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Advice for politicians touting security of supply: be practical

By Miriam Siers on 13-Jun-2016

A common theme was bandied about the stage at Gas Infrastructure Europe’s annual conference in Sofia last week: security and diversification of supply. But conference goers are seemingly tired of what they are terming political idealisms.

The speaker line-up on day one of the conference was impressive. Bulgarian prime minister Boyko Borissov stole the limelight – and not one of his pack of bodyguards saw fit to try and stop him doing so – and spoke about the need for new pipelines to open up the Bulgarian gas market to different sources of gas.

The European commissioner for the energy union, Maros Sefcovic, spoke via video of the importance of central and south eastern European gas connectivity when it comes to security of supply for the region. The Bulgarian and Romanian energy ministers touted the interconnections they are building between their two countries as the answer to supply isolation in Europe.

But as ever in markets, there are two sides to this. If politicians are planning to bring new sellers of gas into the market, they also need to encourage new buyers too. Doug Wood, head of gas at the European Federation of Energy Traders, challenged a panel of politicians on the matter, saying it is just as important to invest in opening up and creating a competitive market with many companies buying and selling gas.

Bulgarian energy minister Temenuzhka Petkova’s reply was simple: if you bring new sources of gas to the market, competition will follow. But more realistic perhaps was the summary of Swedegas chief executive Lars Gustafsson: at the end of the day companies still need to make money.

Building these pipelines may have the potential to solve security of supply concerns, but whether they actually do or not will depend on a key economic factor: are they financially viable from the point of view of the intended users? There is concern in the industry that a lot of the diversification projects being discussed will simply gather dust when they are completed.

Gustafsson’s simple advice is something politicians would do well to remember when debating the need for new pipelines to guarantee security of supply: “Be practical”.