Buyers are more important than sellers: EU commissioner Piebalgs

Buyers are more important than sellers: EU commissioner Piebalgs

Amsterdam (Platts)--9Jun2006

Buyers are more important than sellers, the European Union's Energy
Commissioner Andris Piebalgs told delegates at the World Gas Conference in
Amsterdam Friday. And Norway, Algeria and Russia were not enough, as demand
rises and indigenous production declines. "We need to add to the mix of three
suppliers. Caspian gas is also needed."
A meeting of the five countries involved in the Nabucco pipeline project
-- Turkey, Bulgaria, Romania, Hungary and Austria -- has been called in Vienna
in the next month or so, under the auspices of Austria's presidency of the EU.
That pipeline is to bring gas from the Caspian overland, with the gas coming
initially from Azerbaijan's Shakh Deniz field and perhaps later from Iran,
according to sources at Austria's OMV.
And liquefied natural gas will bring better solutions, Piebalgs said. He
ruled out a global spot gas market sending price signals to investors as
wishful thinking and underlined the continuing importance of long-term
contracts. We can't escape from those, he said. But he did call for a global
codex of laws that satisfied the consumer and brought the best prices for
clients.
But he admitted that the onus was on the consumer to make the market
attractive enough for the sellers. That would come about, he said, as the 25
individual states aligned their rules to become a single entity, and red tape
was eliminated: this had been a complaint from major LNG exporter Qatargas,
whose CEO Faisal Al-Suwaidi complained of the 100-plus consents needed for the
South Hook terminal in the UK. "A liberalized market downstream strengthens
security of supply," Piebalgs said. While tensions over lack of investment
were increasing, he said different parts of the world saw the problem
differently, with Asia more concerned than Europe about supply security.
Piebalgs also expressed a degree of optimism in the wake of the
Russian-Ukraine gas dispute, questions of monopolies, and Russian complaints
about regulation.
The CEO of Russia's gas export monopoly Gazprom Alexei Miller had used
the conference to comment on the effect that the buyer's wish to diversify
sources would have on the small number of suppliers now dominating the EU's
gas market. Gazprom was developing markets elsewhere, especially in Asia, he
said. And his export manager Alexander Medvedev also made trenchant comments
about the failings of regulation, citing the Austria-Italy long-term capacity
auctions as a case in point: most of the winners of "derisory" volumes had no
access to gas and sold their capacity back with a significant mark-up which
customers would end up having to pay for. Piebalgs expressed the hope that the
G8 meeting in July would bring some "pleasant surprises" in this respect. "It
is important that both sides understand energy politics," he said.

Speaking after Piebalgs--whose view on the relative importance of buyer and
seller he challenged--Al-Suwaidi said that he approved of buyers'
diversifying their sources in the name of security of supply and that he, as
the seller, was doing the same, with about a third of the country's LNG under
development planned to go to Asia, Europe and the US each. And in the last two
markets the seller was taking market risk, with neither price nor available
terminal capacity, especially in the US, guessable when the contracts were
signed. "We are happy to take market risk," he said. Nor can one energy source
meet demand, so secure energy supplies would be predicated on a mix of coal,
nuclear, gas and renewables, he said.

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