A pipeline of gas from Russia to Europe is a pipeline of money from Europe to Russia. The two sides are therefore locked in a mutually dependent, if abusive, relationship. It’s a bit like sharing a rowing boat with a high-functioning lunatic. Both of you know that coming to blows would sink the boat – but, short of that, there’s a lot that he can do to make your life extremely uncomfortable.
The obvious thing to do is get out of the boat – so how can Europe meet its energy needs without Russia? The Crimean crisis has prompted many to look to America, and some powerful US politicians are ready to help. According to Keith Johnson in Foreign Policy, one such figure is the Speaker of the House of Representatives:
“…John Boehner (R-Ohio) took to the opinion pages of the Wall Street Journal to call on the United States to ‘liberate’ its ‘natural energy’ as a weapon against Russian strongman Vladimir Putin by accelerating a sclerotic permitting process for natural gas export terminals.”
That would be most welcome, but it’s not going to happen anytime soon, if at all:
“First and foremost, it takes years and billions of dollars to construct the specialized terminals needed to convert natural gas into a liquid and then cram it into specially built tankers. The Energy Department has approved six of the 30-odd applications it has for LNG export terminals to sell gas to countries with which the United States does not have a free trade agreement.”
Even when the terminals are up and running, the likelihood is that most of their liquified natural gas will be going to Asia (where gas prices are higher), not Europe:
“Terminals that have already won conditional approval have supply contracts with power companies in Japan, South Korea, and India. Japanese firms, for example, have secured supply deals with four of the six terminals that have won Energy Department approval so far.”
It seems that “only a handful of European firms have signed long-term contracts with U.S. LNG exporters.” One of these is our very own Centrica, but it’s not Britain that’s dependent on Russian gas. Rather Europe’s vulnerability lies in Germany, Italy and most points east.
The only long-term solution is for Europe to develop its own energy resources – and in particular the shale gas deposits that stretch across the continent, including great swathes of Ukraine.
In this respect, Britain does have a vital role to play. As Derek Brower explains in a must-read article for Petroleum Economist, Russia is using its influence to discourage shale development in its export markets:
“Poland, once considered the country with the best prospects and, given Gazprom’s domination of its supply, most reason to exploit its shales has failed at the first hurdle. Officials used to working with Russian partners, say some Polish critics, have successfully thwarted their own country’s interests. Ukraine’s own reserves are years away from production, too.”
Britain, for the moment, is free from such pressure:
“Shale optimism has since shifted to the UK. In theory, a shale boom there could see some gas move onto the continent.”
More importantly, we could provide a template for the environmentally and socially responsible development of shale gas elsewhere in Europe. This will require a robust regulatory regime and, in a return for a streamlined planning process, a direct financial stake for local residents. We also need to properly align our policy on shale with those on green energy – because the only choice that we really have is between developing all our native energy resources or being dependent on imports from Russia and the Middle East.
We shouldn’t kid ourselves that shale can provide an immediate answer to Europe’s energy dependency. But if we want to make Putin’s blood run cold (or colder than it is already) then nothing would do the job quite so well than the sight of a European country getting its shale industry off the ground.