplying with their edible dead cells ending up in the waste stream.  And the kernel has been partly digested allowing for better absorbtion when eaten.  I think the quote I heard was 1.23 the food energy for distillers grain versus kernel corn.   So it is not as simple as just subtracting weight from a ton of corn in.

The dollar value placed on wet distillers grain is significantly higher than that placed on a ton of #2 corn.  This means from an economic standpoint there is not nearly as much loss in money in cycling corn through an ethanol plant before feeding to animals as you would predict.  And the loss of energy for feeding is not as great as you would predict either because balanced nutrition is more efficient than gross calories from one source, such as starch.  There are a lot of complex money transactions that are still being  optimized because this industry is in its infancy.

I have heard (read) way to many people at TOD say that it is folly to divert all our "food" to biofuels.  I don't think these people live in the midwest or have a complete grasp of the grain to protein food chain in the U.S.  Cattle, poultry and swine are fed corn because it is dirt cheap, not because it has the best food value.  There is no data to date that I know of that says we can't make some transportation fuel and still maintain an extremely plentiful protein food supply.

Biofuels don't have a future.

I don't think we should close the door here. Biofuels are certainly no answer to continue America's waste that's for sure, but as part of a diversified energy system, biofuels may in fact have some value. Good front page piece in today's WSJ about Brazil's program, unfortunately no free link.

Notice they didn't mention the energy inputs required to grow that sugar cane, nor the conditions under which people are harvesting it.
Biofuels don't have a future.
Bio-ethanol probably doesn't, but according to my calculations, bio-charcoal looks stellar.
I wonder if a slurry of pulverized charcoal and biodiesel would work in a diesel or gas turbine engine?
The UK is in serious trouble.

Simmons-August 2003- Russia has four old fields that make up over 80% of their gas supply and they all are in decline. Canada's decline problems are as serious as the US.

Skip to today-

Even so the Government's line lost little of its `What crisis?' approach, Tony Blair urging companies to source more gas from the interconnector pipeline, and Malcolm Wicks insisting demand had been met, and that the National Grid had told him it was `awash with gas'. The NG replied that it had said no such thing, and warned of a hard winter. The Government, snapped an increasingly exasperated EEF, was "in denial"

So Russia while watching it's major source of wealth dwindling is supposed to help the EU/E3, colonies of the US,
to grow at it's expense.

And of course Capitalism's job (we've been hammered over the head with this) is to signal a commodities scarcity or surplus with pricing.  But here we see that what we've been told is a lie.  Capitalism instead is supposed to signal when it's time to freeze prices/ration or go take resources from others.

Japan siezes Senkaku Islands. Chinese Foreign Ministry spokesman Kong Quan saying, "The Diaoyu Islands have been China's territory from time immemorial."

The rich, living in socialism, and the Ukraine are getting a crash course in free markets.  Not so hot, huh? A taste of the Third World.

there are
countries much more dependent than others from the Mother Russia:
Slovakia, Latvia, Lithuania or Bulgaria depend in a 100%; Poland in a
86%; Turkey, that curious country belonging to the Northern Atlantic
Treaty Organization (being in Eastern Mediterranean at some 2,000
miles from the Atlantic), depends in a 80%; Romania, 78%; Czech
Republic 73%. Even the powerful Germany, depends in a 41% from the
Russian gas. Curiously, Italy, a very Southern European country, with
two gas ducts from Algeria and Libya through the Mediterranean,
depends from the Russian gas in a heavy 34%.

What a dillemma-Russia is the world's top producer but it has no debt, it's no one's colony, and it has all the WMD and Sunburn's it needs to destroy any and all comer's.

Yes, I cannot help but laugh at the shock and dismay over Russia using its energy wealth to further its own interests.  How dare they!  We're the only ones who should be able to use our muscle to get what we want!  There are many aspects to power, military, economic, energy, etc., and we are not powerful enough to push everyone around.  In the decades to come I suspect we're going to learn what it means to have been the playground bully after the other kids get bigger than you. We're gonna loose some lunch money.  

