CO2 dilemma to spur 'dash for gas'

Failure to meet carbon dioxide emissions targets agreed at the 1990 Rio de Janeiro climate change summit is likely to prompt a "dash for gas" in continental Europe, and particularly in Germany. This was the view presented by James Allcock, chairman of Interconnector (U.K.) Ltd., to the Gastech '96 conference in Vienna early this month. Allcock was giving reasons why the Interconnector pipeline, being built from Bacton terminal in the U.K. to Zeebrugge terminal in Belgium, will be a

Dec. 16, 1996

3 min read

Failure to meet carbon dioxide emissions targets agreed at the 1990 Rio de Janeiro climate change summit is likely to prompt a "dash for gas" in continental Europe, and particularly in Germany.

This was the view presented by James Allcock, chairman of Interconnector (U.K.) Ltd., to the Gastech '96 conference in Vienna early this month.

Allcock was giving reasons why the Interconnector pipeline, being built from Bacton terminal in the U.K. to Zeebrugge terminal in Belgium, will be a financial success.

"If I were you," said Allcock, "I would accept the optimistic demand forecasts. I think most forecasters underestimate the potential power station use for U.K. gas, particularly in Germany."

Allcock said Germany has built new clean coal-burning power stations, and German generators' experience of using gas to fuel electricity generation may make them reluctant to return to it.

CO2 target shortfall

"Nevertheless," said Allcock, "at the turn of the century, all the signatories of the Rio accords will have to admit they have not met their CO2 emissions targets; nuclear power will remain politically unacceptable for some time to come, so I expect there to be a continental dash for gas.

"I do not expect European countries to expand their purchases from Russia without regard to the desirability of diversity in supply sources. Nor do I think Gazprom has established trading companies in Europe in order to destroy the downstream margins that it was their object to gain."

The Interconnector pipeline will have capacity to deliver 20 billion cu m/year of gas to Europe and is expected to be operational Oct. 1, 1998. Germany's Wingas GmbH is the only customer to date, having agreed to take 3 billion cu m/year of U.K. gas under two contracts with Interconnector interest holders British Gas plc and Conoco (U.K.) Ltd.

Changing markets

Allcock noted that as in Britain, continental Europe's gas markets are increasingly beginning to change, at the European Union level, slowly, and with growing momentum at the national level, particularly in Germany and Holland.

"It is clear to me," said Allcock, "that we will not see the same market structure emerge in Europe as in the U.K. It will be a unique pattern evolving from the existing diverse structures of the industry on the continent."

Allcock said import dependence in continental Europe is expected to grow to at least 50% by the turn of the century, with both Algeria and Russia expected to increase delivery volumes to Europe substantially.

LNG spot sales

Domenico Dispenza, director of gas supply at SNAM SpA, Milan, observed that one change in Europe's gas market recently has been the birth of a spot market in liquefied natural gas (LNG), with spot cargo deliveries so far to Spain, Turkey, France, and Belgium.

"Ever since Enagas bought its first spot consignment from Australia in 1993," said Dispenza, "short-term contracts have become increasingly common between European gas companies and LNG producers who, normally speaking, turn their attentions to the more profitable Far Eastern markets.

"Recently nearly all the European companies with regasification plants, including Botas, Enagas, Gaz de France, and Distrigaz, have bought LNG from two producers, Abu Dhabi and Australia, a total of 1.5 billion cu m which, although not a vast amount, does signal a new development."