New gas infrastructure in Europe does not diversify or ensure the market's supplies, which leaves the European gas grid increasingly driven by weather, a Vienna energy conference was told Tuesday.
Speaking on the second day of the 6th Annual Platts European Supply and Infrastructure conference, Christopher Micsak, senior analyst at Bentek Energy, a unit of Platts, said that, for example, the impact of Nord Stream on the fundamentals of supply security have been muted, and the European grid remains susceptible to supply and demand side shocks.
"New infrastructure does not increase supply security of flexibility in the European grid. There's no new Russian gas coming into the European market as a result, nor is any new capacity or flexibility added -- there's no new field [in Russia] to send out more gas into Europe," he said.
During the cold snap in early February 2012, for example, storage withdrawals tripled in France, but were insufficient to meet all demand, causing spot prices to nearly double.
"The Russians did not increase flows" in response, Micsak pointed out.
Also, new infrastructure is less flexible as the only way to secure funding for it is by securing long-term contracts, leaving very little room for extra spot gas to enter the market and the options of new buyers significantly decrease, he said.
"The incentive for new lines such as Nord Stream is, surely, geopolitical, such as the strengthening of relations between governments. Nord Stream could have been [former German chancellor Gerhard] Schroeder's way of getting to the Gazprom board."
Moreover, new infrastructure serves no use if there is no additional storage capacity near the consumer, he said.
Furthermore, LNG demand in Asia has and will continue to draw cargoes away from Europe, Micsak said, adding to the insecurity of European supplies, with total European sendouts down 36% year-to-date.
