24/10/2017
At the EPRG's event "A new Gas Paradigm in Eastern Europe?" that took place on 17. October 2017 at CEU, Michael LaBelle, Associate Professor and Jean Monnet Chair in Energy and Innovation Strategies at CEU discussed that after the failed gas pipeline projects, such as South Stream and Nabucco LNG could bring a new era for the region offering more competitive and consumer-focused gas supply. Akos Lotz, Researcher at the Center on Global Energy Policy, Columbia University argued that LNG demand is still low in Europe which is the least favorite destination for LNG. Andras Deak, senior researcher at the Hungarian Academy of Science and Art pointed out that LNG will not push Gazprom out the region, but Gazprom will have to deal with less profit.
A summary of the key points:
LNG could bring a diversification in the gas supply and be a competition to the old gas pipeline system. It could offer a possibility for reshaping the landscape from a gas interconnections-system to a more competitive multi-supplier mode of covering the gas demand. When discussing the gas bills consumers pay, a relevant question is whether to have a monopoly in the gas supply or a choice from more suppliers, the latter which is in line with the Energy Union consumer-focused energy policy. However, the LNG market is over-supplied and the demand in Europe cannot absorb this supply yet. The demand grew faster than expected. This has proved wrong the entire previous prognosis that LNG will “arrive” in the European market. Europe in the least favorable destination for LNG, while Latin America is the most favorable. LNG was Asian gas demand project. The gas demand in Europe, to some extent due to energy efficiency, has decreased since 2009 by 20%. Europe does not compete for supply and takes what other importers do not need. Croatia has a LNG terminal and does not need additional gas, which is a possibility for Hungary, but this kind of decision depends on politics and geopolitics. Gazprom wants long-term agreements and strategic partnerships, but Europe has no need of such long-term agreements. Europe is becoming an emerging regulatory economy. There is a potential for Gazprom to renew the long-term agreements with Croatia, Hungary, countries which are politically friendly and Gazprom could allow them price concessions. Lithuania has a LNH terminal, but still buys gas from Gazprom. In fact, the gas price from Gazprom depends lately much more on the tax then the oil price; Russia has high tax rate and does not want to reduce it. Central Eastern Europe does not play a big role for Gazprom since 75% of the exports of Gazprom are in Western Europe. EU’s decarbonization goal could be an issue for Gazprom and gas in general. The current prognosis is that LNG would come to Europe in the next years, but it would not push Gazprom away. Gazprom will continue to be a stable supplier, but could have less profit or would need to enter a new market. But, Gazprom cannot stop LNG construction. LNG contributes to the new paradigm as it depoliticized the gas sector. Europe is faced with a gas dilemma – to grow gas storage from gas pipeline imported from Russia or be a market of last resort for LNG.