I do think it's going to get dangerous though, as countries form new alliances around new centers of power, which will be focused on energy.

We're gonna loose some lunch money-LOL

It's simple- countries form new alliances around new centers of power, which will be focused on energy.-

You would be talking about B(V)RIC and the Shanghai

United against unilateralism

VLADIMIR RADYUHIN  United against unilateralism

in Moscow

 The quadrangle involving Iran need not necessarily or primarily be anti-U.S. It has solid economic foundation to build upon. While Russia and Iran are leading energy producers, India and China are major energy consumers. Indian Petroleum Minister Mani Shankar Aiyar, for one, is a strong champion of cooperative engagement between India and China in seeking access to the energy markets of Russia, Iran and Central Asia. He has put forward a plan to extend the proposed Iran-Pakistan-India gas pipeline to China. Aiyar made a similar proposal with regard to the planned Turkmenistan-Afghanistan-Pakistan gas pipeline. Russia may be involved in both projects as a contractor and a supplier of gas. This would create a trans-Asian energy grid linking not only Russia, Iran, India and China, but the Central Asian countries, Bangladesh and Myanmar.

Development of transport corridors between Asia and Europe is another compelling motive for cooperation both within the SCO and in the India-Iran-Russia-China quadrangle. India is already linked with Iran and Russia by the North-South sea-and-land transport route, which is expected to handle 20 million tonnes on completion. There are plans to build a transport corridor from Russia through Central Asia to China. A 20-million-tonne oil pipeline is already under construction from Kazakhstan to China and the feasibility of a parallel gas pipeline is being studied.

The cooperative approach is obviously the best choice, but I think it cannot work if one of the members of the group is being a pig and using far more energy than anyone else.  That would be us (US).  Cooperation would probably mean a decrease in per capita energy use, and the US way of life is not negotiable.  Therefore we use guns.  Even ignoring the moral issues, I think it will fail.
The US can now be expected to intensify its efforts at "regime change" in Russia's sphere and inside Russia itself. The elections in Belarus and Ukraine in March will provide opportunities. But Russia is displaying a determination to push back hard against all such efforts, and the weapons in its arsenal are irresistible. Europe's complicity with the US will come back to haunt it as it pays the price for endangering Russia's legitimate interests. Everywhere, the involvement of the US hand equals pointedly increased instability and economic harm. Europe will have no choice but to side with Russia against the US when push soon comes to shove.


This is a well-trained approach towards 3rd world countries, called "double standards". It's simply becoming more and more brutal with time. My fear is that with oil and NG getting scarcer, countries like Russia will be becoming more and more tempted to retaliate and also become brutal in defending their interests.
The Russians have said they would supply more gas to Europe, but not much. The new fields are in Eastern Siberia and Sakhalin - so they are destined to Asia and the US. But Russia is not an unreliable supplier at present. Any supplier will cut supply if the customer don't want to pay the normal price.

The UK situation is a good example of price mechanism working. At those prices the supply is adequate. It will be adequate even if there would be much less gas available - only the prices will be higher. We will only see real supply disruptions and acute problems if the supply is down by some unexpected technical problem or like. The consequences of the natural gas crisis are more concealed - drop in industrial production, less investments, less household demand, more unemployment - all kind of economic problems that mostly are not seen as energy-related.

I think that the UK is to Europe as California is to the U.S.  UK/Ca have natural gas reserves that are depleting faster than reserves elsewhere, and they are at the end of the supply line--getting the natural gas "leftovers."
What if California opened up their coasts to drilling?  Would there be enough to make a difference, even for a few years?
Not really, but every little bit helps. I think that California should open up the continental shelf for drilling for it's own sake. Ditto Florida. I also think that ANWR should be opened because there might be gas there. I just don't think it's going to matter very much.
Hell, even if California gave permission it's still going to be at least three years before you can get delivery of a drilling rig to here, followed by a year of exploration, followed by a year of development, before the first oil and gas start coming.
Then figure another five years to get peak oil and gas from the new fields. Which won't even make up for decline in the present California oil and gas fields.
But every little bit helps. Even if they are the competition.