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Norway overtakes Russia as EU's biggest gas supplier

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Staff writer ▼ | July 1, 2013
Norway overtook Russia as the main supplier of the EU's natural gas in 2012, a first for the Scandinavian country, the chief economist for the British Petroleum Group chief said, reports EuroActiv.
EU natural gas
EU natural gasNorway overtook Russia as the main supplier of the EU's natural gas in 2012, a first for the Scandinavian country, the chief economist for the British Petroleum Group chief said, reports EuroActiv.

Christof Rühl, who is also a BP vice president, said drugin unveiling a new energy report in Brussels that over the past 10 years: the rapid growth of shale gas production in the United States and the rapid growth in liquefied natural gas trade. In the last year, shale gas production continued at a slower level, and LNG trade suddenly declined.

What emerged behind these trends was a "very interesting interfuel competition between coal and gas," said Mr. Rühl. Globally gas consumption rose 2.2% faster in 2012 compared to a year earlier, but below the long-term average. The growth is largely US-driven, as gas consumption in the world's largest economy has increased more than in any other region of the world.

At the same time, the EU and the former Soviet states have registered the largest regional declines in gas consumption, said Rühl, who presented BP's 2013 edition of the Statistical Review of World Energy.

A record decline in regional gas prices was registered in the US while hitting an all-time high on the Japanese market to compensate for the closure of nuclear reactors following the 2011 Fukushima disaster. On the European spot market, prices increased, although not as high as in Japan.

In the US, drilling activities have shifted from shale gas to shale oil, because gas prices fell while oil remained expensive. Rühl illustrated this shift with figures, the increase in shale gas production in the US having been 84 billion cubic metres (bcm) in 2011, compared to an increase of only 10 bcm in 2012.

What happened in the EU is exactly the mirror image of the US developments, Rühl said. With increasing Asian demand, Europe did not compete for LNG and its imports to Europe fell by 25%, Mr. Rühl said and added that they could have raised their prices, but this didn't happen, as they were faced with competition from an unexpected quarter – cheap coal.

The BP chief economist explained that the coal that was used in US power generation was now available for Europe, cheap enough to compare with natural gas in Europe. On average, generating power in Europe is 45% cheaper with coal than with gas. As Russia's gas prices remained tied to oil prices, and as Norway's had left this system of indexation, imports from Norway rose 12%, while imports from Gazprom fell 10%. And 2012 became the first year when Norway sold more gas to the EU than Russia, said Mr. Rühl.

Mr. Rühl said the increased use of coal had a negative impact on Europe's carbon emissions, but the problem remained more serious in China, which is consuming half of the world's coal for the first time. A substantial increase of carbon emissions also is taking place in Japan, he added.

Global emissions increased again last year, by 1.9%, slightly higher than the increase of the world's energy consumption, which is largely due to the increased use of coal, BP's energy report says. At the other extreme, the biggest decrease of CO2 emissions came from the US. In Europe's emissions declined, though at a slower rate than in previous years.

"That's highly surprising. We think about the European Union as an entity which has decades of energy and climate change policies behind it, and the US as an entity where climate policy is not particularly prominent," said Mr. Rühl.

Gazprom CEO Alexander Medvedev reacted to a Financial Times article which claims that the Russian gas monopoly is in decline and that it is losing its hold in the EU market: "Recently, Gazprom Export set a new record in daily gas deliveries. We pumped 466 million cubic metres of gas to Europe on a single day, pushing existing pipeline capacities to their limits. And Gazprom posted a whopping $38 billion (29 billion euro) profit in 2012. In challenging economic times this is hardly a sign of weakness."