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Pluses, Minuses To Europe's Response

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If the apparently now resolved Russia-Ukraine gas crisis demonstrated anything, it's that the European Union needs not only to be responsive in the face of such adversity, but also to speak with one voice rather than 27 (p3). On both those counts, it did reasonably well. At an industrial level, the performance was less convincing. Europe's gas supply sector and infrastructure -- predicated on Russia supplying 25% of EU gas -- struggled to cope when the interruption of flows through Gazprom's main export system via Ukraine generated Europe's biggest energy crisis since the 1970s. The EU political message was robust and consistent. "Russia and Ukraine are showing that they are incapable of fulfilling the commitment they made," European Commission President Jose Manuel Barroso said a day after both breached a Jan. 13 deal to resume transit flows. He also said he would advise European companies to sue, unless both resumed flows. The commission and the Czechs, who assumed the rotating six-month EU presidency on Jan. 1, spoke as one voice -- most notably at a conference hosted by Russian President Dmitri Medvedev last Saturday, where Czech Trade Minister Martin Riman and EU Energy Commissioner Andris Piebalgs presented a united front as the sole top officials representing Brussels. Senior EU figures avoided apportioning blame and instead insisted that, in German Chancellor Angela Merkel's words: "Gas must flow again" (WGI Jan.14,p1). Europe "must act now to avoid future repetitions of this type," Barroso said last week. So the commission will present new proposals to improve energy security. "Mobilizing €5 billion [$6.6 billion] of unspent money from the EU budget in favor of energy interconnections will also be crucial," he said (WGI Dec.17,p1). Bulgaria is already seeking over €400 million of co-funding for a new LNG terminal in northern Greece, a new pipe to import send-out gas to Bulgaria, extra storage, and pipe links with Romania. Bulgaria plans to host a gas importers' summit in April, while Hungary is hosting its own Nabucco summit next week (p4). In previous gas crises, such as that of 2006, flows resumed before the EU Gas Coordination Group (GCG) had even convened. This year the GCG, composed of experts from national ministries and the commission, had to deal with an escalating crisis, meeting two days after all flows across Ukraine were cut off. Its six Jan. 9 recommendations were lucid and, like the EU Energy Ministers on Jan. 12, appealed for solidarity. How much Europe -- faced simultaneously by the loss of three-quarters of its Russian imports, 10% of Norwegian gas export capacity, problems on an Algerian import pipeline, and force-majeures affecting 40% of Nigerian and 33% of Qatari LNG -- could show solidarity with eastern European neighbors heavily or solely reliant on Russian gas, at the far end of a continent-wide system of pipes configured to flow gas west and not east, was open to doubt (p1). But minor gas swaps were seen and modest contingency plans developed to mitigate inbuilt gas inelasticity (WGI Jan.7,p1). Meeting again on Jan.19, the GCG welcomed several measures "taken mainly by industry." In Slovakia, the east-west flow was reversed last Saturday, with gas delivered from Germany via RWE Transgas's Czech grid. German gas firms supplied extra volumes through Austria to Hungary, Slovenia, Croatia, Serbia and Bosnia-Herzegovina. Higher withdrawals occurred from gas storage where available, some of which helped neighboring countries, including Hungary helping out Serbia. The GCG also noted that gas production within the EU was increased as much as possible, including boosts to UK and perhaps Norwegian exports to the continent that were, admittedly, a response to "market signals." The GCG said "certain production margins in Netherlands and Denmark could also be readily available and used," and top Dutch supplier Gasterra told WGI Tuesday that a contingency plan for it to raise sales by 10%, or 50 million cubic meters (1.8 billion cubic feet) per day, with the increment earmarked for its mainly German customers remains on standby but has yet to be deployed. The EU group cited "the possibility of Greece helping out Bulgaria to a certain extent in the coming days with gas from its LNG terminal." Bulgaria has said it would like a new LNG terminal built at Alexandropoulis in northern Greece and linked by pipeline to Bulgaria. A Bulgarian official tells WGI that the terminal could cost €500 million, and a new pipe €125 million (WGI Jan.14,p1). These may take years to build, however, with no developer yet chosen. Extra LNG was also delivered into Belgium and Greece, the GCG said.

Topics:
Gas Supply, Gas Pipelines, Security Risk
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