A BBC view of natural gas supply

The BBC, on Channel 4, has just issued an analysis of oil and natural gas called Over a Barrel . Lest you feel impelled to search the dial, I should perhaps warn you ahead of time, that a favored expert is the good Dr Yergin. And so their opinion seems to be that the oil peak will not be a concern until 2020, but that the gas situation is worse. Not because there is a real shortage, but rather, as has been discussed here, because of the behavior of Russia, who supplies an increasing portion of European gas. A lot of the worry comes because Gazprom is spending more money on other investments, by a factor of three, rather than putting it into the development of their available fields, such as those in the Yamal Peninsula, Barents Sea ( mainly the Shtokman field) and in the Far East. Gazprom seems to be investing in distribution systems, and other businesses, and looking to foreign investors to help in field development.
Russian natural gas production developed through a series of fields. Back in 1966, the world's second largest gas field at Urengoy came on stream. (It is second only to the North Dome/South Pars field that lies between Iran and Qatar). And as a Trivial Pursuit comment the name means "rotten godforsaken place" in Nenets. Russia's second largest field is Yamburg which was added to the network in 1984. Gazprom, itself, was founded in 1989. The third largest field in Russia is Bovanenkovskoye which is in the Yamal Peninsula . It is anticipated to cost $70 billion to develop, something that is now anticipated to start in 2008. Orenburg is the largest field outside Western Siberia, and is under production. They have yet to decide who is to partner with them to develop Shtokman although the rumor has been that it will go to Norway. Again that will require significant western investment.

While the article discussed the relative benefits of calm, rather than anxiety in dealing with Russia, it did raise the issue of trust, and the relative distribution of Russian gas between the domestic and export markets. This is an issue of obvious concern, both internally to Russia and to Europe and the possible LNG customers in North America.

A recent study has suggested that there is not, at present, enough gas to go around.

ensuring domestic supplies would also require that Russia decrease exports of natural gas to European markets, according to the report, which notes the potential consequences for the CIS, Asian-Pacific, and European gas markets. . . . . . "Taking into account the objective results, in the future one cannot discount the growing internal demand for gas," the NIIGazekonomika study states. "The fulfillment of any of the scenarios presented can potentially lead to an inability by Russian Federation producers to meet demand for gas in both domestic and foreign markets. This situation in turn can prevent double-digit Russian GDP growth and can disrupt gas export obligations."
Such gas is is currently anticipated to be on the market is in the hands of a very small number of people. Further, the widespread assumption that the "market will prevail" is not seen as working, since increasingly, supplies are being tied up in long-term contracts. Part of this distrust in the market is apparently coming from the Chinese, who are assiduously lining up supplies now, rather than anticipating being able to acquire them, as needed, on the spot market of the future.

As a result, without investments in the so-far undeveloped fields, such as those of the Yamal Peninsula and those in Obskoy and Tazov, there will not be enough natural gas to go round. And because of the way that Gazprom is currently making investments, outside the industry, it will increasingly need foreign investment if it is to exploit the fields that it needs, in time to meet foreign expectations.

And Gazprom is challenging the rights of others to run pipelines where it has interests. Gazprom is fighting the plans of ExxonMobil to run a gas pipeline from Sakhalin Island to China. They want to run their own.

"(Exxon's pipeline) is not foreseen in the programme of development of Russia's Far East and East Siberia and does not meet the goal of a complex development of gas transportation system in the country's east," the source was quoted as saying.

Gazprom wants to build two pipelines from Siberia to China, which would supply up to 80 billion cubic metres per year.

The BBC article pointed out that more of the world's natural gas is being transported by LNG tanker (as appears to be the favored method from Sakhalin) but with tanker numbers needing to triple, supply chains are becoming longer and more complex, and the security has not been addressed.

