Posted by: russiaoilandgas | July 16, 2007

EU Optimistic About Cooperation with Russia

EU Gas Energy Russia Pipline NordstreamThe third and final day of the 5th Petroleum and Gas Congress held alongside the 9th MIOGE exhibition in Moscow was marked by the strong message sent by EU officials and European companies: Russia is, and will remain, Europe’s most important strategic partner in the energy sector for years to come.

The meeting was highlighted by the speech of Christian Cleutinx, Eurocommission’s Director General for Energy. “There is a lot of optimism for the future,” he said in referring to the potential of Russia’s cooperation with the EU. “We were pleased when President Putin confirmed the EU’s energy demand would be covered by Russian supplies; the EU-Russia energy dialog is extremely important for us.” 

The main reasons for Russia’s importance is the fact that Europe buys 1/3 of its energy out of Russia making it the biggest market for Russian gas export monopoly Gazprom. Forecasts project that the situation will not change in the future. “Gas production in Russia will grow from 640 billion cu in 2005 to 740 billion cu in 2020 while European exports are set to increase to 200 billion cu from today’s 145 billion cu,” said Rainer Seele, member of the Board of Directors of Wintershall AG.  He also pointed out that Russia holds 48,000 billion cubic meters of gas which is roughly 25% of the global reserves.

 “If we look at the capacities and the European demand for gas, we’ll see there is no way of bypassing Russia,” noted Rainer Hartmann, head of the Moscow representative office of E.ON Ruhrgas, adding that Europe can ‘sleep well’ due to Russia’s ability to supply it with natural gas.  He also drew particular attention to the Nordstream pipeline, which will be delivering gas directly to the European customers with the initial capacity of 27.5 bcm/a in 2010 arguing it is “essential due to the decline in indigenous production of gas in Europe. The Nordstream project will provide the additional capacity of 200 billion cu. With Nordstream we get high quality and secure routes building additional capacity for Europe.” 

“We believe in the EU that Russian has been a reliable supplier and will remain one,” said Christian Cleutinx, denouncing the controversy which surrounded Russia’s reputation of a reliable gas supplier after the Belarus incident last January. “Long term contracts contribute to the security of supplies for Europe and security of demand for Russia,” continued Cleutinx. “However, now the question is turning into whether Russia will be able to deliver gas to Europe instead of whether Russia wants to deliver gas to Europe as the growing Russian economy will drive the domestic demand for gas up to 690 billion cu in 2012, or a 55% increase,” he said.

 It was pointed out that Europe is just as important for Russia as Russian resources for Europe as there has been a strong correlation between the revenue from hydrocarbon exports and Russian economic growth. “We’re looking to increase mutual confidence and trust which are the key points of the energy dialogue,” said Cleutinx, adding that “we believe our interdependence is a win-win situation for us, what’s good for one is good for the other.” 

“This interdependence should make the foreign companies which are willing to invest in Russia confident about making this move; however, the EU expects them to get the same treatment in Russia as Russian companies get in Europe, so it should be reciprocal” said Cleutinx in an exclusive comment for OGE. “We should remember we’re neighbours, we have common border and the same future.”

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