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COM (80)295
V ol.1980/0108

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COMMISSION OF THE EUROPEAN COMMUNITIES
COM(80)295 final
Brussels .2nd June 1980
7: -;5* TZ* I_ v
r :^ - <i .r><=*r:- ,< *c-iL ■pZ&-~T
COMMUNICATION FROM THE COMMISSION TOTHE COUNCIL
CONCERNING COMMUNITY ACTION INTHE
NATURAL GAS SUPPLY SECTOR
\
COM (80)295 finalI

r..-rWO'VOMMUNICATIOWOF'THE-CQWniSSION"'CONCERNING COMMUNITY
ACTIONINTHENATURALGASSUPPLYSECTOR
Introduction
Atthebeginningof1979,theCommission presentedtotheEnergyCommittee
adetailedreportentitled"NaturalgassuppliesandprospectsintheCom­
munity".*)TheEnergyCommitteeaskedforexamination ofthereportbyex­
pertsofthegovernments andtheindustryconcerned asthebasisforsubse­
quentproposals bytheCommissiontotheCouncilforactiononaCommunity
andnationalbasis.ThepresentCommunication takesaccountofthesefurther
consultations -theCommission askstheCounciltoendorsehisconclusions.\
Themainresultsofthisreportareasfollows:
1.TheroleofnaturalgasintheenergysupplyoftheCommunity
SincetheinceptionoftheCommunity/theshareofnaturalgasintotal
primaryenergyconsumption hascontinually growntoreachacurrentpropor­
tionof18%,orinabsolutetermsathirty-fold increasefrom6million
toetonearly180milliontoein20years.Naturalgashasalmostreached
thesameproportionintheenergybalancefortheCommunity ascoal.
Oneofthecommonenergypolicyobjectives setbytheCouncilon17.12.74
wasfornaturalgastoachievean18%shareoftotalenergyconsumption
by1985.Thisfigurehasalreadybeenattainedanditisevidentthat
naturalgashelpedsignificantly inreducingthedependenceofthe
Communityonimportedoilby13%since1973. >
<*>Doc.COM/ENER/31/78

2
Upto1985afurtherincreaseinnaturalgasconsumption bytheCommunity
ofnearly4,5%perannumisforeseen.Sincethegrowthrateintotal
energyconsumption islikelybelower,naturalgascouldreacha20%share
oftotalenergyconsumption in1985,therebycontinuingitsroleinreducingthe
Community'sdependence onoilimports.
' . I
Bythemid80*showever,wehavetoexpectasharpdecreaseingrowthrates
fornaturalgasconsumption .Thenationalobjectivesfor1990oftheMember
Statesshowanaverageannualgrowthrateof1%from1985to1990.Conse-x
quentlytheshareofnaturalgasintheenergybalancefortheCommunityis
likelybegintodecline.
"'•\--
Priorityfornaturalgasusageshouldtherefore begiventopremiumuses(eg.
householdandsmallconsumers).TheCouncilDirectiveofthe13thFebruary
1975*)requiring MemberStatestosubmitforauthorisation ,whichisonly
givenundercertainconditions,proposatsforthenewuseofgasinpower
stations,isconsistentwiththispolicy.
^Thecausesoftheforecastchangesintrends v: >
a)Decreaseinproduction withintheCommunity
'Therapidexpansionofnaturalgassuppliesovertwodecades,attimes
i*withextremelyhighratesofgrowth,arosechieflyfromtheextensive .
naturalgasdepositsintheCommunityitself,namelyintheNetherlands
andlaterintheNorthSea.Production fromthemajorgasfieldshas
nowlevelledoffandisshowingthefirstindicationofbeginning tode­
cline.The"objectives "oftheMembercountriesindicate astagnation
innaturalgasproductionintheearlyeightiesandamorerapiddecrease
by1985.Bytheendofthecenturytheproduction couldfalltohalfof
thecurrentlevel,ifnewreservesarenotdiscovered .Industryestimatesforna
turalgasproductionfortheyear2000rangefrom80to'130milliontoe.
Evenifthehighestfigureisreachedthisrepresents adeclineof15%
comparedwiththemaximumproductionfigureattainedin1976.
b)-Negotiations onncw-impert-ation^contracts
Theforecastincreaseinnaturalgasconsumption ispartlycoveredby
longtermcontractscurrentlyamountingto104milliontoe/yearoveraperiod
of20to25years,whichhavebeenconcludedwiththefollowingcountries :
••^
*OfficialJournalNo.L178ofthe9.7.75. .
..., ./.

