Bloomberg: Four Reasons Europe Is Stuck Buying Gas From Putin
Can Europe wean itself from Russian gas? Lithuania seems to have succeeded. The Baltic nation, which until now has bought 100 percent of its gas from Gazprom this week inaugurated a liquefied natural-gas facility, supplied from Norway and elsewhere, that could furnish all the country’s gas needs as early as next year. “Finally, we have our energy independence,” Energy Minister Rokas Masiulis said.
Alas, few other countries can replicate that feat. A study released this week by the Oxford Institute of Energy Studies in Britain predicts that Europe won’t significantly reduce its dependence on Russian gas for at least a decade—and probably longer. Here’s why:
• Buyers are locked into multiyear contracts with Gazprom. “The vast majority of Russian gas exports to Europe are sold on long-term contracts varying from 10 to 35 years,” the report says. (Lithuania is an exception; its contracts expire in 2015.) Through the mid-2020s, European buyers will be obliged to take at least 75 percent of the amount of Russian gas they bought in 2013, a year in which Russian gas supplies to Europe hit an all-time high, the report says. Although some European buyers have recently renegotiated their contracts with Gazprom, “there are significant limitations on the options to reduce the volumes in these contracts, or to terminate contracts before expiry.