The European natural gas sector: Prospects and aspirations

Posted in Europe | 22-Sep-06 | Author: Ioannis Michaletos

Ioannis Michaletos is WSN Editor South East Europe.

As the winter is coming closer, the developments in the energy market in Europe come to the limelight. After the last year’s dispute that occurred due to the Russian stance in gas exports, the big European producers are planning ahead.

The European Union member states are the second largest consumers of natural gas after the Americans. 500 billion Cubic Mt are consumed each year and 50% of that is imported from third parties, in which Russia is a major onei. Therefore the European companies start to plan ahead and take into consideration the difficulties that they might appear due to political disagreements and developments from the Russian side. That also includes the forming of a pan European strategy with the leading French, German and Italian companies as the main initiators.

On 14/09/2006 the representatives of the seven largest gas companiesii met in Brussels and invited also members from the Greek (DEPA)iii and Polish (PGNIG)iv natural gas companies, to attend. The main issue that was discussed was the probable monopoly that is strived by the Russian side in the sector of natural gas imports. President Putin wants to export substantial amounts of gas through the Northern axis with the subwater Baltic pipeline that will connect Russia and Germanyv. Moreover there are plans for the Southern axis that includes the completion of the pipeline from Caspian Sea to Turkey-Greece and terminating in Italyvi. Thus the Russians would be able to completely avoid Ukrainian territory. Moreover a third axis from Byelorussia – Poland and Germany is also being planned in Moscow. Should all the above plans become a reality, Russia would be able to export its gas in Europe in larger amounts and increase the European dependency in Russian natural gas. In essence if one adds the oil imports from Russia; Europe would be much more depended in Russia in a generation from now. Furthermore the future liberalization of the European energy market was discussed as well as the role of the competition authorities in the still flux European market. It is noteworthy to mention that the representatives of the British and the Norwegian gas corporations were not present since both states have abundant reserves of gas and are completely self sufficient on that respect. The Slovak company SPPvii didn’t also attend the meeting because Slovakia is one of the major concentration terminals for Russian gas imports to Europe and has special low prices agreements with the Russians. In essence it is probably the only country totally content with the current situation.

South Eastern European gas concerns.

The natural gas pipeline from Caspian- Turkey- Greece to Italy is set to become one of the leading energy axes. It has the ability to transfer 11, 6 billion Cubic Meters per year and it will connect Russian gas, and in the future Azeri and Iranian as well. Up to now the part between Turkey and Greece is still being developed and it is assumed that it will be finalized by spring 2007. The Greek-Italian sector is more technically difficult to build because of the high costs associated with the subwater pipeline. Nevertheless world leaders in finance such as the Japanese Sumimotoviii are eager in lending capital, since this pipeline might prove to be a very successful investment in the future.

On overall the recent meeting in Brussels revealed a movement in the European energy market that relates to the anxiety of the European corporations on how to establish feasible and long lasting relations with the Russians and at the same be prepared for any political crises such as the one last winter between Russia and Ukraine. The energy sector is the highest priority of the Putin administration in Moscow and it is one that is going to create culminations in multiple political levels such as the Transatlantic relations and the enlargement of the EU in the Balkans. As long as Europe is not autonomous in energy it will be hard to achieve a single voice or become a unified geopolitical force.

ii EON – Ruhrgas(Germany), Gas De France(France), ENI(Italy), Gas Natural(Spain), DONG(Denmark), Gasunie(Netherlands), Distrigas(Belgium)