TPT September 2007

Oil & Gas News

to be limits on demand or additional supplies to avoid further price increases. The International Energy Agency was founded by the Organization for Economic Cooperation and Development (OECD) in 1974, following the oil crisis of that period. Its primary goal is the prevention of disruptions in the supply of oil. French oil giant Total signs on to Russia’s Shtokman natural gas project Total, of France, will form a consortium with Russia’s Gazprom to develop one of the world’s largest offshore natural gas deposits. Under the agreement announced July 12, Total is to own 25 per cent of the operating company that will develop the area, the Shtokman field some 340 miles north of Russia’s Arctic coast. The operating company will also help finance the field. The Shtokman field is unquestionably one of the most technically daunting energy projects anywhere. Lying high above the Arctic Circle, it is in darkness for six months of the year and is buffeted by winds and storms. Icebergs are a threat. The extracted gas would have to be transported by undersea pipeline to Russia’s northern coast. But the field promises a large reward for effort. It holds 3.7 trillion cubic meters of gas and 31 million metric tons of gas condensate, enough to furnish the entire gas supply of the 27 countries of the European Union for seven years. Expected to go online in 2013, it could also supply the East Coast of the United States, if US-Russian relations should improve by that time. Gazprom will hold the license to the field through a subsidiary, the largest Russian company said in its statement. Russia’s insistence on retaining control of its resources prompted the forced sale last year of a majority stake held by Royal Dutch Shell in a development project. And in October Gazprom abruptly halted talks on Shtokman with five foreign oil companies – Total; Norsk Hydro and Statoil (both Norwegian); and ConocoPhillips and Chevron (both American) – and said it would develop the field on its own. But the chief executive of Gazprom, Aleksei B Miller, presented the Total-Gazprom deal in a positive light, possibly hoping to promote easier relations with technically proficient foreign firms. For its part, Total offers an example of the coming model in energy development: the majors, which historically controlled such projects, as junior partners to national companies. If Total can adapt to its role in Russia, its prospects there look promising. According to the Paris-based International Energy Agency, Russia commands the world’s largest reserves of natural gas and eighth-largest reserves of oil. An adjustment of roles for Gazprom and BP in the development of the vast Kovykta natural gas field In another example of the shift in Russian policy to favour government control over major reserves, BP Plc on June 23 was moved to agree to sell its 62.8 per cent stake in the Kovykta field in

Five-year forecast: an accelerating rise in world oil use and a possible squeeze on supplies The International Energy Agency, which advises 26 industrial nations, has predicted that world oil demand will rise faster than previously expected over the next five years while production slips, threatening a supply crisis. A report issued by the Paris-based agency on July 9 sees global oil demand rising by an average of 2.2 per cent a year from now to 2012, up from a forecast in February of 2 per cent annual growth from 2006 to 2011. The share of world oil consumption represented by the developing world, including emerging industrial economies, is seen rising from 42 per cent to 46 per cent of global demand by 2012. Reviewing the IEA report in the International Herald Tribune (July 10), James Kanter noted that the pressures on fuel supplies are expected to grow because booming Asian economies are using more fuel to power their manufacturing industries, notably automotive. Rapid growth in the petrochemicals industries and the spread of low-cost airlines are also lifting demand. “Amid these demand factors, there is a scarcity of refining plants and the personnel to operate them,” Mr Kanter wrote. “Supplies are also a concern because of deteriorating output from some countries outside the Organization of the Petroleum Exporting Countries.” He cited the view of Lawrence Eagles, head of oil markets analysis at the energy agency, that the world “needs more than three million barrels per day of new oil each year to offset the falling production in the mature fields outside of OPEC.” Other analysts discerned signs that energy habits were moving in two directions. In developed countries, and especially the European Union, governments are acknowledging an obligation to conserve energy and use renewable sources of energy, a trend that is expected to ease pressure on oil supplies. “But that trend is being offset in developing nations,” Mr Kanter wrote. “While they still use far less energy per capita, they are making goods for rich buyers elsewhere and are increasingly adopting heavily

e n e r g y - c o n s um i n g lifestyles that include the use of cars, refrigerators, and air- conditioners.” Mr Eagles of the energy agency said that stepped-up investment in refining capacity could help reduce petroleum prices over the next three years, but that, beyond 2010, “tightness in OPEC’s spare capacity will reassert itself.” And by 2012, he warned, there would either have

©Richie Lyon. Image from BigStockPhoto.com

98

S eptember /O ctober 2007