Black Swans Bring New Challenges to Energy Leadership

New Challenges to Energy Leadership

“Energy Leadership”

By: Nicholas Newman

At the GB Gas Security of Supply Seminar held on the 2 February 2012 at the Institute of Mechanical Engineering London, there were two groups, the first the free market ideologues, who held that it was not necessary for government to intervene. That existing efforts were unnecessary.

The second group consisted of people who realised that our political leaders had to take account not only gas market conditions but also of political expediency and minimising of economic damage that potential gas supply disruption could have on the economy. It is interesting to note as a result of the leadership demonstrated in the energy sector as a result of the various Russian Ukrainian gas disputes that disrupted gas supplies to Europe and caused enormous economic damage to Eastern and Central European states. Such leadership has resulted in the minimising of future disruption to European gas supplies.

Overall in Britain’s case, energy leadership is very weak. It needs to be a lot more proactive if it is to catch up with Germany, France and Russia. Energy sector needs strong long-term leadership in order to make the tough decisions on investment a country requires to ensure long-term affordable travel supplies. As to where the U.K.’s and Europe’s gas supplies to originate, it is certain that a large proportion of the gas will come from domestic sources within the European economic area. In addition, the EU will continue to import by pipeline large quantities of gas from Russia and North Africa, also LNG imports from Qatar.

No the real uncertainty is where additional sources of gas are to come from to replace declining European production and meet future growth in overall demand. After all, five years ago in the United States. As for black swans, no one expected a few years ago that shale gas would change America from a net gas importer to a potential net gas exporter. That is why Europe is hoping that it can repeat the Americans shale gas revolution. In addition, it is looking further afield for additional gas supplies from such places as the United States and Qatar in the short term and perhaps Australia by the end of the decade.

Unfortunately for Europe additional gas imports from Qatar and Australia are likely to be increasingly expensive due to increasing competition from their traditional Asian customers such as India, Pakistan, Thailand, China, Taiwan, Japan and South Korea.

For more on GB Gas Security of Supply Seminar

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