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 Russia's seizure of Ukraine's Crimea region has revived doubts about
whether the European Union should continue to rely on Russia for
nearly a third of its gas, providing Gazprom with an average of $5
billion per month in revenue. Some 40 percent of that gas is shipped
via Ukraine.
EU powerhouse Germany is among those with particularly close energy
links to Russia and has echoed comments from Gazprom, Russia's top
natural gas producer, that Russia has been a reliable supplier for
decades.
Russian supplies of gas to the EU were disrupted in 2006 and 2009,
but only because of knock-on effects when Moscow cut off Ukraine for
not paying its bills. Although those incidents resulted in EU
attempts to diversify its energy sources, contracts to the bloc have
always been honored.
EU officials said the current Ukraine crisis, however, had convinced
many in Europe that Russia was no longer reliable and the political
will to end its supply dominance had never been greater.
"Everyone recognizes a major change of pace is needed on the part of
the European Union," one EU official said on condition of anonymity.
"At the back of people's minds, there will always be the doubt that
if the relationship goes sour, Russia has that weapon and it's not
something it should have," another official said, referring to
Russia's option of severing supplies.
A draft document prepared ahead of the summit calls on the European
Commission, the EU executive, to present by June a comprehensive
plan to reduce EU energy dependence.
As alternatives to imported gas, the Brussels talks will debate the
EU's "indigenous supplies", which include renewable energy and shale
gas.
They will also underline the need for energy efficiency and to build
better cross-border links to share resources, control costs and
develop EU capacity to pump gas to Ukraine should it need help.
A British discussion paper, circulated among member states, lists a
range of options, including intensifying talks on the export of
Iraqi gas via pipeline to Europe and examining how to "facilitate"
gas exports from the United States as part of trade talks with the
EU.
EU officials said they expected the issue to be raised during U.S.
President Barack Obama's visit to Brussels next week, although
analysts caution that any U.S. gas exported would be more likely to
head to Asia rather than Europe because prices there are higher.
FORTY-YEAR BOND
Keen to underline its continued relevance, Gazprom last week issued
a statement to mark the 40th anniversary of supplying Russian gas to
Germany under long-term contracts to utility E.ON . Russian gas is
sent directly to Germany via the Nord Stream pipeline, specifically
built to bypass Ukraine.
E.ON is among the utilities whose business models have been shaken
by an EU shift to green energy. The company says the grid needs
gas-fired generation to balance intermittent solar and wind.
One of the many questions is the extent to which indigenous shale
gas can replace imports.
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The signs so far are that public opposition and Europe's different
geology mean it cannot match the United States' shale gas
revolution, which has lowered energy costs there. Even in the oil
and gas industry, many are cautious about the prospects for EU shale
gas.
That leaves EU industry smarting at what it sees as a competitive
disadvantage, when the Ukraine crisis is likely to inflate energy
prices further. It is seeking help for energy-intensive industry to
manage costs, which it says have been driven up by subsidies to
increase the share of green energy.
The renewables lobby says the real driver of energy costs is
imported fossil fuels, on which Europe spends more than 400 billion
euros ($557 billion) per year.
"The EU is criticising Russia's invasion of Crimea while pouring
money into Russian coffers for gas imports," said Thomas Becker, CEO
of the European Wind Energy Association, which is calling for a
tougher goal on use of renewable energy.
But as coal-dependent Poland for one opposes an early agreement on
2030 climate and energy policy, this week's talks are not expected
to get anywhere near a deal on that.
EU Climate Commissioner Connie Hedegaard said only that the talks
should send "a strong signal".
The draft summit document says EU member states should aim to make a
final decision on the new policy framework "as quickly as possible
and no later than October 2014".
That will disappoint those who say a decision is urgently needed to
drive investment in low-carbon energy and to reduce fossil fuel
imports, as well as to settle the EU negotiating position ahead of a
U.N. climate change deal meant to be sealed late next year.
So far, the European Commission has suggested 2030 policy should
include a 27 percent EU-wide goal for renewables as a proportion of
energy use and a 40 percent cut in carbon emissions versus 1990
levels.
That compares with an existing target to cut carbon by 20 percent by
2020, which the European Union has almost achieved, as well as a
goal, binding on each member state, to get 20 percent of energy from
renewables, which is also within reach.
($1 = 0.7181 euro)
(Additional reporting by Francesco Guarascio in Brussels, Henning
Gloystein in London and Madeline Chambers in Berlin; editing by Dale
Hudson and David Evans)
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