A coal‐based strategy to reduce Europe's dependence on Russian energy imports

Abstract

Europe is dangerously dependent on Russian natural gas (NG): 13 European nations rely on Russian NG for over 50 % of their requirements ( Fig. 1). In addition, Europe relies on Russia for about one third of its oil imports. Europe is acutely aware of this high level of energy dependence, which has been, once again, highlighted by the Ukrainian crisis. The European Council March 2014 Brussels Summit Meeting focused on Europe's energy dependence on Russia, especially for NG.[2] The Summit recommended that efforts be intensified to reduce Europe's gas energy dependency and that the EU accelerate diversification of its energy supply. However, via a carefully thought out strategy, Europe can significantly reduce its dependence on Russian energy supplies through greater utilization of clean coal. 1Europe's natural gas problemThe International Energy Agency (IEA) forecasts that Europe's NG production is likely to gradually decline while consumption increases, and the need for imports thus increases over the next two decades (Fig. 2). Given current trends, the EU will import over 80 % of its NG needs by 2030, and the gap between consumption and production will continue to widen.[3] Shale gas may be available for incremental production, but no major forecasting agency is projecting significant European shale output for the foreseeable future. High population density, a lack of mineral rights ownership, public opposition and unique geology are the main impediments. Without sufficient production, Europe has historically imported NG, but an increasingly tight global market may make it difficult to reduce reliance on Russian NG. World LNG demand is forecast to grow strongly over the next two decades, especially in Asia -where prices are already the highest. China is in the process of dramatically increasing its LNG import capacity, and some believe that China could become the major driver of demand in the international gas market. [4] European LNG prices will continue to increase, and forecasts of U.S. LNG prices in Europe are in the range of $13-14/MMBtu (2013$) by 2025. 2 NG prices are likely to continue to trend higher than projections because 50 % of Europe's current gas is price indexed to oil. 3 LNG at $11-13/MMBtu for Europe is highly optimistic: Oil-indexed NG prices (2012$) could exceed $14/MMBtu within a decade, and this implies that in current (nominal) dollars NG prices could be in the range of $20-25/MMBtu. Identifying other optionsThe EU's share of global energy resources -about 3 % -is relatively small.[5] Out of the EU's total resources, supplies of coal and lignite are the largest component, comprising 88 % of energy reserves and 95 % of resources (Fig. 3). Accordingly, the EU's endowment of coal is orders of magnitude larger than that of oil and gas combined.[5] In fact, the EU has a 97-year supply of coal, but just a 12-year supply of oil and gas.[6] Initiatives that increase the use of coal will thus diversify Europe's energy sources and enhance its energy security. Although Europe is still a large coal pr...