EBRD 2017 Annual Meeting: Eastern Europe’s regional gas markets

By Svitlana  Pyrkalo
@pyrkalo

EBRD 2017 Annual Meeting:  Eastern Europe’s regional gas markets

Integration is one of the qualities of a successful modern economy as defined by the EBRD in its new transition concept. But why is it better to be integrated than closed off?

The gas market is one of the most obvious examples of what integration can really mean for economies and by extension for entire countries’ direction of travel.

Gas supplies are extremely dependent on costly infrastructure, delivered either via expensive pipelines or, in the case of LNG, via even more expensive gas liquefaction and regasification plants (and then also via pipelines).

Only working across borders can ensure that a country avoids being dependent on a single supplier of gas. Having access to a regional gas market means access to various suppliers who are competing to provide the best price. It also means better security of supply.

EBRD Director for Natural Resources Erik Rasmussen started this discussion panel at the EBRD 2017 Annual Meeting and Business Forum by explaining the significance of natural gas both as a fuel which is crucial to satisfy people’s basic energy needs, and as an enabler for renewable energy which is intermittent by its nature.

Jayesh Parmar, partner at Baringa, spoke about free market in the gas sector. “All across Europe we have seen a retreat of the state from owning many assets like gas hubs and interconnectors. But the gas supply chain has not really changed, despite being privatised. So how do you create competition when physical pipes for transmission and distribution are a natural monopoly? The simple answer is, unbundling and providing equal and fair access to all parties to those transmission pipes.”

He added: “‎I am a great believer that gas has a great role to play in our future energy mix and it is a low carbon fuel for a low carbon future.”

John Roberts from the Atlantic Council said: “‎I want to see the maximum use of renewables but since for some time they will continue to be a minority component [of energy mix], I want to see the maximum use of gas. Gas cannot be cut off. If a city is cut off from gas it will take months before all appliances are checked [and reconnected].

‘In Europe we have a great diversification of sources. But what happens if one of your main suppliers dries up, for whatever reason? We need to end the situation where there is only one supplier who can demand high price. And for that, we need to develop [gas] storage.”

Milosz Momot from a recently launched EC regional policy initiative for Central and Eastern European gas markets, CESEC, expanded the case that building infrastructure for natural gas brings overall benefits in terms of reduced gas prices and better security, even if the new assets themselves seem underutilised.

“New LNG terminals and new pipelines which may not be full all of the time ‎benefit all by helping bring prices down,” he said, and argued for a system to better cover the costs of those assets.

  

Petru Ion Vaduva, the CEO of Transgaz, outlined the project for the BRUA Pipeline which will take in new gas supplies from the Caspian basin and the Black Sea basin, and help security of supply in Europe.