NATURAL GAS MARKETS: GROWING SOVIET OPPORTUNITIES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00283R000500130005-4
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• Original Classification: S
• Document Page Count: 27
• Document Creation Date: December 27, 2016
• Document Release Date: September 2, 2010
• Sequence Number: 5
• Publication Date: May 1, 1984
• Content Type: REPORT

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Secret-
Directorate of
Inteltigence
.,t
Natural Gas Markets:
Growing Soviet Opportunities
GI 84-10084
May 1984
Copy 409
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Intelligence
Natural Gas Markets:
Growing Soviet Opportunities
An Intelligence Assessment
Resources Division,
This paper was prepared byl Office
of Global Issues. Comments and queries are welcome
and may be directed to the Chief, Strategic
Secret
GI 84-10084
May 1984
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Natural Gas Markets:
Growing Soviet Opportunities 25X1
Key Judgments Western Europe and the United States are likely to become increasingly
Information available dependent on imported natural gas supplies over the next two decades if
as of I April 1984 gas supply and demand trends develop as we envision:
was used in this report.
? By the year 2000, Western Europe could be importing about 50 percent
of its gas if the large untapped Norwegian reserves are not exploited by
then. Even if some of the new Norwegian gas begins to flow by the end of
the century and gas demand in Western Europe grows slowly, gas
imports could still approach 40 percent of consumption by 2000; up from
18 percent.
? The United States could be importing about 25 percent of its gas
requirements by the turn of the century, according to some private
industry forecasts, although most US import needs could be met by
expanded use of Canadian gas.
? Lacking significant domestic gas reserves, Japan will continue to rely on
imports for about 95 percent of its gas requirements through the end of
the century. Japan has developed the most diversified group of suppliers
and could easily meet increased needs by expanded imports from
Indonesia and Malaysia or from new projects in the Middle East or
North America, although the Soviets could also enter the Japanese
market by then.
Because of the seven- to 12-year leadtimes needed to bring new, non-
Communist gas supplies onstream, consumers must line up supplies soon to
meet their demand needs in the 1990s. Except for Soviet gas, however, the
development of new gas supplies will be costly. The cost of gas from the
Norwegian Troll Field, for example, could exceed current West European
import gas prices by 40 to 100 percent, according to some Norwegian
Government estimates. New liquefied natural gas (LNG) export projects to
Western Europe may not be economic until the turn of the century,
Failure to ensure development of new
gas projects could leave the major industrialized countries more heavily
dependent on Middle East oil or enhance Soviet ability to capture a greater
share of the West European and Japanese gas markets in the 1990s.
iii Secret
GI 84-10079
May 1984
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Given the likelihood of a temporary gas glut over the next several years, the
supply problem in the 1990s may not be addressed fast enough. Although
we expect the supply cushion to erode gradually as the 1990s approach, the
need for additional supplies may not be recognized soon enough to
encourage investors to make the huge capital commitments necessary to
develop alternative supplies. As a result, Moscow, as the lowest cost
supplier with spare export capacity, will have a golden opportunity to
increase its gas sales in Western Europe. A second export pipeline to
Western Europe probably would take only a fraction of the time needed to
develop alternative gas supplies. In the Far East, the probable demise of a
Canadian LNG export project to Japan could pave the way for Japanese
purchases of Soviet gas from the Sakhalin project.
To avoid increased reliance on Soviet gas, the West Europeans will
probably have to make a political commitment soon to develop large, new
indigenous supplies to meet gas needs in the 1990s or promote export
projects in Africa and the Middle East. Development of the Norwegian
Troll Field will probably require tax concessions or subsidies to get off the
ground, and consumers will probably have to pay a premium for security of
supply. In the Japanese market, a proposed Alaskan LNG export project-
similar in size to the one operating-could avoid Japanese reliance on
Soviet gas, if Tokyo's official interest in the Soviet Sakhalin gas project can
be overcome.
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Natural Gas Markets:
Growing Soviet Opportunities
Introduction
Natural gas is an important fuel for enhancing energy
security. Gas provides about 26 million barrels per
day oil equivalency (b/doe) or 20 percent of world
energy needs, and proved world gas reserves of more
than 85 trillion cubic meters (some 500 billion barrels
of oil equivalency) are sufficient to last more than 50
years at current rates of consumption-roughly 20
years longer than proved world oil reserves will last at
current depletion rates. Gas, moreover, avoids the
environmental problems or public opposition associat-
ed with coal and nuclear power and is readily substi-
tutable for oil in most industrial, residential, and
electric utility applications. Since 1973, increased gas
use has met nearly 30 percent of the increase in world
energy requirements and is partially responsible for
the decline in oil consumption and prices.
Rising dependence on imported gas supplies, however,
could pose security problems for some regions. West-
ern Europe, Japan, and the United States account for
about half of world gas consumption but as a group
hold less than 12 percent of proved world reserves
(figure 1). Communist countries, the Middle East, and
Africa contain about 75 percent of proved world gas
reserves, with the Soviet Union alone accounting for
more than 40 percent of total world reserves. Thus, by
the 1990s, we believe the major industralized coun-
tries could face similar price and security of supply
concerns for gas that oil currently poses. To reduce
their vulnerability, consuming nations must take steps
to increase indigenous production where feasible and
promote gas development projects in diverse areas of
the world to ensure adequate and secure supplies. F_
Current Gas Surplus
The main concern in international gas markets in
recent months has shifted from lining up new supplies
to absorbing contracted gas deliveries because of
depressed demand. After steadily increasing during
the 1960s and 1970s, gas consumption declined sharp-
ly in Western Europe and growth slowed considerably
in Japan during 1980-82. The world economic reces-
sion that began in 1980, combined with the sharp
escalation in international gas prices in recent years,
was responsible for the large but temporary reduction
in gas use:
? According to Organization for Economic Coopera-
tion and Development (OECD) data, West Europe-
an gas consumption declined abruptly in 1980 after
two decades of uninterrupted growth, falling more
than 7 percent by the end of 1982. Only last year
did demand rebound.
? Gas demand in Japan-the largest liquefied natural
gas (LNG) importer-has risen less than 2 percent
between 1980 and 1982, compared with a sixfold
increase between 1973 and 1979.
? US gas use has dropped nearly 20 percent between
1979 and 1983.
