Europe's cooking with gas

European Gas & Electric Policies

It's a fact that the combined economies of Europe and Asia will need to get their hands on about 300 billion cubic meters of new gas resources by 2020 if they are to meet growing energy demands. Fact according to ENI chief Paolo Scaroni...

Whether or not that is the exact figure remains unclear, but nonetheless both markets are certainly growing and they definitely need to find more sources of natural gas. North America has succeeded in making itself self-sufficient with its reserves of shale gas and as a result has exited the global natural gas market. Now the European Commission are set to invest 2.3 billion euros to support the development of the natural gas market in the continent.

The EC are to finance 43 electricity and gas interconnection projects as part of a bigger "recovery package" agreed last year in response to both the economic and the Russian-Ukrainian gas crisis.

"Cooperation among pipeline projects"

But Scaroni has offered his own solutions; "better pipeline interconnections, cooperation among pipeline projects competing for the European market, continued LNG expansion, and - maybe - shale fields such as US producers have developed. And the capital, he says, may come from international oil majors who increasingly see natural gas as the place to grow."

He insists that both Nabucco and South Stream, the two pipeline schemes competing to take gas from the Caspian sea to European markets, should join forces in an effort to increase efficiency and boost profit.

ENI, along with Russia's Gazprom, are the two companies behind South Stream, a project seen in some circles in the European Union and the US as Russia's attempt to undermine Nabucco, which is designated a strategic project by the EU.

At a conference in Houston, Scaroni said, "What we have here is what bankers call a strategic fit. Should all partners decide to merge the two pipelines for part of the route, we would reduce investments, operational costs and increase overall returns," reports Bloomberg.

Fall in gas resources

Although Russia is not necessarily needed in terms of providing gas reserves, there is a distinct lack of inter-connectors which leaves Eastern European countries like the Ukraine vulnerable to cut-offs. Russia, Scaroni says, has been a "reliable supplier for over 40 years", there he believe it makes more commercial sense to combine the two projects to bring Europe gas from both areas.

To meet demand, Scaroni insists Europe will have to find another 180 bcm annually by 2020 and much of this is down to the current fall in gas resources, thus making the construction of more inter-connectors with the assistance of Russia a priority.

Although Nabucco, which will eventually pass through Turkey, Bulgaria, Romania, Hungary and Austria, is currently further ahead in terms of construction than South Stream, the project is yet to confirm gas contracts which could force it to seek partnership with its rival.

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Daniel Jones

Daniel is a Politics and Philosophy graduate from Cardiff University where he also worked as a section editor on the award winning student newspaper. After university he joined an IT support company where he was a B2B online writer. He loves anything to do with sport and joined GDS in July 2009.

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