Bear in mind that natural disasters can be much worse than terrorist attacks, and that while the United States have not seen hurricanes this season yet, China has been hit six times already, with Prapiroon having just diminished to tropical storm status. The article points out that both China and India are building oil stocks to guard against such disruptions. However, while the facilities have been in place for a time, the costs of oil have so far been reported to have slowed down the actual filling of them.

China has paid a lot of money to establish positions around the world - but they have a different utility curve, and have made a commitment to security that others have not. Thus they are buying into new fields, rather than relying on the production of older fields as do other world customers (such as us) and who will, accordingly see the impacts of depletion earlier. However Dr Yergin felt that we were putting more effort into producing more efficient cars.

The article ended with the need to cooperate and integrate European and US oil and gas systems, to confront the current situation. Whether the EU can do this, to ensure energy security, is a critical series of issues for the EU. But it requires that each country realize the crisis and that it has to work with others to find a real answer. Otherwise Gazprom will divide and rule.

It notes that there is more to energy security than exporting our values.

And as a final note, as we try and assess whether Russian oil production is nearing a peak, it is a little more difficult to do, when companies are producing oil off the books.

The West-Siberian Noyabrsk Prosecutor's Office in Russia's Yamal-Nenets autonomous district has opened three cases against Sibneft-Noyabrskneftegaz, accusing the company of producing over RUB 15 bln worth of excess oil in 2001-2005, Yevgeny Mikhnov, a senior prosecutor's assistant, told Interfax.

And so their opinion seems to be that the oil peak will not be a concern until 2020,

What I don't get is that even if you believe this date, it's still terrifying. That's only 14 years away! Blink of an eye.

CERA's detailed analysis only takes it to 2015, so I don't know how they claim no peak until the 3rd or 4th decade of this century, followed by an undulating plateau for decades more. Does CERA have access to some time corridor that gives them this certainty? They claim that there could be as much capacity as 101 mbpd by 2010. So at least we should see if their analysis is on target within the next 4 years.
Gosh darn those insidious Chinese and their evil strategic long term planning!  Guess that leaves us (or,US) with our tanks, planes, soldiers, nukes, to procure/enforce/extort our energy needs.  
I take any "legal" activity in Russia against an oil company with a grain of salt or two. I believe that the kleptocracy that rules Russia is consolidating the oil and gas resources into one hyper-company, which will control Russia's future, and Europe's as well.

Note that the charges are that they sold about $500million of oil; even at lower prices, this is only about 10 to 30 million barrels over a five year period-- or at the maximum, less than 20,000 bpd. Not material to determining peak production, even if repeated five times by other companies.

Putin is fully aware of the power that Russia has with its natural resources, and he is making sure that he controls it. Europe will be looking at Russia very differently in five years. If Russia does not develop its gas fields, then there is no way that Europe can have gas, without paying dearly, both economically and politically, for it.


It is Russias right to act in this way. They have the commodity; we have the money. These are called market forces. We are pushing 'democracy' and capitalism on everone else and we don't like it when they give us a taste of their own medicine!
Correction: 'a taste of 'OUR' own medicine!'
And what did the US Do?
Send Cheney to peripheral states to start lecturing Russia about 'democracy'...

I have always said, a nuclear tipped, oil and gas rich Russia will have us by the balls , should it so choose.

But also, Russia itself will ramp up internal oil consumption for its higher standard of living. Other countries too will have less oil for market as either they ramp up internal consumption or deplete to levels that match existing levels of internal consumption.

Oil will not be the fungible commodity that the WTO and Globalists think it is.

