Europe Searches for Alternatives to Russian Gas
January 11, 2006
Gas is moving again from Russia to Ukraine, but trust in the Russian energy giant Gasprom has been hurt. What remains is an uncomfortable feeling of too much dependency on Russian gas -- and the fear that Russia could abuse its energy reserves as a political instrument.
As a result, the Austrian EU presidency has been pushing for a discussion of energy policy during the bloc's spring meeting. EU Energy Commissioner Andris Piebalgs has called for a common European energy policy.
Energy experts said the EU should definitely act after the gas dispute.
"The danger of a high dependency on imports has become clear," said Claudia Kemfert of the German Institute for Economic Research (DIW) in Berlin, adding that the dependency could get even worse if European states don't start diversifying their gas delivery methods.
The fact that gas consumption is expected to rise by a third by 2020 isn't helping.
At the same time, German and Dutch gas deliveries -- currently 16 and 19 percent respectively -- will drop significantly, according to Dieter Schmitt, an energy business professor at Essen University. He added that the Norwegian gas delivery potential has been maxed out as well.
Few doubt that Russia will remain the most important gas provider for Germany -- a fact manifested in the new Baltic Sea pipeline, which is meant to connect western Europe with Siberia's gas fields and which was backed by former German Chancellor Gerhard Schröder.
Circumventing Russia
Nevertheless, Commissioner Piebalgs and other EU officials are now starting to talk about alternative pipelines such as the so-called Nabucco project.
Nabucco is the name for the plans of Austria's OMV energy company to tap Iranian and Central Asian gas reserves. The pipes are meant to cross Turkey and Balkan countries, bypassing Russia. Construction of the 4-billion-euro ($4.8-billion) pipeline is expected to commence this year.
"If you believe the prognoses, the need for gas will rise tremendously in Europe," Otto Musilek, the head of OMV's gas division, told DW-WORLD. "We've started the Nabucco project knowing that we need new sources and alternative transport routes to deal with this enormous need."
But the plan to use Central Asian reserves has irked Moscow, which currently forces these countries to deliver their gas to Russia in order to resell it to European customers.
"Russia has a massive interest to prevent the pipeline," said DIW's Kemfert.
Experts and gas industry officials also see great potential in liquefying gas. During this process, the raw material gets chilled to minus 163 degrees Celsius (minus 261.4 degrees Fahrenheit) before it is loaded onto huge tanker ships. Until now, this procedure has been extremely expensive and, therefore, uneconomical.
But Astrid Zimmermann, a spokeswoman for German energy company Eon, said that costs for ships and liquefaction plants have been lowered tremendously.
"At the same time, energy prices have risen," she said. "That's why liquid gas is becoming another option next to pipeline gas."
Eon plans to build the first liquid gas terminal in Germany in Wilhelmshaven in order to import gas from the Middle East and North Africa. Zimmermann said that a feasibility study will probably be completed this year.
"We're also in talks with potential providers," she added.
Viable alternatives?
As liquid gas is becoming cheaper, gas producers such as Algeria, Iran, Central America or Qatar are becoming more attractive for western Europe.
"A country such as Qatar was simply unable to compete," energy business professor Schmitt said. "The costs for liquefaction and transportation were too high. Now they are building massive liquefaction plants there."
It will still take years for liquid gas and the Nabucco pipeline to become viable alternatives. The pipeline will start operations in 2011 at the earliest, and liquid gas is not a significant factor in Germany -- unlike in Spain or Italy.
But the EU has made it clear that it plans to bank on liquid gas.
"The project of a European liquid gas terminal must swiftly move forward," Piebalgs recently said in an interview with DW-RADIO's Russian service.