The European natural gas market

The European natural gas market as being driven by three components – a) economic development, b) substitution from coal and nuclear to natural gas for electricity generation, and c) weather. Substitution from coal and nuclear could be what now primarily drives European demand for natural gas.
• It is projected that between now and 2020; Europe will need to develop additional natural gas supplies of approximately 120 – 150 Gcm/a (thousand million cubic meters per year) from more distant sources, if demand as projected by EIA and IEA is to be met.
• As of 2009 Europe obtained approximately 47% of its natural gas supplies from distant sources; this is projected to grow to more than 70 % by 2020.
• Europe’s growing dependence on natural gas from more distant sources may also impact its future policies to ensure security of energy supplies.
• If additional supplies fail to appear, Europe could see an imbalance in natural gas supply and demand starting as early as 2011/2012.
EU and Norway’s collective proven natural gas reserves appear to have peaked in 2001 and have since been in decline. As of end of 2009, the Netherlands held around 75 % of EU’s proven natural gas reserves.

Warsaw pulls signing gas agreement with Moscow. Wednesday, 04 August 2010. 5:47. WARSAW, Aug. 4. Poland should be "a little more time" to set the optimum form of additions to the gas agreement with Russia. According to ITAR-TASS news agency, told a press conference, Prime Minister Donald Tusk. "We will try to optimize the solution so that gas from Russia needed the Polish economy and consumers, was possible and cheaper to make our relationship (under contract) are flexible," - he said. "We do not rule out that the agreement will be signed in the form of which we have already agreed," - added the Premier. Terms of additions to the gas agreement with Russia from 1993 on increased supplies of natural gas to 10.3 billion cubic meters per year and extend the contract up to 2037 have been agreed between Russia's Gazprom and the Polish gas company PGNiG few months ago. In April, long-term supply agreement was reached during a meeting of the prime ministers of two countries, but the intergovernmental agreement has been signed. According to Tusk, is due to the necessity of compliance with the contract law of the European Commission, which has criticized some of his points, as well as doubts about the Polish expert on long-term time frame agreements and gas prices. "We do not want to make a mistake" - he said. Polish Minister of Economy Waldemar Pawlak, who was responsible for signing the contract and declared that "it is a matter of weeks, has transferred its powers in this matter to Foreign Minister Radoslaw Sikorski republic. According to him, such a decision due to the fact that the document "has acquired an international dimension." How to declare local experts by October Poland will spend the entire amount of natural gas specified in the contract with the Russian side for this year and will face difficulty in securing its energy consumers in the winter. Earlier, the President of Poland Bronislaw Komorowski said that the republic will be able to refuse to supply gas from Russia, if it finds itself in sufficient supplies of shale gas. According to him, the first well in Poland will be ready in a few months. Assessment of shale gas will take several years. Poland require 14 billion cubic meters of gas annually, two thirds of this amount it receives from Russia. Earlier, the representative of the Ministry of Economy of Poland, warned that Warsaw may be left without Russian gas in October, if not sign the treaty in the coming months.