Cheney: ''The American Way of Life is not negotiable''

Putin: ''Lets see''

Cheney is a neocon nutbar who thinks that he can make reality happen by projecting power and propaganda.  Like all neocons he has total contempt for the reality based community of which Putin is a member.  The more Russia is assaulted with hate the more it will ignore the west's desires.
Stop the incessant whinging about Russian control.  You are free to shop elsewhere or conserve.
He is talking not about the control of the oil already exported by Russia, but about the control of the oil assets and oil companies. If the oil production in Russia is not tightly controlled by the government, how come ALL the Russian oil barons live in Moscow to be close to the federal government. BTW, this is NOT the case with Russia's steel or nikel or aluminum magnates.
So what they live in Moscow.  Russia has no obligation to the west to service it with cheap oil and gas.  The current "state control" of Russia's fossil fuels serves Russia's interests.  As it should.  Like I said you are free to shop elsewhere or conserve if you think $230 per tcm of gas is "extortion".
Alas, the current state of control of Russia's fossil fuels serves only the interests of Russia's government officials who get fabulous kickbacks in the process of distributing oil and gas production/export rights as well as the US&EU governments whose debt notes Russia buys at the tune of $80bn a year and inflates housing prices in those countries by making the borrowing cheap. As a result, "the state of control" that you are praising hurts ordinary Russians many of whom are a poor despite living in a country ranking first in the production of oil, gas, aluminum, nikel, titanium, etc. It also hurts ordinary folks in the States & Europe because they cannot afford decent housing anymore.
Hmmm...remind you of anyone?

Alright maybe they should use the oil revenues to fund illegal wars and plunge countries into civil war. Would that be more democratic?


This is exactly what is going on. Despite all this anti-American rhetoric and seeming opposition to the US, Russia essentially lent the US money to wage the war in Iraq. Not only Bush, but Putin as well is stained by the blood of Iraqi civilians killed by the US military.
Actually my position is not Anti-American although from what I said that could be construid that way. What I am against is hypocracy; I know sounds cliched! I see an America and U.K. (BTW I am Scottish), that is slowly but surely killing itself through energy mis-management, overexpenditure on wars, both propaganda and military in order to line the pockets of the elite and push the democracy 'front' for some hidden Orwellian agenda.

The world resents this military policeman poking all of it's fingers in other countries business so blatently. You can see it in the european stance.


The same thing is happening in Russia. Putin is building an energy empire assuming that Russia's fossil fuel resources are inexhaustable. Almost nobody in Russia thinks seriously what will happen when the cost of the oil and gas production in Russia becomes so expensive that the process would not be economically viable regardless of the gas and oil prices in the international markets (remember that EROEI thing). Russia's oil production should be peaking second time within 3 years (maybe even this year) and the cost of natural gas for the Russian consumers will have to be raised to match its price in the international markets in only 10 years. This will make a large chunk of Russia's economy non-viable. The bottom line is, the outcome of the peak oil will be as disastrous for Russia as it will be for the US and the UK, and probably, even more disastrous because almost nobody in Russia is planning for the future without fossil fuels.
How about a pole on The Fate of DannyBoy "Jerkin'" Yergin:

  1. Death by Hit Man hired by the rich folks who were taken in by this Con of conz.
  2. Death by Lynch Mob
  3. Death by Natural causes while hiding in exile
  4. Eternal Life married to Satan (sadam is first wife so he is an overloard of Yergin for eternity - see South Park if confused by this last one).
Oops - okay, "poll" not 'pole' (unless you chose 'B' above).
Pardon me for asking, but how the hell do you listen to BBC program? The site is unbelievably obtuse.

OK, I think I've got it. Click on the little "audio" button on the right. Sigh.

it's not very easy to see...
"China (is) buying into new fields ...However Dr Yergin felt that we were putting more effort into producing more efficient cars."

This is perfect.  While the Chinese invest appropriately for an Energy-Deficient future, We in the Western World frantically waste time trying to salvage a DEAD investment in our current unsustainable civilization.

China is doing something worse.  They are massively investing in a transportation system which includes as its centerpiece, the automobile. Presumably, they would realize what this has gotten the U.S. and the world.

China is investing in a world class train system, too, but it must be nice to have so much capital to throw around that one can invest in everything.  On the other hand, at least they may have something to fall back on once they realize the folly of their attempt to emulate the west as far as automobile ownership.  We will have nothing to fall back on except bicycles, buses, and walking.

