Europe wary of Russia's growing energy clout

Almost 80 per cent of Russian gas sold to Europe is transported through Ukraine a country which saw its supplies from Russia suspended in January ostensibly over pricing but which some also interpreted as political pressure due to irritation over Kiev's pro-western lurch.

This year's G8 summit, to be held in St Petersburg in July could be tense with European governments worried that in future Russia could resort to using gas supplies as a political weapon.

Suspicions are compounded by growing tension between Washington and Moscow and the long standing efforts by the US to break Russia's monopoly over gas export routes from Central Asia and establish Turkey as a transit point for Caspian gas to Europe.

US attacks Russia

US Vice President Dick Cheney set the scene with a vitriolic attack on Russian policies in general in a speech delivered to heads of state from Baltic and Black Sea states in Vilnius on May 4.

While Russia supplies about 40 per cent of Ukraine's gas needs, Germany is not much less dependent taking 36 per cent of its imports from Russia and France 25 per cent Lithuania, Latvia, Estonia and Slovakia as well as EU applicant Bulgaria receive almost all their gas supplies from Russia. Austria which holds the EU presidency is also reliant on Russia for 60 per cent of its needs.

Middle East gas producers such as Qatar offer a fast developing alternative source with the latter aiming to become the world's leading exporter of liquefied natural gas (LNG) by 2010 ahead of Russia and Iran.

By 2010 Qatargas and Ras Laffan Liquefied Natural Gas Co expect to export 77 million tonnes of LNG a year. Over the next 10 years Qatar's LNG will account for 5-10 per cent of European demand. The UK is among the first customers with the first shipments of Qatar LNG due to arrive at a new LNG import terminal in Milford Haven in Wales in 18 months time.

LNG needs grow

Europe needs to build more liquefied natural gas import terminals says Ahmed al-Khulaifi, chief operating officer for Qatargas. About 6-8 LNg import terminals are needed in Europe by 2015 according to Petroplus president Paul van Poeke. "There is a fear Europe may become too reliant on pipeline gas," he believes.

Individual EU countries are still pressing ahead with pipeline projects though. Germany is constructing a 3,000 kilometre gas pipeline to take Siberian gas directly to via a Baltic Sea pipeline. Meanwhile the world's longest underwater gas pipeline is also being built from Norway to the UK. This could eventually supply up to a quarter of Britain's gas.

Completion of the Langeled pipeline will mean Norway vying with Qatar to become the world's second largest gas exporter after Russia. Norwegian and Middle East supplies it seems are likely to be the mainstay of British gas needs for many years.