Douglas-Westwood: Energy balance essential for security of supply
Posted: 16 July 2004
“The changing situation in energy supplies has major implications for governments worldwide. The present reliance on oil must be reduced; natural gas and renewables will have to be used to fill the forthcoming energy gap, a massive energy conservation drive is needed and it is becoming increasingly likely that nuclear energy will have to be resurrected.
“Oil demand from the developing economies has more than doubled over the past decade and supply restrictions are now evident. Analysis for ‘The World Oil Supply Report’ shows that it is increasingly likely that oil supplies will peak, possibly within a decade and governments must acknowledge this scenario as the economic consequences are considerable.
“It is therefore essential that governments recognise the need for energy diversity as present high oil prices are merely a foretaste of things to come.”
These are amongst the points made by John Westwood of energy analysts Douglas-Westwood in his opening address to the East of England Energy Group conference in Norwich, England today.
Offshore industry growth
“Over the past few years the world’s oil majors were focussed on gaining reserves by ‘exploration on Wall Street’ rather than exploration offshore with the result that depleting reserves are not being replaced. There is now a need to greatly increase exploration spending to boost reserves and future production prospects.
“During the recent period of high oil & gas prices oil company profits have soared whilst contractors’ profits have fallen. Both this and the reserve addition situation are fundamentally unsustainable.
In the mature shallow-water offshore areas of the world total expenditure is falling – the UK is a case in point, soon to be joined by Norway.
Global offshore expenditure on field developments and operational expenditure is, however, set to continue its overall growth, but this will be particularly focussed on deepwater; with an increasing spend on subsea production and floating production (‘The World Floating Production Report’ forecasts 120 additional installations by 2008).
Growth in natural gas & LNG
Growth in demand for natural gas is outstripping that of oil and depletion of reserves in countries such as the UK and the USA means that activity is focussed on long-distance subsea pipelines. This coupled with the increasing activity in deepwater means that top-of-the-market pipeline installation vessels will be in high demand.
However, much gas is economically stranded and at present liquefaction offers the only real solution. Investment in LNG plants, LNG tankers and import terminals is set to boom. Analysis for ‘The World LNG Report’ indicates a 40% growth in spend over the next few years to exceed $10 billion per annum.
Importance of renewables
“Renewable energy has prospects for strong growth, particularly windpower. In the UK alone some 118 MW have been commissioned in the first half of 2004 and a further 200 MW are planned. Over the next five years it is estimated that some $80 billion will be spent on windpower installations worldwide.
“Offshore windpower is a new industry set to see strong growth. Analysis of prospects in the ‘The World Offshore Wind Database’ suggests a spend of nearly $10 billion over the next five years. The immediate growth market is the UK with 499 turbines forecast to be installed offshore followed by Germany with 558.
“Wave and tidal power is an embryonic industry but with good long-term prospects. ‘The World Wave and Tidal Database’ is forecasting the cost of annual installation to reach $150 million by 2006. Here the UK is market leader.
“Large-scale biomass is another long-term growth sector. The recently published study ‘The World Biomass Report’ forecasts that annual capital expenditure on large-scale biomass power plants estimated at $1.3 billion in 2004 will grow to $2 billion by 2010.
UK needs
Returning to the subject of the UK, Mr Westwood stated his view that “the UK needs a clear and long term strategy for addressing the major changes that will happen in the energy sector in future years. This should include:
“Fully exploiting its remaining oil & gas reserves – the UK has been successful in attracting in new small oil & gas companies to develop some of the many tiny fields that remain and to take over the mature assets of the departing oil majors. It is essential that recent successes are built upon.
“Growing energy from renewable sources – this requires a very long term view. Developers must have the assurance that government support for this sector plans will continue. Secondly, there needs to be a major drive to develop the supply chain otherwise the necessary hardware will be imported, with little benefit to UK industry.
“Greatly increasing energy conservation – major incentives are required to change the UK into a low energy input economy before this is forced, with great economic damage, by major energy price rises.
“Winning export markets for UK offshore oil & gas industry skills – as the major business opportunities are increasingly in foreign markets, a much more integrated approach is needed. The present fragmentation of effort between national and local agencies is not appropriate. In 1980 the UK North Sea accounted for some 30% of the world offshore market. By 2000 is was 13% and by 2008 we forecast it will be down to 7%. Increasing export business is vital.”
For more information see www.dw-1.com
Posted by Richard Price,
Editor Pipeline Magazine
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