Europe Will Remain Dependent on Russian Natural Gas

Thursday, October 30th, 2014
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Russian Natural Gas
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Most of the Eurozone will continue to remain reliant upon Russia for supplies of natural gas for at least the next few decades.

The Baltic nation of Lithuania hopes to shore up its energy independence with the launch of an offshore LNG vessel that will diminish its reliance upon Russian supplies.

The Independence is a 350 million litai (US$128 million) floating LNG terminal which was built in South Korea and measures three football fields in length.

The vessel is expected to have a full capacity of nearly 4 billion cubic metres, enabling the terminal to supply as much as 80 to 90 per cent of demand from the entire Baltic region, including Lithuania’s neighbours of Estonia and Latvia.

Lithuania hopes the project will free it from dependence on Moscow energy giant Gazprom when it comes to gas supplies – particularly given claims that it pays the highest price for Russian gas out of all 28 member states of the European Union.

“We’ve suffered very high energy prices,” said Energy Minister Rokas Masiulis. “Finally, we have our energy independence. And this independence can be shared.”

The issue of the energy and gas independence of European Union states vis-a-vis Russia has become a vexing geopolitical issue of late, given Putin’s recent actions in Ukraine which have incurred reprobation and sanctions from some of Europe’s largest economies.

While it’s possible that the Baltic states can soon look forward to cheaper gas supplies and an energy independent future, a new study from the Oxford Institute for Energy Studies (OIES) concludes that it will be a far more difficult task to wean Europe as a whole off Russian natural gas.

OIES’s Reducing European Dependence on Russian Gas study has found that while Baltic nations and countries in south-eastern Europe could potentially eliminate Russian gas imports in as little as a decade by means of their own supplies and pipeline gas from Azerbaijan, this will not be case for most parts of the Eurozone.

“In the majority of countries, there is limited scope to reduce gas with oil products, and to the extent that it is replaced by coal in power generation carbon emissions will increase significantly,” said the study.

According to the study, European companies will remain obliged by long-term contracts to import at least 115 billion cubic metres per year of Russian gas until the mid-2020s, and around 65 billion cubic metres per year by 2030.

Even in the absence of long term contracts, however, modelling conducted by OIES indicates that European companies will still require as at least 100 billion cubic metres per year of Russian gas until 2030, and as much as twice this amount under certain conditions.

Russian gas supplies will also remain highly competitive against all other pipeline gas and LNG supplies until 2030, conferring Gazprom with considerable influence over European hub price.

An emphatic shift away from Russian gas by European states will incur extensive additional costs in the form of additional infrastructure such ass LNG import terminals and lengthy pipeline connections, as well as expenditures on alternative energy sources.



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