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Europeans hooked on Russian gas face tough choices in search for substitutes

Europeans hooked on Russian gas face tough choices in search for substitutes

Europe wants to break its decades-old dependence on increasingly unreliable Russian natural gas supplies amid fears that Moscow is using its vast energy resources as a foreign policy tool.
But there's no easy way out.
The alternatives are seeking other energy partners in North Africa and the Middle East, reviving nuclear power and investing heavily in renewable energy like biomass and wind power. All bring financial or political challenges that European Union governments may find hard to overcome.
"There will be imports of Russian gas to the EU for a very, very long time, that is beyond any doubt," said Lars Josefsson, chief executive of Sweden's state-owned energy group Vattenfall AB. "What you can discuss is how much of our energy supply should come from one source."
Russia supplies nearly 40 percent of the EU's imports of natural gas and about one-third of its oil imports _ making it by far the biggest outside supplier of energy to the bloc.
Some say that dependence, which dates back to Soviet times, is likely to grow along with the EU's hunger for energy. The EU imports about 50 percent of its energy, and expects that figure to rise to 65 percent in 2030.
Huge natural gas reserves and pipelines feeding into Europe's network make Russia an indispensable energy partner for Europe. The construction of a Baltic Sea pipeline pumping Russian gas directly to Germany will only make it more so, experts say.
However, supply disruptions in the past year, including a three-day cutoff this month of the Druzhba pipeline carrying Russian oil through Belarus, have stoked concerns that Moscow sees its energy supplies as a way to bully trading partners. Many EU countries are now seriously looking for alternate sources, from the Arctic to the Sahara to the Caspian Sea.
"I think Russia really is now showing it is very much unreliable," said Claudia Kemfert, of the German Institute for Economic Research, a Berlin-based think tank.
Disruptions aside, she said, Russia will not be able to deliver enough gas to meet Europe's future demand "because Russia is not investing enough money in exploration and pipelines."
Such talk is welcomed by Norway, the No. 2 supplier of petroleum to Europe. The Scandinavian country, which is not an EU member, has made a fortune on oil and gas deposits in the North Sea and is now exploring new finds in the Barents Sea it uneasily shares with Russia.
This year, seven new offshore fields are expected to come on line, including major natural gas fields Ormen Lange in the North Sea and Snoehvit in the Barents.
"Currently, there is more transport capacity than production, so we can handle more," said Kjell Varlo Larsen, spokesman for Gassco, the state-owned company that delivers Norway's gas to Europe through a 7,800-kilometer (4,800-mile) network of pipelines.
On Dec. 11, Norway set a record for the amount of gas it produced and delivered to Europe in 24 hours _ 300 million cubic meters (10.6 billion cubic feet) _ but the total capacity of the Norwegian pipeline system is 16.7 percent higher, he said.
Nevertheless, analysts say Norway does not have the resources or capacity to replace Russia's gas exports to Europe. Its North Sea gas production is believed to be near-peak, and expected to decline in coming decades.
And in the Arctic, which by some estimates hides 25 percent of the world's undiscovered petroleum reserves, exploration comes with high costs and environmental challenges. The Barents Sea is one of the world's most important fishing reserves.
Stephen O'Sullivan, head of emerging markets research at Deutsche Bank in Moscow, said it remains to be seen whether Europe is willing to pay a premium for secure Norwegian gas to replace insecure Russian supplies.
"People aren't dependent on Russia because they like Russia. They like the prices," he said. "It's one of the most economic alternatives for Europe."
Europe is also turning to North Africa for energy _ Algeria already is the third biggest exporter of gas to Europe through Mediterranean pipelines to Italy and Spain. Another pipeline carries Libyan gas to Italy.
Further afield, new pipelines are being built to carry Caspian gas to Europe via Turkey, bypassing Russia. Ukraine, which is highly dependent on Russian supplies, is interested in joining the project, Prime Minister Viktor Yanukovych said on Jan. 17.
Robert Larsson, a security policy analyst at the Swedish Defense Research Agency, called that pipeline system "one of the most important additions" to Europe's gas flow, but added its impact would be limited.
"It won't break Europe's dependence (on Russia), but it will mitigate a future increase" in that dependence, he said.
There is also the option of importing more liquefied natural gas, or LNG, which can be transported from the far corners of the globe by tanker. However, that requires its own expensive infrastructure, including transfer terminals turning the liquid back into gas.
Then there's the question whether other suppliers of gas are any more dependable than Russia.
"What are the alternatives? Iran, Libya, are they reliable alternatives?" asked Lucia Montanaro-Jankovski, an analyst at the European Policy Center in Brussels.
The disruptions related to the oil price dispute between Russia and Belarus as well as alarm over climate change has fueled European debate about another controversial energy source: nuclear power.
Many nuclear countries that decided to gradually dismantle their reactors, including Germany and Sweden, are now having second thoughts.
German Chancellor Angela Merkel, whose election campaign program called the phase-out "disastrous," sparked debate when she said that Germany needed to consider the consequences of the 2000 shutdown deal. Swedes voted in 1980 to phase out nuclear power, but so far only two of the country's 12 reactors have been shut down.
The European Commission, the EU's executive arm, left the nuclear option open as it presented its energy plan earlier this month. Its focus, however, was on renewable energy.
By 2020, it said, 20 percent of the EU's energy should be generated from renewable sources such as wind farms, hydroelectric plants, solar panels and biofuels. Currently the level is 6 percent.
Christine Lins, Secretary-General of the European Renewable Energy Council, called that goal "absolutely feasible." The best prospects for growth are in biomass, which can be used for both heating, electricity and fuel for transport, she said.
But it requires political will _ governments must make renewable energy competitive through subsidies or tax breaks.
"As a government you have to make a decision whether you want to pay more for your supply security," said O'Sullivan, of Deutsche Bank.
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Associated Press writers Doug Mellgren in Oslo, Norway, Mattias Karen in Stockholm, Sweden, and Gary Peach in Riga, Latvia, contributed to this report.


Updated : 2021-03-03 05:10 GMT+08:00