Gas Week 2013: A Call for Reflection

The last speaker at Gas Week 2013, Brendan Devlin, Advisor, Internal Energy Market, DG Energy, European Commission, took the liberty of providing a summary of his observations to the delegates in attendance in Brussels.

He noted the title of the session was "Reconciling EU Energy Policy Goals with Reality," but asked whether or not the session might be retitled "Reconciling the EU Gas Industry with Reality." Although he admitted there were some exceptions to that remark, like Statoil. 

Mr. Devlin explained, "There has been a failure of the gas industry to address the issue of price; no one has dealt with the issue of pricing within the European Union, except indirectly—by saying that the price of CO2 should rise, so that there is space for gas in the market." 

He added that one of his colleagues had mentioned that one predominant voice within the gas industry members assembled was an attack on the coal industry.

"The coal industry is competitive," he said, "it's working within the emissions trading system (ETS). The fact is, the gas industry with it's present pricing, obviously is uncompetitive and still acting within the ETS. There needs to be some reflection by the gas industry about its pricing policies. Statoil is leading the way."

He said it would be necessary to answer the question: "How do you keep industry in Europe?" explaining that it was about jobs, competitiveness and the future economic welfare of the European Union.

"If we don't address that, all the other issues that we're talking about in the gas market, energy market are secondary—it's really about jobs, and I really would urge the gas industry to think about that. There's no appetite for raising the carbon price in this Parliament in order to allow for space for gas to have an indirect subsidy for its operation in the market, and I don't see that changing," opined Mr. Devlin.

His second point, however, was that Brussels underestimated the value of the natural gas industry and network. "There is so much value out there in the gas sector, in the industry that we do not exploit; we talk about the traditional role of the gas industry, which is to take gas out of the ground and sell it at a rent in the final market. We need to decrease the rent as I've mentioned, but you need to think also about how to use gas intelligently, use the network intelligently and to bring those assets and expertise of the gas industry into the long-term objectives of the European Union, which is to have a carbon neutral—I don't say decarbonized—but carbon neutral energy market by 2050. And if we can do that, we will succeed."

A long-term perspective, he said, was necessary as to how there could be a single energy grid in the European Union which took on electricity, gas and all the other sectors that provided energy, and combined their synergies across networks. 

In terms of diversification, Mr. Devlin remarked that Europe had a lot of gas on its doorstep.

"BP and colleagues in Shah Deniz II are leading the way in opening the Southern Corridor, the access route to the biggest concentration of gas, across 15-20 states. We already have connections to the Eastern Corridor, to Russia, the Northern Corridor to Norway, and the Western Corridor to North Africa. But the largest concentration of gas at global level is in the Southern Corridor, in the path of countries that stretches from Kazakhstan through to Egypt. 

"Those countries are desperate to have relationships with gas consuming countries; we have the biggest market in the world, a great many things to offer those countries and we should make it our responsibility to reach out and bring that gas to the European Union."

He said this is why the European Union was looking forward to the opening of Shah Deniz II and the decision on the allocation of gas into the Union some time this year. 

"BP, Total, Statoil and others are taking this decision responsibly and they have the full support of the European Commission and the European Union to bring that gas to Europe, open that corridor as soon as possible."

Gas supply, he said, also had a bright future, showing a map of international trade of gas in Europe, but explained that it would be much more diversified going forward, which did not mean that there would be a global price, but rather regional prices. The future diversity of gas in Europe, said Mr. Devlin, would likely mean that prices would be lower. 

"The European Commission will not become involved in choosing whether it should be coal or gas, or other fuel inputs into the European Union," he said. "The gas market will have to adapt to much a more flexible, international gas trade and a much more flexible international coal trade.

"When we look to the future, we need to not just think of the countries that are currently supplying gas to the European Union—Russia, Norway and Algeria—we have to look to places that are currently not on our resource plan: Brazil, Argentina, Tanzania, Mozambique and many many others, all of whom are stable and capable of supplying as to the European Union."

Mr. Devlin ended on a positive note: "The future of gas is good as long as the gas industry maintains a reality check and a connection with the terms of the LNG market."