UNDERSECRETARY OF STATE BUCKLEY S REQUEST

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84B01072R000300120008-6
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 20
• Document Creation Date: December 20, 2016
• Document Release Date: March 2, 2007
• Sequence Number: 8
• Publication Date: May 4, 1982
• Content Type: MEMO

Approved For Release 2007/03/03: CIA-RDP84B01072R000300120008-6
} ;. CONFIDENTIAL DDI-5$U-
Execu;ve 1
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4 MAY
,1882
MEMORANDUM FOR: Deputy Director of Central Intelligence
FROM : Robert M. Gates
Deputy Director for Intelligence
SUBJECT . Under Secretary of State Buckley's Request 25X1
1. Action Requested. The attached package for your
signature is in response to Under Secretary Buckley's reque t for
additional analysis on European alternatives to Soviet gas. I
2. Background. A portion of the package has already been
delivered to the Under Secretary's special assistant for use by
an inter-agency working group. The group met on 26 April at
Buckle 's request to discuss a follow-up to the energy portion of 25X1
OGI has a representativq on,the working 25X1
group.
Attachment:
As stated
 Approved For Release 2007/03/03: CIA-RDP84BO1072R000300120008-6
SUBJECT: Under Secretary of State Buckley's Request
Distribution:
Orig - Addressee
1 - DCI w/att.
1 - DDCI w/att.
1 - Executive Director w/att.
1 - Executive Registry w/att.
1 - DDI (for chrono) w/att.
1 - ADDI w/att.
DDI Registry w/att.
1 - D/OGI w/att.
1 - Ch/ED w/att.
2 - ED /M w/att.
DDI/OGI/ED (3 May 1982)
CONFIDENTIAL
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 Approved For Release 2007/0316~NC;IADKU~84B01072R000300120008-6
Central Intelligence Agency
fie srz - y 7S
The Honorable James L. Buckley
Under Secretary for Security Assistance,
Science and Technology Affairs
Department of State
Washington, D.C. 20520
Thank you for your letter of April 26. I was pleased to
hear that our people have been so helpful to you
25X1
Enclosed is a complete package of materials we have put
together on the potential sources of supply available to the
Europeans 25X1
In addition to the graphics, we have provided some textual 25X1
material to indicate the potential of each supplier as we now see
it. The timing and size of new gas deliveries could be affected
somewhat by the political climate in the supplier country.
A partial version of this package has-already been provided 25X1
to your special assistant, Michael Marks, and to Bill Martin for
distribution to members of his working aroup. If we can be of
further assistance, please contact me.
Please accept my best wishes.
5Mi 32
Sincerely,
25X1
25X1
B. R. INMAN
Admiral, U.S. Navy
Acting Director of Central Intelligence
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 Approved For Release 2007/03/03: CIA-RDP84B01072 R000300120008-6
CONFIDENTIAL
Diversifying European Gas Supplies
Over the next two decades, West European gas consumption
will probably rise both in absolute terms and as a proportion of
total energy used. Moreover, existing gas contracts imply
increasing dependence on non-European supplies. Some West
European countries already have signed contracts that will make
them dependent on the Soviet Union for more than one-third of
their gas supplies in 1990. Although sizable new.supplies of gas
must be lined up to meet expected growth in demand, the next two
to three years offer a window of opportunity during which
projects could be launched that would obviate the need for
additional European purchases of Soviet gas in the 1990s. These
new supplies might account for 50-70 billion cubic meters (bcm)
by the year 2000.
Because of the highly capital intensive and dedicated nature
of gas supply infrastructure, gas supplies cannot-be efficiently
redistributed by market mechanisms in the event of a sudden
disruption of supplies. Consequently, some relatively expensive
gas development projects might be undertaken in order to
diversify supplies and minimize dependence I on potentially
unreliable producers.
Assessment of the relative costs of alternative gas supplies
depends heavily on assumptions about the interest rates charged
for project financing. For the Soviet pipeline project, reducing
the effective interest rate by 3 percentage points from current
market rates of 15 percent would cut 10 to 15 percent from the
estimated cost of delivering gas to Europe. The Soviets may have
received effective interest rate subsidies of this amount or
more. The cost of future alternatives to Soviet gas will depend
on the extent to which similar interest rate subsidies are offered
.for these projects.
The Netherlands, currently Europe's largest gas supplier,
would be the most reliable and economical source of additional
gas. The volume of Dutch gas available in the late 1990s,
however, would probably be less than 10 bcm per year.
o Gas deliveries under existing contracts--due to phase
out in the early 1990s--can probably be stretched
through the mid 1990s by deferring gas deliveries from
earlier years when available supplies exceed demand.
o Given the size of Dutch gas reserves and the budgetary
pressures confronting the Hague we believe new export
contracts might be authorized.
