”Home run” for Uppsala Global Energy Systems – Deepwater Horizon discussion, the Norwegian gas bubble and an International Lecture Award

Posted on June 18, 2010

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Global Energy Systems at Uppsala University hit a home run on Thursday June 17. It began at 7.15 am when Mikael Höök represented the group on SVT TV’s “Good Morning Program”. They discussed the catastrophe in the Gulf of Mexico, how frequently similar accidents happen, why they are forced to drill at these astonishing depths, Peak Oil, and if we can expect more accidents in the future. I myself sat in a hotel room in Bergen [Norway] and could declare that Mikael did well in his first live broadcast.

The next leg was Norway’s largest newspaper “Aftenposten” with a headline that covered the entire front page stating “Rapid end to the gas”. The text began, “Snipp, snapp, snut. The Norwegian gas adventure will end much earlier than the authorities have stated. In ten years production will decline dramatically according to new calculations from Uppsala University.” (In Norway and Sweden one usually finishes children’s tales with the phrase “Snipp, snapp, snut, nu är sagan slut” – “Snipp, snapp, snut, now the story is ended).

The journalist Hilde Harbo then wrote two pages in the Economy section of the newspaper where our (Bengt Söderberg, Kristofer Jakobsson and Kjell Aleklett) publication in Energy Policy “European energy security: The future of Norwegian natural gas production” is discussed. She had also asked the Norwegian Petroleum Directorate for their opinion on our research report and they admitted that they have been all too optimistic. Now they have revised their own prognoses to 2021 and these now follow our estimates. They had not intended to release this before autumn but Hilde Harbo’s article forced the truth out. They still do not want to give any prognoses for the subsequent ten years but they admit that gas production will decline. There is also an article about Bengt’s Ph.D. thesis on the EU’s energy security and they present our view that the EU will have problems.

The next surprise came in the afternoon in Bergen. I was invited to give a presentation at ”The 26th CIMAC World Congress”. It did not strike me immediately as remarkable that it was called “The Collin Lecture”. After the presentation I was asked to remain on stage and then the chairman of Lars Collins Fund, Stephen Dexter, presented me with a certificate that stated that I had been awarded ”The Lars Collin International Lecture Award”. It felt wonderful to receive this, my first award. CIMAC, the International Council on Combustion Engines, is an association of producers of the world’s largest engines and their interest in the fuels of the future is, naturally, very high.

(The article in Aftonposten is translated by Michael Lardelli)

The Norwegian gas bubble will soon burst

Hilde Harbo

Published: 06/17/1910 at. 8:14

Gas should secure the Norwegian economy in an era of rapidly falling oil production. That is the government’s standard response to questions about the near future. But researchers at Uppsala University have presented results indicating that Norway’s gas will decline rapidly.

The Norwegian government’s policy is to be reluctant in publishing long-term forecasts for gas. They justify this on the basis of market considerations. The latest forecast was for as far as 2020, and was published two years ago. It shows steady growth and then a leveling off closer to 2020. No forecasts for gas production are published for the period up to 2030. But the Norwegian Petroleum Directorate (NPD) in a commentary on the outlook for both oil and gas production wrote that “the share of production from undiscovered resources is increasing every year, and the expectation in 2030 is that it will contribute in excess of 40 percent.”

Exaggerated.

However, a research group at Uppsala University in Sweden, led by Kjell Areklett, professor of physics and global energy systems, said that the NPD has exaggerated expectations of undiscovered gas resources and new discoveries on the Norwegian continental shelf.

Areklett and colleagues have used official figures for Norwegian gas production, gas reserves and gas resources in their calculations. Their analysis is based on a model developed by the researcher Bengt Söderberg for the calculation of future gas production.

Söderberg has created two scenarios, one including the Norwegian
Petroleum Directorate estimates for undiscovered gas resources, and
the other based on that future discoveries only account for half of what the Norwegian Petroleum Directorate has estimated. Even the most optimistic scenario shows that Norwegian gas production does not reach the level the government has set.

Production will fall.

- I do not understand why the Norwegian authorities have not said that gas production will peak as quickly and fall as sharply as it will. Our figures, which have been tested by other researchers, show that production will fall rapidly after 2020, precisely where Norwegian forecasts end, said Areklett. On the other hand he praises Norway for being far more open than most other nations about their production figures and resource estimates.

- Based on these figures we can with our model do fairly accurate estimates of future production, “he said. Areklett attributes the claimed sharp fall in gas production after 2020 to the current production rate and the low size of new discoveries.

- Norway cannot produce more gas than is found. Since the Ormen Lange field in 1997, there have been no discoveries of major importance. New natural gas discoveries are noticeable by their absence, and there is little reason to believe that you will make new giant discoveries in the future,” said Areklett.

- The North Sea has been thoroughly drilled, and with the exception of Snøhvit, exploration in the Barents Sea has so far been a failure. It is possible that the Norwegian Petroleum Directorate made its estimates anticipating major discoveries in the Lofoten area, but it is highly uncertain
that the oil industry will win the struggle to get permission to drill in this part of the Norwegian Sea”, he said.

