Liberalised energy markets have brought Europe to the edge of a gas supply crisisby Derek Brower / August 27, 2006 / Leave a comment
Published in August 2006 issue of Prospect Magazine
In June I listened to Andreis Piebalgs, the EU’s energy commissioner, tell a gathering of gas industry executives from around the world—including ministers of energy from Russia, Qatar and all the other largest suppliers—that “the client is king,” and that “the buyer is more important than the seller.” Most in the room were too polite to laugh. But if the events of the past year—including Russia’s “gas war” with Ukraine—reveal anything, it is that the European client state is very much not “king.” In the gas sector, Europe is more like a parched man begging at the gates of the desert’s only water vendor.
Indeed, Europe’s rush to gas over the past couple of decades—designed to reduce environmental costs and dependence on oil-producing countries—now looks like a big strategic blunder. Europe faces a potentially devastating shortage of natural gas—a supply crunch that, given the EU’s transition to an economy powered by gas, will mean a sharp rise in prices and a slowing of the economy. And the spectre of this shortage is already exposing cracks in the EU itself.
If that all sounds alarmist, consider the statistics. By 2012, Europe will face a shortage of up to 70bn cubic metres a year. That’s almost twice as much as France currently consumes. Demand in Britain, the EU’s biggest gas consumer, is around 95bn m3/y. And the 70bn m3/y shortage will amount to around one third of Europe’s total demand for imported gas by 2012.
Those predictions, made in June by Paolo Scaroni, the chief executive of Italy’s Eni, include all the pipelines and LNG (liquefied natural gas) terminals that are already planned, such as new infrastructure linking Norway, Russia, and north Africa with the EU.
Scaroni believes that a number of different measures are available to the EU to meet this problem. On the demand side, they all relate to building more capacity. He says that Europe could, for example, build another…