Lower-than-expected gas demand, together with ris-
ing supply availability from projects initiated in the
1970s, has resulted in a temporary surplus. Because of
contractual obligations and projected demand levels,
we think the West Europeans could face a surplus of .
up to 15 billion cubic meters (bcm) this year-about 7
percent of projected demand. In Japan, if supplies
from existing LNG projects were delivered in full
contract volumes, Tokyo would face a potential sur-
plus of as much as 7.5 bcm in 1984-about 25 percent
of annual demand.
deliverable surplus gas supplies in the United States
this year could total nearly 60 bcm-about 13 percent
of current annual consumption
Several consumers are taking action to cope with
expected surpluses. France and Austria are planning
to cut back new deliveries of Soviet gas, according to
US Embassy reporting. Paris, for example, is seeking
a five-year buildup to the full contract volume of
Soviet gas, rather than the agreed-upon three years.
Spain and Belgium are looking to reduce contracted
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Figure 1
World Gas Consumption and Reserves, January 1983
Consumption
1.5 trillion cubic meters
unis
Other
United States
t
USSR
Western Europe
Proven Reserves
87.6 trillion cubic meters
volumes of Algerian gas, while Italy is planning to
boost gas use in electricity generation to absorb
contracted Algerian supplies. In the Far East, Japan
has considered temporarily suspending deliveries of
Malaysian LNG. In the United States, imports of
Canadian gas remain less than 50 percent of contrac-
tual volumes, Mexican imports are at minimum con-
tract levels, and a major gas transmission company
has suspended the largest import contract with Alge-
ria, according to US Department of Energy data. (See
Figure 2 at end of text.)
Balance of the 1980s
Surplus supplies worldwide will probably persist for
some time. Although gas demand is expected to grow,
the increase in gas usage during the remainder of the
decade can be met through existing supply commit-
ments in Western Europe and Japan.
US gas supplies should be adequate
through the late 1980s, because additional imports
will probably be available from Canada.
Western Europe. Lowered prospects for economic
growth, together with rapid escalation of European
gas prices in the late 1970s and early 1980s, have
reduced sharply projected West European gas de-
mand. Most projections call for West European gas
consumption to reach about 247 bcm in 1990, com-
pared with an estimated 215 bcm in 1983, according
to preliminary OECD data. Just a few years ago,
industry and government projections placed 1990 gas
requirements between 270 and 310 bcm. On the
supply side, projections of indigenous European gas
production are now more optimistic than two to three
years ago. As a result, West European net gas import
demand in 1990 has been reduced by about 20
percent, compared with industry and government
projections made in 1982
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International shipments of natural gas have more
than doubled since 1973 to over 190 billion cubic
meters (bcm), representing 12 percent of marketable
gas consumption and the equivalent of 3.2 million
barrels of crude oil per day. We believe natural gas
trade will continue to expand over the next two
decades, with shipments possibly exceeding 300 bcm
in 1990 and perhaps reaching about 500 bcm in the
year 2000. Nevertheless, even by the end of the
century, gas trade will probably account for less than
20 percent of world consumption, with the bulk of gas
consumed in the countries where it is produced. The
inflexibility and high cost of gas transport will
continue to limit trade. The cost of transporting gas,
for example, can run as much as five to 10 times
higher than the cost of transporting an equivalent
amount of energy in the form of crude oil from the
Middle East. Moreover, we believe a sharp increase
in projected domestic production and consumption of
gas in several LDCs willfurther limit the share of gas
traded internationally.
We believe the bulk of internationally traded gas will
continue to move via pipeline over the next two
decades. Pipeline gas exports totaled an estimated
150 bcm in 1983, or nearly 80 percent of total gas
exports, with the Netherlands, USSR, Norway, and
Canada accounting for more than 90 percent of
pipeline exports.
The growth of the liquefied natural gas industry in
recent years has increased supply flexibility in the
gas industry by enabling supplies to be transported
greater distances and delivered to markets with no
external pipeline sources of gas. However, there are
still only afew countries that have facilities for
receiving and distributing the fuel. Many countries
have been dissuaded from importing LNG by the
militant pricing policy of Algeria and the high capital
costs associated with constructing regasification fa-
cilities, LNG tankers, and internal gas distribution
networks. There are only 18 LNG import terminals in
the world-nine in Japan, five in Western Europe,
and four in the United States. LNG shipments totaled
an estimated 42 bcm in 1983, with Algerian and
Indonesian exports accounting for 38 and 29 percent,
respectively, of total trade. By 1990 we believe LNG
.shipments will approximate 70 bcm, with Algerian
and Indonesian exports accounting for more than half
of the trade. Australia is likely to begin exporting
LNG near the end of the decade.
The inflexibility and high cost of gas transport have
resulted in the development of three geographically
segmented markets-Europe (pipeline and LNG),
United States (pipeline and LNG), and the Far East
(LNG only)-each serviced by a small number of
suppliers:
? The European market-West and East-is the
largest gas-trading market. The Netherlands, the
USSR, and Norway are the major pipeline suppli-
ers. The Netherlands exported about 36 bcm to
West European countries in 1983; the USSR
shipped about 60 bcm, divided between Eastern
Europe (55 percent) and Western Europe (45 per-
cent). Algeria delivered about 2 bcm to Italy in
1983 through the recently operational trans-Medi-
terranean pipeline. LNG imports into Western Eu-
rope from Algeria and Libya totaled about 13 bcm
in 1983.
? Gas is supplied to the US import market via
pipeline from Canada and Mexico and by LNG
tankers from Algeria. US gas imports totaled about
27 bcm in 1983, the bulk from Canada. Both
Canada and Mexico have no alternative export
outlets. LNG imports from Algeria totaled nearly 4
bcm; the largest import contract, however, is now in
dispute, and deliveries have been suspended.
? In the Far East, Japan is the sole LNG importer
and accounts for nearly 60 percent of world LNG
trade. Last year, Tokyo imported an estimated 25
bcm of LNG from Indonesia, Brunei, the United
Arab Emirates, the United States (Alaska), and
Malaysia. Japan is the largest market for LNG
imports because of its geographic location, which
precludes gas imports by pipeline, and its desire to
reduce oil dependence. Although Japan probably
will remain the largest LNG importer through the
end of the century, by 1987 South Korea is expected
to begin importing nearly 3 bcm of Indonesian
LNG, demand could
reach 7 bcm annually in the 1990s. South Korea
will need to invest between $750 million and $1
billion in receiving terminals, tankers and storage
facilities, Taiwan
also has plans for importing about 2 to 4 bcm of
LNG in the 1990s,
between $750 million and $1 billion.
