Wavering internal market jeopardizes gas supplies to EU

It is not the erratic nature of gas suppliers outside the European Union (EU) that is undermining the certainty of supplies of natural gas, but the EU’s own inadequately developed internal market. The EU has plenty of gas available and could prevent problems in natural gas supplies, for example in the event of Russia turning off the gas. Better coordination between the member states is needed, along with a more integrated market and more efficient regulation from ‘Brussels’. These are the conclusions of Tim Boersma, who will be awarded a PhD by the University of Groningen on 23 September for research into the current decision-making structures within the European gas market.

During recent conflicts with Ukraine and Belarus, Russia has quite literally turned off the gas for a few weeks, halting some of the supplies to Europe. This has led to concerns in the EU about the power of this weapon and Europe’s reliance on external suppliers. A lot of studies have been carried out to clarify the risks of being dependent, particularly on Russian natural gas, and how Europe would cope if supplies were to be interrupted.

Transport capacity

According to Boersma, this approach is too one-sided as the EU will not be short of gas in the coming decades. The problem is that it cannot always be transported to the places where it is needed. ‘This is one of the main problems. The European gas market is still organized largely on a national level, particularly in terms of infrastructure and regulation. There is too little investment in interconnections, partly because the rules and regulations are not properly coordinated. The tariffs that gas transporters are allowed to charge to recoup their investments are often rather low and subject to regular changes. In many countries, investing in new pipelines simply isn’t profitable,’ says Boersma.

Seventy billion euros

It is estimated that around seventy billion euros must be invested in infrastructure in the period until 2020 to ensure that the market works efficiently. But this cannot be achieved within the current decision-making structure, concludes Boersma, who used the United States as a benchmark in his research. ‘In the US, the federal regulator coordinates investment in infrastructure, using a more market-based strategy. Investors are allowed to make higher profits and the regulator’s primary focus is not on efficiency, as it is in Europe.’

Shale gas

The case of shale gas illustrates the national nature of the energy issue. Europe tends to focus on Poland as the market leader. Boersma, however, concludes that geological, regulatory, infrastructural and market obstacles are making Poland’s capacity to extract shale gas very uncertain, despite the government’s enthusiasm. Unlike the EU, which wants to remain ‘neutral’ when it comes to shale gas, the US federal government has actively supported this development by funding research in the 1970s and adopting a reasonable attitude to environmental control. However, in the US, the individual states still have the final say about whether shale gas may be extracted, which is where the system concurs with that in the EU.  

Curriculum Vitae

Tim Boersma (Hardenberg, 1979) studied European Studies and Communication Studies at the University of Twente. He will be awarded a PhD on 23 September 2013 by the Faculty of Arts at the University of Groningen , with a thesis entitled Dealing with Energy Security in Europe. A comparison of gas market policies in the European Union and the United States.

More information

Tim Boersma, timboersma [at] gmail.com