Rar: No one Knows What the Situation with Gas in Europe Will Be

The Research Director of the German-Russian Forum Alexandr Rar during his conversation with the Telegraph doubted the feasibility of construction of terminals for liquefied natural gas (LNG) delivery in the Baltic region. At the moment Qatar gas from tankers is more expensive in Europe that Russian gas from the pipeline.


— Mister Rar, during the Conference “Baltic Forum” you stated that American CNG will hardly enter the world market earlier than 2016, but there are suppliers also in Russia, and they impose greater and greater influence on the play?


— In Russia there are definite turbulencies within the gas market, new companies occur which are entering the gas business. Gazprom yet is the main producer and main transporter, but look, Rosneft gains new assets in the gas business in Russia as well as abroad, liberalization of the law is taking place, regarding transportation of liquefied gas by other companies within the territory of Russia.


Not getting deeper into the specificity of the current legislative processes, I would like to say that in Russia we observe the change of the market itself. It is not that sterile, bureaucratized and still, as some Europeans still consider it to be. There other demands, challenges connected with the liquefied gas.


But we should fairly admit that no one knows, what the situation will be. Shall the shale revolution take place in Europe itself? We definitely should not count on another American economic miracle here. And that is why we should monitor which combination of gas contract shall exist in Europe in several years. As we see today, gas from the Persian Gulf doesn’t reach Europe. A year ago everyone counted on that. Primarily it is forwarded to China and Asia, because the contracts were signed their faster and there are technical facilities to receive gas and the money there is different.


And foreign markets receive American gas only when American would find it possible to export it. Yet it fills in the American market, where it assists the industry to lead the country out of the crisis. It is due to cheap gas the USA exceeds the growth of other countries and maintains its status of the world economic power. They are really lucky with shale gas and they have used this luck in a proper way. But this does not mean that they’ll have plenty options to transport it through the ocean to Europe.


That is why the contracts concluded between European companies and Russia have sense. Yet a year ago it seemed to us that the is plenty of gas. And now it has turned out that there is less of it and it is distributed not the way we have counted on. That is why it is good to have the combinations of tankers and the pipeline.


On the one hand, the world is on its way to the common gas market, on the other – many importers of Russian gas are satisfied: there is some guarantee that the concluded contracts allow establishing a stable contact with Russia.


— So does it mean that the LNG terminals projects look less attractive that a year ago?


— This process has already started and can’t be stopped. But we should perceive it calmly. Yes, the gas market is changing, but we shouldn’t reject the things done in the past, which helped us to maintain stability during almost last 50 years. Why should be construct multiple expensive terminals, when we have an option to agree on the pipeline? As definite diversification is expected in the system of gas export via the pipelines.


—  Will Gazprom be forced by the fines of the European Commission and growing competition to sell gas on spot prices in Europe?


— We’ll know the answer when we see the way the market goes. I think that the optimal is combined approach towards the pricing. Long-term contracts are not the attempt to enslave an importing state, they have another function. We should understand that Gazprom and other companies are interested in long-term contracts to protect investments.  They also need to have the guarantees that if they produce really expensive gas…


And to produce gas in Russia and the whole world will be more complicated year by year, as we need to explore the regions, where production has not been performed till the moment, we should drill, establish absolutely new infrastructure there, build new cities and this really costs a lot. And if Gazprom, which invests into the North of Russia, is not sure that its gas shall be demanded, it will have to compete within unstable and unclear market, — it consider these investments worthless. No investor is ready to risk this way.


During the Forum they said that yet two years ago they hoped a lot on alternative sources. In 20 years they, of course, shall be the main driver of the industry, as revolutionary technologies are under development, especially in Germany and China. But now many countries experience crisis. And look, Europe gets back to coal, polluting the environment again. Is it logical?


Personally I believe that gas as a “pure” energy carrier shall be demanded from now forward.


Translated by EuroDialogueXXI from Telegraf.lv