Skip main navigation
We use cookies to give you a better experience, if that’s ok you can close this message and carry on browsing. For more info read our cookies policy.
We use cookies to give you a better experience. Carry on browsing if you're happy with this, or read our cookies policy for more information.

How can EU reduce dependence on Russia?

EU’s gas market liberalization

The deregulation of the gas market will obviously impact Gazprom. It is the largest supplier and its gas crosses many transit countries to reach its customers. Under the new rules gas now has to pass through hubs in Europe, using back-to-back transport deals to move the gas from hub to hub and ultimately to the end consumer (Henderson& Mitrova, p. 34).

As a result, while in the past Gazprom would negotiate transport contracts across countries that would uniquely allocate pipeline capacity to its gas, under the new rules all pipes must offer third party access and capacity must be auctioned on a regular basis.

The potential impact of US LNG

The problems of replacing Russian gas with LNG imports center around whether the LNG can be delivered to countries which are heavily dependent on Russian gas, and whether LNG prices will be competitive with Russian gas.

During 2015 the lower oil price has effectively brought Gazprom’s oil-linked price into line with the European spot gas price and with the potential competition from the US. However, if the Brent oil price starts to rebound towards the $70-75/barrel range, then the gap between the oil-linked price and hub-based prices, which will be influenced by the arrival of cheaper US LNG, is likely to open again, leaving all holders of oil-linked contracts in a difficult position (Henderson & Mitrova, p. 44).

Non-Russian alternative gas pipelines

Russia has exerted its influence through an intricate network of pipelines. The figure illustrates Russian-supported gas pipelines. The EU must further develop non-Russian alternative gas pipelines in the “southern corridor” such as TANAP and TAP aimed at bringing Caspian (Azeri and Turkmen) and Middle Eastern gas to European markets via Turkey. The non-Russian alternative gas pipelines are slow to develop. (see also ‘ ‘A gas pipeline network in Europe’’)

EU’s low carbon energy transition

The EU’s 20–20–20 initiative, aimed at reducing emissions of greenhouse gases by 20 percent by 2020 and flanked by reaching 20 percent of renewable energy in total energy use, will put demand-side pressure on European energy generation and systems.

Challenges for a European shale revolution

Legal Frameworks

Unlike in the US, shale gas in Europe is very unlikely to become an important source of energy due to differences in legal frameworks. A key to the regulatory framework is how to manage multiple landowners and their claims. US residents earn royalties from the shale gas extracted from beneath their homes. US landowners own both surface and mineral rights. In Europe, because any underground mineral rights belong to the government, landowners have no incentive to support shale gas development.

Different geology and environmental concerns

In Europe, the geology is also less favorable, notably with the shale containing a higher clay content making it more difficult to use hydraulic fracturing. Unlike in North America, shale gas in Europe is located in densely populated areas where active drilling and hydraulic fracturing would not be practical.

Test drilling operations in Sweden and Poland have shown that the geological conditions in those parts of Europe are not as favorable as those in parts of the US.

Environmental concerns

In Europe, the public debate is almost exclusively about the environmental concerns. In Germany, the Netherlands and the Czech Republic, the public has demanded that their administrations conduct further studies, while in France, Bulgaria and Spain, there have been calls for a ban on fracking. In the United Kingdom, Lithuania and Romania, governments have cautiously moved ahead.

References:

  • David G. Victor, “The Gas Promise,” in Jan H.Kalicki and David Goldwyn (eds.), Energy and Security: Strategies for a World in Transition (Washington, DC: Woodrow Wilson Center Press, 2nd ed., 2013), p. 91
  • Tim Boersma, “Four Questions on Shale Gas Developments in Europe and the U.S.,” November 18, 2013.

Share this article:

This article is from the free online course:

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

Hanyang University

Contact FutureLearn for Support