We’ve been hearing quite a lot about the natural gas glut hitting global markets, and the rapid decrease in demand among the world’s leading consumers. In essence, market forces appear to be rapidly deflating Gazprom’s potency as a political weapon for Russian foreign policy, but as the FT reports, “few seem to have realised that in fact there may be an opportunity for European countries and their big energy companies to wield the stick against the Russians.” I guess the gas cartel can’t quite get its members’ production policies in line yet, despite the threats.
From the Financial Times:
Oversupply comes as a result of increases in existing pipeline capacity, the coming on stream of the Medgas pipeline between Algeria and Spain, and more production worldwide in countries such as Algeria, Norway and Qatar. The exception is Russia, where gas production has fallen by a dramatic 25 per cent this year compared with 2008.
Put simply, as one top industry executive suggested, this means Europe has no need for Russian gas – at least for the next two or three years.
That fact should wake up a few European policymakers to the opportunity of negotiating with a much stronger hand, instead of complaining that Europe has little bargaining power in the face of Russia’s vast gas resources.