Energy Politics and the Perception of Gazprom in Germany

Presentation European Business Congress, Working Group: Energy

Mr. Burkhard Woelki, Director Corporate Communications Gazprom Germania GmbH

Lerici, April 17th, 2015

Agenda

I Gazprom Perecption: Perception vs. Facts

2

III Natural Gas in the German Energy Transition

IV What Gazprom suggests to do

II Qualities of Natural Gas

V Résumé: Energy Security

I Gazprom: Perception vs. Facts

Russland swings the Energy Club- Neue Züricher Zeitung (2006)

Gas als Political Weapon

- Berliner Zeitung (2007)

Gazprom – Real Russian Roulette- FAZ (2001)

Gazprom threats to cut suppliesStuttgarter Zeitung (2015)

Gazprom‘s threat alerts Federal Government- Handelsblatt (2008)

Gazprom keeps Europe in a tight grip

- Deutsche Welle (2012)

I Gazprom: Perception vs. Facts

Breaking Russias Natural-Gas Chokehold

- National Reviews Online 04/02/2015

Europe‘s Addiction to Russian

Natural Gas to ContinueInternational Policy Digest 04/09/2015

I Gazprom: Perception vs. Facts

The Four Dimensions of Security of Supply

Interdepen-dency

Interdepen-dency

Path Dependenc

y

Path Dependenc

y

Gas Reserves

Gas Reserves

40 Years ofSupply

40 Years ofSupply

I Gazprom: Perception vs. Facts

1. Dimension:Interdependency

Total supply Total revenues

30%

57%

ReliableSupply

SteadyRevenues

I Gazprom: Perception vs. Facts

Brotherhood (4500 km)

Blue Stream (4000 km)

Jamal (4000 km)

Nord Stream (1224 km)

A pipeline is a supplycommitment fordecades.

The built pipelinesconstitutes a pathdependency. A changeis the short runtechnically impossible.

All Russian natural gas fields are out ofhistorical reasons onlyconnected to Europe (exception: Sakhalin).

The four major pipelinesto Europe combined arelonger than thecomplete highwaynetwork of Germany.

2. Dimension:Path Dependency

I Gazprom: Perception vs. Facts

3. Dimension:Gas Reserves

Gazprom possesses36 tcm natural gas reserves (16,94 billion households)

Gazprom produces487 bcm p.a. (300 mil. Households)

Existence ofenormuous reservescauses the pledge tosupply.

Global gas reserves

17%

Global gas production

14%

Gazprom holds 17% ofthe global reserves of

natural gas

Gazprom holds 14% ofthe global production of

natural gas

I Gazprom: Perception vs. Facts

Gas crises are not a supply problem, but a transit problem.

4. Dimension:40 Years of Supply

Security of Supply is no question!

„ ..even in the darkest times of the cold war“ (Min. Sigmar Gabriel)

II Qualities of Natural Gas

Natural Gas is..

Reliable

• Interdependency

• Path Dependency

• Gas Resources

• 40 years of supply

Green

• Natural Gas has thelowest CO2-emissions of all fossil fuels.

• „Natural Gas is thebridge toRenewables“ (Greenpeace)

Flexible

• Natural Gas can bestadapt to fluctuativepower production byRenewables.

• IEA predicted a „Golden Age of Gas“ in 2011

But in reality we see..

Natural Gas is the Best Partner for the Renewables!

III Natural Gas in the German Energy Transition

..a prognosis for a decreasing gas demand in European Union!

III Natural Gas in the German Energy Transition

Transport• Large potentials

for CNG and LNG to build in combination withelectro-mobility an alternative for thetraditional gasoline-driventransport concept

• Tax exemptionsfor natural gas in transport in coalitionagreement

Power• Low CO2-prices and

cheap coal lead tostrong decrease ofprofitability of gas-powered power plants(Example: Irsching)

• Secretary Gabriel considers theimplementation of an additional German market for CO2-certificates

Heat• Gas for heating in

competition with heatinsulation in housingsector

• Amendment of CHP-law undergovernmentalconsultancy

• Switch from L-Gas toH-Gas in NorthwesternGermany holds newpotentials

Competition and Challenges ahead• CO2 prices in Europe below any effective threshold• CO2-saving from renewables are neutralized by coal• Cost of Energiewende are exploding but increase of carbon emissions

IV What Gazprom suggests to do

Suggested Policy MeasuresNatural gas should take ist rightful place in the Energiewende which it deserves

due to its climate saving potential, flexibility and reliability.

Transport• CNG and LNG protect

both the environmentand human health(25% lower CO2-emissions thanpetroleum-poweredautomobiles)

• Current tax incentivesfor gas as fuel as wellfor gas-poweredvehicles must beextended beyond 2018.

• Transparent pricing atfilling stations shouldbe realized using theSwiss "liters equi-alent".

Power

• Support of an additional CO2-certificate market in Germany, as suggestedby Minister ofEconomioc AffairsSigmar Gabriel

• Internalization ofexternal carbon costs tofuels

Heat• The superior qualities of

modern gas heating incomparison to insulationmust be highlighted.

• The lower CO2-prevention costs serveas powerful argumentsto favor gas heating overinsulation.

• Insulation chemicals areenvironmentallyquestionable/endangerhuman health

• Gas heating muchcheaper for houseowners than any otherefficiency measure (e.g.fuel cell, heat pump,pellet cauldron, etc.)

V Résumé: Energy Security

Energy Security = Security of Supply + Security of Demand

Energy security is always the product of boh securityof supply and security of demand. Whereas Russiaand Gazprom have proven their ability andcommitment to serve the European market fordecades, the future of gas demand in Europe andGerman remains ambigous.