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Tim Daiss

Tim Daiss

I'm an oil markets analyst, journalist and author that has been working out of the Asia-Pacific region for 12 years. I’ve covered oil, energy markets…

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This Is Just The Beginning Of Europe’s Gas War


In a move that should not surprise energy pundits nor even those that follow geopolitical news in Europe, on Thursday Russian gas giant Gazprom said it’s looking to gain an even larger gas market share in Europe following record-high 2018 exports, as it expects a decline in Europe’s gas output combined with rising demand. Last year Gazprom sold more than 200 billion cubic meters (bcm) of natural gas to Europe, including Turkey, while its gas market share in the region rose to more than a third, Reuters said in a report on the matter.

Elena Burmistrova, in charge of the Gazprom’s exports, said the company would be able to offset a production decline in the EU, mainly at the Netherlands’ Groningen, once Europe’s largest natural gas field. “North Sea production is also gradually declining ... So, the space for Russian gas is being freed up,” she said on the sidelines of the European Gas conference in Vienna.

Future gas wars

Gazprom’s statement comes as EU gas production is projected to spiral downward over the next 12 years. Regardless of possible development of non-traditional gas resources, production will decline by 43% against the 2013 level, Russia’s National Energy Security Fund (NESF) said recently.  Moreover, the Paris-based International Energy Agency (IEA) forecasts that EU gas production will halve by 2040.

This dwindling production also comes as a number of EU states are poised to break away from over-reliance on both nuclear and coal needed for power generation, leaving opportunities for renewables, particularly solar and wind power, as well as liquefied natural gas (LNG) imports. However, all of these sources will take more time and funding to develop before they can add a more significant percentage of the bloc's energy mix going forward.

Moreover, competing for more gas market share in Europe will see both geopolitical and energy stakes increase, pitting Russian piped gas exports, but also more LNG, as the country develops its LNG sector, against higher priced U.S. and Qatari LNG. Meanwhile, Qatar (the global LNG export leader and the U.S. which will soon be the third largest LNG exporter) could agree to tie-ups in LNG, both for economic and geopolitical motivations in the mid to long term. Qatar is already investing heavily in the U.S. LNG sector as a pure diversification play as U.S. production begins to take off, competing for both European and Asian market share. The Asia-Pacific region accounts for 72 percent of global LNG demand, with that amount projected to increase to 75 percent amid rampant Chinese LNG demand. Related: Oil Prices Drop After Touching 2019 High

Russia has held a decades old gas supply monopoly, dating back to the end of World War II, in Europe, putting it at a distinct geopolitical advantage over EU members, particularly Poland and the Baltic states. Moscow has also cut off gas supply during the middle of winter to make political statements in the past, upping the ante up for EU states dependent on Russian gas supply.

German naivety

However, more EU member states are seeking to pivot away from Moscow’s gas supply grip by turning to more LNG, particularly U.S. sourced LNG. Other major EU players, particularly Germany, the EU’s largest economy, however, seems uncharacteristically naive about the dangers of over-reliance on Russian gas.

Berlin has approved and pushed ahead, amid heated backlash from Washington, the controversial Nord Stream 2 gas pipeline. Nord Stream 2 is a 759 mile (1,222 km) natural gas pipeline running on the bed of the Baltic Sea from Russian gas fields to Germany, bypassing existing land routes over Ukraine, Poland and Belarus. It would double the existing Nord Stream pipeline’s current annual capacity of 55 bcm. However, the U.S. has long maintained that it posed a threat to European security, while the U.S. is a large part of safeguarding that security.  On January 29, German news agency DW reported, citing one of the project’s engineers, that the Nord Stream 2 natural gas pipeline should be operational by November.


By Tim Daiss for Oilprice.com

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  • Mamdouh Salameh on February 10 2019 said:
    Nord Stream 2 and Turk Stream gas pipelines which will bring additional Russian gas supplies estimated at 70 billion cubic metres (bcm) annually under the Baltic and Black Seas to the European Union (EU) via Germany and Turkey respectively when they are completed by December 2019 are unstoppable. In fact, Nord Stream 2 could be completed by November 2019, one month earlier than expected according to German engineers working on the project.

    Russia’s market share will be boosted by both rising demand in the EU for piped natural gas and also for LNG and an expected lower North Sea gas production particularly with the planned shutdown of the Groningen gas field in the Netherlands by 2030. Moreover, the International Energy Agency (IEA) is projecting that EU gas production will halve by 2040.

    The rising EU demand for gas is coinciding with a projected decline in EU gas production at a time when a number of EU states are poised to break away from dependence on nuclear and coal for power generation towards gas and renewables particularly solar energy.

    And like any astute and far-sighted businessman, Russia’s giant gas company, Gazprom, will always look for opportunities to expand both its business and return on investments worldwide. Therefore, expanding an already-dominant position in the EU’s gas market should be no exception. Gazprom could be hoping to enhance its market share from the current 35% to more than 45%-50% in the next decade.

    However, competition in the EU gas market will intensify with US and Qatari LNG challenging the dominance of Russia’s gas. Still, it is doubtful whether US and Qatari LNG could compete with the much cheaper Russian piped gas for the foreseeable future.

    And despite threats of sanctions and backlash from President Trump, Germany has steadfastly supported Nord Stream 2 not out of naivety as the author of this article naively claims but because it considers Nord Stream 2 first and foremost an economic project which will bring uninterrupted and cheap Russian gas supplies to Germany and the EU thus ensuring energy security to the whole of the EU. And with Germany on the way to phasing out coal-fired generation by 2038 with the aim of cutting carbon emissions and also phasing out nuclear electricity by 2022, it will need more gas supplies and quickly. Germany can’t for the foreseeable future run on renewables only.

    Last year, renewable energy accounted for more than 40% of Germany’s power generation beating coal in the process.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • Ronald Wagner on February 25 2019 said:
    The entire world has many natural gas finds. It is becoming virtually free energy if it can be piped rather than liquified. Many countries will decide to use their own. Natural gas will become the worldwide base fuel for electrical power generation and powering vehicles of all kinds from trucks and buses to ships.

    Natural gas is far more abundant than oil and is also being flared all over the world. If it ever becomes scarce it can be replaced by methane hydrates in the ocean which are much more abundant than natural gas on land.

    Natural gas is also far less expensive than gasoline or diesel. It can replace either as needed, with a few exceptions. It is also the base for producing fertilizer, plastics, medications etc.

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