Suspicious.

He wonders why the Norwegian authorities do not release production estimates for the period after 2020, and suggests that the Norwegian people are being deceived.

- In all other situations energy forecasts have been made for the period up to 2030. This is the case, for example, for the International Energy Agency (IEA). This makes me suspicious, and makes me wonder if the Norwegian authorities do not want to reveal the truth.

- What would be the motive for consciously withholding this information?

- It’s always unpleasant to announce that an industry will end. So far they have been telling the Norwegian people not to be concerned about the end of oil because you have got gas, “said Areklett.

- “But”, he adds, “Norwegian gas production has a “use by” date, and it is not that far in the future”.

NPD estimated in 2008 that we will produce between 125 and 140 billion Sm (3) (standard cubic meters) of gas in 2020. Last year’s production was 103 Sm (3).

Next article by Hilde Harbo

Old forecasts have gas figures that are too high

Published: 06/17/1910 at. 8:16

The Norwegian Petroleum Directorate (NPD) acknowledges in principal that the Swedish researchers are correct in saying that the NPD forecasts have been too optimistic. They have now revised their estimates.

Aftenposten has gained access to the NPD’s completely fresh projections of future gas production until the year 2021, to be published later this year. It shows a clear decline in the forecasts of gas production compared with the last published figures (2008).

- Yes, it is true that we have been too optimistic. Our expectations have not turned out to be what we thought. In particular, this applies to gas production in the Norwegian Sea. The sizes of the discoveries have been smaller and the time taken to develop the finds has been longer than originally expected, says director Jan Bygdevoll, director of analysis and forecasts in the NPD.

At the same time he believes that any exaggerated expectations up to 2020 do not necessarily lead to a steep decline after that time.

- Part of future production will just take longer than expected to get underway. That will reduce the rate of decline after 2020 that the lack of new major discoveries would otherwise cause, said Bygdevoll.

He claims that some smaller discoveries will initially be more profitable to put into production as they can make use of existing pipelines and infrastructure in nearby fields that will have spare capacity once their production declines.

When it comes to the Swedish researchers’ conclusions about the steep decline in gas production after 2020, he says that the outlook is uncertain and difficult to calculate.

- We agree that gas production begins to decline sometime after 2020 but we do not know how fast. This is partly related to how much one chooses to produce before that point in time and how much we find. Gas production is flexible, and the volumes are not just a consequence of what is possible to produce, but also what might be more profitable if held back, “he said.

The forecasts from Uppsala University published in Aftonposten 2010-06-19

(Swedish)

Torsdagen den 17 juni blev en fullträff för Globala energisystem vid Uppsala universitet. Det började redan klockan 7:15 då Mikael Höök representerade gruppen i SVT:s morgonsoffa. Man diskuterade katastrofen i Mexikanska golfen, hur ofta liknande olyckor händer, varför man tvingas ut på dessa fantastiska djup och om vi kan förvänta oss fler olyckor i framtiden. Själv satt jag på ett hotellrum i Bergen och kunde konstatera att Mikael gjorde en bra insats i sin första direktsändning.

Nästa fullträff var Norges största tidning Aftonposten som med en rubrik som täckte hela förstasiden konstaterade ”Raskt slut på gasen”. Texten börjar ”Snipp, snapp, snut. Det norska gasäventyret vill ta slut mycket tidigare än vad myndigheterna tidigare sagt. Om tio år kommer produktionen att minska dramatiskt enligt nya beräkningar från Uppsala universitet.” (Med frasen “Snipp, snapp, snut, nu är sagan slut” brukar man i Norge och Sverige avsluta en sagoberättelse.)

Journalisten Hilde Harbo får sedan två sidor i ekonomidelen där vår artikel , Bengt Söderberg, Kristofer Jakobsson och Kjell Aleklett, diskuteras och kommenteras. Hon har också frågat det norska Oljedirektoratet om deras åsikt om vår forskningsrapport och man erkänner att man varit allt för optimistiska. Nu har man själva reviderat sina prognoser fram till 2021 och prognoserna följer nu våra beräkningar. Man hade inte tänkt att publicera detta förän till hösten men Hilde Harbos artikel tvingade fram sanningen. Vad det gäller följande tio år vill man fortfarande inte lämna några prognoser men erkänner att det kommer att minska. Det finns också en artikel om Bengts doktorsavhandling om EU:s energisäkerhet och man för fram vår åsikt att EU kommer att få problem.

Nästa överraskning kom på eftermiddagen i Bergen. Jag var inbjuden att hålla föredrag på ”the 26th CIMAC World Congress”. Jag reagerade inte så mycket på att det kallades ”The Collin Lecture”. Efter föredraget fick jag stanna kvar på scenen och då lämnade ordförande för Lars Collins fond, Stephen Dexter, över ett diplom som förkunnade att man tilldelat mig ”The Lars Collin International Lecture Award”. Det kändes fantastiskt att få min första utmärkelse. CIMAC, International Council on Combustion Engines, är en sammanslutning för producenter av världens största motorer och intresset för framtidens bränslen var naturligtvis på topp.

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