US wants rivals to Gazprom in Europe gas market

Fri Oct 27, 2006 7:54am ET

By Radu Marinas

Bucharest (Reuters) – Europe’s gas market is dysfunctional and needs alternatives to Russian monopoly Gazprom but potential suppliers such as Azerbaijan are under a lot of pressure to keep out, a U.S. official said on Friday.

Gazprom , Russia’s gas export monopoly, currently supplies a quarter of Europe’s gas needs and its market share is expected to grow in the coming decades. It is not just Europeans who are troubled by the rising dependence on Russia.

“Our national security is best served when energy and other markets function efficiently. Right now, the European gas market is dysfunctional,” Matthew Bryza, U.S. Deputy Assistant Secretary of State for Europe and Eurasia told Reuters.

“When gas prices in central Asia are $100 for 1,000 cubic metres and in a country like Romania you’re paying $285, something is wrong. What’s wrong is a lack of competition,” he said in an interview after attending a regional energy conference in Bucharest.

Gazprom shocked Europe at the start of this year when it cut supplies to Ukraine, the key gas transit route, during a pricing row and then restricted some European flows to ensure Russians stayed warm during an exceptionally cold winter.

The firm said its gas deliveries never fell below its contractual volumes and says it will always be a completely dependable supplier, even though it warned this week of another looming gas crisis this year.

Competition

EU politicians have pressed Moscow to liberalize its gas market. They want Russia to let its gas-rich neighbors — Turkmenistan, Uzbekistan and Azerbaijan — negotiate prices directly with European clients, rather than being held to hostage by Gazprom, which controls transit routes.

However, earlier this year Russia enshrined Gazprom’s gas export monopoly in law, steamrollering the idea of allowing open access to its pipelines.

Bryza said the United States wants Gazprom to remain a reliable gas supplier to Europe, but it also wanted openness.

“We want competition as well. We want Europe to have an alternative so it is safe and so Gazprom has to compete like any other company.”

He said Azerbaijan was under “a lot of pressure by others in the region” not to ship gas but had a contractual obligation to send gas through Georgia to Turkey this year, with the first major flows to Europe expected in at least 5-10 years from now.

“We hope that by next year, when the Turkey-Greece-Italy pipeline is completed, at least the Turkey to Greece portion, there will be Azerbaijani gas flowing into that pipeline,” he said.

“So that could be as early as next year … A small volume.”

Azeri President Ilham Aliyev said earlier this year he wanted to bring forward the first gas supplies to Europe from the major Shakh-Deniz field in the Caspian Sea. The field is estimated to contain 1 trillion cubic metres of gas.

Bryza said in June that Washington would be in favor of speeding up the development of Azeri gas for European consumers.