Norwegian gas offers a secure, but costly alternative to
Soviet gas. Norway could potentially supply an additional 40 to
50 bcm in the mid-1990s.
25X1
25X1
25X1
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CONFIDENTIAL
o Norway has huge gas reserves--presently about 2.6
trillion cubic meters--and the government believes
there is considerable potential to add to this total.
o Norway's new conservative government has already taken
steps to accelerate resource development; however,
additional measures would be required to reach full
export potential.
o If a triangular gas deal can be arranged--using the UK
as a conduit for delivering gas to the Continent--
substantial savings of time and money could be realized
in delivering 10-15 billion cubic feet of gas to Europe
beginning in the early 1990s.
.o Given the high cost of developing Norway's gasfields
and building major trunklines to the Continent, large
additional supplies of Norwegian gas would probably
cost 15-20 percent more than Soviet gas if no interest
rate subsidies were offered for the Norwegian
project.
Algerian gas can be produced and delivered-to Europe at well
below the cost of Norwegian gas. An additional 5-6 bcm could
probably be delivered through existing Trans-Mediterranean
pipelines and up to 15 bcm through a new pipeline to Spain.
o Field development costs are relatively low and the
feasibility of undersea pipeline connections to Western
Europe has been proven.
o On the other hand, Algeria's militant pricing policy
and its unilateral suspension of gas deliveries to
France and the United States in 1980 label it as a
potentially unreliable supplier.
All the liquefied natural gas (LNG) projects under
consideration to supply Western Europe would probably be
expensive because of high delivery costs. Some of the projects
must overcome political uncertainties.
o Canada could supply 5 bcm of gas to Europe beginning in
1990 if technologies for exporting LNG from arctic
waters are proven.
o Although the original proposal for Nigeria's Bonny LNG
project has collapsed, a scaled down version of the
project--to deliver 8 bcm--might be completed.
o The Cameroon's Kribi LNG project could supply 7 bcm in
the early 1990s if political and institutional problems
can be overcome.
25X1'
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o Qatar has huge gas reserves in its North gasfield and
might supply 8 bcm late in the 1990s.
Proposed gas pipelines from Africa or the Middle East to
Western Europe are probably not politically or economically
practical.
o Any such pipeline would probably cross several unstable
countries and could cost from $30 to 60 billion.
25X1;
I
o Supplies from a Trans-African pipeline, carrying gas
from Nigeria and Cameroon to Europe would be subject to
disruption in any of the countries crossed and in any
event, would probably face high transit fees. 25X1!
CONFIDENTIAL
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 Approved For Release 20007 !t E if 1l P84B01072R000300120008-6
Continental Europe: Natural Gas
Supply and Demand Forecast
BILLION (SIC 1980-2000
tE.'IER3 PU YEt1
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CONFIDENTIAL
Additional Gas Supplies for Italy
o Algeria. Although Italy originally planned to use the
possibility for an additional 5-6 bcm/yr through the
Trans-Mediterranean Pipeline to supply other European
consumers, this prospect is less likely due to i
German/French agreement on Soviet deliveries. Thus,
assuming a new contract is arranged with Algeria, the
additional volumes would equate to about 70 percent of
what Italy plans to receive from the Siberian
Pipeline. However, pricing issues must be resolved on
the 12 bcm under the present contract with Algeria
before additional quantities are contemplated. 25X11
o Nigeria. Italy has an agreement to receive 1.4 of the
8 bcm/yr destined for Europe from the Nigerian LNG
project. While this project as originally envisioned
is now dead, the IEA Secretariat still believes that an
8 bcm/yr project is likely to go ahead. (The original
Bonny project was foreseen to have a capacity of about
16 bcm.) This and other possible LNG projects (from
Cameroon, Qatar, Egypt, or Northern Norway) would
require additional receiving facilities--even if the La
Spezia facilities are no longer used for Libyan
exports.
o Qatar. A Qatar LNG facility, which would export 8-8.5
bcm/yr, could be completed as early as the late 1980s,
although a mid-1990s date seems more likely.
Development of this project has received more emphasis
because of declines in revenue brought about by.
declining oil production and lower oil prices.
o Cameroon. Although sufficient reserves still need to
be proved, industry sources are o timistic that a LNG
project of 5 bcm/yr is possible.
o Norway. Within the OECD, Norway emerged as the largest
potential exporter after 1990. Reserves are immense,
but long lead times to develop fields and
transportation systems are likely to prohibit
significant additional Norwegian supplies to the
Continent before the early 1990s. By the -end of, the
century, the Norwegians could more than double'their
present exports and contribute at least as much as the
proposed Siberian Pipeline. Lead times for some fields
might be significantly reduced if the Norwegians could
use the UK as a conduit for shipping supplies to the
Continent. If Italy begins negotiations soon, it could
conceivably contract for 5 to 10 bcm/yr of gas from
Norway which could arrive as soon as the mid-1990s.
