The Changing World of Europe's Asstes
Ben Rodgers
GIS Analyst, Petroleum Services
Deloitte & Touche, 180 Strand, London, WC2R 1BL, United Kingdom
Telephone: +44 (0) 207 438 2941
Fax: +44 (0) 207 438 3881
Email: brodgers@deloitte.co.uk
Abstract
As European gas markets become increasingly more connected both physically and
contractually, gas assets will need to rise to the challenge. Some assets will find that their
location in the new gas market is more (or less) advantageous than it was in the past. To assist
companies in removing this uncertainty and to help formulate plans for the future the ‘gas toolbox’
was developed. The toolbox brings together asset economics, spatial data and GIS technology
to create credible scenarios of European gas supply and demand. Asset based forecasting
models are first developed in Microsoft Excel, allowing users to speculate about the supply and
demand characteristics of gas assets and to provide risk frameworks in decision support. Once
loaded into our ArcGIS system, users can visualise and add or remove assets from their
scenarios. Developed using ArcObjects and Visual Basic, the toolbox has been customised to be
a spatial and temporal model. Up to 20 years worth of data can be visualised and edited for each
scenario. Individual costings of the gas transit routes from well head to burner tip are exposed by
performing network analyses, taking into account planned, decommissioned or new assets for the
selected year.
Background
As European gas markets become increasingly connected both physically and contractually, gas
assets, gas players and the institutions that affect gas markets will need to rise to the challenge.
The location of some assets in the new gas market will be more or less advantageous than in the
past. Gas asset economics will be increasingly exposed to market forces and regulatory scrutiny.
Asset operations, flexibility and option value may radically change.
During the next two decades the European gas market will play a pivotal role in Europe’s energy
market and economy. Gas suppliers into Europe will play an expanded role within the wider
global gas market place. The development of the European gas market could set the overall
conditions for the global gas market.
Europe is uniquely positioned to capture maximum value from its location, gas infrastructure and
diverse gas supplies. Gas will play a more important role in the European energy market in the
future than it does today. European energy demand is diverse with oil, gas, hydro and coal all
utilised. Europe, however, is import-dependent for gas supplies and takes delivery of large
tranches of gas from Algeria, Norway and Russia. Whilst diverse sources of supply have been
secured, Europe will always be susceptible to the overall market conditions of the global gas
market place.
The conditions that shape the development of the physical gas market in Europe will have a
major effect on the conditions of the whole European energy market.
With this in mind, Petroleum Services set out to develop a framework and then capture and
model these conditions within a GIS. It was felt that much of the uncertainty in the European
energy market is caused by a poor understanding of the energy infrastructure, such as the asset
economics, demand and supply characteristics and gas network connectivity. Typically, GIS
have been developed to model either the upstream or the downstream energy markets
independently, without analysing the effects that developments in one market may have on the
other. Our aim was to develop a holistic and integrated model that would expose and link the
economics, physical interconnections and constraints across both of these market places.
The Concept
Recent independent studies indicate that gas demand is growing throughout Europe. However, it
is not likely that the UK, Europe’s biggest gas market, can remain self-sufficient in gas. New
analysis by Petroleum Services of Deloitte & Touche, reveals that the equivalent of another
Ormen Lange – the largest new development offshore Norway (18 trillion ft ³) – needs to come on
stream every year from 2007 just to meet existing UK demand (see Figure 1). The recent
announcement by Marathon Oil to build Symphony, a 675km pipeline from Brae in the North Sea
to Bacton in the UK, demonstrates the perceived opportunities for gas suppliers in the coming years.
Figure 1 – Future UK supply and demand
