Mediterranean energy firms form group, offer outlook

Doris Leblond
OGJ Correspondent

PARIS, Mar. 4 -- The 24 countries bordering the Mediterranean Sea account for 9% of world energy demand, a share that will remain proportionately unchanged to 2030, reported Paris-based Observatoire Mediterraneen de l'Energie (OME)—a newly formed association of 35 leading energy companies that operate in the Mediterranean Basin.

However, the extra demand will shift from the northern Mediterranean countries to the southern countries, and fossil fuels will continue to account for about 80% of demand in 2030, with oil remaining the dominant fuel, OME said. The region's overall energy dependence will increase, and by 2030, gas dependence will have reached 28% and oil dependence 39%.

OME launched what is to become an annual publication, "Mediterranean Energy Perspectives (MEP)," to provide a nongovernmental view of energy demand's expected evolution in the region. The report, OME's first in-depth analysis, gives projections to 2030 of the region's energy scene.

The first issue, MEP 2008, released in early 2009, uses a reference scenario based on past energy trends, with the main assumptions related to benchmark population, economic growth, and international fossil fuel prices. The scenario also assumes no major deviations from the energy policies and measures already in place or implemented by yearend 2007.

Oil demand
The almost half billion people who live in the Mediterranean Basin currently consume 990 million tonnes of oil equivalent (toe) or 9% of world energy demand. During 2005-30 this share should remain stable, with demand expected to grow by 1.5%/year, on average, to 1.426 billion toe.

Oil will remain the dominant energy source, with demand increasing, MEP reported. Even though oil will lose some of its share as gas takes over for energy generation, oil demand will continue to rise, pulled along by motor fuels, mainly diesel and gasoline

Oil demand is expected to increase to 522 million toe in 2030 from 432 million toe in 2005, and 80% of the increase will come from the south, especially the southeastern Mediterranean. By 2030, the north will account for only 60% of total demand compared with 70% currently.

While transport will continue as the main consuming area, industry will account for the biggest increase in total consumption, led by the southern countries.

About 40 million toe of refining capacity is expected to be added to the region by 2015. Refiners will add another 60 million toe of capacity by 2030 to accommodate growing oil products demand, particularly middle distillates, for which import dependence will grow. Diesel exporters, specifically Russia, might not be able to supply, as soon as 2015, the region's demand for 40 million toe, a figure that should more than double by 2030.

Gasoline surpluses are expected to exceed 30 million toe over the next decade, MEP said, but export destinations may not be able to absorb the surplus.

Natural gas demand
Total natural gas demand in the Mediterranean countries is expected to exceed 500 billion cu m by 2030, up from 244 million toe in 2005. Over the last 15 years, gas demand has more than doubled, reaching 300 billion cu m in 2007 or 10% of world gas demand. Currently, the North Mediterranean countries account for 60% of the region's gas demand, but by 2030 their share should fall to 45%.

MEP said the structure of energy demand has changed drastically over the past 3 decades. From an industry-based energy mix, the Mediterranean now offers a more evenly-balanced consumption, with transport and the residential sectors increasing shares. Over the next decades, residential gas use will increase to one quarter of the final total consumption.

Coal will retain its 12% share of the energy mix, while renewables will be the fastest-growing fuel over the projected period and by 2030 should account for about 11% of energy demand.

The study insists that pursuing business-as-usual policies "will not result in a desirable energy future" for the region unless huge efforts are made to improve energy efficiency and diversify the energy supply mix, a strategy that should partially mitigate the effects of climate change in the area.

Oil, gas production
The Mediterranean Basin's proved gas reserves amount to 8 trillion cu m or 4.6% of the world's gas reserves. Most countries in the region have been thoroughly explored for hydrocarbons, but those in the southwest Mediterranean area, especially offshore, are still underexplored.

Most current oil and gas production comes from the southern area of the basin—Algeria, Libya, and Egypt. By 2030, oil production is expected to increase by only 20% but will be maintained at over 6 million b/d, while gas production will have doubled from its 2007 level.

Algeria, Libya, and Egypt hold almost 95% of the total gas reserves of the Mediterranean region. Virtually all the marketed production increase will come from these three countries, from 185 bcm in 2007 to 360 bcm by 2030.

Algeria will remain the largest producer, followed by Egypt and Libya. The three countries account for 87% of total gas production in the Mediterranean. During 1987-2007, marketed natural gas production in the region increased to 185 bcm from 76 bcm. Its share of world gas production jumped to 6% from 4%.

Algerian profile
MEP 2008 provides country studies of Algeria and Turkey.

Algeria is one of the world's top five largest gas suppliers, and the value of its hydrocarbon exports has grown nearly threefold since 2000 to almost $60 billion in 2007.

Although it holds 1% of the world's oil and 2.5% of the world's gas reserves, it is still underexplored.

Most oil and gas discoveries are in the central and eastern area of the Saharan platform. Offshore Algeria remains a deepwater exploration frontier.

Total hydrocarbon production is expected to continue increasing rapidly until 2020, remaining about 300 million toe until 2030 compared with 225 million toe in 2007. While total oil production is expected to fall below today's level, gas production should double.

In 2007 Algeria's oil production averaged 2 million b/d, and gas production some 90 billion cu m, accounting for over 2% of global oil production and some 3% of global natural gas output. Crude oil production is estimated to be already on a plateau level, and condensate production will gradually decline. However LPG production will offset these declines until around 2020.

Natural gas is expected to continue to account for two thirds of total energy demand in Algeria by 2030, especially for power generation. Oil accounts for only one third of total requirements, mainly for transport and LPG for residential use. Over the next 2.5 decades, oil and gas demand should almost double.

Hydrocarbon exports will increase until 2020, when it will slowly decline. Gas exports should continue to increase along with the construction of new LNG plants and gas pipelines to Europe. Over the next decades, Algeria will remain one of the top world gas exporters and one of Europe's few gas suppliers.

Turkey
MEP 2008 said Turkey is simultaneously an energy consumer, energy hub-corridor, and energy investor, all of which make Turkey a regional and global energy player.

Its energy future will remain fossil-based, but, except for coal, Turkey is poor in fossil fuel resources. Primary energy production more than doubled over the last 4.5 decades, reaching 26 million toe in 2006. It should increase to 60 million toe by 2030, with nuclear and hydro playing a major role. Coal will account for nearly half of total primary energy production by 2030. By then Turkey's total oil and gas production will be nearly half today's level.

Energy import dependency will be 74% by 2030, in line with current level, despite nuclear energy and growth in renewables, which nevertheless will not exceed 5% by then. Despite increased domestic lignite reserves use, Turkey's fossil fuel import dependency will remain at over 82% in 2030.

Primary energy demand is expected to keep growing at the current 4% rate to 2030, doubling per capita level to 2.7 toe.

Gas likely will be the most important fuel in Turkey's energy system, with demand expected to grow about 5%/year to 2030 and to exceed 90 billion cu m, driven by power generation. By 2030, it will account for one third of Turkey's primary energy demand.

Total energy consumption will grow at the same 4%/year rate as in the past. With over a one-third share of total primary consumption, oil will remain the most consumed energy by 2030, pulled along by transportation.