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Figure 3
Western Europe: Natural Gas Supply and Demand, 1982-2000
? Midpoint estimate.
b Based on individual country submissions to the lEA.
Current supply contracts with the USSR, Algeria,
and Libya call for deliveries by 1990 of more than 75
bcm, some 5-10 bcm in excess of 1990 requirements
imports of Dutch gas will be near minimum contract
levels during the mid-1980s and Algerian deliveries
will approximate only 80 to 90 percent of contract
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(figure 3). The potential surplus could be even greater
in the mid-1980s when new Soviet deliveries and
Algerian shipments are scheduled to reach full con-
volumes.
tract volumes. At that time, potential surplus supplies Japan. As the world's largest LNG importer, Japan
could approximate 25-30 bcm-about 10 percent of has sharply scaled back prospective gas needs. The
projected annual demand. We believe such conditions latest official Japanese Government projection esti-
will force purchasers to take only the allowable mates 1990 gas requirements at 55 bcm-nearly 20
minimum level from some contracts, renegotiate low-
er contract volumes, or shut in domestic production.
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Figure 4
Japan: Natural Gas Supply and Demand, 1982-2000
Japanese Government.
b Petroleum Association of Japan.
Based on projects under construction or agreed to.
Canada
Australia
Malaysia
UAE (Abu Dhabi)
percent below the 1979 estimate. Japanese industry expected to reach full contract volumes under strict
sources place 1990 gas demand even lower. As a "take or pay" provisions t (figure 4).
result, if all the LNG projects now agreed to or under
construction are completed as scheduled, we believe
supplies could exceed 1990 requirements by as much stipulated percentage of contracted volumes not taken.
as 8 bcm. As in Western Europe, surplus supplies
could be greatest in the mid-1980s, when gas deliver-
ies from projects in Indonesia and Malaysia are
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Figure 5
United States: Natural Gas Supply and Demand, 1982-2000
Authorized additional
potential exports
300
1982 84 86 88 90 92
Demanda
Supply gap
Canada
United States. Gas demand and production projec-
tions by the Department of Energy indicate 1990 US
import requirements of around 50 bcm-an amount
slightl below currentl contracted supplies (figure 5).
Some are less
sanguine concerning domestic production estimates,
and their forecasts point to a potential supply gap in
1990 of nearly 25 bcm-in part reflecting the recent
suspension of one Algerian import contract. In any
event, such a shortfall easily could be met by addition-
al supplies from Canada, provided gas pricing prob-
lems can be resolved. Mexico has shown only limited
interest and ability in adding much volume to the US
Market Conditions in the 1990s
The generally favorable gas supply conditions facing
major consumers in the 1980s could change dramati-
cally in the 1990s. Beyond 1990, Western Europe, the
United States, and to a lesser extent Japan, probably
will require large, new volumes of gas imports. We
think that nearly half of total 1995 import require-
ments in these regions have yet to be lined upF--]
Demand projections by government
sources indicate moderate growth in West European
and Japanese gas consumption during the 1990s.
These sources place West European gas requirements
at between 260 and 275 bcm in the year 2000, up
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Forecasting Gas Demand and Supply
Great uncertainty surrounds long-term gas demand/
supply forecasts. The success of past long-term fore-
casts has been minimal, and recent projections re-
main vulnerable to the shortcomings of past projec-
tions. The threat of unexpected supply disruptions
and uncertainties regarding economic growth, price
trends, and the responsiveness of supply and demand
to price changes all hinder forecasting. Even small
changes in economic growth and price assumptions
can cause substantial modifications in projected ener-
gy requirements. Some analysts now even believe
sharp declines in energy and gas requirements in
recent years have led forecasters to understate future
demand requirements
Methodology
To assess gas market conditions through the remain-
der of the decade, we examined an array of long-term
forecasts completed during the past year. Our survey
included forecasts by major oil companies, consulting
firms, financial institutions, and governments. We
examined the forecasts for reasonableness of assump-
tions concerning economic growth and energy prices.
In deriving a base or summary case, we attempted to
represent the consensus opinion, tempered when nec-
essary by possible alternative scenarios:
? For Western Europe, we relied primarily on recent
forecasts by the OECD, EC, and private industry
sources. Several forecasts contained a low-demand
scenario in the 1990s. We believe the higher end of
the demand range is more likely, given near-term
downward pressure on gas prices because of surplus
supplies.
? In the Japanese market, we relied on Tokyo's latest
official projection and Japanese private-sector fore-
casts. Although these forecasts are largely in agree-
ment for the 1980s-indicating rising demand re-
quirements-projections diverge sharply in the
1990s. Rather than estimating continued growth in
from a projected 247 bcm in 1990. Gas use is slated to
grow mainly in the residential and industrial sectors.
Some forecasts, however, contain a lower growth
scenario, with total West European demand essential-
ly flat in the 1990s. In Japan, official government
demand, for example, the Japanese Institute of
Energy Economics-a respected private forecasting
firm predicts gas demand will peak in 1990 and
then trend moderately downward. Four LNG pro-
jects with a total capacity of more than 20 bcm
slated to expire in the 1990s are unlikely to be
renewed, according to the institute. Such a scenario
probably would lead to heavier dependence on
imported oil than Tokyo currently projects. We
have assumed Tokyo will proceed with its gas use
plans.
? In assessing the US gas market, we used recent
Department of Energy (DOE) projections of gas
consumption and production. Forecasts by some
major US oil companies indicated lower domestic
production prospects, resulting in greater potential
import requirements. Nearly all forecasts point to
greater US reliance on imported gas supplies as the
end of the century approaches.
Key Assumptions
Prices. Most of the energy supply/demand projections
assume declining real oil prices to the mid-1980s, flat
real prices through 1990, and real price increases of
1.5 to 3 percent per year through 2000. In general,
prices of other fuels are expected to move in line with
oil prices.
