According to OGJ, the UK held an estimated 18.8 trillion cubic feet (Tcf) of proven natural gas reserves in 2006, a 10 percent decline from the previous year. Most of these reserves occur in three distinct areas: 1) associated fields in the UKCS; 2) non-associated fields in the Southern Gas Basin, located adjacent to the Dutch sector of the North Sea; and 3) non-associated fields in the Irish Sea. In order to take advantage of its domestic reserves, the UK government has encouraged the use of natural gas, including its substitution for coal and oil in industrial consumption and electricity production. As a result, natural gas consumption in the UK reached 3.4 Tcf in 2003. Further, the percentage of total energy consumption sourced from natural gas in the UK has increased from 20 percent in 1980 to 34 percent in 2003. In 2004, the UK was a net importer of natural gas for the first time since 1996.

Total oil production (including condensates, natural gas liquids, and refinery gain) in the UK was 1.87 million bbl/d in 2005, a 10 percent decline from 2004 and 37 percent below the peak of production in 1999. The UK government expects oil production in the country to continue to decline, reaching 1.38 million bbl/d by 2009. Reasons for this decline include 1) the overall maturity of the countrys oil fields, 2) the application of new crude oil extraction technologies that lead to field exhausted at a quicker rate, and 3) increasing costs as production shifts to more remote and inhospitable regions.
Most of the UK crude oil grades are light and sweet (30° to 40° API), which generally makes them attractive to foreign buyers. The UK has been a net exporter of crude oil since 1981. According to the British Department of Trade and Industry (DTI), the largest destinations of crude oil exports in 2004 were the United States (28 percent), the Netherlands (21 percent), Germany (17 percent), and France (14 percent). Much of the crude oil exported to the Netherlands is not actually consumed there, but rather sold at the Rotterdam spot market. In 2005, the UK exported 219,000 bbl/d of crude oil and 167,000 bbl/d of petroleum products to the U.S., contributing 2.2 percent and 4.8 percent to total U.S. crude oil and petroleum product imports, respectively.

The United Kingdom (UK) is an important political and economic power in Europe and the world. With its significant North Sea reserves, the United Kingdom is a major European oil and natural gas producer. The UK is the largest oil producer in the EU, but production has declined since peaking in 1999. The UK Continental Shelf (UKCS), located in the North Sea off the eastern coast of the UK, contains the bulk of the countrys oil reserves. Most of the UK crude oil grades are light and sweet (30° to 40° API), which generally makes them attractive to foreign buyers. BP is the largest oil producer in the UK, with 26 fields producing a total of 471,600 bbl/d in 2004, according to OGJ. There is an extensive network of pipelines in the UK to carry oil extracted from North Sea platforms to coastal terminals in Scotland and northern England. The UK has a single international crude oil pipeline, the 220-mile, 34-inch Norpipe operated by ConocoPhillips. The UK had 1.9 million bbl/d of refining capacity in 2006, according to OGJ. ExxonMobil operates the single-largest refinery in the country, the 326,000-bbl/d Fawley facility in southern England. The UK is one of the largest natural gas producers in the world. The UK produced 3.6 Tcf of natural gas in 2003, about the same as the previous year, but a decrease from the peak of 3.8 Tcf in 2000. Private companies control the UK natural gas sector, including production, distribution, and transmission. There are four main pipeline systems in the UK that carry natural gas from offshore platforms to coastal landing terminals. Currently, the UK has a single LNG import terminal, the NGTs Grain LNG on the Isle of Grain. Most UK coal consumption is for power generation. Natural gas-fired power stations are replacing coal as the principle source of the UK power supply. Conventional thermal plants provide the bulk of the electricity supply in the UK. BE operates eight nuclear power stations in the UK. The UK government has introduced regulations that require electricity distributors to source a portion of their electricity supply from renewables (including hydroelectricity), currently 3 percent but set to rise to 10 percent by 2010. The UK is an Annex I country under the Kyoto Protocol.

According to Oil and Gas Journal (1/1/06), the UAEs natural gas reserves of 214.4 trillion cubic feet (Tcf) are the worlds fifth largest after Russia, Iran, Qatar, and Saudi Arabia. The largest reserves of 198.5 Tcf are located in Abu Dhabi. Sharjah, Dubai, and Ras al-Khaimah contain smaller reserves of 10.7 Tcf, 4.0 Tcf, and 1.2 Tcf, respectively. In Abu Dhabi, the non-associated Khuff natural gas reservoirs beneath the Umm Shaif and Abu al-Bukhush oil fields rank among the worlds largest. Increased domestic consumption of electricity and growing demand from the petrochemical industry has provided incentives for the UAE to increase its use of natural gas. Over the last decade, natural gas consumption in Abu Dhabi has doubled, and it currently stands at around 4 billion cubic feet per day (bcf/d). The development of natural gas fields also results in increased production and exports of condensates, which are not subject to OPEC production quotas.

