Europe dependent on Russian gas supplies 'for at least until the next decade'

Gurjit Degun
27 August 2014

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27 August 2014 | Gurjit Degun

Europe will be reliant on Russian natural gas supplies for at least until the next decade, according to Fitch Ratings.

The financial information services firm explained any attempt to cut the dependence would require a “significant reduction” in overall gas demand or a big increase in alternative sources of supply, “but neither of these appears likely”.

Fitch said it expects demand for natural gas in Europe to “grow slightly” until the mid-2020s, as the economy recovers.

“After that it is likely to accelerate as gas-fired electricity generation replaces old coal and nuclear capacity, although renewables will also fill some of this gap. Even if coal-fired and nuclear energy were favoured over gas, the impact on energy security would be limited because Russia also supplies 26 per cent of the EU's hard coal and is the sole supplier of fuel rods to nuclear power plants in several countries.”

Fitch Ratings added it would take at least a decade for production of European shale gas to “reach meaningful volumes”. The report said: “By that point it would probably only offset the decline in production from Europe's conventional gas wells.”

In terms of piped gas, the research explained that imports from markets other than Russia are “likely to remain limited”.

Another alternative is liquefied natural gas (LNG), the production of which is set to increase by around 70 billion cubic metres (bcm) a year by the end of 2017, according to Fitch. But it added: “Much of this new capacity is tied to long-term supply contracts and spare capacity in global LNG is likely to remain tight, in the tens of bcm. We do expect new LNG supplies to be signed up by Europe, but the LNG market is unlikely to be large enough to gain market share against Russian gas.”

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