Learning from the Crisis: Securing European Natural Gas Supplies

  
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"A larger, well-interconnected market receiving supplies from a variety of exporters is expected to be the best insurance" against gas delivery disruptions, writes Arno Behrens, a research fellow at the Centre for European Policy Studies (CEPS), in a March paper.

The gas dispute between Ukraine and Russia in January 2009 showed that "the EU had not learnt much from a similar crisis in early 2006, and was not much better prepared to deal with such short-term disruptions of deliveries of a critical energy source," writes Behrens.

He believes that several conditions need to be fulfilled to secure gas deliveries and "come up with a crisis response mechanism to gas disruptions". Among these are:

  • Functioning markets;
  • established interconnections;
  • diversification and redundancy of import capacity (especially towards Africa and the Middle East), and;
  • regulatory or contractual arrangements.

Since 2006, "investments in additional storage have been insufficient in many member states and some of the most crucial inter-connectors for a pan-European pipeline network are still missing," Behrens deplores.

As "it seems likely that projected infrastructure will not be able to meet expected demand," Behrens wants to "require access to gas reserves, open production to international investments and focus on the stability of transit countries".

Nevertheless, "not all gas consumers have the same need for secure and uninterrupted supply," states Behrens, whose paper makes a distinction between "priority (i.e. non-interruptible) and interruptible customers".

"Suppliers should be required to protect their priority customers" and "interruptible customers need to be offered lower prices, since they do not require protection in the event of a crisis," he writes.

Behrens also suggests creating an agency "in charge of general oversight of the security of the system, including the surveillance of interconnection capacity and ensuring a supplier of last resort".

Concerning LNG, Behrens calls for "a well-calibrated policy regarding the regulations applied to the construction and access to infrastructure facilities (LNG tankers, terminals and pipelines), to avoid hampering their development".

"A systematic and formalised market-surveillance mechanism will be crucial in this respect," he adds.

To conclude, Behrens claims that "the EU should develop a 'European concept for security of supply'," stressing the need "to better integrate energy policy and foreign policy". 

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