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european gas supply problems

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    Europe facing winter gas supply bottlenecksPublished: Friday, 27 October, 2006, 12:59 PM Doha Time

    LONDON: Europe this winter looks likely to escape a repeat of last January’s gas crisis but pipeline bottlenecks and a shortage of storage sites could threaten supplies when cold weather forces up demand.

    Mainland Europe ran short of gas during a cold spell at the turn of the year when imports from Russia fell as Moscow halted supplies to transit market Ukraine because of a price dispute.

    "The risks are lower than last winter," Mark Spelman, head of energy at consultants Accenture said.

    "But it is not a foregone conclusion that there will be no disruptions because some of the underlying risks have not gone away; in particular there is still a lack of storage and the need to improve cross border interconnections."

    About 80% of Russian exports to Europe is pumped via Ukraine, with the rest going through Belarus. Russia supplies a quarter of Europe’s gas.

    Russia this week struck a new gas deal with Ukraine, easing European concerns about winter supply. During January’s crisis Ukraine used gas that was meant to be pumped to Europe, Russia said.

    Moscow remains at loggerheads with Belarus over oil and gas issues but Europe-based analysts doubt that Russia would let the row threaten supplies to Europe and sour relations with Germany and other big consumers.

    "Russia and Germany have been working closely on energy security. With Germany taking the Presidency of the EU and G8 in January, there is a strong mutual interest in not rocking the boat," Spelman said.

    "The Russians will also be keen to ensure there are no unnecessary political waves next year ahead of the presidential elections in 2008," he added.

    Russian gas specialist Jonathan Stern at the Oxford Institute for Energy Studies also doubts that Moscow would let its disputes with Belarus boil over into a gas blockade.

    "Belarus is potentially problematic but would the Russians want to provoke a situation given what happened last winter? I think probably not," Stern said.

    Belarus has threatened to sever all relations with Russia if Moscow forces through sharp price increases.

    Russia’s gas export monopoly Gazprom has threatened to quadruple gas prices for Belarus from next year. Gazprom has said it will impose higher prices if Belarus does not cede control of its gas pipeline network.

    Europe’s overall supply situation is improving on the back of growing imports of liquefied natural gas (LNG) from North Africa and the Middle East, and pipeline gas from Norway which should help utilities avoid a supply crunch this winter.

    "Suppliers know the spotlight is on them so they’ll probably be working extra hard to avoid last year’s problems," Chris Le Fevre of Le Fevre Consulting Ltd said.

    Italy, which had to tap emergency gas stocks when Russian supplies fell during January’s cold spell, has used LNG to raise its expanding stores ahead of the winter, analysts say.

    Britain, Europe’s biggest gas market, is boosting imports to counter a drop in output from ageing North Sea fields.

    But Structural weaknesses in the wider European gas network have not been addressed since January’s crisis.

    One conclusion from the post mortem following January’s Russian gas crisis was that the situation was made worse by bottlenecks on certain borders.

    Britain’s reliance on one large storage site was exposed last winter when the facility had to close during a cold snap because of a platform explosion and fire. The closure caused shortages and helped force up energy bills.

    "(The UK’s) infrastructure is getting old and unreliable, nobody wants to talk about that," Stern said.

    The forecasts so far are for a mild winter although that could change.

    "The latest announcements from the (UK) Met Office are for a mild wet winter up until Christmas, with colder weather only coming after that," the network operations director of Britain’s National Grid, Chris Murray told Reuters in a recent interview.

    "There seems to be an alignment with what the expectations of the weather are and when we see additional gas supplies becoming available." – Reuters

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