Energy Leaders Push for European Policy Shakeup After Ukraine

Apr 11, 2014 3:28 pm ET

April 11 (Bloomberg) -- The crisis in relations with Russia should compel the European Union to transform its energy policy and reduce the region’s dependence on natural gas imports, a trio of industry leaders said.

“If it really wants to wean itself off Russia gas, it needs to embark on a medium-term program made up of improving gas interconnections, shale-gas friendly regulation, alternative imports, more nuclear and possibly more coal,” Paolo Scaroni, chief executive officer of Italy’s largest oil company, Eni SpA, said in e-mail comments today.

The EU imported 30 percent of its gas supply from Russia last year, a proportion that’s even higher in some eastern and southern European countries. That reliance has come under scrutiny during the crisis over Ukraine this year, sparking a debate about how to diversify sources of supply. Russian President Vladimir Putin has warned Ukraine’s non-payment for gas shipments may threaten supply to Europe.

Scaroni said the EU should appoint a senior energy commissioner to coordinate all aspects of policy across the region. At the moment, it’s a bit of a “patchwork,” he said.

Still, sources of energy that are competitive with Russian gas aren’t easily available in the short-term. Significant exports of shale gas from the U.S. may be years away and Europe would compete with Asia for shipments of liquefied natural gas in the meantime, driving up prices.

“In the long-run, the choice to reduce the share of Russian gas in Europe supply would be a major political decision,” said Gerard Mestrallet, chief executive officer of GDF Suez SA, France’s biggest gas supplier. “Public opinion should be completely informed of the much higher cost it would imply for European customers,” he said in response to Scaroni’s comments.

Shale Reserves

European countries have been slow to develop their own reserves of shale gas, partly because of concern hydraulic fracturing, the process used to extract gas from shale rock, may be environmentally harmful. That attitude needs to be reassessed, said John Browne, a former CEO of BP Plc, Europe’s third-largest energy producer.

“The EU needs access to all commercially viable sources of energy,” said Browne, who now chairs U.K. shale-gas explorer Cuadrilla Resources Ltd. “Constructive regulation permitting the expeditious development of the EU’s shale-gas resources would materially reduce the region’s dependence on imported gas.”