William Stoichevski is a freelance journalist based in Olso
When cold winds begin to blow this fall, Russia will begin eclipsing Norway to become Europe's No. 1 supplier of natural gas.
By October, the 55-billion-cubic-metre-a-year Nord Stream pipeline -- with the power-generating capacity of 14 nuclear plants or 15 using coal -- will bring Siberian gas across the Baltic Sea to Germany, where 17 nuclear plants are to be closed by 2022. As the gas tap is turned on, banks will meet to finance a second massive Russo-German pipeline: South Stream, with 63 Bcm/y of strategic gas.
Nord Stream will wean Germany off "expensive" Norwegian piped gas, while the landfall of South Stream in Eastern Europe and then Italy in 2014 will make Russia the largest energy supplier to Europe. It has become clear that the only viable alternate energy source for 80 million Germans free of nuclear power is Russian gas, despite turbine installations that have turned Germany into Europe's largest wind-power market.
It isn't just the secure volumes in the two pipeline projects of consortia partners Gazprom of Russia and Wintershall of Germany. It's about prices, and German gas retailers have protested these by turning away supplies.
At a Norwegian gas conference this week, German gas wholesaler VNG (with stakes in Norwegian offshore fields) tersely told deepwater player Statoil that it had to drop the price in its 10- and 20-year gas-supply contracts to the Continent. Gas director Michael Ludwig said the glut of natural gas has driven market prices far lower.
Statoil sells nearly all its capacity to Europe in long-term contracts, and for years has vied with Russian giant Gazprom to be Germany's No. 1 supplier. A quarter of Norway's gas-pipeline capacity of 120 Bcm is earmarked for Germany, but as little as 75 per cent is often contracted.
Nord Stream and the four parallel pipelines of South Stream could seal Norway's fate as a supplier in parts of Europe. In 2009, as Eastern Europe froze amid record low temperatures, Russian gas was stalled in transit country Ukraine, while Statoil admitted it could no nothing -- all its capacity had been sold long-term.
Eastern Europeans shivering in the cold became opportunity for Gazprom and Wintershall.
"We needed new production in Europe and we at Wintershall wanted to diversify our supply sources," Wintershall gas-trading boss Gerhard Konig said. He says Nord Stream satisfies security of supply -- the old agenda -- while South Stream is about new volumes and markets.
The consensus in Europe is that relative glut will soon turn to relative scarcity. U.K. gas giant Centrica says gas and power futures for the winter of 2011-2012 stand at 25 per cent pricier than those of this past winter.
All of Europe's gas players place shale and coal-bed methane somewhere in the future, an unknown for the vast, potential deposits in Germany, Poland and Sweden or for North American exports. In the interim, France has temporarily banned shale gas and coal-bed methane exploration despite new, promising extraction techniques.
Europe is sticking to its gas forecast. Energy company BP's World Energy Outlook suggests 30 billion cubic feet per day of the Continent's 50 Bcf/d of gas imports will be piped in by 2030. By then, the mixed contracts of piped Russian gas might have shown their penetrative power.
Meanwhile, Wintershall gas director Koenig admits "European production of gas is decreasing rapidly."
"We will have in 2030 a gap of 170 Bcm per year," he said.
Mr. Koenig sees a "gas renaissance" in the cards for Germany, Russia and Europe.
Even the Anglo-American pipeline Nabucco is no longer seen as a South Stream rival but as having "complementary" aims: "The first taps new supplies of Caspian gas. The second will provide new transport for Russian gas to Southeast Europe."