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Just Face It, Europe Needs Russian Gas
30.04.15 19:16 Economics
Just Face It, Europe Needs Russian Gas

CEO of energy giant spells out the obvious: Europe depends on Russian gas and will continue to do so for the foreseeable future.

Tue, Apr 28 | 967 11
Map of existing and planned pipelines

This article in the Daily Telegraph, reporting the views of a gas industry expert, sets out the facts.

Europe depends on Russian gas and there is no viable replacement in sight. All talk of one is nonsense, and moreover costly nonsense for which Europeans consumers will ultimately have to pay a high price.

Whatever rationalisations the European bureaucracy comes up with to justify its campaign against Gazprom, the simple fact is that in economic terms it is counterproductive and makes no sense.

What it is doing is not “reducing Europe’s dependence on Gazprom”. Rather, it is driving Gazprom away, forcing it to look for new customers and to redirect the flow of its gas away from Europe.

What that in turn will mean is that Europe will have to pay a significantly higher price for its gas and its energy than its competitors will, or than it would otherwise need to pay.

Unfortunately if the events of the last year have proved anything, it is that economic realities are never allowed to get in the way of the anti-Russian obsessions of many of Europe’s leaders.


From the Daily Telegraph:

Europe will remain dependent on Russian gas for years to come, energy giant Centrica has warned, dismissing suggestions the EU can replace it with other sources as “unrealistic”.

European leaders have scrambled to try to cut reliance on imports from Vladimir Putin’s Russia since the Ukraine crisis escalated last year, with Ed Davey, the energy secretary, suggesting loft insulation and wind farms were needed to “take on the Kremlin”.

But Rick Haythornthwaite, Centrica chairman, told shareholders on Monday: “Whatever we might want as Europe, we need to be very careful about being pragmatic about the realities of it… I think it’s unrealistic to think that Russian gas is going to be replaced in the near-term.”

Iain Conn, Centrica chief executive, added: “Russia supplies… about a third of Europe’s gas. You can’t switch that off easily without huge consequence. There is no way the United States can supply that volume of LNG to replace it.”

If sanctions were imposed on Russian gas companies would have to comply, he said, but it would have “a very significant impact on Europe’s ability to balance its natural gas sources and uses”, particularly in Eastern Europe which was “not plumbed in to many alternatives”.

But he added that Russia had been a “a reliable supplier of gas all the way through the Cold War” and that it needed European demand. “Russia realises that plays a very important part in Russia’s own future and there’s as much value in this co-dependency as there is potential threat,” he said.

 

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