Growth. The forecasts assume average annual real
economic growth of about 1.5 to 2.5 percent during
the 1980s for Western Europe. Forecasts point to an
average annual growth rate of 2.4 to 2.8 percent
during the 1990s. For Japan, most forecasters as-
sume average annual real economic growth of be-
tween 3.0 and 4.0 percent during the 1980s and 2.5 to
4.0 percent during the 1990s. In the United States,
DOE projections are based on a 3.3 percent growth
rate during the 1980s and 2.4 percent growth rate
during the 1980s.
projections and private industry forecasts point to
Japanese demand requirements of 62-64 bcm in the
year 2000, compared with estimates of approximately
52 bcm in 1990. Most of the growth in gas consump-
tion will come in the industrial and commercial/
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residential sectors, because Japanese electric utili-
ties-which account for around 75 percent of Japa-
nese gas use-have become increasingly reluctant to
conclude new contracts. In the US market, Depart-
ment of Energy projections indicate a decline in gas
consumption from 560 bcm in 1990 to 525 bcm in the
year 2000. Higher gas prices resulting from reduced
domestic production will impede gas use, as will price
competition from oil and coal,
Indigenous production is expected to decline signifi-
cantly in Western Europe and the United States
during the 1990s. Planned West European gas pro-
duction from existing fields is likely to fall from a
projected 180 bcm in 1990 to around 116 bcm by the
end of the century. In Japan, gas production will
grow, but the lack of significant reserves will cause
domestic gas production to provide only about 6
percent of gas requirements by the end of the century.
In the United States, Department of Energy estimates
point to domestic gas production of about 455 bcm in
the year 2000, compared with a projected 505 bcm in
1990. Some private industry sources forecast an even
sharper drop in domestic production, and believe the
projected weakness in world oil prices will continue to
delay development of Alaskan natural gas resources.
Import requirements are likely to grow in all three
regions. In light of currently contracted supplies from
the Soviet Union and Algeria, the West Europeans
face a potential supply gap of between 76 and 91 bcm
in the year 2000-approximately 30 percent, of pro-
jected.gas demand. The likely availability of addition-
al Dutch gas supplies and development of the Norwe-
gian Sleipner Field would reduce the supply gap to
between 50 and 60 bcm in the year 2000. Under a
low-demand scenario, the supply gap would still be
about 30-35 bcm by the end of the century, approxi-
mately 13 percent of projected demand. 'On the basis
of gas consumption and production projections by the
Department of Energy, and existing import contracts,
uncovered US gas import requirements approximate
50 bcm in 1995 and 65 bcm in the year 2000. If some
industry estimates of lower domestic production of
natural gas prove accurate, the supply gap could
reach nearly 110 bcm in the year 2000-approxi-
mately 20 percent of projected demand. Based on
existing commitments, additional Japanese import
requirements approximate 7 bcm in 1995 and 12 bcm
by the end of the century. Failure to proceed with the
Canadian LNG export project to Japan, however,
would increase these import requirements by an addi-
tional 4 bcm in the 1990s.
Western Europe and the United States are likely to
become increasingly dependent on imported natural
gas supplies over the next two decades, if gas supply
and demand trends play out as we now envision:
? By the year 2000, Western Europe could be import-
ing about 50 percent of its gas needs if the large
untapped Norwegian reserves are not exploited by
then. Even if some of the new Norwegian gas begins
to flow by the end of the century and gas demand in
Western Europe grows slowly, gas imports could
still approach 40 percent of consumption by 2000,
up from 18 percent.
? The United States could be importing about 25
percent of its gas requirements by the turn of the
century, although most US import needs could be
supplied by expanded use of Canadian gas.
? Lacking significant domestic gas reserves, Japan
will continue to rely on reports for about 95 percent
of its gas requirements through the end of the
century. Japan has developed the most diversified
group of suppliers and could easily meet increased
needs by expanded imports from Indonesia and
Malaysia or from new projects in the Middle East
or North America, although the Soviets could also
enter the Japanese market by then.
The Supply Issue
The bulk of gas reserves to meet the rising import
needs of Western Europe, Japan, and the United
States are in remote or politically sensitive areas of
the world. Estimates by a major US firm of defined
reserves and likely reserve additions suggest that the
Communist countries-led by the Soviet Union-
could account for about one-half of world gas produc-
tive potential by the year 2000, up from about one-
third at present (figure 6). The Middle East and
Africa are projected to provide about 25 percent of
the potential additions to gas productive capacity
between now and the end of the century.
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Figure 6
World Natural Gas Productive Capacitye, 1982-2000
01984 ^ 1990 ^ 2000
Communist
countries
United States
Western Europe
Latin America
Far East
Canada
Middle East
Africa
With domestic gas production from existing fields in
Western Europe projected to decline, the West Euro-
peans must either develop new indigenous gasfields or
promote gas export projects in Africa and the Middle
East to avoid increased dependence on Soviet supplies.
The cost of these new gas supplies, however, will be
high. Compared with a current price of about $3.60
to $4.00 per million Btu for imported gas supplies in
Western Europe, the cost of delivering Norwegian gas
from the Troll Field is placed at $5.50 to $8.50 per
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cost of new gas supplies from the Middle East or
Africa could be even higher. Capital costs for a large-
scale, 15- to 20-bcm LNG project could approximate
$15-20 billion. Long-distance gas pipelines from the
Middle East or Africa, moreover, could pose security
problems
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USSR. With the world's largest gas reserves, the
Soviets are well placed to meet West European gas
needs. Under the current Soviet Five-Year Plan, one-
sixth of total industrial investment is earmarked for
the gas industry, and the Soviets are building six
major gas pipelines-one an export line to Western
Europe-covering 20,000 kilometers. Because the
Soviets can acquire pipeline right-of-way through
their own territory and other Communist countries
virtually cost free and are willing to accept low or
even negative returns initially on gas exports to
ensure hard currency earnings, Moscow can under-
price any competitor. With Soviet energy sales ac-
counting for roughly 70 percent of Moscow's hard
currency earnings and with gas expected to partially
replace oil in this trade, we believe the Soviets
probably will continue to undercut any competition.
Algeria. Despite near-term problems with gas produc-
tion and exports, we believe that declining production
of oil and refined products in the 1990s will force
Algeria to seek expanded markets for natural gas.
Development of southern gasfields, as planned, could
provide Algiers with an exportable gas surplus of
about 20 bcm annually above current export commit-
ments in the mid-1990s. Because of Algiers's militant
pricing policy and past supply interruptions to
France, however, West European purchasers may
well view the Soviets as a more secure source of
supply for the 1990s.
