RFE/RL: Gazprom's weakness is more dangerous for Europe than its strength

Gazprom is not only the largest company on Earth, with natural gas prices reaching record highs and looking to rise further, it is also one of the wealthiest as well. And with just more than 50 percent of Gazprom's shares belonging to the Russian government, the European Union in particular is worried that political disputes between Gazprom's consumer countries and the Kremlin could result in reductions or suspensions of gas supplies, RFE/RL reports, quoted by Info-Prim Neo. But is Gazprom as powerful as many people think? Or is the use of gas in political purposes a major threat to Europe? Some experts answer “no” to both questions. Among them is Jonathan Stern of the Oxford Institute for Energy Studies, who is also the author of the book “The Future of Russian Gas and Gazprom”. He explained to RFE/RL that Gazprom has 150,000 kilometers of high-pressure pipeline – a very large, yet very old system. Much of it was installed some 30-40 years ago and now needs extensive replacement. “I think they now realize that they need to replace it as fast as they can and that probably means they are going to spending something on the order of $5- $10 billion per year on pipeline replacement for a good period of time ahead.” About two-thirds of Gazprom's gas currently goes to the domestic market. The rest is exported but accounts for most of Gazprom's revenue, though the company's total revenue is enough to account for some 25 percent of Russia's federal tax revenues. According to the editor at the Edinburgh-based FSU Oil and Gas Monitor, Jennifer DeLay, the Russian concern exports between 30 and 40 percent of its total production to Europe and Turkey. “Gazprom needs Europe as much as Europe needs Gazprom, more in fact.” She believes that European gas sales account currently for about 60 percent of Gazprom's total revenues. “Losing that would hurt the company very much”, DeLay told RFE/RL. Within the European Union the percentage of Gazprom gas imported by individual member states varies. Belgium, for example, receives a mere 1.6 percent of its imported gas from Gazprom, whereas Germany gets about 40 percent of its gas from the Russian company. Some former Communist bloc members rely on Gazprom entirely for their gas imports. Pierre Noel, an energy expert at the European Council on Foreign Relations in London, believes that the big problem for the EU is not becoming too dependent on Gazprom, it is that Gazprom alone cannot fill all of the EU's energy needs. “They already are unable to meet all their commitments with their own production and Gazprom is particularly reliant on two sources of non-Gazprom gas , which are imports from Central Asia – essentially from Turkmenistan – on the one hand and the so-called independent producers, the non-Gazprom gas producers in Russia.” Oxford's Stern believes that in the next five years, particularly starting about 2011, is going to be a difficult time for Gazprom - “the fields that brought them through the last 30 years are declining”. Pierre Noel adds: “The sort of mid- to long-term future is probably brighter for Gazprom, but they have a very difficult intermediary period to manage between essentially now and when the new generation of super giant fields come on stream from the Yamal Peninsula”. In conclusion, as these experts believe, cited by RFE/RL's Bruce Pannier, Europa has a double problem: Europe's dependence on Russian gas is dangerous not because Russia could use it as a political tool, though it was employed in its “close neighborhood”, particularly Ukraine and Belarus, but because Gazprom will just not be able to meet the demands.