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Thursday, October 27, 2016

Europe could cope with their gas problems only with the help of Russia

Europe is waiting for a record decline in own gas production, while demand for natural gas will grow. Such a disappointing forecast gives the Austrian gas company OMV. To neutralize these annoyances can only Russia, say the Austrians. The EU policy to squeeze Gazprom out of the market is nothing but losses, the Europeans brought.

Gas production in Europe will shrink by 50 billion cubic meters a year, while gas demand will be increasing every year, said at the St. Petersburg international gas forum, a member of the Board of Austrian OMV, Manfred Leitner.

“The decline in the EU will allow Gazprom to increase supplies and thus increase the share. Capacity of LNG in the EU is unlikely to go quickly, so how to buy the traditional gas cheaper”

“50 billion cubic meters per year will be reduced domestic production in Europe, will have to fill the gap through imports. The demand will increase,” he said.

Leitner called Russia’s most important European partner in terms of gas supply. According to him, at the expense of cooperation with Russia Europe will be able to achieve a balance of supply and demand of gas in its domestic market.

“Our partnership with Russia is an important element to ensure that Europe in future will be available a reliable supply of gas… future projects needed to bolster confidence in this partnership”, – said the representative of the OMV, reports RIA “Novosti”.

According to him, OMV is trying to convince European politicians that they should be more accommodating toward the establishment of new gas supply routes to Europe. As noted by Leitner, currently the EU cannot act as a whole and to find common solutions, including in the gas sector. “The presence of gas taken for granted, but, unfortunately, it is often used in political discussions,” said Leitner.

It encourages to continue to strengthen its relations with suppliers of natural gas, in particular with Gazprom. “Against this background, the partnership with Russia is very important for us. Reserves (gas) in Russia is large, and the cost of production relatively low. So we are discussing with Gazprom participation in gas projects in Russia”, – said the representative of the Austrian gas company.

Leitner called pretty shocking figures for the upcoming falling of volumes of its own gas in Europe. Gas production there really is shrinking, and pretty fast. But still not 50 billion a year. So, for the last 10 years the production volumes of gas to European countries fell from 310 billion to 240 billion cubic meters a year, that is 60 billion cubic meters.

“With expectations of production cuts of 50 billion cubic meters per year Europe will remain without gas in five years, which, of course, impossible. Apparently, in this case an inaccurate translation or an inaccurate comprehended the meaning of what was said by the representative of the OMV”, – believes the Chairman of the Board of Directors of “Engineering company “2K” Ivan Andrievsky.

However, in recent years, the production decline in Europe was greatly accelerated. “In the current average production at fields in Europe from year to year drops to 15-20 billion cubic meters. m This is well illustrated by the example of the Netherlands is the second country in terms of gas production in Europe,” – says Anna Kokoreva of “Alpari”. So, for the last two years, the Netherlands has reduced gas production by 38% compared to 2014, when it produced 55 billion cubic meters.

Europe annually consumes 440-445 billion cubic meters (up to 2015). 45% she ensures that their needs in Gaza. About 30% of Europe buys in Russia, major importers are Algeria and Qatar, there are a number of small importers of North Africa. “The structure of the gas market there is a fairly long time, and the changes in the last 10 years was mainly due to fluctuations in the level of extraction and gas consumption in the region”, – said Andrievsky.

Unfortunately, the demand for gas in Europe in the last 10 years also fell – by more than 20%, or almost 100 billion cubic meters. “Such statistics suggest the opposite consumption growth – the question only in the presence of favorable conditions for economic development of the countries of Europe, which, unfortunately, can not be guaranteed. Therefore, while talking about the large growth in gas consumption in Europe is quite difficult. Although for certain countries this theme is relevant,” – says Ivan Andrievsky.

“The EU economy is recovering, perhaps the demand will grow with it, but while a spike in consumption is not expected – I agree there. While we can talk about the growth of gas exports from the Russian Federation or other countries in the EU due to the replacement of European gas.”

In recent years, the EU pursues a systematic policy for the diversification of gas supplies and to reduce dependence on Russian supplier Gazprom. However, to achieve success in this direction could not, therefore, the gas issue is increasingly politicized European elites, and in the last two years in the open.

“However, over the 10 years to radically change the market structure did not work, although a local “success” in this direction, probably still was. This, for example, say in the Baltic States”, – said Andrievsky. These advances, however, the emergence of the LNG terminal cost the same to Lithuania and Poland a lot of money.

The Polish government, for example, claim that in a few years abandon Russian gas, including through LNG terminal in świnoujście. However, this political statement, which is disadvantageous to Polish business and buyers of gas. Because LNG is significantly more expensive than Russian pipeline gas. Poland will have, as well as Lithuania, to force the business to buy expensive LNG to replace Russian gas with the help of special law. Who in their right mind would want to buy gas not for 265 dollars from Russia, and 700 dollars from Qatar? And Warsaw still have the nerve to demand a discount, not a Qatari supplier, and Gazprom. And Poland volumes from other suppliers, and yet in a short time is unlikely to emerge. LNG is more profitable to sell in Asia, where demand is still growing.

As for the threat of shale gas from the United States, trial supply have been, but then the case still goes on. About any large-scale expansion of the question. Especially now, when gas prices fell. In any case, us LNG will eventually come to Europe again, more expensive than Russian. Tankers to carry the gas to liquefy and dilute – expensive.

“At the moment the prerequisites for a fundamental change in the situation in Europe is not. There is a potential danger from oil shale suppliers, but for them, first, are interested in a more expensive market, Asia-Pacific, and second, while large-scale supply of LNG from North America is not fixed,” – said Andrievsky.

“Capacity of LNG in the EU is unlikely to go quickly, as it is expensive to buy cheaper conventional gas. The decline in production in the EU will allow Gazprom to increase supplies and thus increase the share” – I agree Anna Kokoreva of “Alpari”.

The data of Gazprom on gas supplies from Russia in foreign countries say that Russia is more than able to hold a leading position in the European market. So, in 2015, Gazprom increased its supplies to Europe by 8% to 159,4 billion cubic meters, reaching a record share of 31% in European consumption. Gazprom’s exports to Europe amounted to about one third of the total volume of deliveries of the company and provided more than half of its revenue. This year the growth continues. For the first nine months of 2016, Gazprom increased its exports to far-abroad countries 10.7 billion cubic meters. The most rapid rate of delivery increased in the UK – at 4.65 billion cubic meters since the beginning of the year, Germany by 1.9 billion cubic meters in the Netherlands for 1.52 billion, in France – 1.5 billion, to Poland – 1.36 billion

The demand for Russian gas is growing rapidly in several southern European countries. In particular, delivery to Greece soared to 57%, or 645 million cubic meters last year. At the same time Russia is actively preparing to increase export flows of energy resources to the East. Suffice it to say that pipeline construction “Power of Siberia” – in order to supply China with tens of billions cubic meters of blue fuel.


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