Netherlands. The Hague has authorized additional
gas export commitments, but the volume and timing
of such exports are yet to be announced. US Embassy
reporting indicates possible additional exports of 10-
15 bcm per year. Negotiations with West European
purchasers are scheduled to take place this year. F_
Norway. With more than 30 percent of Western
Europe's total proved gas reserves, Norway could
provide Western Europe with an additional 40 bcm in
the 1990s. About half of this total would come from
the deep ocean waters of the Troll Field. Develop-
ment of West Troll has been declared commercial by
Norske Shell based on a $6 billion development plan
that would make the project about 1.5 times more
expensive per unit capacity than any other offshore
development project. Total development costs could
approximate $30 billion,
Because of the Troll Field's long develop-
ment leadtime, a contract would have to be signed in
early 1985 to enable the field to start production by
1993-95 at the earliest,
Canada. Canada may be unable to meet US import
requirements in the 1990s. Authorized gas supplies
available for export to the US market will decline
from more than 50 bcm per year at present to under
10 bcm by 1995. Based on 1982 Canadian National
Energy Board projections of supply and domestic
demand, total gas volumes available for export in
1995 will approximate only 22 bcm. Even under
industry scenarios of optimistic production, Canadian
consumption requirements would leave less than 50
bcm of gas available for export in 1995 and 30 bcm in
the year 2000.
Mexico. Mexico has shown only limited interest and
ability in adding volume to the US gas market-its
sole export outlet
Even if Mexico should overcome icu ties associat-
ed with increasing gas production, we believe domes-
tic consumption of natural gas is likely to grow and
constrain the amount available for export.
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Other. Several countries have proposed LNG export
projects that could substantially boost gas availabil-
ity in the 1990s (table 1):
? Canada has proposed a 4-bcm-per-year LNG export
project to Japan to diversify gas exports. The issue
of gas supply for the project, however, has yet to be
resolved, and a principal Japanese buyer has delib-
erately delayed requesting the necessary loan for
the $2.4 billion project.
? Australia-with 900 bcm of proved gas reserves-is
moving ahead on a $2.5 billion LNG export project
to Japan. Although startup of the project has been
delayed twice by Japanese buyers until 1988, a
proposed restructuring of the deal would give Japa-
nese participants a majority equity share, which
could ensure the project's survival. Australia could
earn nearly $1.5 billion a year in export revenues
from the project in the early 1990s.
? US firms have proposed two Alaskan LNG export
projects to Japan. One-a 20-bcm-per-year proj-
ect-has been greeted coolly by the Japanese and
would probably require a consortium of buyers in
the Far East because of the project's size. Although
a feasibility study is planned, we believe the Japa-
nese are more concerned with formal compliance
with the Tokyo-Washington agreement to promote
US energy exports to Japan rather than with actual
gas purchases from the project. Another proposed
project of 2 bcm per year, however, has been
received with interest by Japanese trading compa-
nies, according to State Department sources. The
Japanese firms believe the project could fill the gap
left by the probable demise of the Canadian project
and thus avoid Japanese Government efforts to
make them buy Soviet gas from the Sakhalin
project.
? Nigeria has revived plans for a scaled-down LNG
export project of 4-5 bcm per year with a potential
cost of $2.5 billion. The former Nigerian regime
had proposed a slush fund from 50,000 b/d of oil
exports above the OPEC quota to finance the
project. With oil providing more than 90 percent of
Nigeria's foreign exchange, Lagos is eager to diver-
sify its energy exports with gas-90 percent of
which is flared.
? Abu Dhabi, currently the only Middle Eastern
LNG exporter, has discovered additional natural
gas reserves in the Persian Khuff. Even after only
limited tests, geologists expect the area to be highly
productive.
? Qatar has proposed a $6 billion LNG export project
to supply 8.5 bcm per year from the giant North
Dome gasfield to consumers in Japan and Western
Europe. A British firm and French firm are negoti-
ating with Qatar to complete an agreement to
develop the field.
? Indonesia, one of the largest exporters of LNG, is
looking to develop huge gas reserves near Natuna
Island for export to Japan or elsewhere. In 1982,
LNG exports netted Jakarta $2.2 billion and pro-
vided more than 12 percent of export earnings.
? Malaysia contains the largest proved natural gas
reserves in the Far East and has proposed an
expansion of its current 8.5-bcm-per-year export
project to Japan and has offered to sell gas to
South Korea.
Several other countries have also proposed LNG
projects, including Cameroon, Trinidad and Tobago,
Thailand, and Chile (appendix).
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In the Far East, Japanese development of LNG
projects in Australia, Canada, Alaska, or the Middle
East would enhance Japan's energy security by diver-
sifying gas supplies away from heavy reliance on one
or two suppliers. Indonesia and Malaysia, which could
sharply increase gas exports, are already slated to
supply about one,-half of Japanese gas requirements in
the 1990s, and the Soviet Sakhalin project could
provide an additional 4 bcm of gas to Japan in the
early 1990s. Because the Soviets are near and want
hard currency, Soviet gas robabl will be Tok o's
cheapest source of supply.
Japanese Government officials have
indicated that their negotiating position concerning
Soviet gas is to get it 20 percent below current LNG
Figure 7
Changing Projections of World LNG Trade
in 1990
import prices.
In the US market, Canada and Mexico together may
not be able to fulfill US gas import requirements in
the 1990s, if they materialize as some industry
sources project. Any additional Canadian supplies,
moreover, will be costly to develop because potential
reserves are largely in inhospitable regions requiring
new technology. LNG supplies probably will be even
more expensive. Declining US indigenous production
should raise domestic prices, making some LNG
projects more economic in the 1990s. The uncertainty
surrounding both domestic gas deregulation and the
Alaskan gas pipeline project, however, along with the
recent problems of Algerian LNG supplies, make it
unlikely any'new LNG projects will be embarked
upon before the next decade,
If energy demand projections materialize,
failure to develop LNG projects quickly or to secure
more Canadian gas could force the United States into
relying more heavily on Middle East oil.
Energy Security Implications
According to our analysis, surplus gas supplies and
gas distribution flexibility in all three gas-consuming
regions probably will be sufficient to handle even a
major gas supply disruption during the remainder of
the decade. The surplus of gas during the 1980s,
together with Soviet marketing efforts, however,
could also prevent or delay development of those new
gas projects needed to meet West European demand
requirements in the 1990s. Failure to develop new gas
supplies could leave the major industrialized countries
more heavily dependent upon Middle East oil or allow
the Soviet Union to capture a greater share of the
West European gas market in the 1990s. Moreover,
delays in developing alternative LNG projects for the
Japanese market could bode well for Soviet efforts to
sell gas from the Sakhalin LNG export project.
