Russia's gas king taunts crumbling Europe over China pipeline coup
Gazprom's chairman has describing Europe's energy shortage as "scary" and ridiculed the EU's push for wind and solar power as a shambles
By Ambrose Evans-Pritchard, in St Petersburg
4:19PM BST 23 May 2014
Europe has lost the global scramble for reliable energy supplies and faces a long-term queeze as Siberian gas is diverted to the fast-growing markets of Asia, Russia's gas chief has warned in scathing comments aimed at EU political leaders.
Alexey Miller, chairman of the state giant Gazprom, said Russia's $400bn deal this week to supply gas to China for 30 years is a black moment for Europe and will change the geo-strategic balance in the world. "The global competition for Russian gas resources started yesterday. Let there be no mistake about that. We have untapped the Asian market and this is going to have an impact on European gas prices," he said.
Mr Miller said the 38bn cubic metres (BCM) contract from 2018 is larger than the entire volume of liquefied natural gas (LNG) sold in the world. "You don't find that sort of contract on the side of the road in Europe," he told the St Petersburg Economic Forum.
Relishing his theme, he said China's gas demand is growing exponentially and would surge past Europe's total consumption to reach 400 BCM in "the very near future" as the Politburo tries to wean its polluted mega-cities off coal-powered plants. A large proportion of this will come from the vast Siberian fields, crowding out supplies for buyers in Europe deemed "less reliable".
Describing Europe's energy shortage as "scary", he ridiculed the EU's push for wind and solar power as a shambles, and said its LNG venture had gone nowhere with capacity use collapsing to 22pc. "Europe has lost the competition global for LNG, and in a single day it has just lost the competition for the world's pipeline gas as well," he said.
The comments reflect the fury in Russia over a string of hostile measures by Brussels following the Ukraine crisis, including a de facto freeze on the South Stream gas pipeline through the Black Sea and plans being developed by a team at the European Commission to slash reliance on Russian gas as quickly as possible.
The China prize has given Russia a dramatic means of fighting back, though it is far from clear what the Memorandum of Understanding between the two sides actually means. Most analysts say it is highly unlikely that China would wish to become too dependent on Russian supplies after witnessing the skirmishes in Europe.
The reason why Europe's imports of LNG have fallen so low is because Japanese demand since the Fukushima nuclear disaster has pushed up the price. Germany, Spain and the UK have been turning to coal instead to produce electricity.
Mr Miller's words were echoed by the Russian energy minister, Alexander Novak, who predicted that China would need to import a further 110 to 130 BCM from Siberia beyond the original deal, a four-fold increase.
Mr Novak was slightly more cautious, saying that China's total gas use would double over the next decade to 300 BCM and then flatten at European levels. By then India would be entering the fray as the next big market.
Michael Stoppard, chief gas strategist for IHS Energy, said the volumes may be huge but the price is being held down by "brutal competition" from coal. Gas currently trades at a price equivalent to $30 a barrel in the US and $60 in Europe, far below the spot price for oil.
It is no longer a remote prospect that the "sleeping giant" of Iran could burst on the global scene with colossal levels of supply as sanctions are lifted. Gas may rise from 21pc to 25pc of global energy use by 2030, he said, but that does not mean that Russian gas producers will automatically make much money from it.