The U.S. primary investment is in military weaponry, combined with wasting billions of dollars flowing to firms like Halliburton.  I guess the plan is to wait until everything has their oil and gas flowing and then take over the whole world.  

Iraq will probably end up as at least three countries.  This might be a good course for the U.S. as well. We could start by splitting off the west coast states who seem to have a more forward thinking energy policy than the nation as a whole.


This is perhaps the best rebuttal of the technolover's creed I have ever seen. It covers the physics of the techno nightmare and shows how the "solutions" offered by industry, government and others who fantasize about the infinite planet are dead wrong. It uncovers the bad logic, worse math, and outright distortions of their arguments showing that their energy accounting skills are bankrupt.

I highly recommend this article.

Toyota's all electric RAV4 EV supposedly got 84 mpg. But if you take into account the fuel spent to create the electicity it runs on, the efficiency is reduced to 28 mpg, just 4 mpg more than the hybrid gas/electric RAV4.
I also recommend the paper at EV world. Go to the archives and go to the PDF section. There, you will find an analysis of the well to wheel efficiency of various vehicles including the new Tesla BEV.  They come to different conclusions than the paper you cited. Their assumptions are different since in one instance, they analyze efficiency using the most efficient natural gas fired generator available.  However, they also give a figure based upon the average efficiency of a U.S. power generator.

The paper you cited looks like it was assuming the worst case,not the medium, average, or best case.  Which is the better assumption? Let the audience decide.

Full disclosure:  The paper I cite was apparently written by or for the company that is producing the Tesla. While one should always be skeptical, especially when the author may have something to gain, keep in mind that the assumptions and calculations made by the author are explicit and can be examined and challenged by the discerning reader. I wouldn't dismiss the article out of hand just because it was written by a person associated with the BEV industry, such as it is.

The paper looks reasonable to me but I would like others to look at it who have more expertise in this area to critically examine the paper. If the paper is valid, it appears that we should gradually move to a higher mix of electric cars.  Further work needs to be done, however, to consider the embodied energy of both the ev and its competitors in an apples to apples comparison.

FWIW, I am not a tech lover, and would like to see the private auto largely eliminated. However, to the extent, that we are going to own and drive personal vehicles, I would like to see us drive the most efficient possible. Let the best technology prevail in terms of efficiency and greenhouse gas emissions. I don't care which technology is chosen as long as they meet those two basic criteria. I certainly don't have an ax to grind.

The danger, regardless of technology, of course, is that people will just fixate on the supposed technofix, keep driving, and forget about what we have done to our countryside and our cities, what a real hell hole most of them are if one is at all conscious and understands the alternative land use arrangements. It also helps if one has ever lived in Europe where they tend to have a more rational approach to the way they lay out their cities and the fact that one is not so dependent upon the auto. Of course, things could have changed a lot since I lived there, in the 1980s.

We have grown up with the auto and cannot imagine any other arrangement. The noise,the traffic, the insanity, is just part of the background noise which we have largely become accustomed to. We accept our fate and drive on. I have never bought into this paradigm but I too have become somewhat numb, if for no other reason than to survive emotionally.  

Most of the numbers they use are reasonable, and they provide cites for everything they use. Two things seem at least a bit out of line.
  • They assume natural gas fired electricity with 60% thermal efficiency. The overall thermal efficiency for generation in the US is actually just about 45%. Given the recent history of natural gas supplies and prices, it seems to be more likely that we will be expanding coal generation (at about 33% efficiency) than that we will be expanding gas generation.