Looming gas surpluses during the 1980s will pose the
major deterrent to developing new supplies. Several
proposed LNG export projects have already been
scrapped or delayed indefinitely (figure 7). Last year,
for example, France and other participants in the
proposed Kribi LNG project in Cameroon postponed
further work on the facility until the 1990s, and
members of a consortium led by Enagas of Spain
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Gas Project Leadtimes
Except in the Soviet Union, major new international
gas export projects will take about seven to 12 years
to be brought onstream. Gas export projects require
several years to develop not only because of explora-
tion and drilling efforts, but also because of the
immense construction of the distribution infrastruc-
ture needed to get gas to markets. The construction of
gas pipelines entails laying miles of pipe, in some
cases over rough terrain or under water, and install-
ing compressor stations figure 9). LNG projects
require construction of liquefaction trains, port facili-
ties, tankers, and reception terminals figures 10 and
11):
after the signing of the 1977 agreement. Gas did
not begin flowing until mid-1983, however, because
of price disputes. The pipeline will not reach
operational capacity of 12 bcm until 1986.
? Indonesia. Following several years of exploration
and drilling to prove up sufficient reserves for an
export project, it took an additional four years for
Indonesia to construct the Badak and Arun LNG
plants. The Arun plant, completed in 1978, required
38.5 million manhours, and more than 8,000 work-
ers were employed during the peak construction
period.
? USSR. Pipelaying operations for the 4,450-kilome-
ter Soviet gas export pipeline were completed in 18
months, and the pipeline is partially operational.
During the peak of construction, as many as 18,000
workers were assigned to pipelaying operations. The
Soviets committed themselves to completing the gas
export pipeline ahead of schedule as a riposte to the
US embargo. The normal time for such pipelaying
operations could be even less in the future because
Moscow will have added much of the infrastructure
necessary to build pipelines.
? Algeria. The trans-Mediterranean pipeline to Italy
from Algeria was completed in 1981-four years
completely withdrew from the Cabo Negro LNG
project in Chile. Additional Dutch gas export agree-
ments during the 1980s, moreover, could delay devel-
oi)ment of Norweaia lies,
Indee ,recen y
proposed negotiations over the sale of Dutch gas
supplies to the United Kingdom could delay or pre-
vent development of the Norwegian Sleipner Field,
Failure to develop
velopment of the Norwegian Troll Field.
The buyer's market could also hamper producers and
consumers from reaching acceptable prices for new
gas supplies. Having weathered the sharp price in-
creases and seller's market of the 1978-81 period,
? Malaysia. The $2 billion LNG facility took about
four years to construct. 25X1
Because much of non-Communist gas reserve poten-
tial is in deep ocean waters, in hostile climates, in
complicated geological structures, or remote from
existing gas markets, new gas export projects are
likely to take even longer to develop:
? the Norwegian Troll Field 25X1
will take at least 10 to 12 years to be brought on-
stream.
? LNG projects in Nigeria, Cameroon, and Qatar will
require seven to 10 years to come on line.
consumers are likely to take advantage of the current
and projected buyer's market to press for price con-
cessions from existing suppliers. The French and West
Germans are already renegotiating the price of new 25X1
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to play off the Dutch, Soviets, and eventually the
Algerians in upcoming negotiations to extract maxi-
mum price concessions, according to US Embassy
reporting. Indeed, in a recent agreement to resume
Libyan LNG deliveries suspended since 1980, Rome
achieved a price nearly 15 percent below both the 25X1
Libyan demands and the current price of Algerian
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Figure 8. Pipelaying operations
can take several years.
LNG to France and Belgium. Lower gas prices from
existing contracts, however, will make new gas proj-
ects even more unattractive. New gas projects under
consideration in Nigeria, Cameroon, Qatar, and Nor-
way, for example, will require extensive capital invest-
ments that will result in per-unit-gas costs substantial-
ly higher than gas from existing sources.
In addition, the projected surplus in contracted West
European supplies will be greatest in the mid-1980s
when new projects-such as the Norwegian Troll
Field and/or LNG export projects in Africa or the
Middle East-must be undertaken if supplies are to
be deliverable in the 1990s. We believe these projects
will require seven to 12 years to be brought onstream.
Indeed, the inflexibility and long leadtimes of gas
projects indicate that, if gas pipelines and LNG
facilities are not undertaken even in periods of slack
demand, additional supplies will not be available
during periods of rapid demand growth or energy
supply disruptions. The European gas deal with the
Soviets, for example, was undertaken when energy
prices were rising. The deal is now less attractive
because of weak demand. Had the pipeline project
started in 1976, Western Europe would have had gas
to resort to when oil prices exploded in 1979-80. We
are concerned that such a scenario could be repeated
this century if Norwegian or other gas supplies are not
developed quickly and oil flows are disrupted in the
1990s.
Soviet Influences
In our view, recent Soviet marketing efforts could also
undermine the development of alternative gas pro-
jects, leaving Moscow well placed to meet West
European and Japanese import requirements in the
1990s. Potential sales of natural gas to hard currency
countries offer one of the few bright spots in the
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Soviet export catalogue. We expect the Soviets to
aggressively market their gas in the West, undercut-
ting competitors' prices when necessary. Because the
Siberia-Western Europe gas transmission line is al-
ready in place, there would be no cost to the Soviets if
they chose to do so. Moscow has already been offering
spot sales and discounts on gas deliveries above 80
percent of contracted volumes,
Recent attempts to negotiate gas deals with
the Finns, Swedes, and Greeks have also caused the
Soviets to cut offer prices sharply to near parity with
coal and heavy fuel oil, according to Embassy report-
ing. In recent negotiations with Turkey, Moscow has
even agreed in principle to deliver the gas below the
price of fuel oil.
With 10 to 15 bcm of spare capacity in existing lines,.
the Soviets could also use these pricing tactics to
capture any small growth in West European import
demand. Such additional Soviet sales could undercut
sufficiently the volume of new gas supplies needed
from the Norwegian Troll Field to make its develop-
ment impractical in the next decade. Moreover, a
second Soviet export pipeline-if demand warrant-
ed-probably would require less than half the devel-
opment leadtime of Troll. A recent Danish discovery
of gas in the North Sea, for example, will be shut in
because of current market conditions, and export
prospects to Sweden and West Germany will dep end
on the siicce-.;,% of Soviet sales effortsJ
Moscow's efforts to attract new customers have been
partially successful:
? Rome has given the Italian state energy agency
formal approval to renew negotiations with the
Soviets for additional gas purchases.
