Europe questions Russian gas reliability

Jan. 4, 2006
Although Russian natural gas supplies to Europe have reportedly returned to normal, the conflict between OAO Gazprom and Ukraine's pro-Western government has left a disquieting mark.

Doris Leblond
OGJ Correspondent

PARIS, Jan. 4 -- Although Russian natural gas supplies to Europe have reportedly returned to normal, the conflict between OAO Gazprom and Ukraine's pro-Western government has left a disquieting mark.

The conflict began when Gazprom demanded a quadrupling of the price of gas it delivers to Ukraine via a pipeline system that extends to Europe, which experienced a reduction in its deliveries of Russian gas. Russian gas represents about 25% of European supply.

It is not yet clear whether Gazprom cut off supplies to Ukraine as it threatened to do Jan. 1 or if Ukraine helped itself to gas from the pipeline.

A number of European countries, including Germany, Poland, Hungary, France, and Italy, experienced 5-40% curtailments of Russian gas. Gaz de France reported on Jan. 2 a 25-30% volume shortfall under its long-term take-or-pay contract with Gazprom.

GDF has the most diversified natural gas supply portofolio of all of Europe's gas utilities. GDF also is starting to receive growing consignments from Egypt and Nigeria. GDF has two LNG terminals: one on the Mediterranean at Fos-sur-Mer, which is being expanded, and one in Brittany at Montoir.

The curtailments, described in Europe as "the gas shock," have raised questions about Russia's reliability as a gas supplier.

A spokesman for the International Energy Agency told OGJ that, "Russia had a great reputation as a reliable supplier to Europe, but after recent events this seems at risk." He added that it was likely that concerned IEA members would discuss the matter at some future date.

EU Energy Commissioner Andris Pielbalgs had called a special meeting of gas experts for Jan. 4 to discuss the Russian-Ukrainian crisis. Neither the IEA nor the European Commission has managed to set up a gas emergency system like the emergency oil-sharing system that forms the basis of the IEA.