.rW,*Natural"Gas-Import .ContractswithThirdCountries
'·Milliontoe/a% time
supply
beginssupply
ends-
1.Algeria 43.6 41.9 1966-84(
2000
2.Norway 25 24.0 1977/78 1997/98
3.USSR 18.2 17.5 1977/80 2000
4.Iran 7.7 7.4 1982 2004
5.Nigeria 7.0 6.8 1986 2006
6.Libya 2.5 2.4 1972"" 1992
1 \ _.
Howeverthesecontractsalonearenotsufficienttoreachthe20%shareof i
totalenergyconsumption foreseenfor1985.Takingforexampleanaverage j
'increaserateof2%peryearfortheconsumptionofnaturalgas,agapof J
100millionT.O.E.canbeexpectedaroundtheyear2000inthesupply.This j
flap,however,couldincreaseto150millionT.O.E.witharateof3L
c)Certaincontractsrecently'concludedindoubt
ι
Someofthecontractslistedinthetable,withanannualquantityofabout27 i
milliontoecann0longerberegardedasfirm.Amongsttheseisthecontract' ■- N i: - <•
withtheNationalIranianGasComp.forwhichthefutureisdoubtful.However,•!
.J
evenifworkwasrestarted ontheproject,itiscertainthatgasdeliveries »
couldnotstarfontime.ForthreecontractswithAlgeria,representing about
-19milliontoeitisuncertainifthegaswillbedeliveredinliquefiedformasi
contracted.TheAlgeriangovernment hasdeclaredareluctancefortheexport
ofgasasLNG(liquefiednaturalgas),becauseofthelargeinvestment andassocia-;
tedfinancethisrequires.
Negotiations areunderwayandafinaldecisioncannotbeexpectedbeforemid
1980.Theconstruction ofoneortwopipelinescrossingtheMediterranean sea
asanalternative methodofdeliverywouldnotonlyincreasethetransportation •
costbutalsopreventthestartofthedeliveriesforeseenuntil1984." i
"• •< \
.' ■. ■''• t

-4-
, ι
Thereforethedangerofasubstantial gapbetweenactualnaturalgas j
supplypatternsandthe1985objectives,leadingtosupplyproblemsin f
certainregionsoftheCommunity,cannotbeexcluded.
ι.I
3.Securityofsupply
•... !,I
Thesecurityofnaturalgassupplyisestimatedtobehigh,mainlyduetothe
largegasresourceslocatedwithinCommunityterritory.However,.thedependence
onimportsfromnon-membercountriesisincreasingveryrapidly.In1975
at6%itwasstillrathersmall;for1980itisestimatedat25%;by1985itis
forecastatabout407.andby1990,afigureofabout50%hastobeexpected.
' I
If,asforecast,indigenousproduction decreases andconsumption continuesto
increase,asimilar"dependenceongasimportswillresultattheendofthecen-j
turyaswecurrently haveonoil.
TheCommunityisconfronted withadifficultproblem.Thedangerous dependence
.^onoilimportscanbereducedbyturningtonaturalgas,althoughitmustbe
ensuredthatthereductioninthedependence onimportsofonefuelisnot
.replacedbythesamedependence onimportsofanother.
Thereforeeffortshavefirstlytobedirectedtomaintainadequatesupplies
fromindigenous resources.Althoughfurtherimportsareindispensable ,they
mustbekeptwithinacceptablelimits.Ahigherdegreeofdiversification shouldJ
also.beattained.Unilateral dependence shouldbeavoidedandsuppliesfrom
politically stableandsuitablelocatedcountriesshouldbestrengthened .
' -i
TheCommission hascharged independent expertstopursuedetailedstudies
onwaysofimprovingthesecurityofsupply.Withthecompletionofthese
studies,theCommissionwillprepareacomprehensive reportandsubmitthe
conclusions made>togetherwithsuitableproposals,totheCouncil.
4.Commonactions •
Themaintenance ofsecureanddurablesuppliesofnaturalgastotheCommunity
mustbebasedonthreemainapproaches :
ν
• > v
Î