? Greece and the Soviet Union have signed a contract
to conduct a feasibility study for a 1,200-kilometer
natural gas pipeline from southern Russia to the
northern Greek industrial area.
? Moscow has concluded an agreement for additional
gas sales to Finland in which the price will not be
linked solely to crude oil prices.
If Soviet price flexibility eventually results in sales to
Sweden, Greece, or Turkey, Moscow will not only
increase its hard currency earnings but also could
limit access of potential suppliers to the European
market (figure 11):
? An extension of the Finnish gas pipeline from the
Soviet Union into Sweden probably would dampen
Swedish interest in financing and building a gas
pipeline from the Norwegian Troms Field to the
continent. Such a pipeline through Sweden is one
alternative for bringing about 25 bcm of northern
Norwegian gas annually to the European market in
the 1990s.
? An extension of the Soviet pipeline network into
Greece or Turkey could effectively block access to
the European market by suppliers in the Middle
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Figure 10
Typical LNG Project
302498 5-84
East, where 45 percent of world non-Communist gas
reserves are located. Markets in Turkey and Greece
are key steppingstones for Middle Eastern suppliers
to the larger West European market because they
will need to sell gas in transit to minimize the cost of
delivery. Moreover, the alternative of shipping LNG
to Western Europe from such countries as Iran,
Qatar, and UAE would be more than 30 percent
Tying gas sales to goods and equipment purchases
could put further pressure on the West Europeans and
Japanese to import Soviet gas. In Italy, the president
of the country's industrial association-Confindus-
tria-has called for Rome to sign for Siberian gas to
avoid jeopardizing Italian prospects in the next Soviet
five-year plan. The prospect of large-scale, Soviet
coal-slurry pipelines in the 1990s-each of which
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more expensive than shipments by pipeline,
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Figure 11
Selected Natural Gas Pipelines
Pipeline supplying Soviet gas
Existing
--- Proposed
Pipeline supplying non-Soviet gas
Existing
--- Proposed
Den ark -^
Norwegian
Sea
y~Y Sweden o\ro3
Troll 0 all
gas field Norway Finland
Gavle Tampere
North ~~ nHeta}hnki*
Sea Stockdol Kotka.
~'~*Ankara
Cyprus
?Orenburg
gasfield
0Aral
Sea
The United States Government has not recognized
the incorporation of Estonia. Latvia, and L,thuenie
into the Soviet Union. Other boundary representation
ie not necesseriiy eeme.it.me.
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would reportedly involve an investment comparable to
that required for the Siberia-Western Europe natural
gas pipeline-could also lure the West Europeans to
purchase Soviet gas in exchange for lucrative Soviet
equipment contracts.
In the Far East, the Soviets are developing gas
reserves off Sakhalin Island and plan a 4-bcm-per-
year LNG export project to Japan. Toyko joined the
project in the mid-1970s, and the venture is similar to
the Siberia-Western Europe natural gas pipeline pro-
ject. It involves the transfer of technology and equip-
ment financed through Western credits-at below-
market interest rates-in exchange for Soviet
repayment through the delivery of energy resources.
Moscow could earn about $700 million in hard cur-
rency annually from the gas sales. Because of project-
ed gas surpluses, Tokyo has dragged its feet on the
project. Recent problems associated with getting a
similarly sized Canadian LNG export project to
Japan off the ground, however, have been greeted
with pleasure by some Japanese Government officials
and bode well for the Sakhalin project. The officials
believe substitution of the Canadian project with the
Soviet Sakhalin project will provide more business for
Japan.
Gas Security Options
Given the likelihood of continued softness in world
energy markets, we believe new gas export projects
cannot be justified on near-term commercial or even
regional economic grounds. New LNG export projects
for Western Europe, for example, may not be econom-
ic until after the turn of the century,
Projects such as the Norwe-
gian Troll Field-with production costs alone as high
as $6.00 per million BTU-probably will require tax
concessions or subsidies to get off the ground. A 1-
percent interest rate subsidy, for example, could lower
unit costs by 35 to 45 cents Der million BTU,
Alternatively, a price
acceptable to buyers could be agreed upon and an
individual tax structure for the project set up to allow
production at the agreed price. Even if the Norwe-
gians changed their position against government tax
concessions or subsidies, however, we believe the West
Europeans probably would have to make a political
commitment to ensure development of Troll by paying
a premium for security of gas supplies. Moreover,
development of Troll will require a greater degree of
regional planning and cooperation among the West
Europeans.
In Japan, a proposed Alaskan LNG export project-
similar in size to the one in operation-could be
substituted for the Canadian gas project and thereby
avoid Japanese reliance on Soviet gas. According to
State Department sources, Japanese trading firms
have expressed interest in the project, but Japanese
Government backing of the Soviet Sakhalin project
must be overcome.
From a regional strategic perspective, completion of
some of the proposed gas projects would provide
important redundant capacity to cope with potential
disruptions of natural gas supplies through the bal-
ance of the century. In addition, excess gas supplies
could be substituted to some degree for oil during an
oil supply disruption. Fuel-switching capability has
increased significantly in recent years as facilities
have been converted to alternative fuels and as new
equipment has been installed with multi-fuel flexibili-
ty. for example, about
75 percent of all large industrial users in the United
States can switch back and forth between oil and
natural gas, and 90 percent of all new industrial
equipment sold is capable of dual- or multi-fuel use.
Such trends, we believe, are similar in Western
Europe. As the existing capital stock is replaced
worldwide, fuel-switching capability is likely to in-
crease, providing important flexibility between oil and
gas during a supply disruption. In our view, failure to
proceed with new gas development projects in the next
few years could leave the major industrialized nations
more heavily dependent on Middle Eastern oil or
leave Western Europe vulnerable to a gas shortfall
during the 1990s.
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Appendix
Table 1
Existing LNG Projects
Exporters
Importers
Contract
Volume
(bcm/yr)
Contract
Term
Comments
Algeria
Belgium
2.5
1982-2002
Deliveries of about 1.5 bcm/year are made up to Montoir, France, until
Distrigaz's Zeebrugge terminal is operational in 1986. Belgium has the option to
increase deliveries to 5 bcm in 1986.
Algeria
France
0.5
1964-90
Contract extended in 1976 to 1990.
3.5
1972-98
Contract extended in 1976 to 1998.
