As europe's gas consumption soars, will the supply be secure after the year 2005?
6 February 1997
UN Round table looks at how gas suppliers are preparing for the future
"With gas consumption in Europe at an all-time high, the picture for gas
production is less rosy. Production in several western and central European countries
is already down, and after 2005 there will be an overall decrease, giving rise to a
serious supply gap," said Mr. Yves Berthelot, Executive Secretary of the United
Nations Economic Commission for Europe (UN/ECE).
To address this issue, the United Nations Economic Commission for Europe,
through its Working Party on Gas, organized a Round Table, entitled Gas Supplies to
the ECE Region - the Challenges of the XXI Century a few days ago. Taking part in
the Round Table were leading executives of the gas industry, and Iran's ambassador
to the United Nations:
- Mr. George VERBERG, General Managing Director, Gasunie (Netherlands)
- Mr. Alexander GRITSENKO,
General Director, VNIIGAZ/Gazprom
(Russian Federation)
- Mr. Peter JESSEN,
Director of European Marketing, British Gas
(United Kingdom)
- Mr. Peter MELLBYE, Executive Vice-President, Statoil (Norway)
- Mr. Jamel MERAD, Director of Gas Division, Sonatrach (Algeria)
- H.E. Mr. Sirous NASSERI, Ambassador (Permanent Mission of the Islamic
Republic of Iran to the United Nations)
Highlights of the Round Table
Europe's growing gas demand
What makes natural gas Europe's fastest growing energy source? It is flexible
to use, environmentally friendly, available in abundant resources, and consumers are
showing confidence in secure long-term supplies. Its market share has expanded
significantly over the past 25 years. The figures speak for themselves: between 1970
and 1995, in western, central and eastern Europe together, gas consumption soared
from 320 Bcm to 1,024 Bcm*/.
An EU report predicts an almost 50% rise in total western and central European
gas demand by 2010. Gas use in power generation is the most promising sector of
growth.
Supply/demand gap already in sight
In most western and central European countries, production is decreasing, but
overall European production should remain stable up to the year 2005. After that
date, however, it is expected to decrease. Given the estimates for supply and
demand, western and central Europe are facing a supply gap, starting after 2005 and
widening thereafter. By 2010, this gap could reach 90 Bcm.
Short-term supplies guaranteed
In the short term, ample gas supplies are available from numerous sources.
Meeting the short-term western and central European demand growth is not a
problem thanks to the already contracted imports from the major traditional suppliers
(Russian Federation, Algeria, Netherlands, Norway). "Norway is going to play an
increasing role on the European market. Exports should rise from 30 Bcm/y today to
65 Bcm/y in the 21st century," Mr. Mellbye informed the meeting. The same is true
for the United Kingdom. "British gas reserves are well sufficient to cover both UK
demand and exports from the Interconnector up to 2005," said Mr. Jessen.
Long-term supply - how can it be secured?
Meeting the long-term supply, however, remains a major challenge for the
industry. The supply gap, which will appear after 2005, can only be filled by new
suppliers, and will require huge investments in production and transportation
infrastructure. "Diversification of gas supply is an adequate opportunity of giving the
full potential growth of natural gas," said Mr. Verberg.
Distance increases costs: "take-or-pay" contracts needed
The gas needed to meet future demand will have to be transported over
increasingly long distances. All the new supply projects will require billions of dollars
to be implemented. Such amounts will be invested only in a secure framework,
including long-term "take-or-pay" contracts between gas producers and importing
companies. Additionally, for security of supply, gas storage will increase its strategic
importance on the European market.
Leading suppliers outside western Europe
The Russian Federation and North Africa are expected to remain the leading
suppliers outside western Europe. With its healthy gas reserves, Russia is going to
increase further its gas exports to Europe. "Russia holds 33% of total worldwide
reserves," said Mr. Gritensko. Russia is developing a new transmission corridor (the
Yamal-Europe project), which would allow additional quantities of Russian gas in
Europe.
With the extension of the capacity of the Transmed pipeline and the recent
commissioning of the Maghreb/Europe pipeline, as well as the construction of a new
pipeline between Libya and Italy, North African producers have secured their position
as key exporters to the southern European countries. "The natural gas policy of
Algeria is to preserve and extend its position on the Mediterranean market and to
expand in Europe and North America," said Mr. Merad.
New suppliers by 2005/2010
By 2005/2010, new suppliers should be entering the market to cover the
widening European supply gap. Fortunately, outside gas resources potentially
accessible by central and western Europe are considerable. The Persian Gulf is called
upon to play an increasing role, as well as new LNG suppliers in Nigeria and South
America. Iran is the second largest holder of gas reserves in the world. "Its vast
pipeline system could be utilized for exports (as in the case of Turkey) and extended
so that a market share proportionate to its gas reserves can be achieved," H.E. Mr.
Nasseri told the meeting.
The proceedings of the Round Table will be published by the UN/ECE Working
Party on Gas by spring 1997.