-production within the Community •
-conclusion ofnatural gas import contracts with non-member countries
-development ofsubstitute gases ;
I
!
a)Natural gas production within the Community , 1
1
Proven recoverable reserves ofnatural gas within the Community amount
toabout 3billion toe.Asubstantial increase inproduction based on
these reserves seems tobeunlikely . Onthecontrary thecurrent
production rate ofabout 140million toe will probably fall after 1985 .
However ,experts estimate thetotal natural gaspotential ofthe Community ,
inparticular onthecontinental shelf ,rather optimistically . The
natural gas industry estimates natural gas reserves inthe Community ,
recoverable uptothe year 2000,at5to5,5 billion toe.This potential
should beutilised asrapidly aspossible since although asubstantial
increase inproduction isunlikely ,the forecast decline inproduction
can bepostponed .The following isasummary ofareas ofaction .
1)There are,particularly inthe North Sea,many known fields with
associated ornon-associated natural gas.which are not connected
• . i-.
toexisting gaslines .Theconstruction ofsuitable gathering line 's"
could make use ofmost ofthese reserves . ,
ii)Inspecial cases the recovery ofgas from isolated fields can only be
achieved bytheapplication ofnewtechnologies i.e. liquefaction ,
methanol production orpower generation onplatforms .
iii)There are inthe Community geological structures with known gas
reserves which cannot beexploited ,because oftheunsuitable pro­
perties ofthe rock stratum .New,but expensive ,production methods
can extract such gas.
iv)Hopes fornatural gasreserves indeeper geological strata arealso
expressed byexperts .However drilling into such stata isvery costly
andrisky . Suitable means should bedeveloped toencourage such
exploration efforts .
./

v)The Community 'srecoverable natural gasreserves would besubstantially
increased over the next .10to15years ,ifthe above actions were pursued .
Extending the indigenous reserves available tothe Community would improve
thesecurity ofgas supply ,and increase their timespan .
' • • 1 - »
' •- . !•
b)Importation contracts with non-member countries !
. ' I
Despite efforts toincrease the production potential ofthe Community ,
the conclusion s>fnew importation contracts is-inevitable ,ifthe contribu­
tion ofnatural gas tothe energy supply ofthe Community istobeexpanded
oratleast maintained inthe longer term . ^
Known recoverable world ,gas reserves aresufficient tomeet the growing
demand -notonly .for Europe -until thenext century . However ,supply •
problems donotarise from insufficient reserves but from : *.
.-transport costs rapidly increasing with riistance
-uncertainty over whether countries with large natural gas potential
are willing toexport their gas
-the need toavoid over-dependence onpolitically unstable regions .
The Community should ensure that imports arediversified asfas aspossible
butdespite the recently concluded contract with Nigeria thecurrent degree of
diversification cannot beregarded assatisfactory . Further opportunities
for increasing thediversification ofsupplies inthe medium term may be
offered bygas from Cameroun ,Canada ,Qatar and some other countries inthe
Persian Gulf .
'From thepoint ofview ofgeographical proximity and close economic cooperation
Norway ,must beregarded asoffering anexceptional opportunity ,with its conr .
siderable natural gas reserves inthe North Sea.
The Community ishighly interested inthe conclusion offurther importation
--contracts ofnatural gas with Norway .

