Gas is the perfect fuel for Europe, says industry guru Peter R Odell. The continent has big reserves, users are familiar with it and pipeline runs in major population centers are short.
"Coupled with the interest in environmental issues...this means that gas and the European market go together like strawberries and cream," Prof Odell argues.
A fully-integrated gas transport network will be in place within Europe by 2020. And the region is surrounded by states which either are or have the potential to be very big gas producers – who will compete with each other to keep prices down.
"Western and central Europe are really jam pots surrounded by wasps coming in from all sides," says Prof Odell, who has been studying and analyzing the gas industry since the 1960s.
As a professor – now emeritus – in international energy studies at the University of Rotterdam, as a consultant and as a lecturer at the London School of Economics, he has propounded views which were regarded for 30 years as deviant and heretical.
His conviction has been that gas is the fuel of the future. He believes that European and global reserves are many times larger than the official estimates from governments and oil producers.
From the 1960s to the last decade, gas was regarded as a limited resource. Fields were not developed, and the European Union banned its use in power stations in 1976.
Prof Odell, who will be 70 this summer, argues that such views put the industry in a straitjacket. Supply and demand were consciously depressed by the authorities and decision makers – both producers and transporters.
He approached the European Commission in the mid-1970s and proposed a study on the long-run supply price of gas in Europe to ensure sufficient profitable supplies to meet demand.
This offer went through all the stages of evaluation as a project but was turned down at a political level.
"It would have been too embarrassing, you see. There was the Dutch government pleading scarcity and refusing to sell gas to the French and Germans. And there we were in Rotterdam saying it was a load of nonsense, and offering to show how and why."
Prof Odell attributes this underestimating of gas reserves primarily to ignorance. Europe simply lacked any depth of expertise on the subject.
And the company personnel who did know better saw no reason to say that the Netherlands, the UK and Norway had so much gas that they did not know quite what to do with it all.
"That would have undermined their propensity and ability to sell these resources at high prices," Prof Odell notes.
He has seen his calculations win general – if grudging – acceptance, and has received public apologies from senior oil company executives who previously dismissed his reports as rubbish.
Others have been more embarrassed, while some are still making the same mistakes, he says.
"The EU was so far behind in what needed to be said about gas, that it's even now failing to get the sums right. Its forecasts for 2020 are still much too modest in terms of both supply and demand."
But the gas directive from Brussels will perhaps help a little in budging the countries which have most enthusiastically opposed a liberalization of the market.
However, Prof Odell believes that economic forces would anyway have done away with the old state monopolies and quasi-monopolies. So he describes the directive as "candyfloss" and the "froth on a pint of beer".
"You've got to have the politics right, but the economics are still the driving force."
In his view, increased gas supplies explain why nuclear power stations are no longer built in Europe. Gas will continue to take over from oil and coal, and market forces are set to boost this industry by at least 50 percent up to 2015.
While the share of natural gas in total European energy consumption now averages 20 per cent, he predicts that it will reach 35 percent around 2020. And gas is set to be the key fuel world-wide in 2050.
"The combination of demand for gas and electricity, and the ability of the one to produce the other more cheaply than any other way, make the opportunities for expanding gas markets very exciting."
Another of his predictions is that supplies of conventional natural gas and unconventional forms – such as methane in coal mines and hard-to-reach sources in tight and deep formations – could rise six-fold from today’s 150 trillion cubic meters to 1,000 trillion.
"If you also add gas hydrates, you can multiply by a factor of 20," he adds. "That'll take us into the 22nd century."
All the years of analyses and research have at least convinced Prof Odell of one thing – the chances of finding new gas depend on the commitment made to exploration and exploitation.
How much lies in the ground is not relevant, because nobody knows the answer to that.
Supply to meet demand will increase regardless, either by boosting Europe's own gas production or by expanding imports from other countries.
Prof Odell concludes by telling a story about the potential consequences of inadequate knowledge and wrong political decisions.
The Dutch government told its citizens in the 1970s that they had better prepare for the worst and be ready to convert back from gas to oil. And it resolved not to expand gas exports.
At the time, the Netherlands could have achieved such sales at 40 Dutch cents per cubic meter. The price today is 15 cents – if the sellers are lucky.
And the Groningen field in the northern Netherlands, which the authorities once thought held 1 500 billion cubic meters of recoverable gas has turned out to contain 3 000 billion.
In other words, the Dutch lost out on huge revenues at a time when the market was screaming for gas and oil prices were sky-high.
"This was such a disastrous policy and cost so much money that it has to be treated pretty harshly, I think, in terms of the wisdom of governments," Prof Odell comments.
By Astri Sivertsen
© 2000 Mena Report (www.menareport.com)