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Skip to 0 minutes and 0 secondsWhat is Europe’s strategy to reduce dependence on Russia? In North America a liberalized gas market emerged and Henry Hub as the main North American gas trading hub was adopted in the late 1980s. The United Kingdom established the National Balancing Point (NBP) as a reference price in the late 1990s. The European experience demonstrates the potentially far-reaching implications of the development of gas trading hubs. Continental Europe’s liberalization of the energy markets was driven by the EU’s political ambitions to create a fair market for all countries and this is instigated through Directives which were part of the ‘Energy Packages’ that also included reforms to the electricity markets.

Skip to 0 minutes and 50 secondsThe process usually starts with a move to Third Party Access (TPA) to the network infrastructure, often requiring legislative changes to force incumbents to release infrastructure capacity and gas supply volumes thus incentivizing independents to enter the market. As a result of the shift from oil-indexation to gas-on-gas hub pricing from 2007-2014 Northwest Europe is now 88% gas-on-gas, Central Europe over 50%. Most of oil indexation is now in Southeast Europe. Gazprom has strongly defended the principle of oil-indexation.

Can EU reduce dependence on Russia?

There is limited scope for significantly reducing overall European dependence on Russian gas before the mid-2020s (Dickel et. al., p. 1).

European conventional gas production is expected to fall by 110 bcm/year (or by 40 percent) in the period 2013–2030. No significant unconventional (shale gas, tight gas, and coal bed methane) gas production is likely prior to 2020, and less than 20 bcm of production from those sources by 2030.

Countries in the Baltic region and southeastern Europe which are highly dependent on Russian gas, and hence extremely vulnerable to interruptions, could substantially reduce and even eliminate imports of Russian gas by the early 2020s, by a combination of LNG supplies and pipeline gas from Azerbaijan (Dickel et. al., p. 1).

The actual figures being very dependent on the three main producers – Norway, Netherlands, and the UK. No significant unconventional (shale gas, tight gas, and coal bed methane) gas production is likely prior to 2020, and less than 20 bcm of production from those sources by 2030.

The outlook for (renewable) bio gas is more optimistic with a possible increase from 14 bcm in 2012 to 28 bcm in 2020, and perhaps to 50 bcm in 2030, although problems of subsidy make the larger figures uncertain.

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This video is from the free online course:

Global Resource Politics: the Past, Present and Future of Oil, Gas and Shale

Hanyang University