  • They use a figure of 110 watt-hours per km, or just under 180 watt-hours per mile. The figure I am more used to seeing is about 250 watt-hours per mile. The Tesla may indeed be more efficient than other electric vehicles, but it would be important to understand why.
A more realistic estimate of their energy figures for a generic electric car would need to be adjusted down by a factor of about 0.75 to account for the actual mix of generating fuels. That would yield 0.86 MJ/km, still better than the other vehicles in their comparison but not by nearly as much.
tstreet--nice little essay you've written here. My sentiments exactly.
One thing that bothered me about this article was the assumption of a 10,000 BTU/lb for coal. I don't know that much about gasoline or natural gas, but I would guess that BTU is fairly consistent for both. But with coal, BTU/lb varies all over the place from 8000 or so up to 16,000+. Fossil plants are designed to operate on a very narrow range of BTU/lb for a particular unit. The optimum BTU/lb is covered as part of the purchase contract. It requires a major reworking of a unit to make it use a different composition coal. It would seem to me to be more accurate to take heat rate statistics (reported by utilities to FERC) and average them to calculate the coal energy contribution in this study.
In the last paragraph of the section "Electric Engines vs Gasoline Engines" section the author admits to doing an apples to oranges comparison to obtain the above numbers.

From the article - "There are secondary considerations to be evaluated which are beyond the scope of this paper.  They include the energy cost of refining the gasoline as well as the energy cost to transport it. ..."

Without a detailed and accurate accounting of all the processing steps for both sources of energy it's difficult to tell what is the truth.

Example - From  

"Isn't a lot of energy wasted in the inefficiency of the power transmission lines?

Yes, there is a high level of efficiency loss in power transmission. However, it is still less than the inefficiencies of the internal combustion engine. For example, take two barrels of oil in the ground. Take one and turn it into gas to run a car. Turn the other into electricity to run an EV. Out of the 100% total potential energy in the crude oil, only 11% is left to turn the wheels of the car. The rest is lost in inefficiencies of extraction, refining, delivery, and combustion. Out the 100% total potential energy in the other barrel, 17% is left to power the wheels of the EV. The overall system from well to wheel is much more efficient for EVs than for internal combustion vehicles."

It would be interesting to see the results of a study performed by a reputable organization.


This broadcast is informative and incredible. Failure of British liberalization of the oil & natural gas markets, etc. I can't wait for the transcript.

Thanks for passing this on, HO.

at least now we know it's the pommes' faults as opposed to the US.  That makes me feel oh so much better.

And only Aussies can call us pommies

If you are a yank (septic tank), you are allowed to call us limeys.

You are also called pommies in NZ
Sorry, I forgot the Kiwis are allowed to call poms/ pommies as well :)

What do the Canadians call us?

What do Canadians call Brits? Don't know-- but I know Bush calls his Brit by saying "Here, Tony, Tony, time for kibbles and bits!"
Bush has it down to a brief, low whistle now.

Never seen a bitch trained so well as Toady B. Liar.

My Canadian wife says we are the one's who "speak English with the funny accent"

Canadians think they don't speak with an "accent"!!

true, but "pommie" is actually derived from the French insult "pomme" which is a pejorative abbreviation of pomme de terre, which means potato.  :)

So there.  Ha!  So should we call you Brits "potatoes" instead?!?!  

I thought it came from property of her majesty.
as in a pomeranian?  the dog?

Pomerania is/was a place name.

huh.  I didn't know that.  excellent.
Since we're having a bit of fun here and Dan "I'm just a country boy" Yergin is in rare form on this BBC broadcast, I will speculate, not without some knowledge of phonetics and historical linguistics, that the name "Yergin" is a bastardization of the word "gherkin" which in its secondary meaning is

A small cucumber, especially one used for pickling

[Dutch gurken, pl. of gurk, cucumber, short for agurk, possibly from Polish ogorek, perhaps from Late Greek angourion.]

So many things come to mind. The shape, the intent (pickling) -- it's like a Rorschach test.

I could be wrong but it fits so well!

There is no doubt that the Russian oil production is entering the "bumpy plateau". In July 2006, the production dropped to 1320 thousand tonnes a day, or 2 thousand tonnes a day down from the previous month.


