Europe and Natural Gas: "We're extremely lucky"
Emmanuel Haton, Director of European Government Affairs, BP, said he had three slides and wanted to speak about "reality" at Gas Week 2013 in Brussels.
"I'll leave it to you to come to the conclusions," he quipped, referring to the policy that Europe needed. "Reality is a bit like the law of gravity; you may not like it, but it is the law and reality always comes back."
The reality in this case was not such a bad one.
Mr. Haton showed delegates a map of Europe and its surroundings, pointing out that it showed, "We tend to forget that we're extremely lucky in Europe that we've got such a resource—1 trillion cubic meters of gas. We are far from having an issue of supply or security of supply around Europe."
He remarked that one could fill 400 million Olympic swimming pools with 1 trillion cubic meters of natural gas. "So if you policymakers have any doubt about the availability of the resource, energy security, just forget it—that's a fantasy. We are surrounded by natural gas and it is secure. They are proven reserves."
Taking unconventional gas into account, he said Europe had 2-3 centuries of resource available.
Mr. Haton queried: "Would you build a policy to displace the resource, because you are worried about future availability?"
His next slide was about the massive costs of gas infrastructure, outlining the 2 million kilometers of pipeline, 19 LNG gasification terminals and 124 natural gas storage facilities.
The last slide showed the growth of coal demand globally, but with the US share declining and incremental growth in Europe. He explained, "It's interesting to note that it is basically the same stuff that comes from the US to Europe, the reason being that, even if the US hasn't got the climate policy, they've discovered unconventional gas. And because that gas is associated with liquid gas, which we call condensate and runs the price of crude, 'red gas', its value is nearly the value of the by-product—it can nearly go to zero, but you will produce it because you want the wet gas.
"So if the price of natural gas goes nearly to zero, it is displacing coal, which ends up coming to Europe," he continued.
In the end, Europe had a climate policy, but things were working out better in the US, according to him, as Europe ended up emitting twice the CO2. "Something's not working," commented Mr. Haton, who then showed how global CO2 emissions had gone down in both regions; the dramatic rise, he noted, was in China and India.
Of Europe and its climate change efforts, he remarked: "Even with the best will we may have in Europe we're not going to get the climate sorted simply by doing things ourselves; we're not going to save the planet whatever we do, simply because the planet is not listening to us."
Meanwhile, Germany, he said, was still using coal and lignite to make up half of its electricity needs. "They've got this schizophrenic policy by which they are putting offshore windfarms and using coal and lignite. How can this be possible when they could go to the neighborhood and negotiate a contract to go from coal to gas and would half their emissions?"
Another facet of the situation was the lack of a coherent European policy, according to Mr. Haton.
"You've got the so-called European energy policy and 27 member states doing what they want; you've got climate policy, but not an energy policy. Until Europe gets this fixed you will find the emergence of plenty of exotic situations where you subsidize offshore wind, while at the same time import cheap coal from the US."
Getting the European market sorted, he explained, was the first step to addressing such phenomena. "At the moment, we are in a 'seller's market'—we take the price of our seller with the size of our market and import from the producing countries. We should be in a 'buyer's market'."
In the European Council he said it was necessary to say to the European energy markets that member states would complete the internal markets for gas and electricity.
"There's only one thing to do—finish the Internal Energy Market, complete the interconnections of the grids, get an overarching body to check what's happening."
He noted the great resistance from member states when someone wanted to bring liquefied natural gas into Europe: hundreds of excuses why a ship should not come in, which meant it was urgent to have a coherent policy regarding this in Europe.
He asked, "Does the price of gas still need to be linked to the price of oil, forever, when the oil price goes through the roof and the price of coal is so low and emissions are going to double? Those are the kinds of questions you can ask. When you're a seller's market, you just take what's there—what the seller wants to give you."
Finally, looking at the pipeline infrastructure, Mr. Haton noted there was no natural gas flow from West to East.
"Recent EU member countries like Lithuania are still watching their backs," he noted, "because the gas is coming from behind them, not from the West, and no one has really had the courage to address this."