25X1'
25X1,
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CONFIDENTIAL
o Egypt/Libya/Persian Gulf. Recent gas discoveries by
ENI have provided optimism for Egypt. A senior vice-
president of ENI has indicated that substantial new
reserves are likely to be added in the 1930s, making
Egypt a possible exporter of LNG in the 1990s. The
Italian firm AGIP has already made a sizable discovery
off the Libyan coast. Discussions of possible natural
gas pipelines from the Persian Gulf are now at a very
preliminary stage. Such a project would probably not
be possible before the mid-1990s. Nonetheless, the
sizable gas reserves of the area might warrant the
construction of a pipeline if political and security
concerns could be reduced.
o Greater Efficiency. Higher gas prices have already
stimulated significant efficiency improvements in
Italy. Further progress, particularly in the
residential sector could be expected to trim gas
consumption from projected levels. In addition, there
remains significant scope for added coal burning by
industry in Italy. Current plans for industrial use of
coal foresee an increase from 4.7 MTOE in 1980 to 7.1
MTOE in 1985 and 7.4 MTOE in 1990. If Italy would push
to continue the same level of penetration in the second
half of the decade as in 1980-85 period, the equivalent
of nearly 3 bcm/yr could be switched to coal instead of
the current plan for 0.4 bcm. There might also be some
small potential to switch coal for gas in the
electrical sector after 1990. U.S. coal could meet
this added demand in addition to existin commitments
to supply coal to Italy.
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 Approved For Release C @MQ D,ITT L-RDP84BO1072R000300120008-6
Italy: Natural Gas
Supply and Demand Forecast
BILLION cui is 1980-2000
PETERS PER TEPR
Greater
Cf f LcLency
9ypt/LLbya/
~,?
LNG
ddLtLonaL
iLgorLa
IndLgenoL-,s :
,
New i ersLan Gulf
SuppLLes ~..~~? '? ' ~..;~ ,
?~?'? `.:' Norway
1990
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Italy (excluding additional Soviet Gas)
1980
1985
1990
1995
2000
Estimated Gas Demand
28
35.4
43
52
67
Indigenous Production
12
7.3
7.3
7.3
7.3
Contracted Supplies:
Soviet Gas
7.1
7.1
7.1
7.1
7.1
Libya
2.4
2.4
2.4
2.4
2.4
Netherlands
6.5
6.5
6.5
0
0
Algeria
0
12.5
12.5
12.5
12.5
New Supplies:
Additional Algeria
--
--
5
5
5
LNG
--
--
2.2
5
5
Norway
--
--
---
10
10
Egypt/Persian Gulf
--
--
--
2.7
8.7
Greater Efficiency
--
--
--
--
9
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CONFIDENTIAL
Additional Gas Supplies for France
?o Netherlands. France should be able to extend
deliveries under existing gas import contracts with the
Netherlands for several years beyond 1994 by deferring
gas deliveries from earlier years. Total gas available
for import will probably exceed French needs through
the 1980s. Based on gas demand estimates in the French
national energy plan, the total surplus over the decade
could exceed 15 bcm. If imports of Dutch gas were
reduced accordingly in the 1980s, sizable deliveries of
Dutch gas could be taken in the mid-1990s.
25X1'
Moreover, given the size of Dutch gas reserves and the
budgetary pressures confronting the Hague, we believe
it is likely that new contracts will be signed for
Dutch gas exports. France could possibly purchase an
additional 2- h the 1990s from the
Netherlands. 25X1
o Algeria. Additional supplies of Algerian gas--
available as LNG or via a pipeline link through Spain
or Italy--could provide France 4-5 bcm of gas by the
year 2000. The French, however, have been reluctant to
increase purchases of Algerian gas because of price and
reliability factors. 25X1
o LNG. Additional LNG supplies could be available by the
early 1990s from Nigeria, Cameroon, or Qatar. Nigeria
probably will go ahead with a scaled down version of
the Bonny LNG project eventually from which France
could be expected to import about 1 bcm per year. The
Kribi LNG project in the Cameroon is a more likely
source of gas for France, perhaps as much as 2 bcm per
year in the 1990s. A Qatar LNG project would probably
not be completed until the mid-1990s, but could supply
additional gas to France late in the decade.
o Norway. France could probably purchase 5-10 bcm of gas
from Norway in the late 1990s provided steps are taken
to encourage Norwegian gas development. A pipeline
link to the Continent from Norway's Troll field (Block
31/2) mi ht alone sup 1 30-40 bcm to the European
market.