5.2
1982-2002
Algeria
Spain
4.5
1974-94
Deliveries have never exceeded 1.5 bcm/year, and price and volume are under
negotiation. Algeria has demanded $500 million for Spain's failure to import the
full contract volume under the contract's take-or-pay clause.
Algeria
United
1.4
1978-98
States
4.5
1982-2002
Suspended in December 1983.
Libya
Spain
1.4
1969-91
Current deliveries total about 0.8 bcm/year. Contract extended to 1991.
Libya
Italy
2.3
1969-90
Italy has signed a contract to buy 0.7 bcm/year over a 13-month period after
purchases were suspended following a price dispute in 1980. Deliveries of about 1
bcm per year are possible without renovating Libyan facilities.
Brunei
Japan
7.2
1973-92
Will be extended to half of current commitment after 1992.
Abu Dhabi
Japan
2.9
1977-97
Extension undecided.
Indonesia
Japan
11.9
1977-99
An amendment signed in 1983 increased contract amount by an average of 1.4
bcm/year, and the contract will be extended.
4.5
1983-2003
Bontang.
Malaysia
Japan
8.5
1983-2003
Deliveries are slated to reach full contract volume in 1986.
United
States
Japan
1.3
1969-89
Contract extended by five years in 1982; extensions are likely.
Table 2
LNG Projects Pending Finalization or Startup
Exporters
Importers
Contract
Volume
(bcm/yr)
Expected
Startup
Comments
Canada
Japan
4.0
1987/1988
Issue of gas supply for the project unresolved; a principal Japanese buyer
deliberately delayed requesting the necessary loan.
Australia
Japan
8.5
1988
Projected startup postponed from 1986 to 1988; a sales agreement with Japanese
customers yet to be completed, but survival of the project likely.
Indonesia
South Korea 2.8 1987
Project is planned for late 1986 startup, but 1987 more likely.
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Table 3
Potential LNG Projects
Exporters
Potential
Importers
Potential
Volume
(bcm/yr)
Qatar
Japan
Western
Europe
8.5
Bangladesh
Japan
4.0
Thailand
Japan
2.0-4.0
Malaysia
Japan
South Korea
8.5
Indonesia
Japan
8.5-14.0
Nigeria
Western
Europe
4.0-5.0
Cameroon
Western
Europe
4.0
Chile
United States
Western
Europe
Japan
2.0
Canada
(Arctic)
Pilot Project
United States
Western
Europe
3.5
Trinidad and
Tobago
United States
6.5-8.0
Norway
Western
Europe
United States
8.5-11.5
USSR
(Sakhalin)
Japan
4.0
United States
(TAGS)
Japan
South
Korea
Taiwan
20.0
Comments
Buyers yet to be found; the Qataris doubt the durability of the $6 billion project given
current market conditions.
Development unlikely because of downgraded gas reserve estimates.
Possible expansion of initial export project to Japan or South Korea.
Large new gas reserves offshore Natuna Island could be developed for a third LNG
plant, providing large amounts of CO2 can be removed from the gas.
Original project scaled down from 16 bcm after cost estimates jumped from $4.5 billion
to $16.5 billion and gas demand estimates in Western Europe were revised downward.
Work delayed until the 1990s. Without French financial guarantees of approximately $3
billion, the project unlikely to proceed.
Foreign participants have withdrawn from the $1.2 billion project.
US buyers have the right of first refusal; project could face extreme opposition from
environmental groups.
A sales agreement yet to be reached.
Troms gas reserves not yet proved sufficient.
Firm commitments yet to be made by Japanese buyers.
Immense capacity of the project would require a consortium of buyers in the Far East
and probably some gas shipments to the US west coast.
A project about the size of the existing Alaskan LNG export to Japan proposed by US
firms and favorably received by Japanese trading companies.
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Figure 2
Natural Gas Movement and Liquefied Natural Gas Terminals, 1983a
The United Slates Government has not recegntted
the naonpotanan of Estonia. labia. end tilhoanla
o Ne Smiet Croon. Other boundary repreeentaenn
ie nob neceesanly othootettte.
South Paahc
Ocean
Liquefied natural gas terminals
Export Import
0 current ^
0 proposed D
a Width of arrow is proportional to
volume of gas transferred.
South Atlantic
Ocean
Total
Exports
Argentina
United
States
Total
191.8
2.4
27.2
Natural gas
150.1
2.4
23.4
Canada
21.2
0
21.2
0
0
Bolivia
2.3
2.3
0
0
0
Chile
0.1
0.1
0
0
0
Mexico
2.2
0
2.2
0
0
West Germany
1.6
0
0
0
0
Norway
22.4
0
0
0
1.6
Netherlands
35.6
0
0
0
5.3
USSR
60.1
0
0
2.8
0
2.0
0
0
0
0
2.6
0
0
0
0
3.8
0
0.8
2.3
12.2
7.9
United
Kingdom
r- 0
r Belgiu
/ France
man
7ry/ Spain Italy
North Aflarrhr' .) ?
Ocean \\ }oo
Algeriay ' 0
Bangladesh'
Thafl no,td,
I 1M
Luxem-
bourg
Nether-
lands
Spain
Switzer-
land
15.3
0.3
2.6
2.1
1.3
15.3
0.3
2.6
0
1.3
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0.1
0
1.1
0
0
0
0
0.4
0
0
0.7
0
0
2.6
0
0
0
0
7.4
4.9
0.3
0
0
0.9
0
0.8
4.0
8.4
0
0
0
0
0
2.0
0
0
0
0
0
0
0
0
0
0
Natural Gas Movement, 1983'
United Western Eastern USSR Japan
Kingdom Europe Europe
11.1 34.2 33.1 2.6 25.2
11.1 34.2 33.1 2.6 0
0 0 0 0 0
0 0 0 0 0
0 0 0 0 0
0 0 0 0 0
0 0 0 0 0
11.1 6.4 0 0 0
0 16.8 0 0 0
0 11.0 33.1 0 0
0 0 0 0 0
0 0 0 2.6 0
Declassified in Part - Sanitized Copy Approved for Release 2012/01/27: CIA-RDP85T00283R000500130005-4
Japan North Paufc
South"t ti~~~~DDD Ocean
-Korea ^?u?0000
 --1. T
Declassified in Part - Sanitized Copy Approved for Release 2012/01/27: CIA-RDP85T00283R000500130005-4
Secret
Secret
Declassified in Part - Sanitized Copy Approved for Release 2012/01/27: CIA-RDP85T00283R000500130005-4