Statoil CFO Optimistic About European Gas Supply

Torgrim Reitan, the chief financial officer of Norway’s Statoil, is upbeat about Europe’s fuel supply, despite the dispute between Russia and Ukraine that has threatened the continent’s access to gas.

In two interviews on May 26, Reitan said Europe’s energy status is better than it’s been in 10 years. “From an energy-security perspective, the situation is actually better than it used to be in the last decade,” Reitan told Bloomberg TV. “The European market has developed significantly over the last decade. It’s now a liquid market, with multiple sources.”

Reitan acknowledged that European Union countries get about 30 percent of their gas from Russia, and that more than half of that gas is piped through Ukraine. The EU could face tough choices if Gazprom, Russia’s government-controlled gas company, makes good on its threat to stop Ukraine’s gas supplies because of $3.5 billion in overdue payments.

Still, Reitan said, Russia has enormous proven reserves of gas and is eager to sell it. “Energy has always been geopolitical and it will remain so,” he said. “But I also think it’s fair to say that the Russian supplies have remained stable and predictable for decades.”

The Statoil CFO pointed to Russia’s recent deal to supply gas to China for three decades at a cost of an estimated $400 billion. He said the agreement “just demonstrates the importance” of gas in general to the Russian economy. He also said the fuel to be sold to China would not be coming from gas fields that would continue to supply Europe.

Therefore, Reitan said, there will be plenty of Russian gas for EU countries.

In fact, Reitan said in a separate interview with Reuters, the security of Europe’s gas supply “has never been better” because the continent has found new sources of gas from a new network of pipelines and LNG terminals.

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Russia supplies about one-third of the EU’s gas, and half of that flows through Ukraine. Even if Gazprom, Russia’s government-controlled gas company, eventually stops gas supplies to Ukraine, Europe is on the verge of obtaining gas from other sources.

One is from the Shah Deniz II gas project, owned in part by Statoil, which is expected to ship gas from Azerbaijan to Europe by 2020. Meantime, Poland and Lithuania are ready to begin operations at new LNG import terminals on the Baltic Sea in early 2015. Finland and Estonia are planning similar facilities within six years.

And even today, Russia already is able to bypass Ukraine and ship gas to Europe via the Northstream pipeline through the Baltic, which began serving Europe in 2011. And a second pipeline, Southstream, is expected to bring Russian gas to Europe through the Black Sea. Southstream is expected to go online by 2020.

And, of course, Reitan said, Norway’s Statoil, which now provides EU countries with one-fifth of their gas, will continue to supply the continent.

These sources of gas, both in existence and in planning, show that the European energy market has growing energy options, and that, Reigan said, “provides energy security.”

By Andy Tully of Oilprice.com