According to Oil and Gas Journal (1/1/06), the UAE contains proven crude oil reserves of 97.8 billion barrels, or slightly less than 8 percent of the world total. Abu Dhabi holds 94 percent of this amount, or about 92.2 billion barrels. Dubai contains an estimated 4.0 billion barrels, followed by Sharjah and Ras al-Khaimah, with 1.5 billion and 100 million barrels of oil, respectively. The majority of the UAEs crude oil is considered light, with gravities in the 32 degree to 44degree API range. Abu Dhabis Murban 39 degree and Dubais Fateh 32 degree blends are the UAEs primary export crude streams, though Dubais production is been falling in recent years due to the decline of its modest reserves. Most of the UAEs oil fields have been producing since the 1960s or early 1970s. Proven oil reserves in Abu Dhabi have roughly doubled in the last decade, mainly due to significant increases in rates of recovery. Abu Dhabi has continued to identify new finds, especially offshore, and to discover new oil-rich structures in existing fields.

The United Arab Emirates has had strong economic growth due to historically high oil prices. The United Arab Emirates has several projects underway to make modest expansions to oil production capacity. Imports of natural gas from Qatar via the Dolphin Project pipeline are set to begin in early 2007. Electricity demand in the UAE is growing at a rapid pace.

Natural gas liberalization along EU requirements is proceeding at different rates in the Visegrad countries. In 2002, an EU Directive on natural gas (2003/55/EC) was adopted under which industrial and commercial users were enabled to choose their suppliers by July 1, 2004. Under the Directive, all customers should be able to choose their suppliers by July 2007. The Directive required vertically integrated natural gas monopolies to unbundle transmission operations by July 2004 and distribution operations by July 2007, as well as to establish a market regulator and a power exchange. Along with divesting and unbundling state owned natural gas companies, governments are required to open their natural gas market to outside competition, thus allowing customers to choose their own supplier. In Slovakia, the natural gas market was opened to competition among gas suppliers in July 2004. This deregulation included industrial and commercial sales of gas, but excluded household consumers. This means that each customer (except from in the residential sector) has the right to choose its supplier, as opposed to being assigned a utility by the government. The opening of the natural gas market for all customers will follow in July 2007. Slovensky plynarensky priemysel (SPP) (EdF 24.5 percent, Ruhrgas 24.5 percent and Slovak National Property Fund 51 percent) is responsible for natural gas imports, transit, and distribution. The companys subsidiary, Nafta Gbely, operates Slovakias natural gas storage of 60 Bcf. SPP is currently unbundling its natural gas assets according to EU requirements. In June 2004, the Hungarian government approved a new Gas Act, establishing a regulatory framework for a liberalized natural gas market in Hungary. The Act called for partial liberalization of the countrys gas market, allowing all non-residential users to choose their supplier by July 2004, and for all consumers by July 2007. Along with opening the market liberalization, MOL, as required by the Gas Act and EU regulations, has unbundled its gas business activities (supply, storage, and transmission) into three, 100 percent MOL-owned, independent entities. The Gas Act created a new tariff regime, which came into effect in October 2003. Previously, the government required MOL to sell consumers natural gas at below-market rates while buying at world prices, resulting in huge losses for MOL. Under the new price regime, MOL has continued to subsidize residential consumers but on a smaller scale in order to make the transition to higher prices less abrupt. Hungarys natural gas sector is organized around six regional distributors: Fogaz (Budapest region); Tigaz (northeast region); Degaz (southeastern region); Ddgaz (south Danube region); Kogaz (west and Mid-Danube region); and Egaz (northeast region), with MOL still controlling most of the countrys upstream and downstream natural gas activities. The regional distributors have all been privatized, with RWE, E.ON Energie, Ruhrgas, Eni and EdF holding majority and minor stakes in them. According to the Czech Republics State Energy Policy, which was approved on March 10, 2004, the countrys natural gas market was opened to competition starting January 1, 2005, for all customers with metering systems to continuously record their gas usage. This deregulation was extended to all customers except households on January 1, 2006. The market is scheduled to open to all customers, including households, starting on January 1, 2007. Natural gas transmission has been unbundled and gas distribution is scheduled to be unbundled by December 31, 2006. Much of the countrys natural gas sector has already been privatized, with Germanys RWE holding a 100 percent stake in Transgas and majority stakes in all but two of the countrys eight regional distributors (see links). Transgas is responsible for importing and transiting natural gas, the inland pipeline grid and underground storage facilities. RWE will have to unbundle these assets according to EU regulations. In August 2002, the Polish government adopted a plan to restructure and privatize wholly state-owned oil and natural gas company POGC. According to the plan, POGC would remain responsible for natural gas transmission, storage and wholesale trade, while six separate regional companies would be responsible for distribution. The new EU Directive, however, will require POGC to unbundle its natural gas operations. In May 2004, the Polish government agreed to open the countrys natural market to competition, according to the schedule outlined by the EU Directive on natural gas.

