Globalizing Gas Markets and European Energy Security. Three Sobering Thoughts
Over the past years, European policy makers and industry executives had to jealously watch a ‘shale gas revolution’ unfold on the other side of the pond. There, thanks to new drilling techniques, US gas production skyrocketed to some 680 billion cubic meters per year, now ahead of Russia’s 590 bcm, making the US the globe’s number one gas producer and spot markets see record lows of 3 USD per MMBTU. The US Energy Information Administration has recently estimated Europe’s recoverable unconventional gas reserves to be on par with America’s, fueling hopes of replicating the US success story on the old continent. What’s more, with lots of more gas coming on ‐ stream, gas markets are said to see an end of the decade ‐ old regional gas model, where three different markets co‐exist aside each other. North America, Eurasia and the Asia ‐ Pacific, the hopes are, will soon merge into a global gas market; liquefied gas will be shipped easily where needed; and prices will consequently come under pressure because of gas ‐ on ‐ gas competition unfolding on an international level. For many European leaders, this scenario appears as a silver bullet to their energy woes – high import dependency on Russia, the increasingly difficult Eastern neighbor; energy prices currently three times as high as in the US and spelling disaster for Europe's chemical and steel industries; and an urgently needed and secure fuel ‘bridging’ Europe’s path into a low carbon future without pushing the continent’s energy system to the verge of collapse. Yet, Europeans may need to rethink on three fronts.