fouid not be needed to cover increased energy deoand;
Uould add to the problem, not to the solution, of energy supply security.
Would probably be an expensive source of energy.
hen the pipeline plans were first seriously discussed, and this year, KA's projections of West European energy demand0 were lowered byb/d. (See attached uble).
IEA projection of total Industrial nation energy demand was lowered by.
Tbe amount of Soviet gas to be imported throughroposedoquivalentnly about one eighth to one fifth as large as the reductionrojected European energy demand.
This any not be the end of the story; demand projections may continue to be lowered as information on the strength of market reactions to higher oil prices pours In.
(b) Many projections of European demand for natural gas also are being levered.
have
lowered0 forecasts by abou! the volume of the projected Soviet deliveries.
(c) Alternative energy sources are available:
ikoly future mwith Algeria and Nigeria will ukeIflT, fro* these source* to westernhanprojected in 'European plans, indeed,
Europe is the only alternative markets mu^ZM'
ifasrlalsa. Mdeto Europe isillion cubic feet per day,
percent of the additional Soviet gas. US needs car.
be wet from domestic, Canadian, and Hexion
ore than enough Norwegian gas can be,developed to offset the Sovietingle gas
structure, discovered and explored during theears, could produce at least two-thirds of thT proposed Soviet deliveries by the early to. -
coal supply wille to aieet increasesl*rger than The necessary adjustments jn Xumnean energy
sus^r? h European
. . investconts in US coalcxaraole in
arge port capable ofrgemake tbe coal cheaper. Loss ofcould be offset byillion tons ofan increase oT about one-third in currentof "est European cool
i^<JI^iRSlJne_enha^
(a) The European argument that the pipeline would increase the
energy supply by diversifying sources and reducing intali^ nsecure Person Culf is weak, ir not totally
f Soviet gas supplies were secure, they would
Soviet gas would substitute foraall part (less thanercent) of Persian Culf supplies and;".
The supply of Soviet gas could not be expanded If the Persian Gulf or other foreign supplies were interrupted.
tonyrtliTiAL"
of Soviet gas are themselves not reliable! theyto both technical and political risks.
technical risks result from severe climatictho USSR and the near absence of spare Sovietand gas storage: periodically the Sovietscuts in their exports to Western Europe to meetdomestic needs (this point is well known to
lthough in most likely circumstances hoscou would be loath to use its gaslunt-weapon to pressure Western Europe, because it needs the gas revenueould be able to exert subtle political pressure.
Vulnerability to Soviet pressure would increasefact that increases in imports of Soviet gasoffset declines in imports of Soviet oil. ForWestern Europe, Soviet oilarginal andof-energy, for which alternatives can be Soviet gas, however, would become part ofload of European energy supply because of the hicosts required.
other sources of gas too are subject topolitical risks,uober of cases, these risksdecline;
Algeria and Nigeria both will become highly dependentteady flow of gas revenues to cover their expenditures.
Is Sovietource of cheap energy?
(a) Soviet gas,riced at approximate parity with crude oil, is not cheep. IS and Australian coal arc substantially cheaper.
W urEetf continue Lo bo soft for severai years, the bargaining position of gas isportcrs will beet stronger and stronger. Consequently, patient buyers are likely to get better terns.
CONF^rffiAl
Original document.
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