Bloomberg News

Obama Pitches Shale Gas as EU Seeks to Cut Russian Imports (1)

March 26, 2014

The crisis in Ukraine underscores the need for the European Union to consider imports of natural gas from the U.S. and development of domestic resources to diversify supplies, President Barack Obama said.

The annexation of Crimea by Russia pushed the 28-nation EU to accelerate its search for ways to cut reliance on imports from Russia’s OAO Gazprom (OGZD), the main supplier of gas to Europe through Ukrainian pipelines. Europe depends on purchases from abroad for more than a half of its energy consumption and governments in the bloc are divided over exploration for shale gas, which has brought the U.S. toward energy independence.

“It is useful for Europe to look at its own energy assets as well as how the United States can supply additional energy assets,” Obama told reporters today in Brussels after a meeting with EU President Herman Van Rompuy and European Commission President Jose Barroso.

The EU’s overall energy dependency rate is set to rise to 80 percent by 2035 from the current 60 percent, according to the International Energy Agency. The bloc’s heads of state and government at a summit last week asked the European Commission, the EU executive, to prepare by June a road map on how to cut reliance on Russian imports and increase security of supply.

As a part of their debate on energy policies for the next decade at the March 20-21 summit, EU leaders also urged member states to speed up integration of electricity and gas markets to help reduce costs. Power prices in some parts of Europe are double those in the U.S. amid a shale-gas revolution.

Energy Policies

In light of the crisis in Ukraine, Europe will need to examine its energy policies to find ways to diversify supplies and accelerate its energy independence, Obama said. The U.S. as a source of energy is one possibility, he said.

“The truth of the matter is that just as there’s no easy, free, simple way to defend ourselves, there’s no perfect, free, ideal cheap energy sources,” Obama said. “Every possible energy source has some inconveniences or downsides.”

Gas from Russia accounted for 30 percent and oil for about 35 percent of EU imports in 2011, according to EU data. Other major gas suppliers to Europe are Norway, Algieria and Qatar.

Imports of gas from the U.S. as an option to diversify supplies to Europe was mentioned last week by U.K. Prime Minister David Cameron, who is seeking a 25-year plan to improve the EU energy security. Other possibilities recommended by the U.K. include gas development of the so-called southern corridor for gas from the Caspian region and Iraq, and increased cooperation with Norway and North Africa, the U.K. said in a document for the EU summit.

LNG Exports

The U.S. Department of Energy has approved seven permits to export liquefied natural gas to countries that don’t have free trade agreements with the U.S., with 24 applications still pending. The projects approved so far would ship 9.3 billion cubic feet a day of gas overseas, or about 17 percent of gas demand from European countries that are part of the Organization for Economic Cooperation and Development, government data show.

U.S. and EU teams are going to meet next week to discuss energy cooperation, Barroso said today.

“The question is whether through our energy ministers and at the highest levels we’re able to find ways in which we can accelerate this process of diversification and this is something we’re very much committed to,” Obama said. “It’s not something that can happen overnight, but what I think this entire crisis has pointed to is the need for us to get moving now, with the sense of urgency.”

To contact the reporter on this story: Ewa Krukowska in Brussels at ekrukowska@bloomberg.net

To contact the editors responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net Dan Stets, Bill Banker


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