John D. Grace¹

(1) Earth Science Associates, Long Beach, CA

ABSTRACT: Future European Natural Gas Supplies: Geology, Technology and Price

Europe, the world's second largest gas market, enjoys a unique abundance of potential gas supplies. They are distributed over a wide variety of basins, field sizes, production costs and certainty of existence and commerciality. Six fields in NW Europe, West Siberia and Algeria produced 57% of regional supply in 1998; four are in decline. These fields' sizes afford them tremendous cost-saving economies of scale that will be lost as they are depleted.

Depending mainly on the growth of Russian and Western European consumption, meeting gas demand in 2010 may require significant contributions from fields not now online. These new fields will be much smaller and support lower production rates; most will require longer and more expensive transport - exerting upward pressure on delivered gas cost.

The geologic and engineering characteristics of these future sources of supply are generally known now, providing insight on the likely impact on future European gas prices. The highest leverage to offset cost-driven price increases will be greater pipeline efficiency, on-platform gas liquification and reduction in minimum economic field sizes in the North Sea and central northern West Siberia. The next largest cost offset will come from exploitation of associated hydrocarbon liquids, particularly in northern West Siberia.

Technological advances in field development that increase well flow rates and reserves accessed per well will also help. However, given the geographic distribution of gas resources relative to European markets, these improvements, while important to project profitability, will have modest effects on the cost of delivered gas.

AAPG Search and Discovery Article #90906©2001 AAPG Annual Convention, Denver, Colorado