Much Ado about Gazprom
Blogger Robert Amsterdam points to a recent post on the EU Energy Policy Blog that shows Russia’s power in Europe is far less than some like to imagine. According to the article, natural gas only accounts for 25% of Europe’s energy consumption, and Russia’s share of Europe’s imports of gas, as shown in the table above, has been precipitously declining as Europe’s energy usage has increased. Indeed, in the past two decades Europe has slashed its reliance on Russian energy by half. The report states: “Since 1990, 80% of the growth in European gas imports has originated from countries other than Russia, especially Norway, Algeria, Nigeria and middle eastern countries. Accordingly, Russia’s share of EU gas imports has declined sharply, from 75% in 1990 to just over 40% today.” The author’s stark conclusion: “Europe’s gas supply is not dominated by Russia. 93.5% of the energy consumed in Europe is covered by sources other than Russian gas.”
What’s more, even if Europe did depend on Russian gas, it’s far from likely that any intention action by Russia would turn off the spigot.
The report states:
There may be no problem of European overdependence on Russian gas, but this is not to say that all is well on the supply front. Over the next 15-20 years, Gazprom faces serious supply challenges, and the international gas market is likely to experience considerable tightening. Despite controlling the world’s largest gas reserves, Gazprom will find it difficult to maintain its current supply levels. Production from the three “super-giant” west Siberian gas fields, which account for the bulk of Gazprom’s output, is now in steep decline. The company’s ability to maintain, let alone increase, production in the coming decades depends on the development of a new generation of fields on the Yamal Peninsula in northwest Siberia. Gazprom’s official line is that Yamal will come on stream in 2010. But independent analysts and most of the European gas industry think this is highly unlikely. Some mention 2015 as a more realistic date for Yamal’s completion.
In fact, Gazprom’s production is already insufficient to meet all the company’s commitments. It depends on two other sources of gas – “independent” Russian producers and imports from Central Asia, especially Turkmenistan – to make up the shortfall. This “bridge” is supposed to supply Gazprom’s needs until the Yamal fields come online. But there is uncertainty over whether Gazprom will be able to source sufficient volumes from Turkmenistan, while independent Russian producers have little incentive to increase their production in the absence of access to Gazprom’s transmission network, which would enable them to reach consumers directly. Moreover, domestic gas consumption in Russia is growing, driven by economic expansion and a gas-intensive electricity mix. So there is at least a risk that Gazprom’s “bridge” to Yamal could collapse. Industry assessments vary from a tight but manageable supply situation to an impending crisis.
So it’s not that Russia is threatening to cut off Europe, it’s that Russia is threatened by being unable to supply Europe — or indeed even Russia’s own domestic demand, a point Boris Nemtsov has already made emphatically in his White Paper on the gas monopoly.
Once again, we see a Russian propaganda bubble, this time gas-filled, burst like a childish illusion. Russian dictator Vladimir Putin has a strangehold on information in Russia, which means that his own people are blissfully ignorant of these basic facts, but the outside world is not fooled. Russia does not have the same sort of draconian power over the outside world’s abilitity to monitor information as the USSR did, and regardless it certainly cannot influence our own data, which leaves Russia standing naked and alone before a gaping, slackjawed world.