Oettinger: Maintaining Supplies for the EU (And More)
In the context of a potential energy security crisis in Europe, Energy Commissioner Guenther Oettinger addressed delegates at the Energy Security Summit 2014 last night in Berlin, Germany, appealing to Europe that it needed to help itself, Ukraine and others decrease their dependence upon the biggest supplier of gas to Europe, namely Russia.
Mr. Oettinger reported that the Commission was moderating negotiations between the government of Russia, Gazprom, Ukraine's Naftogaz and the Ukrainian government to avert a potential natural gas crisis. The Commission, he said, had been requested by the European Council to prepare a communique as to how to secure Europe's level of natural gas supply and how to reduce its levels of dependence on certain gas suppliers. He added that such concerns did not apply to supplies of oil or coal, which were traded in free markets.
"It's gas," he explained, "as it was in 2006, and again in January of 2009."
"Our ambition is to hold this level of security of supply, not just for the EU 28, but for Ukraine, Moldova, Georgia and some of the west Balkan countries."
He noted that only four countries in the EU were not importing gas from Gazprom, while 18 member states received between 10 and 80% of their total consumption from Gazprom. Oettinger added, "There are six member states getting 100% of their gas from Gazprom - one supplier, one source, one pipeline: Finland, Slovakia, Bulgaria, Lithuania, Estonia and Latvia."
To have a coherent position, he explained, Europe needed to speak with one voice. As an example of this, he recalled that while Russian president Vladimir Putin had recently sent letters to leaders in 13 countries, the response he received was from one man, the president of the European Commission José Manuel Barroso.
"There's no doubt Ukraine needs help: financial assistance, political advice for better governance and for the long-term."
Oettinger said he had concerns over whether or not Europeans were willing to back Ukraine for the next decade as one year was not sufficient.
Regarding Europe's 480 BCM annual consumption, he said one third was from the Netherlands, Norway, the UK, Denmark and Germany, but that those sources would be depleted in 10-15 years, which mandated a smart gas strategy involving energy efficiency, renewables and diversification. Of the last point, he said Europe had requested of its Russian partner that gas not be used as a geopolitical weapon. He commented, "At the moment they're doing their best, but Ukraine is in a different position."
Commissioner Oettinger noted that Ukraine had been paying $268/TCM, but since April had been paying $485/TCM. Neither price, he said, was a market price.
Meanwhile, he said that the EU could accept that it received 145 BCM/annum of gas supplies from Gazprom, but sources from Norway, Algeria and LNG from the Middle East and others were being developed. Germany, he noted, had no LNG terminals.
Regarding the Southern Corridor project, he reported that Europe would get 10 BCM/year of gas by 2019 from the Caspian Sea region, and could eventually receive gas from Northern Iraq, Turkmenistan and, politics permitting, Iran, broadening the scope of natural gas sources, suppliers and external companies.
Developing more integrated markets via reverse flow and more storage was also a priority for Europe, doubling the amount of gas storage reserves from 30 to 60 days, according to him.
To help Ukraine, he said that reverse flow options had been activated between Ukraine and Hungary and Ukraine and Poland, while such an arrangement with Slovakia was forthcoming.
He commented, "These three options may bring some 15 BCM/year from European Union markets, so 20 BCM of own production, 15 from our markets would reduce direct imports from Gazprom, reducing dependence from Russia."
Mr. Oettinger admitted that Ukraine had not been paying its natural gas bill for several months, the country's bill now tallied some USD 4 billion and Russia was now demanding pre payment for gas deliveries in June.
"Why is it our concern? Ukraine is our partner and Ukraine is our transit country," he said, calling for a stabilization of the situation in Ukraine and Naftogaz, which would be a part of the financial assistance from the IMF and EU, which were helping to negotiate a fair price for Ukraine and hoping to avoid any interruptions in supply for June and July, as they were important months for filling gas storage facilities, which Commissioner Oettinger called the most relevant for European supplies.
Drew Leifheit is Natural Gas Europe's New Media Specialist.