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 Approved For Release 2007/0Q :1 t BO 1072 R000300120008-6
France: Natural Gas
Supply and Demand Forecast
BUION MM 1980--2000
r I-IwI -wu,~
New
.
SuppL Les .. ;? , ;:;, ? ::.;;=;:;`'~;
ALaerLa
"50 1933
'fir' a
''. NetherLande
amw
wft
Max
Nether-Lana 'j w
SovLet Gas
I-T
IndLoemus
LNG
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CONFIDENTIAL
1980
1985
1990
1995
2000
Estimated Gas Demand
28
31.7
42.7
48
50
Indigenous Production
8.5
7.3
7.3`
7.3
7.3
Contracted Supplies:
Soviet Gas
Existing
4.2
4.2
4.2
4.2
4.2
Urengoi
Min
--
6.4
6.4
6.4
6.4
Max
--
8.5
8.5
8.5
8.5
Norway
2.4
2.4
4.0
4.0
4.0
Algeria
4.2
9.3
9.3
9.3
9.3
New Supplies:
Algeria
--
--
--
3
4
Netherlands
--
--
--
2
2
LNG
--
--
--
3
4
Norway
--
--
--
5
7
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Additional Gas Supplies for West Germany
o Netherlands. New contracts for gas -imports from the
Netherlands could probably supply West Germany an
additional 2 bcm per year through the 1990s. In
addition, deliveries of gas under existing Dutch
contracts will probably be stretched beyond 1985
because of deferred deliveries from earlier years.
o Norway. Germany could probably purchase a large share
of the 40 to 50 bcm per year available to Europe from
Norway in the mid-to-late 1990s. If Norway's Sleipner
field were linked to the United Kingdom in a triangular
gas deal, some additional su plies of Norwegian as
would be available by 1990. 25X1;
o LNG. LNG supplies from the Canadian arctic and from
Qatar could provide additional supplies beginning in
the 1990s. Preliminary agreements have already been
reached with Canada to import 5 bcm per year of gas
produced from the King Christian Island area of the
Canadian arctic beginning as early as 1989. An LNG
project to export gas from Qatar's huge North gasfield 25X1
could support exports of more than 8 bcm per year b t
would probably not be on-line until the mid 1990s. I
o Coal Substitution. Additional substitution of coal for
gas in industrial uses could reduce gas usage in
Germany 3 to 4 bcm per year by 2000.
CONFIDENTIAL
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25X1
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03: CIA-RDP84BO1072R000300120008-6
CONFIDENTIAL
West Germany: Natural Gas
Supply and Demand Forecast
BILLIDN'CUBIC 1980?2000
M WS PER YE M
80
SubatLtutLon
Demand
New LN8
?
UPP,LIes.
I
' NetherLanda
Norway/UK
NOrWo Uren ~.
- - - - - - - - - - - - - -
exLotLn
4
[~dt
IndLgenous
1990 1995
NetherLonda
CONFIDENTIAL
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CONFIDENTIAL
West Germany
1980
1985
1990
1995
2000
Estimated Gas Demand
59
62
63
73
82
Indigenous Production
18.3
18.3
18.3 a
18.3
18.3
Contracted Supplies:
Soviet Gas
Existing
11.9
11.9
11.9
11.9
11.9
Urengoi Min
8.4
8.4
8.4
8.4
8.4
10.5
10.5
10.5
10.5
10.5
Norway
9.9
9.9
10.0
10.0
10.0
Netherlands
20.2
23.2
15
0
0
New Supplies
Netherlands
2
2
Norway/UK
12
16
7.3
9.3
Coal Substitution
1
4
CONFIDENTIAL
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 Approved For Release 2007103103:'CIA-RDP84B01072R000 00120008-6
Bob would like you to respond to the
attached request from Buckley. Please have
your response in to me by 1200 h
May. Your ours on 3
rac
trie 'i of
a letter for the DDCI'
u
e
s
sign
ture
be acting on that date). Please covering memo, for theDDI'ssignatuure, to
the DDCI explaining what the request is all
about. Also, coordinate your response, as
appropriate, with EURA. Thanks.
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 Approved For Release 2007/03/03: CIA-RDP84BO1072R000300120008-6
Continental Europe: Natural Gas
Supply and Demand Forecast
1980-2000
9ILLICH CLBIC
MIER9 PER YEW
350-1
,G, BDP R0.1072RaQO-~00120008-6