Two new features this year marked the 11th Gas Summit held Oct. 26-27 in Paris and organized by Pétrostrategies consultant and publisher, Institut Français du Pétrole, oil and gas consultants SPTEC, and Poten & Partners Inc.
For the first time, no ministers or officials attended, and discussions took place among industry leaders alone with few political overtones. New entrants to a liberalized gas and electricity market were invited to explain difficulties encountered accessing that market, which is still dominated by incumbents.
Even giant electricity provider Electricite de France (EdF) seemed hindered in its attempts to enter the chain from upstream development to downstream distribution. Dominique Venet, EdF executive vice-president, gas, complained that the incumbents hold existing import and transportation capacities, and new players “have to find their way through the transit jungle.” At the other end of the scale, Claude Gianotti, director of the small Swiss-based trader WorldEnergy SA, described the “hard life of new entrants” competing for both supply and consumption and seeking a fairly regulated EU market.
Demand to drop
In the wake of uncertainties expressed at last year’s Gas Summit on whether soaring prices would slow expected gas growth, industry leaders attending this summit noted there were indeed signs of demand destruction, at least in Europe. By 2030, gas supply might well be reduced by 50 billion cu m from established forecasts, ventured Patrick Walliez, gas advisor to the CEO of Suez.
Energy savings of 20% required by the EU Commission before 2020 and rising greenhouse gas emission concerns should also take their toll on gas growth rates, pointed out Gaz de France Chief Executive Officer Jean-Marie Dauger. It was generally expected that gas would continue to play a major role in the energy mix but would face growing competition from nuclear power and coal for the expanding electricity sector, as all sources will be required to meet demand.
Supply concerns
On the supply side, companies were surprisingly less worried than politicians about the short and medium term but were more interested in solving the technical hurdles to uninterrupted supply. They were concerned about the political turn the market has been taking and its impact on the implementation of the huge investments that will be needed to sustain and develop production and transport infrastructure. They also were in favor of stronger partnerships, dialogue, and even interdependence with gas-producing countries.
Italy was one of the counties hardest hit by Russia’s interruption of supplies during the Ukraine crisis last January. ENI Gas & Power Division’s Chief Operating Officer Domenico Dispenza aptly summed up the situation when he said: “Security of supply is caught in the middle of the various forces that are currently reshaping the market. These various forces consist of supply challenges, the need for a panEuropean infrastructure, gas and power convergence, mergers and acquisitions, and regulatory harmonization.”
He was echoed by Iberdrola’s gas unit director Conrado Navarro, who specified the need for investments in cross-border capacities, cooperation between transmission system operators of neighboring member states, supply diversification, interconnections, development of interruptible demand, and storage capacity.
Officials of most companies, such as Edison SPA’s hydrocarbon group Senior Adviser Luciano Sgubini, called for a “stable and regulatory framework” as well as strong incentive policies for investing in new pipeline and regasification plants as well as increased European-wide storage capacity. The current lack of storage and easy access to it by all EU members was seen as preventing the introduction of strategic gas stocks in the European Union to deal with potential supply disruptions.
Supply security, all summit participants agreed, also required diversification of sources achieved through increased recourse to LNG trade, which is becoming increasingly globalized but as yet not “commoditized.” Shell’s David Wells, vice-president, global energy supply, described it as “the lubrication in the global gas industry.”
Speakers-Rune Bjornson of Statoil ASA, Hydro Oil & Energy’s Vice-Pres. Torstein Indrebo, and Sonatrach’s Marketing Vice-Pres. Chauwki Mohammed Rahal-sought to dissipate supply security fears by demonstrating that the range of their new projects kept them in the “reliable long-term suppliers” category.
Rahal was particularly anxious to dispel fears raised by Sonatrach’s partnership agreement with Gazprom that was signed at a crucial period of the EU’s energy security worries. He insisted it was “a normal agreement such as was already signed with many other international companies,” and was intended for the development of joint projects in Russia.
He listed Sonatrach’s “contribution to security of supply for Europe” and indicated that, besides its existing six LNG carriers, Sonatrach would have two additional Medimax carriers in operation between 2007 and 2008 and two Atlantic Max vessels on stream in 2008-10. A planned 8 billion cu m/year gas pipeline to Spain, “on the verge of taking off,” is due on stream in 2009, and “significant developments” for an 8 billion cu m/year gas line to Italy through Sardinia, is scheduled to be on stream around 2010.
However he said that Sonatrach, like Gazprom, did not want to remain a mere gas supplier but was planning to enter Europe’s marketing sector through the establishment of subsidiaries in the UK, Spain, and Italy and would participate in added combined-cycle gas turbines and distribution facilities.