.v.Accelerated development offflajoc.new-;importation projects .such asapipe­
line ,from theNorth Sea-orpossibly apipeline crossing theMediterranean
from Algeria -could help tosolve themedium term supply problem men­
tioned under point 2c.However ,theimplementation oftherequested invest
ments ,suppose enormous financial means and canonly berealised ifthe
Governments andindustries concerned work i"nclose mutual cooperation ,maki
useofCommunity 'ssuitable ,financing instruments as,forinstance ,the
European Investment Bank andthe Ortoli fund .
:) Development ofnatural gas substitutes
Even increased effort onexploration for newnatural gas reserves within
the Community .cannot prevent anincreasing dependence onimports ,which
could reach adangerous degree bythe endofthe century . Consequently
the Community should encourage the development of..sybstitute gases to
avoid this over-dependence .
i)Inthe medium term LPG (liquefied petroleum gas-Propane /Butane)could
make auseful contribution . The supply ofthis hydrocarbon is
likely toincrease rapidly in 'the coming years ,inparticular
*from the Middle East and Algeria ,but also from the North Sea.
Apart from itsutilisation asafeedstock inthepetrochemical industry ,
LPG may beemployed onthe energy markets ofthe Community inthree
ways : .
 i-asanautomotive fuel
-tosupply regions not connected tonatural gas lines
-for extending natural gas supplies bymixing
Thefirst use isonly likely toincrease with more favorable
taxation treatment . The second use could replace substantial
quantities offuel oil,inparticular inrural regions .Thethird
use could increase natural gas supply by5to10Xfor alimited
period . This last possibility could make auseful contribution to
apossible shortfall inthe mid-eighties .
ii)Inthelong term,coal gasific£ion must beconsidered .Even though
r «
the known technologies arenotyet commercial ,they must befurther
developed together with newtechnologies ,as.for example theapplica­
tion ofnuclear heat orhigh pressure in~situ coal gasification .

Indeed the Commission
projects inthis area
bemade bywidespreadiscurrently supporting anumber ofdemonstration
but auseful contribution togas supplies could only
adoption ofany successfully developed technologies .
Price policy
'Even ifitisdesirable that -with respect tosecuring thetotal energy
supply ofthe Community -natural gas supply should increase oratleast
maintain itsposition ,natural gas should beemployed inaneconomic and
rational way.
Asuitable price polidy and appropriate tariff structures present ameans
*
toavoid waste and encourage rational use.Furthermore gas prices should
reflect supply costs onthe world energy market .
The Commission ,incollaboration with national administrations and the gas
industry ,iscurrently preparing appropriate recommendations relating toa
convergence ofprice policies inthenatural gas sector ,which will besub'
mitted tothe Council inthe near future . '

Conclusions
TheCommissionproposesthattheCouncilshouldendorsethefollowingguidelines
forCommunityandnationalactionwithrespecttothesupplyofnaturalgas.
«)DEVELOPMENT OFINDIGENOUS PRODUCTION
Maintainandifpossibleincreasetheproductionofnaturalgas-in
theterritoryunderthejurisdiction oftheMemberStates.
Thisimplies:
-anintensification ofexplorationeffortintheCommunity,
-development ofgasgatheringsystems,inparticularintheNorthSea,
-theexploitation ofmarginalfieldsofassociated andnon-associated
gasthatareisolatedorhaveahighinertgascontent,
-encouragement forthedevelopment ofverydeepwellsandtheemployment
oftertiaryrecoverymethods,
-theapplication ofnewtechnologies intheareasoftransport andstorage.
•' ν.
b)DIVERSIFICATION OFGASIMPORTS FROMTHIRDCOUNTRIES
Increaseddiversification ofgasimportsby
-thedevelopment ofnewgasimportation linkswiththirdcountries,*
givingthegreateststabilityofsupplyanddiversification ofsources
possible,
-theencouragement ofco-operation betweenthegovernments ofMember
Statesandbetweengasundertakings fortherealisation oftarge
importation projectsforsuppliesfromthirdcountries,
-optimaluseofexistingfinancialinstruments intheCommunitywitha
viewtoaid,asnecessary,therealisation ofimportation projectswith
particularly heavyinvestment requirements,suchasunder-sea gas
pipelines andlongdistanceLNGchains,
-thedevelopment ofprogrammeswithcommoninterestintheframeworkof
economicco-operation withproducercountries,
-thegrowingparticipation oftheCommunityintheexpansionofthe
worldmarketinliquefiedpetroleumgas.

-10-
C).DEVELOPMENT OFSUBSTITUTE GAS
Increase thecontribution ofsubstitute gastosupply by:
-encouraging thegasification ofcoal ,,
-increasing theuseofLPG (butane ,,propane )aspeak supply gas
inpublic distribution networks andforsupplying regions without
such anetwork .
κ