European Business: Gas a Key Issue

Energy – specifically gas – is a key issue for European business, according to Markus Beyrer, Director General, Business Europe, who spoke at the European Gas Conference in Vienna, Austria.

“If the crisis has told us one thing, it's that we won't be able to be successful without a strong and competitive industry in Europe,” he said. “We know we won't be able to have a strong industrial base in Europe without secure energy supplies at a competitive price – this is why it's key for us.” 

He noted that natural gas is the main fuel for 200 million European citizens, who use it to warm their households, but it's also crucial for European industry which uses 150 BCM/a.

Production costs in many sectors, he said, heavily depend on natural gas prices, which is why Business Europe is weighing in on the debate.

Despite overall demand declining, Mr. Beyrer said he expects the share of gas to go upwards.

“This will, of course, depend on the decisions we are taking. We are convinced we need a strong European strategy in this field,” he said. “We will need a new European energy policy more focused on the security of supply, more focused on competitiveness,” he added, admitting some progress has been made on liberalization of the market.

Meanwhile, he said, Europe is much less dependent on oil-linked contracts, overall a positive development despite the low oil price at present. “We see that the hub-based system is improving the situation,” he observed.

Still, he offered that some believe that Europe is dependent upon too few gas suppliers, and that European industry is is struggling with many things, among them high prices.

Mr. Beyrer stated: “This is something undermining our competitiveness.”

To illustrate his point, he explained that gas cost $4/mmBtu in the US, while in Rotterdam it runs about double that, at $8/mmBtu. “It used to be $10, but the low oil prices have started to play into this. It means that we have a ration of more or less half the price, and you can see this in investments of certain industrial branches no longer happening in Europe but other parts of the world, notably in the US,” he explained. 

The higher cost of environmental issues in Europe in regards to climate action, he said, adds to the energy price phenomenon.

According to Mr. Beyrer, Europe's priorities should include improvement of the physical network for gas, which he said is about interconnection and making sure the European network is sufficiently fuelled. Progress, he said, has been seen there and in steps towards the single market.

Diversifying suppliers, he said, means both externally and internally. “Aside from building relations with existing suppliers, there are other possibilities.

“If you look west, you have LNG. This is very much part of the negotiations we are having with the US on the Transatlantic Trade and Investment Partnership (TTIP) to make sure their export bans on gas are lifted,” he explained.

Secure ways of delivering Russian gas, he said, are also important.

“We also need a decent route to Central Europe, because otherwise we'll have a missing link there.”

Options in Central Asia and the Middle East for gas, said Mr. Beyrer, also need to be explored.

“We also need secure ways of bringing gas from the Black Sea and Eastern Mediterranean to Europe,” he explained, saying that required a correct framework.

Some hope, according to him, may be found in the Juncker Plan on investment as well as the efforts of the Energy Union. “More needs to be done and the right incentives need to be found.”

Of indigenous resources, he said it is not the right moment to be speaking of shale gas, which he still believes needs to be explored in Europe.

Regarding the regulatory environment, Mr. Beyrer stated that tax and fee surcharges on gas are burdening competitiveness. “Politicians shouldn’t see energy as an alternative source of taxation,” he opined.

“We are committed to the climate policy goals, but we need to stop thinking we'll be able, at 10% of global emissions, to solve a global problem,” he continued, explaining that global warming needs to be addressed at a worldwide level, according to which Europe can adapt its ambitions.

The European business community, he said, is absorbing many of the negative consequences of the difficult geopolitical climate in connection with EU-Russia relations. “We will continue to do our part of the job in keeping bridges open and building them,” said Mr. Beyrer of Business Europe.

-Drew Leifheit