Proven reserves of natural gas are also minimal in the Visegrad countries, with a combined total of 7.7 Tcf, as of January 2006. Poland, with roughly 75 percent of the Groups total, has an estimated 5.8 Tcf of natural gas reserves, with Hungary at 1.2 Tcf. Slovakia and Czech Republic contain 530 billion cubic feet (Bcf) and 140 Bcf, respectively. In 2003, Poland produced 200 Bcf, which met 38 percent of its domestic natural gas demand. Hungary produced 100 Bcf, accounting for almost a fifth of its demand. Slovakia produced only 10 Bcf and the Czech Republic just 5 Bcf. As the Visegrad countries strive to meet EU membership criteria, natural gas is becoming increasingly important to the regions energy mix. Increased consumption of natural gas, as an alternative to coal, is considered to be a key component of the regions plan to meet the stricter EU environmental regulations. In 2003, natural gas represented approximately 22.3 percent of the Groups total primary energy consumption, up from 16.1 percent in 1993. In 2002, Slovakias per capita natural gas consumption was the highest among the Visegrad Group countries, with Hungary a close second. Russia supplies most of the Visegrad groups natural gas requirements via the Yamal and Brotherhood pipelines. Poland and the Czech Republic import small amounts of natural gas from Germany and Norway. About 80 percent of Hungarys natural gas imports come from Russia through part of the Brotherhood pipeline. Hungary also imports natural gas via the Gyor-Baumgarten pipeline, which is connected to Western Europes natural gas grid. The following companies are responsible for operating each countrys national pipeline grid: Transgas (Czech Republic); Mol (Hungary); Polish Oil and Gas Company (POGC) (Poland); and Slovensky plynrensky priemysel (SPP) (Slovakia).

The Visegrad countries have total proven oil reserves of approximately 222 million barrels, with 102 million barrels of that located in Hungary, as of January 2006, according to the Oil and Gas Journal. Poland has proven reserves of 96 million barrels, while the Czech Republic and Slovakia have only 15 and 9 million barrels, respectively. Total oil production in the Visegrad region is minimal, averaging 105,460 bbl/d in 2005. Hungary is the largest producer of oil in the Group, with approximately 45,190 bbl/d, followed by Poland with 33,550 bbl/d, the Czech Republic with 15,240 bbl/d, and Slovakia with 11,480 bbl/d.In 2005, the Visegrad countries met only 12.4 percent of their total oil demand of 853,540 bbl/d from domestic production, making them heavily dependent on imports. Most of the imports came from Russia via the Friendship pipeline. Poland also receives limited amounts of oil from the Naftoport terminal at Gdansk. The Czech Republic imports oil from Russia, as well as from other sources, via the Ingolstadt-Kralupy nad Vltavou-Litvinov (ILK) pipeline, which allows the land-locked country to import crude oil from the Italian port of Trieste via the Trans-Alpine pipeline (TAL). The ILK pipeline, operated by Mero CR, has enabled the Czech Republic to reduce its reliance on Russian oil.

Gazprom, Russias state-run natural gas monopoly, holds nearly one-third of the worlds natural gas reserves, produces nearly 90 percent of Russias natural gas, and operates the countrys natural gas pipeline network. Gazprom is also Russias largest earner of hard currency, and the companys tax payments accounting for around 25 percent of federal tax revenues. Despite its enormous size and significance, Gazprom is seriously encumbered by domestic regulation. By law, Gazprom must supply the natural gas used to heat and power Russias vast domestic market at government-regulated prices (approximately $28 per thousand cubic meters), regardless of profitability. Accordingly, roughly two-thirds of the companys revenue comes from its export sales to Europe, where natural gas is sold for around $135-$140 per thousand cubic meters. Because exported Russian natural gas accounts for approximately 25 percent of Europes demand for natural gas, Gazprom is also one of Moscows main foreign policy tools.
As Gazproms trade relationship with European consumers grows, contentious issues have arisen. European trade representatives denounced Gazproms monopolistic market position and two-tiered pricing system and linked the pricing issue to Russias accession to the World Trade Organization (WTO) in response. In response to calls for fair pricing, the Russian government increased prices to industrial consumers (from $0.79/million cubic feet to $1.61/million cubic feet), yet this price level is still far less than half the prices charged at the German and Ukrainian borders. Russia agreed to grant independent natural gas producers access to Gazproms pipelines, but independents still hold a very small share of the market and have no access to international natural gas export infrastructure.