EU Seeks Turkmen, Azeri Gas Pact to Reduce Russia Dependence. Aug 3, 2010. The European Union is seeking an agreement on a natural-gas pipeline between Turkmenistan and Azerbaijan as the 27-nation bloc aims to import Caspian fuel and reduce its dependence on Russia. The EU regulator’s energy unit drafted a document the parties could use as the basis for a deal on building at least one pipeline across the Caspian Sea, according to a copy of the non-binding paper obtained by Bloomberg.
The EU, seeking less reliance on Russia, wants Turkmen gas for the proposed Nabucco pipeline. Turkmenistan, where foreign investment was held back until the 2006 death of isolationist President-for-Life Saparmurat Niyazov, ships gas to Russia and Iran, and opened a pipeline to China last year. Plans to build a link across the Caspian Sea have been frustrated by unresolved marine borders and opposition from Russia and Iran. “Without Turkmen gas, Nabucco wouldn’t make sense,” said Alexander Rahr, a Russia and Eurasia expert at the German Council on Foreign Relations in Berlin. “The EU is trying to get this pipeline through, but they’re running out of time as the Turkmen are sending more gas to China.”
Azerbaijan attended an EU-hosted meeting in Brussels with Turkmenistan and no agreements were signed, said Vagif Aliyev, head of investment at The State Oil Co. of Azerbaijan. Marlene Holzner, a spokeswoman for the European Commission’s Directorate-General for Energy, declined to comment on the document. Phone calls to Turkmenistan’s department of foreign economic relations went unanswered.
No Concrete Proposal. Azerbaijan has yet to receive a concrete proposal from Turkmenistan, holder of the world’s fourth-largest gas reserves, Aliyev said by phone from Baku. “We are ready to provide transit for Turkmen gas,” he said. The EU must get “serious” about Nabucco to compete with Russia’s OAO Gazprom for Caspian natural gas, Azeri President Ilham Aliyev said in January. Nabucco lacks a clear leader able to attract the necessary financing or hold talks with suppliers and transit countries, Aliyev said.
“The European Commission is showing that a way can be navigated through this tangle of countries and we actually are in the course of doing so,” EU Energy Commissioner Guenther Oettinger said in a copy of a July 27 speech the regulator posted on its website. “We may need extraordinary measures to achieve success, such as the Caspian Development Corporation or the building of a trans-Caspian pipeline link.”
Optimal Use. Turkmenistan and Azerbaijan would have to assure that the owner of the link maintains optimal use of the asset subject to market conditions, according to the draft document. The owner wouldn’t be able to refuse to offer free capacity or reject requests to use available capacity, according to the paper, which does not specify the capacity or route of the pipeline. The two governments would have to consult one another before designating entities that can request to use the pipe, the energy department’s draft said. The link could be used to transport gas in either direction, according to the document. After Niyazov’s death, governments from the EU to Asia jostled for access to Turkmenistan’s gas reserves, estimated at 8.1 trillion cubic meters by BP Plc. That’s enough to meet current German demand for more than a century. Russia wants Turkmenistan and Kazakhstan to build a new gas pipeline along the Caspian coast to keep control over the former Soviet republics’ energy exports. Iran has presented an alternative plan envisioning a network of shipping routes and pipelines that would turn the country into a regional hub for Caspian energy exports. East-West Link. Turkmenistan is building a $2 billion East-West pipeline that will carry about 30 billion cubic meters of gas from the country’s biggest fields toward the Caspian coast when opened in June 2015 as it seeks to increase fuel exports.
The 7.9 billion-euro ($10.4 billion) OMV AG-led Nabucco pipeline is planned to stretch more than 3,300 kilometers (2,050 miles) from Turkey to Austria to send gas to Europe and reduce the region’s dependence on Russia. Nabucco is also seeking to source gas from Azerbaijan and Iraq. The Nabucco partners, which also include Essen, Germany- based RWE AG, Budapest-based Mol Nyrt., Bulgargaz EAD, Romania’s Transgaz SA and Ankara-based Botas, have said they’ll decide on the investment by the end of this year. Construction is set to begin in 2011 and shipments may start at the end of 2014, according to the venture’s website. While Nabucco welcomes increased support from the EU for a southern gas corridor, the venture doesn’t have any formal knowledge of efforts to push for an Azeri-Turkmen deal on a pipe between the countries, spokeswoman Gabriele Egartner said in an e-mailed response to questions.
Sub-soil Jurisdiction. The proposed framework isn’t to be interpreted as affecting Azerbaijan or Turkmenistan’s jurisdiction over sub-soil resources or their sovereign rights under international law to the Caspian Sea, according to the document. The delineation of the Caspian Sea became an issue after the 1991 breakup of the Soviet Union, when Iran found itself with four neighbors on the body of water instead of one. “We think that defining the borders is not the main problem blocking such a project,” Vagif Aliyev said. The main issue is coming up with a commercial project that will be profitable to investors, he said. “We, as investors, are not ready at this moment.”

BP agrees to sell Colombian business to Ecopetrol. Wednesday 4th August, 2010 BP has agreed to sell its oil and gas exploration business in Colombia. The company has announced the sale for $1.9 billion to a consortium of Ecopetrol, Colombia's national oil company, and Talisman of Canada. BP recently announced plans to sell a number of worldwide assets to help cover the costs from the Gulf of Mexico oil spill. It has said it needs to raise around $30 billion from assets. In the next round of sales, interests in Pakistan and Vietnam will also go.