Arab Today, arab today europe to find it difficult to wean itself off russian gas
Last Updated : GMT 13:51:12
Arab Today, arab today
Arab Today, arab today

Europe to find it difficult to wean itself off Russian gas

Arab Today, arab today

Arab Today, arab today Europe to find it difficult to wean itself off Russian gas

Paris - AFP

Europe will have trouble weaning itself off Russian natural gas, analysts say, as its faces declining production at home and Asian competition for supplies. Even before the current flare up of tensions with Russia over its de facto occupation and possible annexation of Ukraine's Crimea peninsula, Europe has been trying to reduce its dependence on Russian supplies. The diversification effort has been bearing fruit: imports of Russian natural gas fell from 45.1 percent of the EU's total to 31.9 percent over a decade to 2012, according to data from the EU's statistics agency, Eurostat. "Europe has reduced somewhat its dependence on Russian gas, even if Gazprom remains a key actor in Europe," said Pascale Jean, a natural gas specialist at PriceWaterhouseCoopers. However the Russian gas giant Gazprom has made no secret it aims to claw back its market share, having built a new pipeline to Germany and a second one under construction to southern Europe. The share of Russian gas in European imports climbed last year, and its share in total consumption has remained relatively stable over the past decade at just under a quarter. However, EU production which currently covers a third of consumption, is expected to fall by up to 20 percent by 2020 and up to 30 percent by 2030. "It is likely that the share of Russian natural gas in Europe will increase further in the coming years, whether we like it, or not," said Tim Boersna, an energy specialist and Brookings Institute in Washington. British North Sea output has already begun to fall and that of the Netherland's is also expected to do so soon. Production in nearby suppliers like Algeria is also on the decline. - Russia fills supply gap - Boersna said "the market will increasingly dictate that Russian natural gas supplies will fill this supply gap." The European gas market finds itself today at a crossroads following two unexpected events which have shaken up the energy market: the US shale gas boom and the Fukushima nuclear disaster. With Japan shutting down all its nuclear reactors, Asia's already rising demand for natural gas has jumped, particularly for liquefied natural gas (LNG). This has caught the attention of gas producers, in particular the Qataris, who have shifted attention from Europe to a fast-growing and more lucrative Asian market. The terrorist attack on an Algerian gas plant last year and frequent stops in shipments via the Libyan-Italy pipeline has cast a shadow over North African supplies. "Given the absence of a significant build-up of North African gas exports and the late emergence of additional exports from Azerbaijan, it comes down to a competition between Russia and LNG producers," the International Energy Agency said in its latest report on the medium-term outlook for gas markets. "Luckily for Russia, the thirst for LNG in Asia means that additional LNG supply is largely absorbed by the Pacific basin, leaving little incremental LNG supply available to Europe." The EU has long looked to tap into Caspian Sea gas supplies, but progress has been slow. The construction of a "southern corridor" pipeline that skirts around Russia was a major EU policy initiative, and while the project is advancing, Gazprom will beat it with the South Stream competing pipeline that is due to come online next year. Norway, which hopes to stem or maybe even temporarily reverse its slide in production, could benefit from renewed EU efforts to diversify supplies. Having briefly become the EU's top gas supplier in 2012, analysts say Norway could expand its market share by several points. Recent discoveries of gas supplies in the eastern Mediterranean off Cyprus and Israel have also fueled European diversification hopes. - Look West - Such hopes are increasingly turning to the other side of the Atlantic, where the shale gas boom has turned the United States into the world's number one producer. Many European countries have refused to allow shale gas exploration or production due to environmental concerns over the "fracking" techniques used to recover deposits. Others have failed to find commercially exploitable deposits. However plans to export US shale gas are multiplying, even if only one LNG facility is currently under construction. Four others are in a relatively advanced state in the permit process. "US LNG is set to become the world's primary swing and emergency supplier in times of crisis, which will be particularly helpful for European buyers," said Eurasia analyst Will Pearson. The first US LNG supplies won't arrive until 2016 at the earliest, however, and Asia will undoubtedly buy up a significant portion. "Another point to keep in mind is that the ramp-up of US LNG exports will be slow and incremental," he said. Europe has already been benefitting from cheap US coal, however. Cut rate gas prices in the US has displaced coal, but shipped to Europe, the coal is still cheaper than natural gas for electicity generators.

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Arab Today, arab today europe to find it difficult to wean itself off russian gas Arab Today, arab today europe to find it difficult to wean itself off russian gas

 



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