New Global Natgas Abundance Signals Loosening of Putin and Gazprom's Grip on Europe's Energy Security

Have written before several times (usually in the dead of winter) about Europe putting itself in danger by making energy deals with the devil, usually accompanied by a frighteningly cold picture of a frozen over European city or a sinister picture picture of Vlad Putin.

But now it seems like the tables have turned and we won't be discussing that topic any more. My own awareness of the game changing nature of unconventional natural gas began one year ago with this Daniel Yergin editorial in the Wall Street Journal describing massive new amounts of gas now becoming accessible in the US and elsewhere via new recovery techniques.

There is now so much of this new-found natural gas that it's no longer helpful to call it unconventional. Then came a briefing I was fortunate to attend last month at MIT with BP's chief economist, Christof Rühl. Describing the future of global oil and gas markets, and including projections for renewable energy and nuclear, he said the whopper that's changing everything is the recently realized super-abundance of natural gas ... everywhere.

Here then, is the take-away for Gazprom and its ardent admirers:

Seldom has a giant been hit by so many big blows in one year. First, by repeatedly cutting its deliveries without prior warning, Gazprom has acquired a solid reputation as an unreliable supplier. Second, after the United States has suddenly started mass-producing cheap shale gas and become the biggest gas producer in the world, the European market is flooded with new liquefied natural gas (LNG). Third, there is plenty of shale gas in Europe, and soon production is likely to start there as well. Steadily increased European demand for gas has been replaced by a gas glut, which the International Energy Agency predicts will last for 3-5 years. Fourth, the gas surplus is naturally depressing spot gas prices.

And it gets worse. But I'll leave that to you if you're interested. The full article in European Energy Review can be found here. Depending on where you're reading from, I think you may find it a rather pleasant change of pace.

Havel Tells Europe to Dump Russia from its Energy Script

Former playwright turned revolutionary turned Czech President (now retired) Vaclav Havel has a history of calling out the emperor when his news clothes are lacking. Europe is facing a Devil's Bargain, with Russian entreaties to continue as its trusted supplier of natural gas on one side, balanced against the alternative of seeking new energy sources and risking Russia's wrath. As I've said on this blog previously here, here, and most recently here, it's long past time for Europe to build itself some leverage via development of credible options.

Here's Havel in Bloomberg:

Rather than buy gas from Russia, Europe should pursue projects like the Nabucco pipeline to import gas from the Caspian Sea region through Turkey, Havel said. On May 6, the European Union approved an initial investment of 200 million euros ($277 million) for the pipeline which was endorsed by Turkey two days later. It’s expected to begin operation in 2015, according to the EU. “They should have come up with that years ago,” Havel said referring to the Nabucco plan, and said Europe must wean itself from fossil fuels.

As one DOD Energy Blog reader noted, this situation mirrors in some ways the brittle grid challenge facing DOD facilities. The initial get-well path is the creation of "energy islands" so critical functions can be powered in the event of an outage. European communities reliant on Russia for heating should be doing everything they can to produce energy locally via renewables and any other resources they can find (e.g., waste to heat). Much of Western Europe has been building out renewables at a tremendous rate, but Eastern Europe lags, and both need to aggressively explore and execute every possible energy option. Full article is here.

Yet the problem of scale remains, as well as the many pitfalls that plague new pipeline projects (see excellent backgrounder on the problems facing Nabucco by DOD and European energy expert Sohbet Karbuz here.)