2008/10/13

An annoyed "Old European's" rant about European energy supply misperceptions


There are several seriously annoying topics that recur all the time in national security related discussions with U.S. Americans; they believe to know that Europe is (especially) weak, doomed - and why.

One such topic is that Muslims will take over Europe by the power of demography.
That's so ridiculous, I won't discuss it. Everyone who believes such a mind fart should invest some money into actually visiting Europe and talk to many intelligent people here.

The other topic is an alleged critical dependence on Russian natural gas and/or Russian oil. As if the USA wasn't dependent on energy imports...

Let's focus on the natural gas issue; natural gas cannot as easily be transported as oil because it's usually a gas - liquefaction is expensive. Gas pipelines are the primary means of transportation today. That limits the choice of suppliers.

The dependence is mostly a forecast problem, much less a problem today. Forecasts for 2030 tell about such a critical dependency, the actual relevance of Russian natural gas today is probably exaggerated.

Let's use Germany as an example; the natural gas share in its energy mix was 22.7% in 2007. That's apparently less than the global average of 24%.
42% of the natural gas was being imported from Russia (June 2006 to May 2007), or 36% in 2006.

Natural gas wasn't really important before the 70's because of city gas, a charcoal-based alternative.
Natural gas is in use for heating, cooking, electricity generation, iron refining, fertilizer production and hydrogen production today and has acceptable or good substitutes for all of these uses.
A sudden loss of a third or half of the natural gas imports would likely lead to a shutdown of natural gas powerplants. These supply electricity primarily for peak demand times and could be substituted by an increased (but under normal economic conditions less economical) output of other powerplants. We've got still some excess capacity for electricity production here (which has historical reasons).

The challenge has been recognized years ago and both policy and enterprises are adapting, trying to develop a diversified import mix. Liquid natural gas (LNG) imports from overseas (especially North Africa) are being planned (the planned harbor facility capacity equals several percent of the overall consumption so far), and projects to build the necessary facilities in Wilhelmshafen (a German harbour) and/or Rotterdam (Netherlands) were initiated. 2030 is a long way to go, and the natural gas export revenue dependence of Russia might well be greater than the natural gas imports dependence of Western/Central Europe.

There's also the other side of the coin; Russian dependence on energy export revenues. Their foreign currency reserves are large enough to reduce the dependency to a medium-term issue, but the use of energy raw materials for political pressure (including mere threats) would seriously undermine their medium-term prospects for exports of the same goods.

Russia's past political-economical conflicts with the Ukraine and Belarus were about ridiculously low natural gas prices; these countries pay about a fourth to half the price per unit that Western Europe does, and were also accused of stealing natural gas from pipelines that was destined for Western Europe and of not having paid some bills. These past conflicts are no real sign for the use of natural gas exports as a political weapon by Russia. It's just fair to side with Russia and acknowledge their right to demand proper payment for their goods.
Russian political pressure on the Baltic states (especially Estonia) is more serious and deserves to be studied in detail.

All industrialized countries are dependent on world trade, this is usually a mutual dependence of both sellers and buyers.

'Old' Europe isn't doomed. At least not more so than the USA, many parts of it likely much less so.

Sven Ortmann
 

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