1st link translated:
Russia increased oil production in January- June by 2,5%, gas - by 2,3%, the export of oil - by 5%

Moscow. 3 July. INTERFAKS-ANI - oil production with the gas condensate in Russia January- June of 2006 was 236,06 mln. tons, which by 2,5% is higher than analogous index of 2005. According to operational data OF GP "TSDU TEK", during June in Russia were produced 39,65 mln. tons of raw material. The output of gas in six months of this year was 333,084 billion cu. m, which to 2,3% exceeded the appropriate index of 2005. During June it was produced by 49,158 billion cu. m of gas. The export of Russian oil into the countries of distant zarubezh'ya in January- June grew by 5% - to 104,25 mln. tons. In the past month Russia placed on the export into distant zarubezh'e of 17,789 mln. tons of raw material.

2nd link translated:
Oil production in Russia in January- July grew by 2,4%

According to the operational information, in 7 months of 2006 in Russia are obtained 276,87 million tons of oil with the gas condensate, which to 2,4% exceeds the analogous index of past year. During July oil production was 40,92 million tons (by 2,3% higher than last year's index). In 7 months of the present year the petroleum companies of Russia obtained 254,23 million tons of oil (+2,2%), By "gazprom" - 7,44 million tons (-0,4%). During July petroleum companies obtained 37,69 million tons of oil (+2,6%), By "gazprom" - 1,09 million tons (+3,0%). The export of oil from Russia to the countries of distant zarubezh'ya along the system of "trans-oil" uch.etom of transit of resources in 7 months was 131,15 million tons (+5,2%). During July are set for the export in distant zarubezh'e 19,27 million tons of oil (+6,1%).


Thanks for the translation. As you can see, the daily oil production in June was 39.65/30=1.322 mln. metric ton and in July it was 40.92/31=1.320 mln. metric ton.
No problem on the translation.  I agree it looks somewhat flat but as many here at TOD will speak, you need a much longer comparison of data to show the plateau for sure.

 westexas I'm sure has numbers on Russia and possibly it's been posted here before =)


Here is a graph of the monthly production of oil & gas condensate in Russia in the last 10 years:


BTW, the oil supply has been slightly falling since May. For the sake of comparison, the jump from May to June should be subjected to a seasonal correction of -0.8%. If you check the data of the last 10 years, you will see that the change in Russia's daily oil production from May to June of the same year exceeds the change in the annual oil production from that year to the next by an average of 0.8%.

The last sentence should read "the change in Russia's daily oil production from May to June of the same year exceeds the MONTHLY RATE OF change in the annual oil production from that year to the next by an average of 0.8%." In other words, if the oil production is not changing from one year to the next, the daily extraction in June of that year should be on average 0.8% higher than in May. If the oil production is growing 12% a year, the daily extraction in June should be 1.8% higher, than in May.
So what does the handle "RussianCowboy" represent?

You're from Russia and you ride bulls? =)

I am married to a Russian woman and I actually grew up in the mid-south and yes, I did ride bulls.  I worked a dairy farm of 1500 acres and 400 head of cattle, growing up.  Then off to college and now in the IT biz...go figure.


Although I am from Russia, I did live for a while in the US Southwest on a cow farm. This is where my funny nickname comes from. And, yes, I love rodeo.
You write: "the widespread assumption that the "market will prevail" is not seen as working, since increasingly, supplies are being tied up in long-term contracts. Part of this distrust in the market is apparently coming from the Chinese, who are assiduously lining up supplies now..."

This is the market, in sensible operation.  As in the fable of the grasshopper and the ants, people who enter the market with a long term view tend to do better.

As a treatment of actions that could be taken in the US, note my recent position paper proposing that the Federal Government should offer long term contracts for energy from new, renewable sources enough to match its rather substantial energy consumption.  This is a national safety measure.  Based in fair part on discussion here I point at wind as the most plausible technology in the near term. I do not discuss alternative storage energy methods when these become necessary for load balancing, but continue to expect to see more discussion of large compressed air (into, say, salt domes).  However, I don't beleive that the government should make that decision.

George Phillies